Despite criticisms about its environmental impact, cryptocurrency has defied all the odds and is on a roll. Although regulators have promised to crack down harder, China has taken steps to restrict crypto mining. Meanwhile, the U.S. has turned its attention to digital assets in a whole new light. Recently, SEC Chair Gary Gensler called cryptocurrency the "Wild West" and said he wouldn't compromise on protecting investors. Still, cryptocurrency strategists have unveiled their predictions of skyrocketing price targets.
Bitcoin
The market remained bullish despite a number of worries. Earlier this week, investors were expecting the U.S. Federal Reserve to increase interest rates again. Additionally, big tech firms like Tesla, Apple, and Google are scheduled to release earnings reports that may add volatility to the market. Meanwhile, the sustainability of mining firms has increased and the difficulty of Bitcoin has declined at the same time. The recent gains were also in contrast to what was happening a week ago.
The recent gains in Bitcoin and other cryptocurrencies are not new. This past week, both Bitcoin and ether were up over 5%. This move followed a 19% increase in the previous week. This has made the price of ETH and bitcoin rise for four consecutive weeks. But, despite the rosy sentiments, it's important to note that the price of these cryptocurrencies is still highly volatile. Hence, long-term investors should avoid investing in crypto without considering their financial situation first.
A few factors contributed to Bitcoin and other cryptocurrencies gaining ground this week. First, Bitcoin's price remains correlated to economic conditions. Although the price of the cryptos has climbed significantly since mid-November, it is still largely dependent on the overall economy. Hence, a rise in prices in one week may not necessarily mean that the price will stay the same for the rest of the year.
Another factor in the rise of Bitcoin and other cryptocurrencies is the recent stimulus spending by the U.S. government. This money is expected to add a significant amount of inflation to the economy. This is why many investors are buying bitcoins and other cryptocurrencies and hedging against rising inflation. They are betting on their future potential and believe that the use of Bitcoin will increase the value of the currency. As the number of people using it increases, so will its trust.
Other cryptocurrencies
The cryptocurrency market has remained under pressure since last November when it hit a high of over $3 trillion. Prices have fallen with the price of the broader market, alongside fears of inflation and a recession. Investors also reacted negatively to the recent collapse of algorithmic stablecoins Terra and luna, which rattled the market. Those events have also captured the attention of government regulators in Washington, who are now working to regulate digital assets.
Bitcoin is now the largest cryptocurrency by market cap and finished the week 5% higher. The recent reversal follows the third week in a row of positive performance. Bitcoin prices rose on the news that the U.S. economy has been in recession for two quarters, which technically defines a recession. Despite the weak economic data, the market has been able to withstand fluctuations in price, and Bitcoin is currently trading at $23,900.
ETH: ETH is one of the best performing cryptocurrencies. On Tuesday, the price of the cryptocurrency rose by 4.9%, a significant amount. The token has been outperforming Bitcoin in every month but four. As of Tuesday, one Ether is worth 8% of a Bitcoin. Bitcoin, meanwhile, fell 1% to $57,000, after reaching a record high of over $69,000 earlier this month.
Ethereum: While Ethereum is gaining in price, its recent flurry of activity may be a temporary blip in crypto market conditions. This could be the first sign of an upcoming trend. The price of Ethereum is getting cheaper, but it is not necessarily a better alternative. Ethereum has also recently been impacted by over $820 million in forced liquidations. In this environment, Ethereum may be able to take the lead in price growth.
Inflows into digital asset investment products
Inflows into digital asset investment products have fallen this week, according to the CoinShare bulletin. Last week, bitcoin EFTs totaled $19 million, while total inflows from the prior week were revised down to $206 million. The decline in inflows from the prior week is likely the result of late reporting of trades. But the trend isn't all bad.
Inflows to Bitcoin-based investment products accounted for the bulk of the weekly total. This represents $350 million in year-to-date inflows, or 0.9% of AuM. Outflows in Ethereum-based funds, meanwhile, have slowed down to a trickle, with negative net flows totaling $111 million. Other altcoin-based investment products saw inflows of $8.2 million, including Cardano and SOL. Overall, the market is up 12% year-to-date.
Bitcoin-focused ETPs and mutual funds also saw inflows. However, a higher percentage of investors were in cryptocurrency ETFs last week. This suggests that investors reacted to the latest Fed statement and lowered their expectations for the crypto market. A week like this may be the right time to buy or sell cryptocurrencies. This trend suggests that the Fed is still unsure of its future stance.
Cryptocurrency-focused digital asset investment products saw inflows for the fifth consecutive week, and for the sixth consecutive week. A total of US$41.6 million was invested in these products in the week ended Sept. 17. Compared to the prior week, Bitcoin saw inflows of $126 million and $1.3 million. Ethereum and multi-asset crypto investment products saw inflows of $201.3 million in the year to date.
Ethereum merge upgrade
The Ethereum Merge is set to introduce major structural changes to the network, making it a must-have for investors in Bitcoin and other cryptocurrencies. Although it's a major upgrade, there are some misconceptions about it. The Merge marks the end of proof-of-work mining as the only way to produce blocks. Instead, validating nodes will propose blocks using staked ether, setting the stage for future scalability and sharding upgrades.
After the upgrade, Ethereum's test chain, called Beacon Chain, will begin merging with the main chain, creating a new proof-of-stake consensus network. Once this happens, Ethereum will be as fast, cheap, and reliable as its competitors. With the help of its massive developer community, Ethereum will be faster than other coins. Ethereum investors have been anticipating the upgrade for years.
Before the Merge can take place, it will need to be implemented in the Ethereum network. The new Merge will unify the 'Eth2' Proof-of-Stake layer and swap miners for validators. This will result in a 90% reduction in new ETH issuance and a reduced energy consumption. The Merge is expected to take place in the first half of next year.
In the meantime, the Ethereum community is planning to switch from PoW to PoS. In fact, the Merge upgrade has been compared to changing the engine of a plane. Critics have suggested that the Merge will not be implemented until August or September. That means the blockchain could take months to reach its final form. This may also delay the rollout of PoS. So, Ethereum developers are taking time.
