Crypto Price Check: Eyes Turn to Ethereum ‘Merge’
Cryptocurrency prices were down on Monday, August 15, as investors and analysts turn to Ethereum’s upcoming merger.
Bitcoin, the most popular cryptocurrency, was down 2.4% to $23,975.68 at last check, according to CoinGecko, while ether fell nearly 1% to $1,882.88 and dogecoin fell 1% to $0.075312.
“Most Hated Conventions”
Frank Corva, senior digital asset analyst at Finder, said Raoul Pal, CEO of financial education platform Real Vision, tweeted last week that the recent month-long rally in risky assets like tech stocks and crypto is “one of the most hated rallies in quite a few years.”
“What Pal meant by this is that most are calling this recent uptick in risk asset price action a minor — and soon-to-be short-lived — bullish trend in an otherwise macro-bearish environment,” Corva said.
“Financial Twitter (FinTwit) and Crypto Twitter (CT) have been filled with sentiments that resemble something of a cross between disbelief and downright vitriol regarding this recent rally.”
Corva said investors and traders may be traumatized after the past eight months of mostly downward price action in risk-on asset markets. As a result, they may be in disbelief or denial.
“Perhaps eight months of downward pressure on markets as a result of the Fed engaging in quantitative easing has completely disconnected investors from the risk on assets from the euphoria they felt from mid-2020 to the latter part of 2021,” he said.
“So, the big question now is whether we are at the beginning of a broader rally in risk-on assets, or should we retrace and test the June 2022 lows for SPY, QQQ and most cryptoassets, including bitcoin and [ether]?”
The answer to this question, Corva said, lies mostly in whether the inflation numbers measured by the consumer price index go down and whether the Fed continues to raise interest rates aggressively.
“But there is also a story that develops within this macro framework,” he said. “Ether – the native asset of the ethereum blockchain – is on the verge of a price break compared to bitcoin.”
Ethereum’s latest dry run
Winston Ma, managing partner at CloudTree Ventures, said ethereum, the second-largest cryptocurrency, has recently gained momentum, again approaching $2,000 as it approaches the merger, scheduled for mid-September.
Both ethereum and bitcoin, the leading crypto, use blockchain technology to validate and record transactions. But the upcoming change in the way ethereum operates will have ramifications for speed, durability, reliability and availability.
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Last week, Ma – author of “Blockchain and Web3: Building the Cryptocurrency, Privacy, and Security Foundations of the Metaverse” – said: “Ethereum ran its final dry run for the merger, which will see ethereum’s underlying blockchain transition from its energy-intensive proof-of-work system to a more efficient model called proof-of-stake.”
“Bitcoin lost some ground to ETH in recent years, with its market dominance falling below 40% from nearly 70% at the start of 2020,” he said.
“This ETH transition is expected to make it faster and more energy efficient, which could drive ETH’s market cap even closer to that of bitcoin as the crypto king.”
Cross chain bridges
Meanwhile, David Lesperance, managing partner of immigration and tax counsel at Lesperance & Associates, said authorities are looking closely at “cross-chain bridges,” which connect independent blockchains and enable the transfer of assets and information between them.
He said the bridges could be an important way for criminals to launder money by sending digital assets across blockchains, bypassing a centralized service that could track and freeze transactions.
A particular cross-chain bridge called RenBridge has been used to launder at least $540 million in crime-related cryptocurrencies since 2020, according to blockchain analytics firm Elliptic, he said.
“Developers have bridged chains to allow users to send tokens from one chain to another,” Lesperance said. “Transfers of digital assets between chains rely on darknodes, or networks of thousands of pseudonymous validators. That has allowed them to become a prime tool for hiding cryptocurrency.”
At the same time, he added, for money launderers the bridges are particularly vulnerable to attack as they hold hundreds of millions of dollars of assets in escrow and multiply their possible attack vectors by operating across two or more blockchains.
“Recently, a bridge known as the Nomad lost nearly $200 million in a devastating exploit as a result of a failure,” he said. “Within hours, the thieves started using RenBridge to launder the money.”
TheStreet has reached out to RenBridge for comment.
