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Cryptos has increased this week, with Ether among the strongest performers.
Dusan Zidar / Dreamstime
Cryptocurrencies have risen in the last week, and sentiment among investors with digital assets has risen in the middle of the prospect that prices have bottomed out.
That has been good news too
Bitcoin
-and even better news for
Ether.
But it may not last, according to analysts.
Make no mistake, digital assets are down in the dumps. The three months to the end of June marked the worst quarter for Bitcoin since 2011 – a year in which it passed the $ 1 mark for the first time – while for Ether it represented the worst quarter ever.
The market value of cryptocurrencies has collapsed to $ 1 trillion from almost $ 3 trillion eight months ago, with Bitcoin and Ether both trading at less than a third of the record highs they reached in November 2021.
Nevertheless, the last week has seen a reversal of wealth.
Bitcoin traded around $ 22,000 on Tuesday, well above $ 18,000 reached the bottom of a mid-June sale, and at its highest level since the cryptocurrency route a month ago brought prices down from $ 30,000. Ether changed hands to $ 1,550, with the token that formed the basis of the Ethereum blockchain network after laying its last bottom below $ 1,000 far behind.
But the collections for the largest and second largest cryptos have not been the same. Bitcoin has risen 11% from a week ago, while Ether is up 45% in the same period.
Ether’s overachievement seems to be rooted, at least in part, in a resurgence of optimism around “The Merge” – which will see the process of extracting the symbol change from an energy-intensive process called proof-of-work to proof-of-effort. .
A major criticism of cryptocurrencies such as Bitcoin and Ether is that they are not climate friendly, and require significant amounts of energy to “mine” tokens using intensive calculations. The mining process is what validates the decentralized ledger for transactions that underpin the blockchain. Proof-of-stake instead requires users to set aside, or bet, tokens to validate the network.
The date for The Merge has been pushed back several times, but traders seem to be grabbing an update from Tim Beiko of the Ethereum Foundation, who said via Twitter July 14 to September 19 was the preliminary date for the update.
Martin Hiesboeck, head of crypto research at the trading platform Uphold, poured some cold water on optimism after Beiko’s announcement, noting that a date for The Merge has been announced six times before – and has been delayed each time.
“While the price action of Ethereum certainly gives hope that the general market may turn around in the next few weeks, the sudden jump is mainly motivated by hype and perhaps a lack of understanding,” said Hiesboeck.
Also from a technical perspective, Ether’s fantastic overperformance of Bitcoin may not have strong legs.
“Bounces can be volatile with short-term overbought relationships returning,” Katie Stockton, managing partner of technical research firm Fairlead Strategies, wrote in a note Monday. “The downward trend remains intact.”
“Ether needs more significant improvement in intermediate momentum to convince us that a lasting turnaround operation is underway,” Stockton added. “From a long-term perspective, a bear market cycle has a grip with negative momentum.”
The technical outlook is not much better for Bitcoin either, according to Stockton.
After the rally this weekend, Bitcoin is not back in a “consolidation phase”, according to Fairlead Strategies, with prices struggling to break the 50-day moving average close to $ 23,200 and showing few signs of improvement in the medium term.
“We remain bearish in the medium term,” Stockton said. “Negative long-term momentum and the declining 200-day moving average increase the risk over the short term, so we would not chase this rally.”
Write to Jack Denton at [email protected]
