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Ethereum's Merge: Market liquidity, efficiency and volatility in the Proof of Stake Era

Author

Listed:
  • Liu, Bin
  • Prodromou, Tina
  • Suardi, Sandy
  • Xu, Caihong

Abstract

This study analyzes the impact of Ethereum's Merge upgrade on market liquidity, efficiency and volatility in cryptocurrency markets. The Merge, which transitioned Ethereum from Proof of Work to Proof of Stake, aimed to improve scalability, security, and energy efficiency. Findings show a significant improvement in Ether's liquidity and a slight enhancement in market efficiency post-Merge, along with reduced trading activity and intraday volatility compared to Bitcoin. These results offer insights into investor behavior, confidence, and external market influences, relevant for market participants and policymakers.

Suggested Citation

  • Liu, Bin & Prodromou, Tina & Suardi, Sandy & Xu, Caihong, 2025. "Ethereum's Merge: Market liquidity, efficiency and volatility in the Proof of Stake Era," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000394
    DOI: 10.1016/j.econlet.2025.112202
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    More about this item

    Keywords

    The Merge; Proof of Stake; Proof of Work; Cryptocurrency liquidity; Ethereum; Sustainability;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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