Crypto Weekly: 19 – 25 September 2022
SEC Chair Gary Gensler has made comments implying that Ethereum’s transition to a Proof of Stake consensus mechanism could see Ether be reclassified as a security. Gensler suggested that tokens that require investors to stake them in order to earn yield could pass one of the qualifications of the Howey test, a set of standards commonly used by regulators to decide if an asset should be considered a security. This may lead to increased scrutiny and oversight from the SEC towards Ethereum.
Sandeep Nailwal, the co-founder of popular Layer 2 protocol Polygon, stated that Ethereum’s transition to PoS could bring a billion users to Web3.0 in the future. While the switch from PoW to PoS does not directly increase the scalability of the network, it lays the groundwork for future upgrades that may do so, including ensuring Layer 2 scalability.
ETHW, a hard fork of Ethereum supported by those that wanted to stick to a PoW consensus mechanism, continues to fall from its peak of $60. ETHW has fallen by more than 70% in the first 24 hours since opening for trading on exchanges.
Prominent Ethereum PoW advocate Chandler Guo predicts that 90% of PoW miners will go bankrupt. Guo also states that he believes that only 10% of miners mining ETHW on the Ethereum PoW hard fork will ultimately survive.
With Ethereum’s transition to PoS, Dogecoin has officially become the second largest PoW cryptocurrency by market capitalization. Bitcoin obviously leads the pack, with Ethereum Classic ranking third, followed by Litecoin.
According to data from mining statistics website 2Miners, the hash rate of Ethereum Classic has increased by 500% in the past 30 days. This surge is likely a byproduct of Ethereum miners switching to Ethereum Classic in anticipation of Ethereum’s transition from PoW to PoS.
South Korean media outlets have reported that the South Korean courts have issued arrest warrants for Terraform Labs CEO Do Kwon and two additional Terraform Labs employees. South Korean prosecutors have reportedly asked Interpol to issue a red notice against Do Kwon, with Kwon and the two Terraform Labs employees allegedly residing in Singapore. This news has caused LUNA prices to plummet by more than 40%.
Starbucks has partnered with Polygon to create a new NFT-based loyalty program using Polygon’s blockchain technology. The new Starbucks Oddesy program will allow customers to purchase and earn digital collectible stamps in the form of NFTs that offer benefits and an immersive Web3.0 experience. Polygon’s PoS blockchain and commitment to becoming carbon negative by 2023 are in line with Starbucks’ own policy regarding sustainability, making the partnership an appropriate fit.
According to The Wallstreet Journal, Boston-based investment giant Fidelity is reportedly planning to launch Bitcoin trading for its retail investors. The company has featured Bitcoin trading for hedge funds and institutional investors since 2018 and, in May earlier this year, recently launched a Bitcoin index fund with over $125 million in investment.
Weekly Technical Analysis: 19 – 25 September 2022
Bitcoin (BTC)
BTC failed to break through its $22,500 resistance level and fell past the $20,000 mark. BTC’s inability to create new highs could be a cause for concern and may put BTC at risk of testing its support at $17,500 this week. If support can remain intact, BTC’s trend will remain sideways. However, if support is broken, BTC will likely enter a downtrend in the short and medium term.
Ethereum (ETH)
ETH faced a significant sell-off following its successful Merge upgrade, putting ETH at risk of entering a downtrend. If selling pressure persists, ETH could be forced below its $1,277 support level and may even hit as low as the $1,000 mark, ETH’s previous low. In the short term, there are no notable factors that could spark a reversal, so investors are advised against entering an ETH position at the moment. ETH will have to break through its resistance level at $1,800 to break out of its current downtrend.
Gods Unchained (GODS)
GODS is up by +57.9% from last week. However, despite its drastic rally, market conditions are still bearish, so risk is high, and investors are advised against chasing the price while it is so high. Instead, consider waiting for prices to fall towards but remain above the 14 baht support level, with potential profit-taking targets around the 26 baht resistance level, as GODS’s overall trend is still not upwards.
XRP
XRP is up by +3.2% over the past week, however, the overall trend is still bearish. Keep a close eye on support at 11.80 baht. If XRP prices cannot remain above its support, the rally will likely come to a close. XRP will look to target a resistance level at its previous high of 14.80 baht. Investors are advised against rushing in and chasing the price as there is still a lack of positive factors that could support a long-term bull run.
Trading and Investment Considerations For The Week
US inflation figures for August were reported to be 8.3%, which, although down from July’s figure of 8.5%, was still above the 8.1% forecasted by most analysts. This has triggered a sell-off of assets, with investors fearful that the FED could ramp up its aggressive interest rate hikes even further at the next FOMC meeting. If so, we could see the FED raising interest rates by up to 0.75-1% instead of the hoped-for 0.5% interest rate increase.
Keep a close watch on this week’s FOMC meeting from 20-21 September. An interest rate increase of 0.75% is likely to not overly negatively impact the market as it would largely be in line with market expectations; however, a rate increase of 1% may trigger another sell-off.
The Merge has not had a positive impact on the crypto market like many were hoping; rather, the upgrade seems to have triggered a sell-off. This may suggest that the transition to PoS is insufficient to shift the perception of Ethereum’s fundamental value. As a result, tokens that were expected to benefit from a Merge-fueled rally, such as Layer 2 projects like OP, have lost their uptrends as well.
The Dollar Index continues to strengthen, managing to pressure crypto’s market capitalization below the $1 trillion mark once more. Similar to Bitcoin, the price of gold and equities on the US stock market are seeing comparable lows to earlier this year in July. Investors are advised to wait and see the outcome of the FOMC meeting. If prices fall even further past their previous lows, the overall market may see another prolonged correction.
Disclaimer: Cryptocurrency is highly risky; investors may lose all investment money. Investors should study and verify information carefully and make investments according to their own risk profile.
*Materials on Bitazza Weekly Newsletter are intended to be used and must be used for informational purposes only. The views, information, or opinions expressed are solely those of the individuals involved and do not necessarily represent those of Bitazza and its employees. The information contained herein is not intended to be a source of advice or financial analysis with respect to the material presented, and the information and/or documents contained in this website do not constitute investment advice.
Sources:
https://cryptopotato.com/sec-chairman-warns-ethereum-update-could-classify-eth-as-a-security/
https://www.theblock.co/post/170463/ethpow-goes-live-after-ethereums-proof-of-stake-merge
https://www.coindesk.com/tech/2022/09/16/chandler-guo-predicts-90-of-pow-miners-will-go-bankrupt/
https://www.theblock.co/post/168603/fidelity-to-offer-bitcoin-trading-to-retail-customers-reports
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