Cryptos, Equities Slide on Central Bank Decisions, Merge Aftermath

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  • Bit­coin and ether extend loss­es fol­low­ing the Ethere­rum Merge and Win­ter­mute hack
  • The S&P 500 and tech-heavy Nas­daq were also veer­ing low­er dur­ing Tuesday’s trad­ing ses­sion, down 1% and 0.6%, respectively

Cryp­tocur­ren­cies and glob­al equi­ties are due for a volatile week amid ongo­ing tur­moil in the dig­i­tal asset space and ahead of var­i­ous cen­tral banks’ mon­e­tary pol­i­cy decisions. 

Bit­coin briefly rose above $20,000 ear­li­er in the week before falling to under $19,000 Tues­day. Ether lost 1.2%, falling below $1,300 for the first time since mid-July.

“Bit­coin and the cryp­to mar­ket saw a sig­nif­i­cant bounce Mon­day, before find­ing resis­tance at $19,666 – the 2017 bull mar­ket top, a key resis­tance,” Mar­cus Sotiri­ou, ana­lyst at the pub­licly list­ed dig­i­tal asset bro­ker Glob­al­Block, wrote in a note Tues­day. “Investors are very cau­tious ahead of the Fed­er­al Reserve deci­sion tomorrow.”

The S&P 500 and tech-heavy Nas­daq were also veer­ing low­er dur­ing Tuesday’s trad­ing ses­sion, down 1% and 0.6%, respectively. 

Ether extend­ed its loss from ear­li­er in the month fol­low­ing the high­ly antic­i­pat­ed Ethereum Merge, which saw the sec­ond largest blockchain switch from proof-of-work to proof-of-stake. The cur­ren­cy has lost more than 7% in the past five days since the Merge’s suc­cess­ful com­ple­tion ear­ly Thurs­day morning.

“We see a clas­sic exam­ple of mar­ket psy­chol­o­gy. Project quotes grew on expec­ta­tions of a major event. In this case, many traders bought ETH in advance in order to sell on the increased hype by the prin­ci­ple of ‘buy the rumor, sell the fact,’” said Ser­hii Zhdanov, CEO cryp­to exchange EXMO. “Nat­u­ral­ly, there were few­er buy­ers after the com­ple­tion of the Merge.”

Zhdanov is con­fi­dent that the price can turn around, espe­cial­ly giv­en that a low­er trans­ac­tion cost means the net­work will be more acces­si­ble to users. 

“This can increase the adop­tion of dapps work­ing in the Ethereum ecosys­tem,” he added. 

World braces for potentially bearish news

The volatil­i­ty from last week shows no signs of slow­ing, with more mar­ket-mov­ing events sched­uled for the com­ing days

On Thurs­day, the Bank of Japan is slat­ed to release its mon­e­tary pol­i­cy deci­sion, and the Bank of Eng­land will reveal its inter­est rate choice. Ini­tial job­less claims in the US are also expect­ed Thurs­day. Investors will be watch­ing for indi­ca­tions of labor mar­ket strength to gauge the like­li­hood of a recession. 

On the eve of the Fed’s Sep­tem­ber rate hike deci­sion, futures mar­kets pre­dict­ed an 82% chance of a 75 basis point rate hike and an 18% chance of a 100 basis point increase, accord­ing to data from CME Group.

Cryp­to mar­kets were also reel­ing Tues­day fol­low­ing reports that liq­uid­i­ty provider Win­ter­mute’s DeFi oper­a­tions had encoun­tered a $160 mil­lion breach. The lat­est inci­dent marks the firm’s sec­ond hack this year. In June, 20 mil­lion Opti­mism tokens were stolen by exploit­ing a failed trans­ac­tion with Wintermute.

“This is a neg­a­tive devel­op­ment with­in the DeFi space, and it will not help with the con­fi­dence of Trad­Fi (tra­di­tion­al finance) insti­tu­tions who are look­ing to enter the DeFi space,” Sotiri­ou said. “As Win­ter­mute were one of the biggest liq­uid­i­ty providers in the indus­try, they may be forced to remove liq­uid­i­ty in order to mit­i­gate fur­ther risk from their loss.”

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  • Casey Wag­n­er


    Senior Reporter

    Casey Wag­n­er is a New York-based busi­ness jour­nal­ist cov­er­ing reg­u­la­tion, leg­is­la­tion, dig­i­tal asset invest­ment firms, mar­ket struc­ture, cen­tral banks and gov­ern­ments, and CBD­Cs. Pri­or to join­ing Block­works, she report­ed on mar­kets at Bloomberg News. She grad­u­at­ed from the Uni­ver­si­ty of Vir­ginia with a degree in Media Studies.

    Con­tact Casey via email at [email pro­tect­ed]

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