EVALUATING THE MARKET PERCEPTION OF PROOF OF WORK AND PROOF OF STAKE PROTOCOLS: A DIFFERENCE-IN-DIFFERENCE ANALYSIS

I assessed the impact of the Merge in Ethereum by analyzing the change in its market capitalization following the event. This study can provide insights into market preferences for proof-of-work versus proof-of-stake protocols. A difference-in-difference analysis was conducted, using Ethereum Classic as the control group and Ethereum as the treatment group to estimate the local average treatment effect following the Merge as the intervention. As a robustness check, the analysis was repeated using the Top 100 cryptocurrencies as the control group. I find no evidence that the Merge improved the market capitalization of Ethereum relative to Ethereum Classic or the Top 100 cryptocurrencies.