The crypto market is the “tail wagging a very sick dog”: Ethereum co-founder Joe Lubin

The years-anticipated Ethereum merger from proof-of-work to proof-of-stake finally happened on September 15, and it went off without a hitch. The Ethereum network now uses 99% less energy.

The merger went “what appears to be flawlessly,” said Joe Lubin, CEO of crypto software giant ConsenSys and one of the founders of Ethereum. Decrypt in an exclusive video interview last week. “I’ve asked around in a bunch of different contexts about awareness of something breaking and I haven’t heard a thing.”

So why is ETH down a brutal 22% in the month since the merger?

Lubin’s response is that the price action immediately following the merger was a “possibly inevitable ‘sell the news'” type of activity, along with some Ethereum miners “offloading their ether holdings while shutting down their rigs.” As for why ETH has continued to fall since it time, along with Bitcoin and the rest of the crypto market?

It’s macroeconomics, stupid.

“The economy is broken and it’s likely to stay broken for a while,” Lubin said. “So we remain the tail wagging a very sick dog: the global macro situation. But our ecosystem and our company are doing pretty well, even with reduced volumes, reduced intensity. I think we’re all just enjoying building.”

That’s the favored explanation from almost every founder in the crypto ecosystem right now, as crypto markets continue to be buffeted by the same economic headwinds in the US (inflation, Fed interest rates) and globally (war in Ukraine, hangover from COVID-19) weighing on stocks , bonds and other more established investment vehicles.

Solana founder Anatoly Yakovenko points to the same factors – and sees at least another year of bear market.

“Looking at the macro stuff, I guess there’s probably 12 to 18 months more of this brutal, Fed rate hike,” Yakovenko said on the latest episode of Decrypthis gm podcast. “But there is an end to it. And just like the last bear market, a lot of teams built and focused on product markets and really tried to build amazing products—many of them succeeded, I think, in a very dramatic way.”

FTX CEO Sam Bankman-Fried put it in similar terms, and perhaps most bluntly, when he spoke at Anthony Scaramucci’s SALT conference in New York last month: “Everything is down this year, because the dollar is up this year.”

Until cash becomes cheaper, crypto markets are expected to remain dormant. But Lubin and other developers remain as bullish as ever on key parts of the crypto industry.

“I think NFTs still have a ton of legs, NFTs are going to undergo so much innovation,” he said Decrypt. “I envision us putting out our irrational exuberance moments with respect to DeFi. I think it will continue to innovate and mature quite significantly, but I think the real building will be in the development of the Web3 economy.”

(Disclosure: ConsenSys is one of 22 strategic investors in Decrypt.)