The cryptocurrencies are suffering a new day of panic amid the risk-off sentiment that dominates the market and the merger (merge) of the ethereum network. Central banks continue to raise their hawkish tone (rate hikes and stimulus withdrawal), which is battering risk assets such as stocks and cryptocurrencies themselves. Bitcoin falls violently and is in the area of 18,400 dollars, while ether (also hit by the uncertainty generated by the merger of the ethereum network) is sinking directly and is losing 1,300 dollars per unit.
The bitcoin, up to 18,490 dollars, while the ether falls more than 10%, and has lost the area of 1,300 dollars. The next clear resistance for this cryptocurrency is not found until $1,000 per unit. Meanwhile, cardano, XRP or polkadot plummet about 11%. The fall in the ‘crypto’ universe is widespread.
The new fall of bitcoin and cryptocurrencies
The price of cryptocurrencies has been experiencing great volatility since last Monday, when the ether fusion began, a process that ended on Thursday, and which aims to change the mechanism by which transactions of this currency are registered and validated and new currencies are issued (a more sustainable and less energy-intensive system). This, although it may be positive in the medium and long term, is generating great uncertainty in the short term.
Why are cryptocurrencies falling?
In addition, looking from the optimal ‘macro’, this week the Federal Reserve and the Bank of England are expected to continue raising interest rates, draining liquidity and announcing more increases in the price of money in the future. These two banks are key institutions for global liquidity, given the importance of their economies and, above all, that of their currencies (dollar and pound sterling), commonly used to settle international commercial and financial operations.
Edward Moya, a strategist at Oanda, notes in a note that “Bitcoin falls again amid sell-off in stocks as risk appetite continues to fade.”
Added to the nerves of cryptocurrencies is the White House statement that is trying to put order in this market, which has been called by some organizations, with the possible creation of an organization that regulates cryptocurrencies. Precisely, one of the attractions of these assets is the lack of regulation and the low traceability of operations. If a public body is finally created to control and regulate cryptocurrencies, investors could establish a new price that reflects the loss of “confidentiality” and “secrecy” that currently dominates this market.
The Treasury and that it can offer some of the advantages that cryptocurrencies offer and occupy its space. However, cryptocurrency advocates believe that a public digital currency will never be able to offer the anonymity that digital assets such as bitcoin do today. The debate is open, but the truth is that the central bank has accelerated the investigation and tests for the launch of what are known as CBDCs.
The ethereum meltdown
On the other hand, the ether cryptocurrency, the second largest by capitalization in the cryptocurrency market, has plummeted more than 26% since its merger process began last Monday, a price drop that is dragging down bitcoin, the best-known digital currency, which in the same period lost more than 15%.
Deutsche Bank analysts have published a paper analyzing the ethereum merger, explaining that “the ethereum developers themselves have described the merger as ‘swapping an old engine for a new one mid-flight.’ Chain have been running since December 2020, it has not yet been used on a scale as large as Ethereum’s. Several other platforms have used PoS, such as Cardano, Solana, and Polkadot, but these networks operate on a smaller scale. It is possible that new vulnerabilities emerge after the merger,” Deutsche Bank experts warned.
The merger, known as The Merge in English, consisted of a protocol change in the ‘blockchain’ (the chain of computer nodes linked together by which cryptographic transactions and projects are carried out, such as NFT cryptoactives) by which I know.
This means that mining farms will no longer be needed to carry out complex computational operations and that, ultimately, involved a high energy bill, one of the main criticisms that fall on this system.
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