Bitcoin and Ethereum rebound from their lows, but weakness points to further declines
Buying returns to the cryptocurrency market, with Bitcoin and Ethereum bouncing back from three- and two-month lows, respectively, hit on Monday. Rises are about 5% for both assets, while other tokens see prices rise as much as 10% since Monday, like Ripple. The total capitalization is close to $940 billion, after touching $900 billion, almost $100 billion from the trillion-dollar levels reached by the cumulative value of cryptocurrencies.
Experts warn that the rebound may not last in the market as the macroeconomic outlook threatens risk assets, with a US Federal Reserve (Fed) rate hike that many expect of 1% just around the corner. Analysts and experts are warning that a further correction is coming for global stock markets, as central banks will not lag behind and will continue to raise interest rates in order to combat inflation that also shows no signs of letting up.
"These are the really important levels. If it were to lose them, all the alarms would go off and would make us think of an extension of the falls to the level of $12,300. Its technical aspect today is very complicated. We will only see a sign of strength with a close above the highs drawn this week at $22,715," the expert added.
As for Ethereum, its downward spiral of 25% falls in the space of a week led it to lose the support at $1,400 and it has even fallen below $1,300, to price levels not seen since July. This indicates nothing other than that a new correction of equal size is brewing for the currency that just migrated from the consensus model to the proof of stake model -from the previous proof of work-, which would take the price down to $1,000.
The selling was initiated by a 'sell the news' move in the first instance and, as we mentioned, by the risk aversion that settled into the markets ahead of the Fed's rate hike. Market participants also realized that, following the migration, Ethereum's developments to reach its 2.0 version are only 55% implemented and it will take years to complete the roadmap of improvements designed by its founders.
Amid an increasingly adverse climate, opponents of the proof-of-stake model were vocal in their criticism, alluding to the risk of centralization of the blockchain, as transaction validation nodes are in the hands of a few entities.
Finally, it is worth noting that the Ethereum merger also drew the attention of regulators. In a controversial filing, the US Securities and Exchange Commission (SEC) noted that it has jurisdiction over Ether transactions taking place worldwide.
Currently, following the protocol change, there are 45% of Ethereum nodes operating in the United States. According to Etherscan data, the second highest density of nodes is in Germany, at 19%. However, the SEC seems to suggest that just because the U.S. dominates the ETH node pool, it has jurisdiction over the global ETH network.