Why Ethereum Pulled Crypto Higher Today

What happened 

Saturday has been a wild day of trading in the crypto market and the day is only a little over half over. At about 11:45 a.m. ET Ethereum (ETH 7.59%) quickly jumped about 10% and those gains have made their way to other cryptocurrencies. 

As of 3 p.m. ET, Ethereum is up 6.8% on the day and from its low to high jumped a whopping 19.5%. Solana (SOL 4.16%) is up 5% in the last day but 11.6% from low to high. Finally, Arweave (AR 12.08%) has popped 12.9% in the last 24 hours. 

So what 

The cause of the big rise seems to be big buyers, also known as whales, increasing their positions in Ethereum. Blockchain analytics firm IntoTheBlock reported on Friday that the biggest 1% of Ethereum holders have increased their positions after “The Merge” was tentatively scheduled for September. 

“The Merge” is a transition from a proof-of-work consensus mechanism to proof-of-stake, which means the flow of revenue for confirming blockchain transactions will go from miners performing calculations to stakers, who simply “stake” their Ethereum. Today’s speculation could be that big buyers will stake Ethereum, taking it off the trading market. 

It’s likely other cryptocurrencies followed Ethereum higher as investors followed whales into the market. In a volatile market like crypto, momentum can lead to more momentum in trading. 

Now what 

Today’s move doesn’t seem to be driven by any real fundamental change in the crypto market, but broadly there is good news. If “The Merge” is completed this fall and lowers costs and increases transaction speed on Ethereum, it would be bullish for the crypto industry overall. Ethereum has the most developers and many cryptocurrencies are simply tokens on Ethereum, so a faster base blockchain would be good for everyone. 

That said, I think today’s move is mostly noise for crypto investors long term. A move that happens that fast can fade quickly, and we have seen some of the pop fade. 

What I’ll be watching over the next few months is the changing regulatory environment and continued liquidations by crypto lenders. Regulatory certainty could actually help the industry long term, and if there’s an end to the bankruptcies and liquidation of lenders it could be good news for crypto markets overall. 

I continue to be bullish on cryptocurrencies and their disruptive potential in technology. The blockchain is a unique ledger for data and developers who can leverage that capability could open new opportunities for innovators. This innovation will help cryptocurrencies, but it’ll be a bumpy ride along the way. 

Travis Hoium has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.

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