Bitcoin surged above $22,000 as it continues a week-long rally ahead of US inflation data and a much-anticipated Ethereum network upgrade.
The world’s largest cryptocurrency hit $22,341.50 as of 9:45 p.m. ET on Sunday before falling slightly, according to data from CoinDesk. Bitcoin was trading at $22,203 around 4:03 a.m. ET on Monday.
After falling below $19,000 on Wednesday to its lowest level since June, bitcoin has since rebounded around 17%.
It also follows a winning week last week for US equities. Bitcoin has been closely correlated with stock markets, especially the Nasdaq, and often moves higher when the tech-heavy index rises.
Crypto investors are eagerly awaiting the August Consumer Price Index report, which is expected to be released on Tuesday, to see the direction inflation is headed, which could provide some guidance on future policy measures. the US Federal Reserve.
Stocks have been under pressure this year as the Fed raised interest rates in an attempt to control runaway inflation.
Cryptocurrencies, which are also risky assets, have taken a beating. Nearly $2 trillion has been wiped from the entire crypto market since its all-time high in November. Bitcoin is down over 50% this year.
This drop was also driven by crypto-specific issues, including the collapse of key projects and bankruptcies that have spread across the industry.
Meanwhile, the Ethereum network will complete a long-awaited upgrade called the Merge. This will transform the Ethereum blockchain from a proof-of-work model to a proof-of-stake model and drastically reduce the amount of power needed to run the network.
Proponents say this could pave the way for wider use of ether, the token that runs on Ethereum.
“Crypto faces an unusual double whammy this week: U.S. inflation data and [hopefully] the long-awaited and oft-delayed Ethereum merger. Hold your breath for a roller coaster ride,” Nexo co-founder Antoni Trenchev said in a note Monday.
“In an age awash with stories, there is nothing bigger than fusion in crypto and it is one the whole world should heed with Ethereum’s carbon footprint set to be reduced by 99% .”
However, analysts have warned that the merger will not necessarily speed up the notoriously slow Ethereum network or reduce the fees associated with transactions.
Still, enthusiasm is growing for the merger. Since ether hit its lowest level for the year in mid-June, the price of the world’s second-largest cryptocurrency has significantly outpaced that of bitcoin. Ether is up over 90% since June. 19 while bitcoin rose just over 20%, raising the question of how much the merger has already been valued.
The Federal Reserve is also expected to raise interest rates again next week at its Federal Open Market Committee (FOMC) meeting, which is another dark cloud hanging over the market. of cryptography.
“The merger could trigger a ‘sell off’ situation in the crypto market and we still need to watch out for next week’s FOMC meeting. Bitcoin may continue to rally, but that may be short-lived” , Yuya Hasegawa, a crypto market analyst at Japanese exchange Bitbank, said in a note on Monday.