We have witnessed a historic week for the cryptocurrency ecosystem, however, the bears have taken over the market, with a hair-raising fall that sounds the alarms, driven by inflation and the economic situation. As if that were not enough, the Terra ecosystem is in big trouble, we will tell you why up next.
One of the most anticipated events in the cryptocurrency ecosystem in recent years has been completed, since last Wednesday Ethereum’s “The Merge” was successfully executed, an update that changes the consensus protocol of its blockchain, from Proof of Work (PoW) to Proof of Stake (PoS). In this way, traditional mining was eliminated, reducing the energy consumption for Ethereum by around 99.5%, an impressive figure!
This project had been planned for several years by the Ethereum Foundation and its group of developers, practically since its creation in 2015, since it will also create a more scalable network with a much cheaper transaction cost. Also, it should be noted that everything had to be done very carefully, since a failed transition could have caused chaos on the platform.
The Merge officially started at 6:43 A.M. UTC, while around 41,000 people tuned in on YouTube for an event called the ‘Ethereum Mainnet Merge Viewing Party’“. After a wait and a process that took around 15 minutes, The Merge officially ended successfully.
Although the update was carried out successfully and without any problems, not everything was really as investors expected, since the price of Ethereum suffered a sharp drop after the event, losing about 25% of its value in a collapse that few expected, at least until a couple of days or weeks after the event. The Merge triggered a strong selloff, which was likely fueled by those who bought Ether to receive the Ethereum PoW airdrop, a fork that came about after the protocol change.
Another important issue that has driven the collapse of cryptocurrencies these days is undoubtedly inflation and macroeconomic indicators that show a quite complex situation, and an impending recession and economic crisis. It has been reported that mortgage rates have just exceeded the 6% mark, reaching their highest level since 2008. Yes, we are seeing figures that would exceed those of that year in which we experienced one of the strongest financial crises in recent times.
In addition, borrowing costs have skyrocketed significantly as a result of aggressive interest rate hikes by the Federal Reserve, with the aim of neutralizing inflation that has been hovering around 40-year highs for several months now. This week an increase of 0.1% per month was reported in the US Consumer Price Index, reaching an inflation figure of 8.3%. However, analysts’ expectations were around 8.1%.
We are in a complicated and painful time for potential buyers, since home prices are quite high, and the high cost of daily life makes it difficult for people to generate savings for this type of purchases, just as reducing the amount of investment in the stock markets, including cryptocurrencies.
In other news, for all those who had a very small hope about the resurgence of Terra, let me mention that the stage is now getting darker. And it is that, a South Korean court has issued an arrest warrant against Do Kwon, the co-founder of Terraform Labs, for alleged fraud and violating the rules of the capital market after the collapse of the platform, through which a large number of users had millionaire losses, with a total amount of $40 billion with the TUSD and LUNA tokens last May.
On Wednesday, prosecutors charged Kwon with financial fraud, arguing that his TerraUSD stablecoin was an investment product that fell under South Korea’s capital markets law. In addition, the court issued arrest warrants for five other people associated with Terraform Labs.
There has been a lot of speculation about his location, and even he himself has pronounced that he is not on the run. However, he could not be located, since according to various reports the character was in Singapore. However, the Singapore Police Force (SPF) said on Saturday that Do Kwon is not currently in its territory, so South Korean prosecutors have asked Interpol to issue a red notice so they can find him as soon as possible.
Bitcoin is currently near $19,300, after rejecting a sharp drop to $18,200. It is currently in an area that used to work as a strong support, but we must be aware of its behavior in this area, because if strong downward pressure is generated again and it consolidates below this level, we could see Bitcoin at its lowest level in the whole year, near $17,100, where we meet another important level. Also, it should be noted that the price of the asset is right at the upper limit of a downtrend channel that has set the tone for this bear market, so it will be interesting to see how it behaves right at this price.
BTC/USDT 1D (TradingView Chart).
For its part, Ethereum is above $1,350, and it looks a bit different than Bitcoin, located at a support zone, after the huge crash it faced last week. We could see a slight move to $1,770 if the price consolidate above this level today. On the other hand, if a strong downward pressure is generated in the market, ETH could fall to a support level near $933, and it would be the second time in the year that we would see Ethereum below $1,000.
ETH/USDT 1D (TradingView Chart).
A rather bittersweet week, after one of the most important events took place that has revolutionized the functioning of Ethereum, and that very likely will boost the project significantly; while on the other hand, sharp falls in the markets and economic indicators that do not look good at all in the short term. We will be aware of everything related to the macroeconomic environment, as well as the follow-up of the Do Kwon case to keep you informed. Without further ado, we wish you an amazing week.
