Blockchain News

Chung’s Weekly Digest (9/19)

Our financial market analyst Chung Yee says: The crypto market tanked after the successful Merge of the Ethereum chain, as investers sold the news.

Green Ethereum

Bitcoin ($BTC) and Ethereum ($ETH) tanked days after one of the most important upgrades to the biggest smart contract network was successfully executed. The crypto dip was expected as traders preferred to lock in their profits after a stellar run that saw many altcoins making double-digit gains.

Ethereum’s Merge has become the biggest decarbonization event ever as global energy consumption will be slashed by 0.2% after the network switches to Proof-of-Stake (PoS)

This upgrade is essential for a very fundamental reason. Crypto assets are largely narrative driven and the Proof-of-Work (PoW) consensus mechanism has always been under heavy criticism for its high energy consumption. Apart from being more secure, decentralized, scarce and censorship-resistant, the Ethereum network has just turned green.

The green narrative is important because it can unlock funds from institutions and retailers that have held back their support on energy concerns. With that out of the way, Ethereum is way ahead of other smart contract platforms by merely being the first mover in the crypto market. Narrative-wise, Ethereum would be the undisputed choice as the most trusted network for financial infrastructures.

Portfolios are built on Environment, Social, and Governance (ESG) mandates and $ETH now fits the bill. There is a strong likelihood that Ethereum can play the role of a store of value because it has more utility than Bitcoin; however, being driven by more than one value proposition can also be considered as a downside.

Ethereum’s issuance has also dipped after the Merge and will appreciate in value because of the deflationary pressure

If Ethereum is widely used to power its network, any failure or hiccup will cause a fluctuation in the asset, resulting in volatility. An asset that fits into the description as an ultimate store of value must be stable.

Weekly Recap

Market Sentiment

Spurred by the excitement surrounding The Merge, the crypto market was starting to recover, but the global macro environment has dragged the equities market down. The current scenario is the perfect setting for accumulation.

The market sentiment for the crypto industry has slightly improved as many believe that the bottom is in. The best strategy to adopt during this market phase is the dollar-cost averaging (DCA) method. It would not be possible to tell if the market has bottomed out, but the market is clearly closer to the bottom than the top.

An unfavorable FOMC meeting outcome can bring $ETH to its support at $1.2k

The next date that is crucial for the economy is the Federal Open Market Committee (FOMC) meeting scheduled on September 21. A further downside can be expected as many market participants expect another round of interest rate hikes.

Coins to Watch

  • Ethereum ($ETH) - Ethereum is now revamped. The Merge has unlocked new narratives and potential.
  • Ethereum is a safe investment and very likely a choice for institutional money.
  • Conventional funds seeking exposure to digital assets would have their sights trained on $BTC or $ETH.
  • $ETH appears to have a more promising upside compared to $BTC because of its utility as a smart contract platform and the deflationary feature introduced by The Merge.
  • Solana ($SOL) - Solana’s image is as an alternative to Ethereum that is both cheaper and faster.
  • Solana’s utility mimics that of Ethereum and is an institutional choice for projects that wish to launch on a layer-one.
  • Solana does not depend on layer-two solutions or parachains to scale. Its closest rival is Cardano ($ADA) which will also be going through a network upgrade.
  • Solana might not be able to overtake Ethereum anytime in the near future, but it will be the main beneficiary of Ethereum’s inability to scale.
  • Cosmos ($ATOM) - Cosmos is another layer-one solution that has been steadily building an ascending channel.
  • It is not touching the bottom of the channel which will act as support.
Cosmos is on an uptrend and a pattern is forming on the Cosmos chart
  • Another reason why $ATOM is a good buy is the introduction of stablecoins in the Cosmos ecosystem.
  • $ATOM is used as collateral to mint these stablecoins and this will effectively reduce the circulating supply and create upward pressure on the asset.

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