Bitcoin beating out Ethereum despite upcoming “Merge”
Anyone reading this I assume is already well aware of What the upcoming Ethereum 2.0 is and doesn’t need me to explain the details. This upgrade or more accurately hard-fork of the Ethereum blockchain has been widely anticipated for years and its delay was the most critiqued aspect for some time. However, the centralization issues surrounding the switch to PoS that have been known for years have just recently been brought into the spotlight. Along with possible security and censorship issues that emerged only recently, Ethereum managed to trade at a loss for the last two days in which Bitcoin managed to have gains.
First off, I want to highlight how rare of an occurrence this is. The last time Bitcoin had two consecutive daily gains in which Ethereum had two consecutive declines was back in early November 2021. This is back when Bitcoin was trading at around $65,000 a far cry from where it is at today.
The chart above illustrates the last occurrence of days in which Ethereum traded higher and BTC traded lower (red line) or when Ethereum traded lower and Bitcoin traded higher (green line). Most of these instances occurred on days with a “Doji” candle representing little to no change. Furthermore, these occurrences rarely appeared back-to-back.
A lot of this new fear on how the merge may affect Ethereum surrounds the staking service Lido, and how it comprises almost a third of all staked Ether. When a single entity has control of at least 51% of the network they can add whatever blocks to the chain that they want or censor the blocks that they do not.
This 51% can easily be achieved when you consider that the vast majority of Ether stacked is using a centralized exchange that runs in the U.S. Given that these exchanges have many times sided with the government in which they reside and taking into account the recent U.S. sanction on Tornado Cash an Ethereum mixing tool, leaves open the real possibility that the U.S. government can effectively censor any transactions or addresses by adding them to the blacklist and essentially make a user’s Ethereum no longer valid.
For these reasons I feel it is safe to assume that this current occurrence of a Bitcoin rally and an Ethereum correction is due to the issues mentioned above and this narrative could continue in the days and weeks ahead which would be bullish for Bitcoin.