The Merge is going to commence next week and while the market is taking yet another nosedive, there is another blockchain profiting from Ethereum’s big transition to proof of stake. Miners were producing approximately $700 million worth of ETH in August 2022 and the equipment that was used for doing so will be put to work elsewhere once the Merge is over.

Is Ethereum Classic becoming the new home for miners, how is the hashrate doing, and is it correlated to price?

Hashrate broke its all-time high

The hashrate for Ethereum Classic broke 50 TH/s this week and continues to climb up. While there are also other proof of work blockchains available, Ethereum Classic seems to be the most reasonable choice.

The mining equipment that is used for mining Ethereum can be used as well for Ethereum Classic. The difference between both blockchains is, that Ethereum Classic continued an old version of Ethereum were the effects of the so-called DAO hacked weren’t lifted by a hard fork. There are also other notable differences in terms of mining.

Ethereum Classic supports GPU mining with graphic cards with less than 4 GB RAM and is also ASIC resistant. It is safe to say that especially GPU miners are considering the option or have already left Ethereum for good.

Does price always follow the hashrate?

There is an old saying among crypto veterans that price will always follow the hashrate. It is not true that one causes the other, but there is a strong correlation. One reason for that correlation is that a growing network usually attracts more value and more money. Thus, its evaluation rises and so does the price.

Ethereum Classic took a hit just yesterday after failing to establish a price level above $40 and at the time of writing it is ranging at a level of about $33. Despite the fact that the price took a hit and bulls have failed repeatedly to confirm a successful breakout, the correlation remains intact.

The price is back at the same level as in January 2022 while the hashrate has doubled and many other altcoins are struggling and are nowhere near of this year’s highs in terms of price. The conclusion is that even if price follows hashrate it doesn’t necessarily follow that price levels have to reach also an all-time high. There are other factors that come into play when looking into the possibility of a bull run. Such as inflation and the Feds rate hikes which are still having both a huge impact on all markets.

What could lead up to a rally?

First of all, a lower inflation for August and dovish rate hike at the next FOMC meeting. Both would be favorable to the stock and the crypto market. When we are looking at Ethereum Classic, then we would also like to see the hashrate rising over time.

It remains to be seen if the influx of miners will increase next week after the Merge has commenced. Either all miners willing to switch have already done so or many are waiting until the very last minute and remain faithful to the chain that is leaving proof of work behind.

Another factor is any kind of Ethereum forks that may try to continue the old Ethereum blockchain in its current form. Should they succeed then Ethereum Classic is facing serious competition, but if they fail the ETC blockchain has a USP that is not easy to replace. In any case, all these scenarios are long-term plays and while a sudden and relentless rally cannot be ruled out, it is still unlikely under the current market conditions that this is going to happen.