Bitcoin broke through the $22,000 mark, continuing a week of recovery ahead of US inflation data and a much-anticipated Ethereum network upgrade.
The world’s largest cryptocurrency hit $22,341.50 as of 9:45 p.m. ET on Sunday before dipping slightly, according to data from CoinDesk. Bitcoin was trading at $22,203 around 4:03 a.m. ET on Monday.
After dropping below $19,000 on Wednesday, its lowest level since June, bitcoin has since rallied around 17%.
The rise follows a week of gains for US equities last week. Bitcoin is closely correlated to stock markets, especially the Nasdaq, and often rises when the tech index is up.
Cryptocurrency investors are eagerly awaiting August’s Consumer Price Index report, due out on Tuesday, to see which direction inflation is headed, which could provide clues about future trends. future policy actions of the US Federal Reserve.
Cryptocurrencies face an unusual twin threat this week: US inflation data and hopefully the long-awaited and oft-delayed Ethereum merger. Hold your breath for a roller coaster ride.
Stocks have been under pressure this year as the Fed raised interest rates in an attempt to control runaway inflation.
Cryptocurrencies, which are also risky assets, have taken a beating. Nearly $2 trillion has been wiped from the entire cryptocurrency market since its all-time high in November. Bitcoin has lost more than 50% of its value this year.
This decline is also due to issues specific to cryptocurrencies, including the collapse of key projects and bankruptcies that have affected the entire industry.
Meanwhile, the Ethereum network will complete a long-awaited upgrade called the Merge. This will shift the Ethereum blockchain from a proof-of-work model to a proof-of-stake model and drastically reduce the amount of energy needed to run the network.
According to its proponents, this could pave the way for wider use of ether, the token that runs on Ethereum.
“Crypto faces an unusual double whammy this week: U.S. inflation data and [espérons-le] the long-awaited and oft-delayed Ethereum merger. Hold your breath for a roller coaster ride,” Nexo co-founder Antoni Trenchev said in a note Monday.
“In an age awash with stories, there is none greater than the cryptocurrency meltdown and it is an event that the whole world should take note of along with the carbon footprint of Ethereum which should be reduced by 99%. »
However, analysts have warned that the merger will not necessarily speed up the notoriously slow Ethereum network, nor will it reduce the fees associated with transactions.
Yet there is growing enthusiasm for the merger. Since ether hit its lowest level of the year in mid-June, the price of the world’s second largest cryptocurrency has significantly exceeded that of bitcoin. Ether is up more than 90% since June. 19, while bitcoin is up just over 20%, raising the question of how well the merger has already been valued.
The Federal Reserve is also expected to raise interest rates again next week at its Federal Open Market Committee (FOMC) meeting, another dark cloud hanging over the cryptocurrency market.
“The Merger may trigger a ‘sell the fact’ situation in the cryptocurrency market and we still need to be cautious for next week’s FOMC meeting. Bitcoin may continue to rally but it could be quite short,” said Yuya Hasegawa, cryptocurrency market analyst at the stock Exchange Japanese Bitbank, in a note on Monday.
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