Published: September 7th, 2022
Ethereum Classic (ETC), the token forged when Ethereum hard-forked into two networks in 2016, reached an all-time high hash rate of 48.79 on Tuesday, 6th September.
Figures from analytics firm 2miners show that ETC rose by close to 12 per cent in tandem with the hashrate rise. At time of writing was trading at USD 34.07, a slight dip from USD 35.40 reached the day before.
That represented a surge of over 60 per cent in the past 90 days, rising from USD 21.39 posted in early June.
In crypto, the hashrate refers to the total computational power required to mine and validate transactions on a blockchain network. The phrase ‘price follows hashrate’ has become common in crypto trading parlance as changes can signal trends in blockchain activity and transaction volume.
Over the past 30 days, Ethereum Classic’s hashrate has jumped by 62 per cent. Looking back further, hashrate growth over the past year has been a whopping 104 per cent.
The higher the hashrate figure, the safer the blockchain is perceived to be, since high hash rates also keep hackers at bay. The computational power needed to breach the Ethereum Classic network via a ‘51 per cent’ attack would be immense.
Back in August 2020, the blockhain was hit by a third 51 per cent attack. Hash rate at the time was a measly 2.90 TH/s. Since then, its skyrocketed by 1,600 per cent, creating a massive barrier for any bad actor seeking to break in.
The main driver for the increasing mining activity is widely assumed to be the network merge that sister blockchain Ethereum has scheduled for later in September.
That event will shift the more popular Ethereum blockchain from a proof-of-work (PoW) to a proof-of-stake (PoS) system to reduce its carbon footprint and improve its efficiency.
When it happens, the current mining hardware used by crypto mining companies for Ethereum will be made obsolete. Ethereum Classic and ETC are already benefitting, analysts believe, since miners need an attractive short-term alternative while they reconsider their equipment investments.
Ethereum Classic continues to operate under the traditional proof-of-work mining mechanism.
It was a different story for Ethereum fans back in June when analysts were wondering just how low ETC’s sister coin ETH could go in 2022.
The price of Ethereum’s native token Ether (ETH) dropped USD 1,000 on Thursday 17th June as the ongoing crypto market sell-off continued to bite.
ETH eventually touched down at USD 975, its lowest level since March 2021 and an 81 per cent dip in value from all-time highs seen in November 2021. The sink happened against worries about US Fed’s looming 75bp rate hike. Skittish investors went on to send stock and crypto markets into bearish territory.
‘The Fed has barely started to raise interest rates and hasn’t sold anything on their balance sheet,’ said Nicholas Dirge, an analyst at data analytics firm Future Insights, at the time. He warned that the situation ‘strongly suggests more downside is on the cards.’
Crypto traders had already been following ETH’s trajectory with trepidation, watching for a decisive break below USD 1,000 that could trigger margin calls around big leveraged bets. If that were to happen, ETH would face even more downside pressure.
Nerves really began to fray however when two crypto lending platforms, Babel Finance and Celsius Network and, froze user accounts, citing concerns about ‘undue market volatility’.
It got worse when crypto hedge fund Three Arrow Capital, which had more than USD 10 billion under management at the time, couldn’t find the necessary collateral to underwrite some of its risk-heavy positions. It’s worth remembering that, in mid-June, traders were still feeling the fallout from Terra’s recent collapse.
Adding to the sense of turmoil were two massive capital withdrawals from Ethereum’s blockchain ecosystem which seriously reduced its benchmark total value locked (TVL) metric. The first withdrawal happened in May and affected Ethereum's decentralized finance (DeFi) projects, pulling TVL under to the tune of USD 93 billion. June 2022 saw another USD 30 billion in withdrawals.
‘The deleveraging hitting Ethereum at the moment is obviously stressing traders and investors alike, with features that make it look like a mini financial crisis,’ said on-chain analytics platform Glassnode in an analyst note. ‘Everyone is keeping fingers crossed in hopes that the short-term pain will dleiver long-term opportunity and cleanse the network of excessive leverage. That could leave space for a less risky rebuild when better days return.’
While 2022 have seen most cryptocurrencies suffer losses of more than 90 per cent from their all-time highs, a hardy group of holdouts has managed to resist the downtrend.
According to data released by Glassnode, the crypto bear market has hammered 65-70 out of the top 100 coins. However, those with the biggest market caps are hurting least. Considering the top ten, nine have fallen by less than 90 per cent.
Of those doing best, notables included Binance's BNB and Polkadot's DOT, which all performed relatively better than the pack by ‘only’ posting losses of between 65 and 85 per cent. The average sink for the top ten coins is still an unpleasant 77 per cent. Broaden analysis to the top 20 coins and the average drop from all-time-highs is 82.1 per cent.
Amid all the unpleasantness of this year, tokens issued by crypto exchanges have been an unexpected bright spot. Together they’ve posted an average price dip of around 67 per cent.
The top exchange token performer has been Unus Sed Leo (LEO), which has only lost 37.9 per cent of its value, and even saw a brief bull market buying in mid-June. LEO is the Bitfinex exchange Ethereum-based utility token, often used by crypto traders to reduce fees.
– Mark de Wolf for FX-List