Ethereum is outperforming most leading digital assets as the Merge rapidly approaches, with ETH last changing hands for $1,700 — a 14% gain since Sep. 7.
But a handful of Proof-of-Work (PoW) tokens are rallying even harder, with traders betting on where Ethereum’s displaced miners are likely to head after the long-awaited upgrade takes effect.
Ethereum will transition to Proof-of-Stake (PoS) consensus sometime around Sep. 15, booting Proof of Work miners from the network in the process. The upgrade will reduce the network’s energy consumption by more than 99.9% while dropping new Ether issuance by 87%.
The countdown to The Merge sparked significant volatility for ETH, with traders racing to accumulate Ether before the upgrade goes live, perhaps in a bid to maximize the value they could receive on PoW forks of Ethereum.
ETH is up nearly 70% since early July, according to The Defiant Terminal.
PoW Coins Rally
Ether isn’t the only digital asset to benefit from the disruptions caused by the Merge, with many traders betting on where Ethereum’s roughly $5B worth of mining hardware and hash rate will be redirected to after the upgrade.
Ethereum Classic is outperforming ETH, with ETC up more than 20% over the past 20 days and 185% since mid-July, according to CoinMarketCap. The price of ETC also doubled relative to ETH since July 18, according to TradingView.
Ethereum Classic’s network hash rate also surged by nearly 150% since early July, according to Messari. The record hash rate signals that many miners have already redirected their mining towards the network.
Bob Summerwill, the executive director of ETCCooperative, an organization providing grants supporting the Ethereum Classic ecosystem, told The Defiant that Ethereum Classic is the largest project by block rewards after Ethereum by a significant margin.
This means Ethereum Classic is better suited than other PoW chains to take on a large increase in hash rate without rewards being severely impacted.
“Other chains have no hope of absorbing even a fraction of the hash rate before becoming unprofitable,” he said.
Still, some smaller PoW chains are also outperforming ETH as The Merge looms, with Ravencoin up 65.5% over the past week and 180% since mid-July, according to CoinGecko.
Flux is also up 14% after news broke the token will be listed on crypto exchange FTX. The token has rallied 180% since early July.
Rocket Pool, a liquid staking service, is also posting strong gains ahead of The Merge, with its token up 38.5% over the past seven days.
Terra Tokens Steal The Show
Tokens linked to the Terra ecosystem posted the largest gains among the top 100 cryptocurrencies by market cap this week. LUNA is up 184%, USTC gained 60%, and LUNC surged 54% over the week.
LUNC’s astonishing rally followed a governance proposal advocating for the introduction of a 1.2% fee on on-chain transactions which will be burned from its supply. The proposal sparked speculation that LUNC could become deflationary, meaning more tokens are burned than are created as rewards for validators.
The move propelled has propelled LUNC to a $2.6B market capitalization after tripling since the month began.
But not everyone is convinced by LUNC’s deflationary narrative. Lightcrypto, a popular crypto influencer, noted that the proposal would burn $55,000 worth of LUNC each day based on current network activity — significantly less than the $162,000 in tokens that enter supply daily as inflation.
“Using pre-tax numbers to extrapolate network activity post-tax is a fool’s errand,” they continued. “A network that charges 1.2% of notional on transactions is not a network that is remotely useful or competitive relative to its alternatives.”
The catalyst for LUNA’s rally is less clear, with the token tripling in value between Sep. 9 and Sep. 10 while daily volume surged by more than 2,900%.
FatManTerra, a popular Terra critic, believes the move was an orchestrated pump carried out by Terraform Labs, the company behind Terra, citing research from Jaewoo Cho, an on-chain analyst. FatMan claims Cho’s analysis indicates that wallets controlled by Terraform Labs sent $3.7B worth of UST to leading centralized exchanges before LUNA’s price went parabolic.
Do Kwon, the founder of Terra, rejected the accusation. “Can definitely confirm it’s not a TFL wallet,” Kwon tweeted. “How does one continue to simply make up s**t.”