- Although cryptocurrencies have benefited in recent weeks, the bulk of gains have been erased this week on release of the Fed’s meeting minutes, suggesting that investors shouldn’t take their risk before it’s been released by the Fed.
- The two largest cryptocurrencies, Bitcoin and Ether both slumped for the fourth consecutive day and a durable recovery will require more certainty, especially with respect to interest rates and economic conditions.
Macro not Merge will ultimately determine when this current “Crypto Winter” will end, with each rebound retracing to earlier levels as investors sit on the sidelines given increasingly uncertain economic conditions.
Although cryptocurrencies have benefited in recent weeks on expectations of a more dovish U.S. Federal Reserve, based on the fact that inflation in the U.S. has slowed and the long-awaited software upgrade of Ethereum, known as the “Merge,” the bulk of gains have been erased this week on release of the Fed’s meeting minutes, suggesting that investors shouldn’t take their risk before it’s been released by the Fed.
And while the Merge has largely been seen as a bullish factor for Ethereum and crypto in general, detractors looking to fork the Ethereum blockchain to remain on Proof-of-Work has created uncertainty and allowed for new trading strategies that will exploit possible chaos as a result of the upgrade.
The two largest cryptocurrencies, Bitcoin and Ether both slumped for the fourth consecutive day and a durable recovery will require more certainty, especially with respect to interest rates and economic conditions.
Institutional players are deploying a variety of sophisticated delta-neutral trading strategies around the Merge, which would pay out regardless of what happens with Ethereum’s upgrade, using a variety of options, swaps and futures to hedge positions.
Nevertheless, the crypto market malaise has seen corporate investors take advantage of lower prices to double down on investments in the industry, with the top 40 publicly traded U.S. companies investing a combined US$6 billion into blockchain startups from September last year to June this year.
