Crypto nurses post-CPI losses as clock ticks to Ethereum upgrade
CRYPTOCURRENCY markets on Wednesday (Sep 14) took stock of sharp losses triggered by hardening expectations of restrictive US monetary policy and braced for a possible test ahead from the upgrade of the Ethereum blockchain.
Bitcoin was near US$20,000 as of noon in Tokyo after a near 10 per cent 1-day plunge. Ether, the native token of Ethereum, extended recent underperformance to drop to US$1,600. Stocks, bonds and digital tokens plunged on Tuesday after hot US inflation data pointed to further large Federal Reserve interest-rate hikes.
The Fed has no alternative but to “pump the brakes, tighten financial conditions, ratchet real yields higher and that’s just going to crunch on risky assets”, Charlie McElligott, cross-asset macro strategist at Nomura Securities International, said on Bloomberg Television.
Such macroeconomic factors are currently overshadowing the Ethereum revamp, known as the Merge. But the upgrade to slash the blockchain’s energy use is due late Wednesday or Thursday and will come back into the spotlight.
An array of financial services are built atop Ethereum, making it a critical crypto highway, so any snafus in the software shift from a so-called proof-of-work to a proof-of-stake paradigm could ripple across digital assets.
“There’s been so much testing that the Merge itself is overwhelmingly likely to be very smooth,” Joseph Lubin, a co-founder of Ethereum, said on Bloomberg Television, drawing a comparison with an overnight iPhone update. Major Ethereum-based services are ready for the upgrade but some smaller ones may need to do more work, he added.
An Ether rally since mid-June, spurred partly by buzz around the Merge, has cooled of late. Both Ether and Bitcoin have more than halved in 2022.
Bitcoin could drop below US$18,000 before prices reach a bottom in October, Mark Newton, head of technical strategy at Fundstrat, wrote in a note on Tuesday. BLOOMBERG
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