Ethereum close to its major upgrade, but why has it fallen more than bitcoin?

This article has been updated to correct the identification of Citadel Securities.

Hello! Welcome back to Distributed Ledger, our weekly crypto newsletter that reaches your inbox every Thursday. I’m writing it in the heat of Austin, TX, where Consensus, a multi-day crypto conference kicked off today.

As usual, find me on Twitter at @FrancesYue_ to send feedback, or tell us what you think we should cover.

Crypto in a snap

Bitcoin BTCUSD, -0.57% edged up 0.8% over the past seven days, trading at around $30,181 on Thursday, according to CoinDesk data. Ether ETHUSD, -0.88% lost 0.7% over the seven-day stretch to around $1,793. Meme token Dogecoin DOGEUSD, -0.78% slipped 2% while another dog-themed token, Shiba Inu SHIBUSD, -1.79, declined 5.4% from seven days ago.

Crypto Metrics Biggest Gainers Price %7-day return Helium $12.00 35.6% Chainlink $9.38 35.3% Theta Network $1.44 19.6% Cardano $0.64 16.4% Tezos $2.21 13.3% Source: CoinGecko as of June 9 Biggest Decliners Price %7-day return Terra Luna Classic $0.00007 -27.2% BitDAO $0.55 -23.1% Elrond $62.67 -17.1% Internet Computer $6.52 -14.7% Waves $7.87 -13.8% Source: CoinGecko as of June 9 Ether lagging

Ethereum is poised for the “Merge,” a long-awaited upgrade that will transition the blockchain from proof-of-work to proof-of-stake, a consensus mechanism that is much more energy efficient. Vitalik Buterin, Ethereum’s co-founder, said in May that the “Merge” could take place as soon as in August.

The blockchain moved one step closer to this milestone this week, as it completed a successful dress rehearsal Wednesday on the Ropsten test network.

However, ether has been underperforming bitcoin so far this year, though both have plunged. Bitcoin is down about 36% year-to-date, while ether lost more than 51%, according to CoinDesk data.  

Analysts attributed it in part to investors’ different perception of the two largest cryptocurrencies. 

“You almost have to think of it as different valuation frameworks where bitcoin is your reserve value in the ecosystem,” Jean-Marie Mognetti, chief executive at crypto asset manager Coinshares said in an interview. 

As investors are worried about heated inflation, signs of a slowing economy, and the Fed’s tightening of its monetary policy, “what you can see is that people are kind of almost de-risking themselves by rebalancing into crypto, while a lot of that crypto is going into bitcoin, which is a legacy of the ecosystem,” Mognetti said. 

David Siemer, chief executive at Wave Financial echoed the point. “A lot of our clients are high net worth individuals. And their first purchase of crypto through us is always in bitcoin,” Siemer said. 

Ether’s disappointing performance could also be related to the uncertainty around the “Merge”, according to Katie Talati, director of research at Arca. The upgrade has been delayed several times in the past, and “I think there’s just a lot of question marks in terms of how and when the merger is going to happen,” Talati said. 

Still, in the longer term, investors are viewing the upgrade as a bullish event, Talati said. “Some of our trading team have been seeing a lot of call buying for longer-dated ETH options.” 

Citadel Securities and Virtu’s crypto push? 

Citadel Securities and Virtu Financial Inc. are building a cryptocurrency trading platform along with Fidelity Investments and Charles Schwab Corp., while the product could be out late this year or early next year, Bloomberg reported, citing people familiar with the matter. 

It marks Citadel Securities and Virtu’s first major push into crypto. Ken Griffin, the billionaire founder of Citadel Securities and hedge fund Citadel, recently seems to have softened his stance on the rather nascent asset class. Once he described the chase for crypto as a “jihadist call” against the U.S. dollar, but he said in March that “crypto has been one of the great stories in finance over the course of the last 15 years.”

“I still have my skepticism,” Griffin told Bloomberg in an interview then. “But there are hundreds and millions of people in this world today who disagree with that … we have to give serious consideration to being a market maker in crypto. It’s fair to assume that over the months to come, you will see us engage in making markets in cryptocurrencies,” he said.

Coinbase rescinding offers 

Last week, Coinbase said it would extend a hiring freeze for both new and backfill roles for the “foreseeable future” and would rescind a few accepted offers “in response to the current market conditions and ongoing business prioritization efforts.” 

On Coinbase Talent Hub, a site the company created to connect impacted candidates with other work opportunities, more than 300 people, with different expertise ranging from business operations to marketing and engineering, recently submitted details of their work experience. On LinkedIn, some said they had already left their previous jobs for positions at Coinbase, while others rejected competing offers. 

I talked to two people who faced such a situation. Read their stories here.

Crypto companies, funds

Shares of Coinbase Global Inc. COIN, -7.86% plunged 6% to $64.95 on Thursday, and they were down 12% over the past five trading sessions. Michael Saylor’s MicroStrategy Inc. MSTR, -6.50% lost 5.22% Thursday to $220.74, and it was down 9.7% over the past five days.

Mining company Riot Blockchain Inc. RIOT, -8.38% shares tanked 8.6% to $5.46, and it was down 20.4% over the past five days. Shares of Marathon Digital Holdings Inc. MARA, -10.20% lost 9.4% to $7.72, with a 17.24% loss over the past five days. Another miner, Ebang International Holdings Inc. EBON, -2.27%, slipped 3.1% to $0.97, while it recorded a 1.2% gain over the past five days.

Overstock.com Inc. OSTK, -3.19%’s shares traded 3.3% lower to $30.95. The shares lost 5% over the five-session period.

Shares of Block Inc. SQ, -9.64%, formerly known as Square, plummeted 8% to $77.98, contributing to a 10.8% loss for the week. Tesla Inc. TSLA, -0.89% shares gained 1.2% to $734.62, while they were down 5.2% over the past five sessions.

PayPal Holdings Inc. PYPL, -3.89% lost 2.2% to $85.56, and it was down 3.1% over the five-session stretch. Nvidia Corp. NVDA, -3.22% shares dropped 1.2% to $184.26, looking at a 6% loss over the past five trading days.

Advanced Micro Devices Inc. AMD, -3.04% shares traded down 0.9% to $101.03 on Thursday, while it was down 6.9% from five trading days ago.

Among crypto funds, ProShares Bitcoin Strategy ETF BITO, -0.48% edged up 0.1% to $18.70 Thursday, while Valkyrie Bitcoin Strategy ETF BTF, -0.43% was up 0.2% at $11.64. VanEck Bitcoin Strategy ETF XBTF, -0.41% gained 0.4% to $29.42.

Grayscale Bitcoin Trust GBTC, -0.61% traded up 0.4% to $19.60.

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