. Ethereum's Impending Merge and Bitcoin's Struggle - 04 May

Ethereum’s Impending Merge and Bitcoin’s Struggle – 04 May

Ethereum’s Impending Merge and Bitcoin’s Struggle – 04 May

04 May 2023

Ethereum Faces Selling Pressure Ahead of the Merge.

Introduction

According to a Bank of America strategist, the price of Ethereum is expected to encounter further selling pressure as investors assess the implications of the upcoming Merge and adopt a cautious approach toward future upgrades. The strategist predicts that alternative blockchains such as BSC, Tron, Avalanche, and Solana will gain market share until Ethereum resolves its current challenges. On the other hand, Bitcoin has experienced a decline below the $20,000 mark once again, following three consecutive days of intense selling activity triggered by hawkish comments from Federal Reserve Chair Jerome Powell.

  • Ethereum’s Selling Pressure and Impending Merge

The impending Merge, which involves transitioning Ethereum from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism, has led to increased uncertainty among investors. As they digest the implications of this transition, many are adopting a wait-and-see approach regarding Ethereum’s future upgrades. Consequently, Ethereum is expected to face selling pressure in the near term, allowing alternative blockchains like Binance Smart Chain (BSC), Tron, Avalanche, and Solana to capture a larger market share.

Bitcoin’s Struggle to Regain Momentum

Bitcoin, the world’s largest digital asset, experienced a significant sell-off last week, closing over 9% lower. This downturn was primarily driven by hawkish comments by Federal Reserve Chair Jerome Powell. Although Bitcoin has shown a 1.5% increase today, it continues to struggle to regain momentum and trade above the $20,000 mark. The analyst highlights a sense of uncertainty prevailing in the market, as buying speed diminishes.

Potential Risks and Outlook for Digital Assets

The analyst notes that while risks associated with a mild recession are likely already priced in, the potential for a severe recession could lead to another correction in risk assets, including cryptocurrencies and digital assets. The macro team at the Bank of America predicts a decline in S&P earnings per share in 2023 and questions the enthusiasm surrounding an 8.5% inflation rate. This uncertain economic outlook may prompt investors to reevaluate their positions and potentially trigger a correction in the crypto market.

Bitcoin and Ethereum Net Outflows

The strategist highlights a significant increase in BTC exchange net outflows over the past two weeks, indicating that the supply of Bitcoin remains tight as investors continue to hold onto their assets. This trend is seen as bullish for Bitcoin. In contrast, Ethereum experienced its third consecutive week of decelerating exchange net outflows, suggesting a potential decrease in selling pressure for the cryptocurrency.

Conclusion

As Ethereum prepares for the Merge and investors evaluate its implications, the cryptocurrency is expected to face selling pressure in the coming months. Alternative blockchains such as Binance Smart Chain, Tron, Avalanche, and Solana are poised to gain market share during this period. Meanwhile, Bitcoin struggles to regain momentum and surpass the $20,000 mark following a recent sell-off triggered by comments from Federal Reserve Chair Jerome Powell. The uncertain economic outlook and potential risks may lead to a correction in the cryptocurrency market. However, the continuous net outflows of Bitcoin from exchanges indicate strong investor confidence, while Ethereum’s net outflows are decelerating, suggesting a potential decrease in selling pressure for the cryptocurrency.