Why the Ethereum Merge Was a “Sell the News” Event

Key Takeaways

Ethereum has successfully shipped the Merge after years of anticipation, but ETH is down. The number two crypto has lost 25% of its market value over the past week.
Though the Merge brought several notable upgrades, it will likely take time for the market to digest the event.
The weak macro environment has been a major factor weighing down ETH and other crypto assets this year.

Ethereum made history when it completed “the Merge” from Proof-of-Stake last week, but ETH has suffered a sharp drawdown since the update shipped.

Ethereum Hit in Post-Merge Selloffs

Crypto traders are rushing to sell their Ethereum following last week’s highly anticipated “Merge” event.

The world’s second-biggest blockchain has recorded heavy losses since it transitioned to a Proof-of-Stake consensus mechanism early Thursday. ETH was trading just above $1,606 when the Merge shipped but has since declined by about 17.8%, trading at $1,320 at press time.

ETH/USD (Source: CoinGecko)

ETH showed weakness in the lead-up to the event, taking a hit Wednesday as the U.S. Consumer Price Index registered a higher-than-expected 8.3% inflation rate. According to CoinGecko data, it’s down 25.1% over the past week.

The Ethereum selloff comes as most major crypto assets suffer from market volatility. September has historically been a weak month for crypto prices, and the recent market action has added to the pain for crypto hopefuls following months of selloffs. Bitcoin broke below $19,000 Monday, currently trading at $18,684. Ethereum-related tokens like Ethereum Classic and Lido have also slid on the downturn, respectively shaving 12.6% and 9% off their market values over the past 24 hours. ETHW, the native token for the Proof-of-Work Ethereum chain launched following the Merge, has plummeted to $5.49 after topping $50 on some exchanges ahead of the event.

While ETH holders had placed hopes on the Merge serving as a catalyst for bullish price action for Ethereum’s native asset, the event appears to have suffered from the “sell the news” effect. “Buy the rumor, sell the news” is a popular turn of phrase in financial markets. It refers to the practice of buying an asset ahead of a major event in anticipation of a price rise before selling the asset after the fact. Coinbase going public on the Nasdaq was another example of a “sell the news” event; many market participants hoped that the U.S. exchange’s listing would propel Bitcoin to $100,000 following the event, but the top crypto peaked at $64,000 on the day then lost over 50% of its market value in the space of six weeks.

Changes to Ethereum

Anticipation for the Merge was high, partly because it was years in the making and partly because it was such a major technological feat. Discussed by Ethereum co-founder Vitalik Buterin since the blockchain’s inception, the transition from Proof-of-Work to Proof-of-Stake frequently drew comparisons to an…