Stocks have been under pressure this year as the Federal Reserve raised interest rates in an effort to control rampant inflation.
Cryptocurrencies, which are also risky assets, have been hit. Nearly $2 trillion has been wiped out from the entire crypto market since its all-time high in November. Bitcoin is down more than 50% this year.
This downturn was also driven by crypto-specific issues including the collapse of major projects and bankruptcies spreading across the industry.
Meanwhile, the Ethereum network will complete a long-awaited upgrade called consolidation. This will shift the Ethereum blockchain from a Proof of Work model to a Proof of Stake model and significantly reduce the amount of power required to run the network.
Proponents say this could pave the way for broader use of ether, the token that runs on Ethereum.
Crypto faces an unusual double whammy this week: US inflation data and [hopefully] The long-awaited and much-delayed Ethereum merger. Hold your breath to ride a roller coaster, Nexo co-founder Anthony Trenchev said in a note on Monday.
“At a time full of narratives, there is nothing greater than consolidation in cryptocurrency and it is something that the wider world should pay attention to by reducing Ethereum’s carbon footprint by 99%.”
However, the analysts cautioned that the consolidation would not necessarily speed up the Ethereum network, which is known to be slow, and reduce transaction fees.
However, enthusiasm for the merger has grown. Since ether hit its lowest level for the year in mid-June, the price of the world’s second largest cryptocurrency has far outpaced that of bitcoin. Ether is up more than 90% since June. 19 While Bitcoin is up just over 20%, the question arises as to how much the consolidation price actually does.
The Federal Reserve is also widely expected to raise interest rates again next week when the Federal Open Market Committee (FOMC) meets, another dark cloud hanging over the cryptocurrency market.
“The consolidation could lead to a ‘sell-of-fact’ situation in the cryptocurrency market and we still need to be cautious about next week’s FOMC meeting. Bitcoin could continue to rally but it could be short-lived,” said Yuya Hasegawa, crypto market analyst. The Japanese stock exchange Bitbank said in a note on Monday.