Little action for Bitcoin and Ethereum before and during 'The Merge'

The cryptocurrency market wavers between the red and the green on Thursday, on a day when it is the focus of investors' attention because of the Ethereum blockchain migration to the proof-of-stake consensus model, the event known as 'The Merge'. This event was successfully completed just a few hours ago. This means that the second largest blockchain will upgrade to a transaction validation protocol that reduces its energy consumption by 99%, which will make the technology and its token, Ether (ETH), more environmentally friendly and therefore much more attractive to long-term investors.

The merge of the main Ethereum blockchain with the Beacon testnet was effected when the total terminal difficulty (TTD) reached 58,750,000,000T. Firstly, the 'Paris' update was executed on the so-called execution layer - the main Ethereum network - and 13 minutes later, Ethereum left the current proof-of-work model. The consensus layer, as this network is also called, where all the developments for the 'Merge' have been taking place, has joined the execution layer, completing the migration and the proof-of-work model has become obsolete for ETH.

However, there is still a long way to go for the price action to reflect this promising development. The event has, in fact, kept the appetite of traders tied up short, as they are on the lookout for what may happen next. Some cryptocurrencies have noted a rebound in volumes for Ether, as it grazed $1,650 on Wednesday and is hovering around $1,600 now.

"What ETH has achieved is absolutely amazing, but the fact that we have not seen much movement in its coin’s price is a concern for many," noted Naeem Aslam, analyst at Avatrade.

As for Bitcoin, it is clinging to $20,000 as hard as it can, but the total capitalization of digital tokens lost $1 trillion as risk appetite took a devastating blow following the US CPI data and expectations that the US Federal Reserve (Fed) will go big with a 1% increase in its benchmark rate next week. The leading currency by market capitalization "probably topped the list of instruments that got carried away by the prospect of fewer rate hikes ahead of the US inflation data and was therefore the hardest hit when the figure fell," commented Craig Erlam, analyst at Oanda.

Regarding 'The Merge', analysts at Julius Baer believe the best-case scenario for the 'crypto space' is that this event plays out as a "non-event", where "the protocol transition goes smoothly and seamlessly," as they pointed out. "Any other outcome would likely cause elevated volatility in the cryptocurrency space, not just in Ether´s price," they added. They also cited how investors have been shorting ETH futures as a hedging mechanism against a migration failure.

Some market observers suggest that this event may have contributed to the rebound experienced in the crypto space ahead of the U.S. CPI data. "Of course, this could also exacerbate the sell-off if it becomes a 'buy the rumor, sell the fact' event. Time will tell," noted Erlam.

"Investors who hold environmental issues close to their investment perspective will be ever more convinced about the technology, and it is likely that in the coming days, we will hear more funds and institutions offering and investing in this project," explained Aslam. "But for now, the big question for traders is why we have not seen any excitement in the price action, and this may begin to bother many, which may, in turn, make them sell their positions," he warned.