This is the most accurate analysis of the crypto bear market at the actual moment.

The info you are going to find is nothing you would've expect. It is about old and important announcements and their impact on cryptocurrencies right now.

The most attractive part is you are going to learn why and how this actions affects your life, investments and work.

If you are strong enough to accept the bad in crypto (or maybe the good, if you have the right protection) just keep reading. Bad things happens in any aspect of life. How could we define happiness without sadness? Don't worry you just need to find little gaps to overcome the hard times and you will, during this article, but in regard of crypto market.

So, let's get started! 

What we are going to touch:

• Crypto prices
• Ethereum merge
• The predictable factors for the crypto market decline
• The real factors for the crypto market decline
• How the bear market affects you and what you can do to not lose money 

Bitcoin and Ethereum prices: what you need to know?

As you may already observed during the crypto evolution, the altcoins prices follow the bitcoin price. If BTC price rallies, the altcoins are booming, but this also applies on the opposite side. Right now, BTC price is in a downtrend and the Ethereum is first to follow it, then all the altcoins prices are dropping even more. It was seen this spring when BTC price increase drove almost every altcoin up a lot. Also, in this bear market, altcoins are as far as 82.79% down and even worst some alts died.

Nobody can forget Terra LUNA and its founder Do Kwan. His 'ponzi scheme' using DeFi protocol Anchor to give investors high yield based on an algorithmic stablecoin (mint and burn system) was not sustainable. Users lost money and DeFi applications saw a decline in usage. 

The people rage was understandable. And also.. the current rage is understandable. Ethereum merge just happened SUCCESSFULLY and Ethereum price is going down... more and more. What? Good news that brings prices down, from when? ETH was traded as low as $1293.78  and BTC felt at $18.367  price. Well.. it seems that macro plays a more important part in the crypto market that you may believed. Before going to the macro part, a short reminder about what was about the Ethereum merge and the progress it brings in today's economy.

Ethereum merge: what happened?

Ethereum had successfully transited from a Proof-of-Work consensus protocol (PoW) to a Proof-of-Stake consensus protocol (PoS). That is what merge means: a little switch between 2 different protocols.

PoW and PoS are both used to control and maintain the functionality of a network in a decentralized manner.

PoW is composed by blocks that contains transactions data which are grouped together in a chronological order to form a 'chain of blocks'. It is relying on so called 'miners' that use their computers' power (in the network they represent the 'nodes') that solve difficult mathematical problems (humans only are not able to do so), in order to add new block transactions on the chain, also maintaining the security, transparency, distribution and immutability of the network. They get rewarded with the network's native minted coins. The more time passes, the lesser the reward.

It is like a competition of who can solve first the puzzle to get the reward based on computational power (heavy hardware machines). Electricity is needed for the computers to make things work, so energy consumption from mining raised growing problems lately.

PoS proposal solves the energy problem, by putting the control of the network in the hands of the 'validators'. To become a validator, a user need to 'stake' a specific amount of the network's native coins (having some tokens that they can not move/sell, empowering the network). The more you stake, the bigger are chances to be randomly chosen for the validator role by the algorithm. Instead of using mathematical puzzles, PoS is rellying on a deterministic probability influenced by the number of coins staked at a specific moment. This is not the game of computers, this is the game of humans allocations. In this way, the energy consumption is reduced by far (the hardware requirements are lower), while the security, transparency, distribution and immutability of the network are not at risk at all. 

Because Ethereum has a lot of applications and its blockchain network is used by many projects, the energy became a real problem for the Ethereum PoW mechanism. To help the web3 space to evolve and support many projects that faced energy consumption difficulties, Ethereum is now a PoS protocol, 'reducing the worldwide electricity consumption by 0.2%' confirmed by the founder Vitalik Buterin. 

Now, let's move to the macro part:

1. CPI data revealed & inflation

The CPI or consumer price index is a price index represents the price of the weighted average market basket of consumers goods and services purchased by households. It is reported over time. The CPI rose 0.1% in August, even the prediction of a 0.1% drop was made. It gained 8.3% year-over-year in August, the government announced. The expectations were to a decline of 8.1%, but the report still reflects a deceleration from the 8.5% pace from July. The reasons for the missing of expectations were the high prices that still continue to rise significantly, especially in  the industries like: energy, vehicles, house rents, food and medical services. All of these are essential in all individuals lives. Nobody can leave without food, energy or medicine. So people are struggling more and more. With inflation at 8.3%, even the desired percentage is 2% and people not being paid enough or the increase of unemployment, alongside with the limited imports and exports, the economy is shrinking. People spend less and that means they can not afford to maintain their investments in the stock market or in the crypto market. The volume is slowing down, so it is just logically that the bear market will continue.

2. 20-21 September: hike rate by the FED & in

Between 20-21 September, the Federal Reserve is meeting to discuss  about the current economical situation. Right now we are in a recession, the energy crisis is present in every country, gas prices are killing people' pockets, so with inflation reaching high levels (prices are skyrocketing) and it should be the FED's duty to mitigate it. What FED can do? For now... imposing high interest rates. Even at the beginning of the year the projections for the September interest rates increase was just about 15 bps or a maximum of 25 bps things changed drastically. On the table are 75 bps, 100 bps and the less probable one 50 bps. To combat inflation, interest rates need to go up, but that means borrowing is more expensive and people are less incentivise to spend and invest money. But that could bring stagflation... and if the rates are not going up, the recession is going to affect even more the people lives. The tomorrow's decision may be positive for the crypto market or it may not affect it at all. Anything different will create more volatility. But remember what happened last time when a 75 bps occurred in June? Yes, a bloodbath in the crypto market. Anything is possible in the last week of September. 

3. Stock market dark September week (Ray Dalio shocking affirmation) 

A little secret first? The last week of September is considered the worst of the entire year according to the history data. So this bad performance of the stock market may be justified by this. And crypto follows stocks, so the bearish sentiment is there. The speculation about this idea are: the investors are back home from their summer holidays and just want to sell some holdings or families need money for back-to-school items and tuitions; more, September is the month when mutual funds start to pay distributions that can bring some tax selling. Ray Dalio, one of the most recognized investors announced the prediction of a 20% crash of the markets. His affirmation may be influenced by the present dark week for markets, so should we believed him? Due to his success in investments, the majority is buying his words. That creates panic and selling pressure from retail investors and institutions and these are two factors that 'help' the prices to go down. More crypto crashes?

4. President Joe Biden's executive order on crypto and The White House Office of Science and Technology Policy report 

Now, more spectacular news. People may not realized it yet, but the reason why crypto is going down right now is related to the President's requirement made back in March, this year. In short, he demanded an analysis over 'digital assets', presenting their advantages and disadvantages, how they bring an impact on the economy, at what levels, if they represent a risk or not and even if they can be implemented in today's governance in some way.

The President asked, so The White House OSTP responded. Few days ago, a long report was released, that mark some aspects of crypto, putting the accent on climate and energy implications of crypto-assets in the US. One of the main points presented was exactly the reason crypto market is down: MINING.

In the report, the authors tried as hard as they could to accentuate the bad impact of crypto mining on electricity usage. The authors reported that energy used for crypto mining represents a percentage between 0.4% - 0.9% of the world energy that is equal to the total energy used by a country like Argentina. The high equipment requirements for a functional PoW blockchain network was also mentioned, but the authors made a mistake when they mentioned that both Bitcoin and Ethereum used PoW consensus. Oooops??!! But still, this brings worries for crypto. (they somehow mentioned latelt that Ethereum is going to be a PoS)

A false argument of the authors was that mining operations have high load factors and they use power constantly. The truth is that cryptominers can turn off and on unlike validators who risk slashing. Another doubtful argument was that crypto uses more than a third of the world energy. No evidence for this. 

For crypto as a payment system, they said that credit cards are more efficient and uses lesser energy, but they 'unintentionally' forgot to mention the larger infrastructure of interactions.

Then, they made the miners the bad actors. It was reported that 38% of mining energy worldwide is consumed by US. So the risk of centralization is there and it made users to lose their confidence in crypto. After all, cryptocurrencies were made to bring decentralization and it must do so to please the users.

The authors supported the idea that miners' locations should be closely monitored and reported in order to identify the actual power usage of electricity. 

What they said was ' the total power usage of today's crypto network cannot be monitored because the users did not disclose their location and report their energy uses ' and sustained that real estimations can not be published, just approximations or outdated data, because of that. Crypto is about decentralization, remember?

In order to reduce the energy consumption miners need to use just renewable energy, so they have to disclose if they use renewable energy, because the government wants more data to make statistics and analysis the situation. What worries miners the most most is that regulations could anytime crack mining if it impacts equities or communities, even if mining uses just renewable energy. The authors confirmed that they want less control for miners abd more for the government. Crypto is not about that, but nice try!

The possibility of banning mining crypto in the US was also mentioned if it does not follow the policies; so China ban on mining is the way to go in US?

Now, about the miners equipment! The report showed that a lot of carbon emission exists because of the ASIC machines (specific equipment required to mine crypto that uses PoW). Also, was noted that 0.3% of global energy generation emission is made by the to largest crypto by market capitalization. Which one you wonder? I wonder the same. Authors missed to note that. If they put in their calculation cryptocurrencies like Chainlink, that stores high volume of data, their calculation may not be fair. 

The sad part of the report was the limited blockchain usecases mentioned, like for tracking supply chain or the power used by solar panels. Of course, the latter one would be managed by specific institutions, so they will even have control over the energy you produce and should own. Again, the control is stole by you guess who: the government. 

The report also focused on the stablecoins and if they can work properly for maybe a future 'FedCoin' ? Of course the authors brought into discussion the failure of Terra Luna algorithmic stablecoin. But stablecoins like USDC, USDT and DAI work. Where were their merits? The bad events like a coin crash are needed in order for us to chose and find properly the coins we need to use. Crypto is new, projects will die and the market will evolve exponentially.

What does all means for you and what you must do?

Crypto market is in red, mainly because the 'digital asset' report did not showed the desired data and did not covered the true potential of crypto and blockchain technology. That means, this is just a normal part of the cycle. It will pass eventually, like history showed us many times before

The economy is not very stable right now and if you want some form of protection in these dark times, you need to find some opportunities. Some basics can be: spending less and using public transport may and not borrowing money from banks can help; do you think about buying a new car? try a used car instead. 

Now, some other ideas for you:

If you are a miner, look closer to the mining regulation and be sure you mine crypto in the right way.

If you invest in stablecoins, don't be scared they will be the next LUNA. Do your research properly and leave the emotions when you make an investment decision. 

If you are an experienced trader, take advantage of the volatility in the markets!

If you made your economical research, you may think about bonds: they do pretty well during high inflation times.

Don't be worry about the buzz. Crypto suffered harder times and it survived. Don't panic when prices are dropping, the recovery is coming. You just need patience. Are you not excited to see how this bad news will turn into necessary steps for the main adoption? 

Disclaimer: This is not financial advice! Informational and educational content only!

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