Bitcoin has gotten quite a few shakeups in the previous weeks largely due to activity from both Ethereum – the second largest digital currency by market cap and its number one competitor – after the Merge, and the Federal Reserve, which held another meeting about a week after it took place.
Has Ethereum Weakened Bitcoin?
It appears bitcoin can’t seem to receive a stable rest over the past several months. The currency has undergone some of its most bearish conditions, and the asset is likely to experience a few more ups and downs before we’re ready to say hello to 2023.
The Ethereum Merge has been a long talked-about event that finally occurred in mid-September. It transferred Ethereum from a proof of work (PoW) module to proof of stake (PoS), meaning mining would be a thing of the past for the ETH network. From here on out, the currency would retain its value only through staking measures.
In addition, there would be fewer transactions bogging down the system, the network would be faster, and gas fees would also thin out. Market analysts at popular digital currency exchange Bitfinex wrote the following in a statement about bitcoin’s state after The Merge:
Bitcoin is in the crosshairs amid frenetic selling pressure as the CPI data dimmed any hopes of moderation from the Fed in its efforts to curb inflation. Battered high-growth tech stocks are continuing to be a proxy for bitcoin amid steep falls across the Nasdaq. As a nascent market built on new technologies, the cryptocurrency space finds itself exceptionally vulnerable to the bearish sentiment sweeping across financial markets.
Joel Kruger – a market strategist at LMAX Group – was also quick to throw his two cents into the mix, commenting:
Sentiment toward [The Merge] has been overshadowed by larger, global macroeconomic forces, but overall, we think most of the event risk around The Merge has been priced in, tilting the greater balance of risk to the downside in the immediate aftermath of a sell-the-fact type reaction… There’s no doubt the CPI report has triggered a fallout in risk assets and crypto markets by extension. Given how things have been correlating, and considering this latest inflation data, we expect more downside pressure in crypto as investors are forced to contend with the reality of higher-for-longer monetary policy that strains growth prospects and weighs on sentiment.
Could Another Drop Be Coming Soon?
He concluded his statement with:
We believe bitcoin should ultimately be used as a proxy for direction in the broader crypto market. Having said this, our expectation is that there is still potential for one more healthy dip, possibly down into the $10,000 area, before the market is then finally supported ahead of the next big run towards a retest and eventual break of the record high from late 2021.
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