The crypto market saw a bearish week, with Bitcoin falling nearly 10 percent in the last seven days. The largest crypto token by market capitalization was trading at $21,750 on Friday, according to coinmarketcap.com. On Monday, it briefly hit the $25,000 mark.
Ethereum, the second largest cryptocurrency, was down nearly 8 percent in the last seven days. It was trading at $1,741 on Friday.
“For the entire week, crypto markets traded in red thanks to the profit booking, which kept the investors on tenterhooks for the strong upside in recent days,” said Raj A Kapoor, founder and CEO of India Blockchain Alliance.
Experts said that the investors would look forward to the upcoming ‘Merge’ announced by Ethereum. “For Ethereum, updates on the upcoming ‘Merge’ is the key,” Kapoor said.
The Merge is a software upgrade after which the miners can use a proof-of-work (PoW) method to “stake” their coins and create new blocks without actually mining them.
Unlike the older method, where the miners need to solve computational problems to win newly minted coins, it is expected to bring down the power consumption level by 99.95 per cent, according to a report by Bloomberg.
“Open interest for Ethereum options crossed $8.2 billion, surpassing Bitcoin’s $5.4 billion as derivatives traders place directionally obvious bets for Ethereum pertaining to the upcoming Merge scheduled for September 19,” CoinDCX’s research team told Business Standard.
“We expect the movement to be in the positive direction as the most widely used blockchain is shifting to a more efficient mechanism of proof-of-stake (PoS),” Kapoor added.
Inflation still key
“Bitcoin has reacted to quantitative tightening measures over the past few months as other digital assets also witnessed drops due to crucial support price levels, after the release of the FOMC July meeting,” CoinDCX’s research team said.
In major global countries, inflation has been out of upper-tolerance levels. The UK, this week, recorded inflation at 10.1 per cent, the highest in over 40 years. Inflation in the US cooled down a bit to 8.5 per cent in July from 9.1 per cent in June but was still way above the Federal Bank’s target.
“In the coming days, inflation is likely to remain at the focus. The United States, the world’s largest economy, will announce its gross domestic product (GDP) numbers for the April-June period. If it registers contraction or misses the street estimates , we can see pressure mounting upon the digital assets as well,” said Kapoor.
He also said the gains would be capped as there is no significant reason for a sustainable upside in the crypto market.