Bitcoin has gained more than 7% during the past seven days while ether jumped over 23% as the global crypto market cap reclaimed $1 trillion of value.
At the time of writing, bitcoin was trading down 5.4% over the past 24 hours, while ether was down 5.7%, according to CoinGecko. Despite the pullback this morning, both cryptocurrencies and the broader market have trended upward over the past week.
Here’s what JPMorgan and crypto market makers had to say about this week's price action:
Price rebound helped by Ethereum merge
JPMorgan Chase analysts attributed the rebound, in part, to the announcement of a tentative date for Ethereum’s merge — September 19. The merge refers to the Ethereum blockchain’s move from a proof-of-work to a proof-of-stake consensus mechanism.
JPMorgan analysts said the announcement “boosted sentiment among crypto investors, propelling ether and other cryptocurrencies.”
According to the note, the “extreme phase of backwardation seen in May and June, the most extreme since 2018, appears to be behind us.” This is evident by the shift back to contango — when the price of futures contracts is higher than the current spot price — in bitcoin and ether futures, displaying a significant improvement in demand.
Still, analysts at the bank noted that the same demand wasn’t seen in the crypto funds or futures space, suggesting that the improvement is likely to be driven by retail investors.
Market makers share similar sentiment
QCP Capital, a crypto trading firm in Singapore, shared a similar opinion in its weekly market update on Thursday. It went on to say that ether has been the clear leader during this “mini bull-run," driven by new clarity on the merge.
The firm also said that positive macro factors played a part in the uplift of crypto across most asset classes. In the time since the record June inflation figure of 9.1%, the market has been pricing out the possibility of a 100-basis point interest rate hike from the Fed in July.
QCP expects a 75-basis point hike and another boost for the market as a 100-basis point hike gets completely priced out. Furthermore, inflation has shown signs of hitting a peak, and this would spell more positivity for the market.
The note concluded that, despite markets being sanguine at present, the possibility of further credit contagion persists.
Chicago-based firm Cumberland echoed this on Thursday when it said it noticed increased flows through its OTC desk, with institutional buyers going long on ether ahead of the merge.
Cumberland's head of trading, Jonah Van Bourg, said this action reflects the incentive structure of every volatile asset, noting that "it’s always easier to buy a bounce than to catch the falling knife."
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