Why did Ethereum Classic jump, as Ethereum Merge countdown begins?

By Frances Yue

Good morning! Welcome to Distributed Ledger, our weekly crypto newsletter that hits your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch. I’m back from vacation and I’m going to show you the latest in the digital asset market.

Find me on Twitter at @FrancesYue_ for comment, or let us know what you think we should cover. You can also reach me via email to share your personal stories with crypto.

Crypto at a Glance

Bitcoin has lost around 3.3% in the past seven days and was trading at around $19,134 on Thursday, according to data from CoinDesk. Ether gained 4.2% over the seven-day period to reach around $1,618. The Meme Dogecoin token traded down 0.9% while another dog-themed token, Shiba Inu, added 0.7% from seven days ago.

Cryptographic metrics

Biggest Gainers     Price    %7-day return 
Terra Luna Classic  $0.0005  126.7% 
TerraClassicUSD     $0.04    41.6% 
EOS                 $1.62    17.9% 
Cosmos Hub          $13.7    16% 
Rocket Pool         $26.63   13.5% 
                             Source: CoinGecko as of Sept. 8 
Biggest Decliners  Price   %7-day return 
Chain              $0.068  -17.5% 
NEXO               $0.89   -17.1% 
Chiliz             $0.19   -14.5% 
LEO Token          $5.13   -11% 
Amp                $0.006  -10.5% 
                           Source: CoinGecko as of Sept. 8 

The rise of Ethereum Classic

As the highly anticipated Merge upgrade of Ethereum begins, Ethereum Classic, a separate blockchain representing an original and unchanged history of the Ethereum network, has seen its symbolic price increase. Ethereum Classic has gained over 12% in the past seven days, outperforming Ether, which has added around 4%.

Explained: What is Ethereum Merge? Here are 5 things you need to know

What is the difference between Ethereum and Ethereum Classic? In 2016, after more than 3.6 million, or roughly $60 million, worth of Ether was mined from the DAO, a decentralized autonomous organization based on Ethereum, the Ethereum Foundation controversially created a new version of the blockchain with no history of hacking. The new chain operated as Ethereum, while the old unchanged network was renamed Ethereum Classic.

Now, Ethereum miners are looking for other coins to mine, like Ethereum Classic, as they will lose their source of revenue after the Ethereum merger moves the blockchain from proof-of-work to proof-of-stake. Once the merger is complete, Ethereum will rely on stakers, or ether holders who lock their coins, to secure the blockchain, instead of miners. Ethereum Classic, on the other hand, will remain a proof-of-work blockchain.

The increase in price and interest in Ethereum Classic from miners and users “is not necessarily temporary,” said Jason Lau, COO of OKCoin.

The price of Ethereum Classic could “end up at a higher level than where we were, because now you really have two different types of products,” Lau told Distributed Ledger in an interview.

Some miners have also proposed to split Ethereum again after the merger, with a chain that retains the proof-of-work mechanism. Compared to Ethereum Classic, the crypto community’s interest in such a new chain might be temporary, according to Lau. “I think they’ll have a lot less community support. It’s sort of a last push from Ethereum miners to capture some economic value,” Lau said.

Hear Mike Novogratz at the Best New Ideas in Money Festival on September 21-22 in New York City. Galaxy Digital CEO has ideas for navigating the crypto winter.

Merge, a “non-event” at the cost of ether?

According to Rance Masheck, president of iVest Plus, the impact of the Ethereum merger on the price of ether could be compared to that of a company’s stock split on its stock price.

“I think it’s going to cause a bit of volatility around ether in the short term, but in the long term I think it’s going to be kind of a non-event,” Masheck said. “It’s like we just saw Tesla do its five-for-one stock split, and its shares haven’t exactly gone up since the split,” Masheck said.

Lau echoed this point, pointing out that the merger would not immediately solve Ethereum’s widespread problems, such as high transaction fees.

“I think it’s a good step for the network and the community on the way back. But in terms of price, I think there will be some pressure afterwards,” Lau said.

Are Crypto Securities?

Gary Gensler, chairman of the U.S. Securities and Exchange Commission, said on Thursday that the “vast majority” of the roughly 10,000 existing crypto tokens are securities, MarketWatch’s Chris Matthews reported.

“The investing public buys or sells crypto security tokens because they expect profit from the efforts of others in a joint venture,” Gensler said.

Gensler also responded to those who argued that current securities law was incompatible with cryptocurrencies and demanded a new set of industry-specific rules.

Through statements and dozens of enforcement actions, the SEC has made it clear how existing law applies to the industry and that no such rule is expected, according to Gensler. “Not liking the message is not the same as not receiving it,” Gensler said.

Crypto companies, funds

Shares of Coinbase Global Inc. (COIN) gained 4.2% to $71.14 on Thursday, and they are down 8.5% over the past five trading sessions. Michael Saylor’s MicroStrategyInc. (MSTR) rebounded 7.8% on Thursday to $229.07, as shares rose 3.7% over the past five days.

Shares of mining company Riot Blockchain Inc. (RIOT) jumped 12.2% to $7.36 on Thursday, contributing to a 13% gain over the past five days. Shares of Marathon Digital Holdings Inc. (MARA) jumped 11% to $13.00, up 13% in the past five days. Another miner, Ebang International Holdings Inc. (EBON) saw its shares rise 0.4% to $0.48 on Thursday, an increase of 3.3% over the past five days.

Shares of Overstock.com Inc. (OSTK) rose 3.2% to $27.36. Shares rose 6% in the five-session period.

Shares of Block Inc. (SQ), formerly known as Square, added 3.2% to $29.96 and were up 1.7% for the week. Shares of Tesla Inc. (TSLA) rose 1.7% to $288.63, up 4.1% in the past five days.

PayPal Holdings Inc. (PYPL) edged up 0.9% to $95.76, up 3.4% in the five-session period. Shares of Nvidia Corp. (NVDA) rose 1.3% to $138.87, with a loss of 0.4% last week.

Shares of Advanced Micro Devices Inc. (AMD) rose 3.4% to $82.34 on Thursday, flat from five trading days ago.

Among crypto funds, ProShares Bitcoin Strategy ETF (BITO) added 1.4% to $11.82 on Thursday, while its Short Bitcoin Strategy ETF (BITI) lost 1.6% to $39.95. Valkyrie Bitcoin Strategy ETF (BTF) rose 1.5% to $7.39, while VanEck Bitcoin Strategy ETF (XBTF) traded 1% lower at $18.63.

Grayscale Bitcoin Trust (GBTC) fell 0.7% to $12.09.

-Frances Yue

Required readings

(END) Dow Jones Newswire

09-08-22 1548ET

Copyright (c) 2022 Dow Jones & Company, Inc.