Ethereum is outperforming the broader cryptocurrency market as the highly anticipated Merge approaches, but the bigger picture is still largely bearish as the macroeconomic factors are still at play. It has gained 48% over the past week, leaving most of its crypto brethren behind.
Ethereum (ETH) has increased an enormous 48% over the past seven days, outperforming its big brother Bitcoin, which has only managed to achieve 19% in the same period. It’s also up 66% from its market cycle bottom of $918 on June 19, reaching its current price of $1549.
A bull trap is a signal indicating that a declining trend in a crypto asset has reversed and is heading upwards when it will actually continue downwards. Though, the current Ethereum rally could be a bull trap with the macroeconomic clouds darkening.
The primary driver of recent momentum for the asset has been linked to announcements regarding its ultimate switch to proof-of-stake, which has been slated for September 19.
The Merge will surely reduce the network’s energy consumption by more than 99%. Though, it will not necessarily reduce transaction fees significantly as this will happen when scaling takes place via sharding which is expected sometime next year.
The next major step, and last dress rehearsal, is the Goerli testnet Merge which has been planned for August 11, according to a July 19 Coinbase report on the Merge. Goerli is the most battle-tested Ethereum environment with the most user activity and the closest reproduction of the real thing. While the major upgrade is the fundamental driver of current Ethereum market sentiment, the asset is still trading down 68% from its November 2021 all-time high. There have also been concerns that an important amount of ETH may flood the market after the Merge and its release from its staking smart contracts.
The director of research at 21Shares, Eliézer Ndinga, told Cointelegraph that this is doubtful to happen:
“The withdrawals of Ether won’t occur until 6-12 months post Merge after the Shanghai upgrade. The withdrawals will be limited to six validators every epoch or ~ 6 minutes to avoid bank runs and keep the network secure.”
A survey by Finder, conducted just before the most recent rally said there is still a lot of negative sentiment regarding short-term Ethereum prices.
The panel of 54 industry experts polled thought ETH would be worth $1,711 by the end of 2022, climbing to $5,739 by 2025, before hitting $14,412 by 2030. Though, they are also doubtful that it would dump to $675 before the year was out.
Finder said there are a couple of macroeconomic factors that could cause this withdrawal. The U.S. The Federal Reserve is hopeful about hiking rates again by 75 basis points during their July 26-27 meeting, which is generally bearish for crypto markets. If Bitcoin takes a dive, Ethereum is sure to follow.
Moreover, the U.S. Bureau of Economic Analysis (BEA) will release its advance estimate of second-quarter GDP growth on July 28. Another negative quarter, which is expected, will mean that the country is in a technical downturn which is also very bad for risk-on assets such as Ethereum.
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