Investing.com– Ethereum led a decline in cryptocurrency markets on Friday after its highly anticipated switch to proof-of-stake was successfully executed, while headwinds from a stronger dollar and rising U.S. rate expectations also weighed.
The world’s second-largest cryptocurrency sank 10% to $1,474.29, its lowest level this month. The losses saw Ethereum unwind all of its gains made in the run-up to its pivot away from proof-of-work, dubbed the merge.
The merge went live on Thursday and has so far encountered no hiccups.
The move sees Ethereum leave behind mining in favor of staking, and has greatly reduced the eponymous blockchain’s energy costs. It is also expected to help the blockchain improve its scale and transaction speeds eventually.
But the shift to proof-of-stake also raised concerns over Ethereum’s security, and has drawn criticism from some members of the crypto community that ascribe to proof-of-work and mining tokens.
Ethereum’s losses also came as ETHPoW, a hard fork of Ethereum supported by miners, plummeted ahead of its official launch.
Broader cryptocurrency markets retreated after strong U.S. economic data indicated that the Federal Reserve will likely have sufficient leeway to raise interest rates sharply this year.
Bitcoin fell 2.5% to below $20,000 again, while total crypto market capitalization slumped well below the $1 trillion mark.
Rising U.S. interest rates have been the biggest factor behind crypto’s losses this year, with the space losing nearly two-thirds of its market capitalization as the Fed began hiking rates.
The rate hikes came as a shock to investors who had enjoyed nearly two years of ultra-loose monetary policy, which created enough liquidity to fuel crypto’s stellar rally in 2021.
But with global recession risks steadily increasing, replicating such a rally may be a far cry in the near future.
Source: Cryptocurrency - investing.com
