Why bitcoin and ether are plunging this Monday

While the crypto ecosystem celebrated Ethereum’s The Merge transition last week, the cryptocurrency market is in the red this Monday morning.

This Monday morning, cryptocurrencies are in the red. According to data from Coinmarketcap, bitcoin is trading at 10:30 a.m. at $18,500, again falling below the symbolic threshold of $20,000. The cryptocurrency has lost 16% of its value for a week, and 8% in the space of a day.

For its part, ether is not doing any better: the asset is trading at 1300 dollars, its value having fallen by more than 25% in the space of a week, including 10% since this Sunday, returning to its lowest level since mid-July.

Consequently, the total capitalization of cryptocurrencies continues to fall, at 900 billion dollars on Monday, far from the symbolic threshold of 1000 billion dollars. As a reminder, this capitalization had reached a historic peak last November, around 2,800 billion dollars.

New Fed meeting

How to explain a new fall in cryptocurrencies? On the one hand, these assets continue to be correlated with traditional markets, which remain stretched as the Federal Reserve prepares to hold its new monetary policy meeting on Tuesday and Wednesday, where it is expected to announce a further increase in its interest rates.

This Monday around 10:35 a.m., the CAC 40 lost 0.83% after already dropping 2.17% over the whole of the past week. Similarly, futures on US markets are down (the declines are between 0.9% and 0.7%) on Monday. In general, equity markets are penalized by risk aversion and cryptos are part of risky assets and are therefore penalized by the reduction in investments by individuals and professionals.

Ether in the sights of the SEC

Moreover, if ether falls more sharply than bitcoin, it is also due to a particular context. Last week, the Ethereum blockchain successfully completed its merger called The Merge. This transition, which consists of moving from a mode of operation of “proof of work” to “proof of stake”, did not leave the American stock market policeman indifferent.

Indeed, the chairman of the Securities and Exchanges Commission (SEC), Gary Gensler, declared last Thursday that cryptocurrencies which use the principle of “proof of stake” (or PoS for “proof of stake”) could be considered as of “securities” after passing the “Howey” test reports the wall street journal. “The Howey test determines whether an asset qualifies as an ‘investment contract’ and therefore subject to federal security laws,” the media outlet said.

The chairman of the SEC, on the other hand, would not have specifically qualified ether or another cryptocurrency according to the wall street journal, but the very system called “proof of stake”. Nevertheless, given the move to The Merge of Ethereum, such a message from the American stock market policeman seems to be beyond doubt. Until now, Gary Gensley had said that bitcoin does not fit into the category of securities.

Leave a Comment