Narrative is false about Ethereum’s price action post-Merge announcement

My timeline has been full this week of chatter about the price action of ETH and BTC. As a result of the Merge being slated for September 15^th, people are throwing around comments on the decoupling of ETH and BTC, the divergence in volatility and various other stats.

This confused me.

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The Merge has been priced for a while now – or so I thought. Furthermore, macro is really what is driving the markets now, not confirmation of a Merge date that we already knew was coming down the line.

So, I got charting to see what I got wrong.

Ethereum-Bitcoin

Let’s quickly go over the premise here. In bull markets, alt coins outperform Bitcoin. In bear markets, the opposite happens – Bitcoin falls in price, but alt coins fall more (as I’m sure you have realised from the absence of a certain demographic, aka shitcoiners, in cryptoland these days).

Ethereum is not as volatile as other alt coins, but it is still further out on the risk spectrum than Bitcoin. I charted ETH-BTC against BTC-USD going back to the start of 2018, and the correlation is clear. In other words, ETH-BTC rises when BTC rises, and falls when BTC falls. Simples.

What has happened over the last month?

Now, let’s zoom on that same chart this year.

The temptation is to immediately conclude that it has diverged over the last month, which is the theme we have seen circulated in the media recently. But in reality, it has reacted precisely how it always does.

On 13^th July, Bitcoin fell to $19,326. This was also the day CPI came in hotter than expected at 9.1%, driving the whole market downwards. Accordingly, in line with the pattern we discussed above, ETH-BTC was also down to 0.0537 BTC.

The next day, the Merge was tentatively announced for September 19^th (before being updated to September 15^th). And markets since have rebounded strongly. But this is nothing to do with the Merge.

The bounceback has to do with the same thing that has always been true here – macro is driving both BTC and ETH. And with macro pushing stock markets higher since the nadir of that July 13^th CPI reading, Bitcoin has moved higher, with ETH higher again – because it is a higher beta asset lying further out on the risk curve. Again, nothing out of the ordinary here.

Volatility

But volatility, you say.

OK let us check that, using the most conventional method – the 30-day annualised metric. Again, I’ve plotted this since the same July 13^th date as above in order to capture any Merge effects.

As you can see, there is no change here since the Merge was announced. In fact, it has actually reduced the volatility as – you guessed it – markets have been rather placid due to the macro factor.

Sometimes we journos need to sit back and admit there is nothing to a story. Or, you can do what I have just done, and write 500 words essentially saying there is no story here.

Of course, we could see this change going forward if there are any unforeseen developments with the Merge. And in the days leading up to the actual event, I would imagine volatility especially will pick up. But over the last month or so, Ethereum has simply acted like it always has.

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