Ethereum’s Pre-Merge Selling Pressure; Investors Analyze Future
01 Jun 2023
Ethereum Faces Selling Pressure Ahead of the Merge as Investors Assess Future Upgrades.
The price of Ethereum, the second-largest cryptocurrency by market capitalization, is expected to encounter additional selling pressure leading up to the Merge, as investors evaluate the implications of this major upgrade. Bank of America strategists suggest that alternative blockchains such as Binance Smart Chain (BSC), Tron, Avalanche, and Solana could gain market share until Ethereum resolves its current challenges. Meanwhile, Bitcoin has dipped below the $20,000 mark again after a series of days marked by strong selling activity, triggered in part by comments from Federal Reserve Chair Jerome Powell. This article delves into the factors affecting Ethereum and Bitcoin prices, including market sentiment, potential risks, and investor behavior.
Ethereum’s Selling Pressure Ahead of the Merge:
According to a Bank of America strategist, Ethereum’s price may face increased selling pressure as investors grapple with the implications of the upcoming Merge upgrade. The strategist suggests that investors are adopting a wait-and-see approach, evaluating the potential impact of the upgrade on the Ethereum network. During this period of uncertainty, alternative blockchains such as BSC, Tron, Avalanche, and Solana may attract more attention and market share.
Bitcoin’s Struggle to Maintain Momentum:
Bitcoin, the largest digital asset, has experienced challenges maintaining momentum. Following three consecutive days of significant selling activity, the cryptocurrency has fallen below the $20,000 mark once again. The recent selloff was primarily fueled by hawkish comments from Federal Reserve Chair Jerome Powell, which created bearish sentiment in the market. Although Bitcoin has seen a minor increase of approximately 1.5% today, it continues to struggle to regain a position above the $20,000 handle. The analyst highlights growing uncertainty as buying momentum weakens.
Potential Risks and Macroeconomic Outlook:
The Bank of America strategist emphasizes the potential risks associated with a mild recession and the impact it may have on digital assets. While the risks of a mild recession are likely priced into the market, the possibility of a severe economic downturn could trigger a correction in risk assets, including cryptocurrencies. The strategist’s note to clients also references concerns regarding inflation, as some analysts question the excitement surrounding an anticipated 8.5% inflation rate. The macroeconomic outlook and potential risks in traditional markets can significantly impact the performance of crypto assets.
BTC Exchange Net Outflows and Investor Behavior:
The strategist highlights the accelerated outflow of Bitcoin from exchanges over the past two weeks compared to the preceding three weeks. This trend indicates a tightening supply and suggests that investors are holding onto their Bitcoin (HODLing), which is considered bullish for the asset’s future price. In contrast, Ethereum has experienced three consecutive weeks of decreasing net outflows from exchanges. This data indicates that the selling pressure on Ethereum has subsided to some extent.
As the Ethereum network prepares for the Merge upgrade, the cryptocurrency is likely to encounter selling pressure as investors assess the implications of this significant development. Alternative blockchains, including BSC, Tron, Avalanche, and Solana, may gain market share during this period. Bitcoin, on the other hand, is struggling to maintain its momentum, with market sentiment affected by comments from Federal Reserve Chair Jerome Powell. Potential risks, such as a severe economic downturn or inflationary concerns, could result in a correction across the crypto market. Nevertheless, investor behavior reflected