The price of ether fell Thursday after the Ethereum network completed its migration to the proof-of-stake consensus mechanism, also known as the "merge."
Ether was last down 5.6% to $1,501.88, after falling as low as $1,459.00 earlier, according to Coin Metrics. Traders had expected to see a decline in the price following the transition late Wednesday night.
"It is important to recognise that the merge has already been largely priced," said Anto Paroian, CEO of crypto hedge fund ARK36. "Ethereum has already appreciated more than 100% since its June lows. It seems likely, then, that if the Merge turns out to have a positive effect on Ethereum's price action, the upside may not be sustainable."
After the value of cryptocurrencies tumbled in the first half of the year with other risk assets, ether rallied to start the second half and has been outperforming bitcoin since. It advanced almost 70% in July alone, compared with bitcoin's 27% gain, according to Coin Metrics. In August it fell almost 9.3%, compared to bitcoin's almost 17% loss.
"Many investors expect it to be a 'sell the news' type of event which means that, after the initial surge, we may actually see the price of Ethereum drop within the next few days or weeks, especially given that, just like the rest of the crypto markets, ETH is still very much driven by the negative macroeconomic outlook," Paroian said.
Investors have been cheering Ethereum's planned tech upgrade for months for its ability to turn ether into a yield-generating asset and to improve the security of the network in an energy efficient way. Many have called it one of the most important moments in crypto's short history.
Many in the crypto market have also been monitoring a popular trade: investors have been buying spot ether and shorting ether perpetual futures, in order to get tokens of the "forked" version of Ethereum for free without the ether price exposure. Some analysts have said they expect to see that trade unwind after the merge.
"Now that the merge has happened, traders and funds are positioning themselves out of it, that trade is kind of over," Jason Lau, chief operating officer at Okcoin, told CNBC's "Crypto World" Thursday.
"On the other side, asset managers and holders are actually positioning themselves ahead of a longer-term game," he added. "The Ethereum merge is really just one step in a sphere in a long series of upgrades that will lead to more scalability will lead to an upgrade in performance of the Ethereum network."
Still, the market remains largely macro-driven. The price of ether was little changed for much of the morning but turned lower in tandem with stocks, particularly the Nasdaq Composite, which was down 1.4%. Bitcoin, whose correlation with stocks hit an all-time high this year, was down by less than 1%.