The change earlier this month spurred a hard fork, splitting the blockchain in two and giving rise to an offshoot chain called Ethereum PoW. Some exchanges and platforms have shown support for the forked version, which still uses proof-of-work (PoW) verification, and at least 19 former ether mining pools are active on it, JPMorgan said in a research note on Wednesday. The forked chain could divide the Ethereum community, the firm said.
A second concern is that the blockchain has become less decentralized, the bank said, “as [just a] few entities command the majority share of staked ETH.”
JPMorgan noted that the price of ether (ETH) has declined sharply. This drop was probably caused by a combination of “buy-the-rumor/sell-the-news flows specific to Ethereum’s Merge event,” together with widespread weakness in risky assets as a result of more hawkish central banks, the report said.
The Merge is the first of five upgrades planned for the blockchain.
Meanwhile, a move to "backwardation" in the futures market is a “manifestation of the shift towards more bearish sentiment in crypto markets in recent weeks,” the note said. Backwardation occurs when the spot price of an asset is higher than its futures price.
In terms of mining, Ethereum Classic's ETC token has been the main beneficiary of the Merge. The network's hashrate has doubled, with the tokens of other graphics processing-unit-compatible PoW blockchains such as Ravencoin and Ergo also witnessing big increases, the note added.
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