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Ethereum Merge: How ETHBTC Could Hint At A Return Of Risk Appetite

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Ethereum Merge: How ETHBTC Could Hint At A Return Of Risk Appetite

The merge is near, so it’s Ethereum time to shine. The eternal second most popular cryptocurrency by market capitalization has been outperforming bitcoin for the last few days. Is the reason the return of the market’s appetite for risk? Or is it just the fact that Ethereum’s developers announced a specific date for the mythical merge? Let’s examine the numbers, the facts, and the experts’ opinions to figure out exactly what’s going on.

In The Weekly Update, Arcane Research’s newsletter, they point out that the ETHBTC pair surged “ from 0.053 on July 12th to 0.7 on July 19th.” It’s at “levels not seen since mid-May,” but why? According to Arcane, it “might be related to increased risk appetite in the market, evident by sharp altcoin recoveries across the board.” They identify another factor, “Celsius repaid its DeFi loans. This contributed to reducing the downward gravitational pull enforced by potential liquidations and contagion-related uncertainty.”

And then, of course, there’s the merge.

What Do The Experts Say About The Merge?

The facts are the facts, Ethereum is on a roll. In a previous report, NewsBTC analyzed the state of the market:

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“Ethereum has now broken above an important technical point. After trending below the 50-day moving average for the better part of last month, ETH has flipped this technical level and is now sitting comfortably above it. The implication of this has been a complete 180-degree turn from bearish to bullish, especially during the short term.”

As for the probable cause, Arcane Research already named two. The main one, though, is the possibility of the merge. Back to The Weekly Update:

“On Thursday, July 14th, the Ethereum Foundation member Tim Beiko suggested Sept 19th as the tentative launch date for the merge. This might have benefited ETH, leading to last week’s surge. Following the announcement, Lido’s staked ETH token has neared ETH parity.”

In another NewsBTC report, we quoted another expert trying to make sense of the situation. According to Youwei Yang, director of financial analytics at StoneX, the causes for the recent surge are:

“The first is the recently announced time for the Ethereum “merge” update, which should make the network significantly more energy-efficient. Yang claims that the “calming” of macroeconomic anxieties is the second.”

ETHBTC price chart on Coinbase | Source: ETHBTC by The Weekly Update

Is Ethereum’s Merge a “Buy The Rumor” Event?

The change from Proof-Of-Work to the Proof-Of-Stake consensus mechanism does use less energy, but brings its own set of problems with it. Discussing those is beyond the scope of this article. The important part of the equation for Ethereum holders is that the merge will finally bring native staking to the blockchain. The thousands of ETH already locked into the Beacon Chain will finally produce real results, and a new kind of user, the validators will rise. 

Is this enough to justify the price surge? Absolutely. Is it guaranteed that the merge will happen on September 19th? Probably not, considering Ethereum has postponed its difficulty bomb five times already.

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ETH price chart for 07/20/2022 on Bitfinex | Source: ETH/USD on TradingView.com

Is The Contagion Event That Sent Everything To Red Over?

According to Arcane, “contagion seems to be resolving now, with prices stabilizing. This recovery may be viewed as a healthy confirmation of the market normalizing as market stress settles down.” Their interpretation of the situation might be overly optimistic, though. A pseudonymous Twitter user that identifies himself as “a trader/defi analyst at a major crypto fund and use Nansen almost daily,” thinks more pain is on the way with or without the merge.

4/

There are dozens of wallets just like these that 3AC still has with thousands of ETH. It’s very likely that all of these wallets are going to be liquidated in order to pay back creditors. Check out the number of funds that have been moved around from just one wallet alone. pic.twitter.com/75HkR097zV

— jbjbjb (@bryptobricks) July 19, 2022

The Three Arrows Capital trial is still unfolding, and “3AC still has with thousands of ETH. It’s very likely that all of these wallets are going to be liquidated in order to pay back creditors.” If that happens, it’s “going to cause a harsh sell-off across the broader crypto ecosystem, setting up the next catalyst down.”

Sorry to rain on Ethereum’s parade, but those are the facts. Good luck with the merge, though.

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Featured Image by Loic Leray on Unsplash  | Charts by TradingView and The Weekly Update

3AC

Crypto winter update: Will the disaster of Q2 continue to cripple Q3 of 2022? 

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Crypto winter update: Will the disaster of Q2 continue to cripple Q3 of 2022? 

The collapse of Terra, 3AC, and insolvency crisis across crypto institutions has sent the market into severe bear tendencies over the course of Q2. Despite gradual recovery during July, the broader market remains tense and vulnerable right now. Bitcoin [BTC] is trading just below $22,900 while Ethereum [ETH] is mounting a massive rebound towards $1,600 after news of the Merge release date.

A Quarter to forget

The second quarter of 2022 has been catastrophic for the crypto space. Bitcoin and Ethereum fell 56.3% and 67.4% respectively, recording one of the worst quarterly performances in their history. The collapse of the Terra ecosystem led to a domino effect across space which culminated in billions of losses. The “crypto winter” also consumed liquidity provider Three Arrows Capital and the insolvency of crypto institutions such as Celsius.

CryptoCompare analyzed the events of the second quarter and what they could mean for the crypto industry. Despite the internal tremors of the crypto industry, the macro landscape is labeled as “dire” in the report. The crypto market has been taken aback by these severe market conditions. The alarm bells of a looming recession are well-anticipated in the risk-asset space right now.

The dramatic fall of the crypto market led to a sharp decline in Total Value Locked (TVL) in DeFi. In total, the value has fallen by 65.7% in this quarter. The report claims that this bear market could lead to the development of innovations in the space much akin to the 2008 Financial Crisis. This, in turn, could be the catalyst for the next bull run in the industry.

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“We expect the TVL in DeFi to continue to stay range bound as the price of crypto assets attempts to recover from the current drawdown,” stated the CryptoCompare report.

Regulations and cyber security failures have also been highlighted during this quarter. Janet Yelen, US Treasury Secretary highlighted the risks associated with the crypto space after the Terra explosion. Lawsuits have been filed against Terraform Labs and other related entities in the aftermath of the crisis. The ongoing security crisis has been well-documented in previous reports. Over $1 billion has been stolen in DeFi exploits over the quarter which continues to threaten protocols.

Where does the crypto space stand?

Given the nature of the macro-economic situation, the current price rebound is a mini-rally during the bear market. Market enthusiasts continue to roll out ambitious plans for crypto. But the industry will suffer severely in the growing tensions across the market. Where the industry goes from here still remains a trillion-dollar question for now.

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Kanav is a journalist at AMBCrypto. He has a Masters in Media and International Conflict and is interested in areas of digital society, crypto developments in the political sphere and the socio-cultural impact of a crypto-society.

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2022

Q2 2022 Cryptocurrency Report Highlights Terra’s Collapse And Capital Exiting The Crypto Ecosystem

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Q2 2022 Cryptocurrency Report Highlights Terra’s Collapse And Capital Exiting The Crypto Ecosystem

On July 13, the dedicated crypto price tracking, volume, and market capitalization web portal Coingecko published the company’s “Q2 2022 Cryptocurrency Report” which discusses the last quarter’s crypto market action and insights. The 46-page report explains how the Terra UST and LUNA fallout wreaked havoc on the entire crypto ecosystem and the stablecoin economy. Moreover, Coingecko researchers say “a decrease in the stablecoin market share suggests that a certain amount of capital has completely exited the crypto ecosystem.”

Coingecko’s Data Suggests Q2 Investors Exited Stablecoins Rather Than De-Risking Into Them

Coingecko has published the company’s second quarter cryptocurrency report for 2022 as there’s been a number of significant changes during the last three months. The study, published last Wednesday, notes that Q2 2022 was “filled with many unfortunate events in the crypto space.”

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The crypto firm’s report explains that while spot market trade volumes have remained steady at $100 billion daily, “the top 30 coins have lost over half their market cap since the previous quarter.” Much of the crypto blunder started from a domino effect caused by the Terra UST and LUNA collapse.

Coingecko details that just before UST’s downfall, the stablecoin was the third-largest fiat-based token in existence, and $18 billion was erased in just a few days. The report notes that BUSD managed to become the third-largest stablecoin. Beside’s Terra’s UST, other stablecoin assets saw their valuations suffer and Coingecko’s analysts suspect a specific amount of funds have left the crypto economy. The researcher’s Q2 2022 study says:

The slight decrease (discounting UST) in stablecoin market share suggests that a certain amount of capital has completely exited the crypto ecosystem, in contrast to last quarter when investors likely de-risked into stables amidst market uncertainty.

The Terra and 3AC Fallouts Spread, Defi Market Cap Tumbles

The 46-page report further explains how Lido’s bonded assets were affected by the Terra blowout and the demise of the crypto hedge fund Three Arrows Capital (3AC). One specific chart shared in the study shows how 3AC’s financial issues affected at least 12 different crypto companies directly or indirectly.

Decentralized finance (defi) was also hit, as Coingecko’s authors say “Due to third-order effects, defi protocols such as Maple Finance were not spared as some users’ funds were lent to Orthogonal Trading, which in turn had gone to Babel Finance, one of 3AC’s creditors.”

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Defi itself suffered a lot and Coingecko’s data shows that the defi market cap slid from “$142 billion to $36 billion in a span of 3 months.” The report again says that much of the value in defi was “wiped out largely due to the collapse of Terra and its stablecoin, UST.”

Coingecko’s study covers a wide variety of subjects that pertain to Q2 2022’s crypto action and touches on topics like other stablecoins losing their peg, decentralized exchange (dex) trade volumes, non-fungible tokens (NFTs), and NFT marketplaces. While the second quarter saw a lot of action, Coingecko’s report highlights how most of it has been bearish and gloomy.

Tags in this story

2022, 3AC, Babel Finance, Celsius, CoinGecko, DeFi, DEX, Dex Platforms, Lido, Lido’s bonded assets, Maple Finance, nft, NFT Markets, NFTs, Orthogonal Trading, Q2, Q2 2022, Q2 report, Q2 Study, report, Stablecoins, STETH, study, Three Arrows Capital, UST, UST classic, USTC, voyager

What do you think about Coingecko’s report and the action recorded in the second quarter of 2022? Let us know what you think about this subject in the comments section below.

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Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,700 articles for Bitcoin.com News about the disruptive protocols emerging today.

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Image Credits: Shutterstock, Pixabay, Wiki Commons, Coingecko

Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

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3AC

Three Arrows Capital liquidators control $40M of the fund’s assets

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Three Arrows Capital liquidators control $40M of the fund’s assets

Three Arrows Capital liquidators control $40M of the fund’s assets Oluwapelumi Adejumo · 2 hours ago · 1 min read

The liquidators said the fund’s assets consisted of bank accounts, cryptocurrencies, NFTs, and stakes in other firms. 

1 min read

Updated: July 22, 2022 at 8:00 pm

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Cover art/illustration via CryptoSlate

Three Arrows Capital (3AC) liquidators Teneo have gained control of assets worth $40 million belonging to the embattled hedge fund, Bloomberg News reported July 21.

The liquidators reportedly stated that the fund’s assets consisted of bank accounts, cryptocurrencies, NFTs, and stakes in other firms.

Bloomberg reported that Teneo representative Russell Crumpler declared on July 20 that 3AC founders Kyle Davies and Su Zhu were still in control of certain digital assets and bank accounts.

Crumpler reportedly stated that Teneo had contacted around 40 companies that 3AC might have invested in and about 30 crypto exchanges and banks.

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In a separate filing on July 8, the liquidators said that Zhu and Davies were uncooperative and that their location was unknown.

The hedge fund owes its creditors $2.8 billion.

3AC’s creditors’ list includes Genesis; bankrupt crypto lending firms Voyager Digital and Celsius Network; Algorand, CoinList, and others.

Meanwhile, Su Zhu and Kyle Davies’ wife also filed claims against the embattled hedge fund.

3AC founders in touch with liquidators

A new Bloomberg report revealed that the 3AC founders are en route to Dubai and have denied claims that they were uncooperative.

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According to Bloomberg, the “death threats” they had received forced them into hiding; however, they have still maintained communication with the liquidator.

Zhu reportedly said the firm had positioned itself for a market that didn’t eventually happen, a view also shared by his cofounder Davies who said:

“We had all of our, almost all of our assets in there. And then in the good times we did the best. And then in the bad times we lost the most.”

The co-founders also acknowledged that Terra’s implosion was part of the reason it failed. According to Zhu, they probably allowed their relationship with Do Kwon to cloud their judgment of the token.

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