Why Bitcoin and Ethereum Are Falling This Monday

While the crypto ecosystem celebrated the transition of Ethereum to The Merge last week, the crypto market is in the red this Monday morning.

Cryptocurrencies are in the red this Monday morning. According to data from Coinmarketcap, Bitcoin is trading at $18,500 at 10:30 a.m., dropping below the symbolic $20,000 threshold again. The cryptocurrency lost 16% of its value in a week and 8% in a day.

Ether, for its part, is faring no better, with the asset trading at $1,300 and having dropped more than 25% in a week, including a 10% drop since Sunday, returning to its lowest level since mid-March. July.

Consequently, the total capitalization of cryptocurrencies continues to fall, hitting $900 billion on Monday, far from the symbolic threshold of $1,000 billion. Recall that this capitalization reached a historical peak in November last year, about 2800 billion dollars.

New Fed meeting

How to explain the new fall of cryptocurrencies? On the one hand, these assets are still correlated with traditional markets, which remain tight as the Federal Reserve prepares for a new monetary policy meeting on Tuesday and Wednesday, where further interest rate hikes are expected to be announced.

This Monday around 10:35 am, the CAC 40 lost 0.83% after falling 2.17% for the entire past week. Similarly, futures in the US markets are down (falling between 0.9% and 0.7%) on Monday. In general, equity markets suffer from risk aversion and cryptocurrencies are part of risky assets and therefore suffer from reduced investment by individuals and professionals.

Ether in SEC scopes

Moreover, if Ethereum falls more sharply than Bitcoin, then this is also due to a special context. Last week, the Ethereum blockchain successfully completed a merger called The Merge. This shift from proof-of-work to proof-of-stake did not leave the US stock cop indifferent.

Indeed, Securities and Exchange Commission (SEC) Chairman Gary Gensler said last Thursday that cryptocurrencies that use the principle of “proof of stake” (or PoS for “proof of stake”) can be considered “securities”. after passing the Howie test, according to the Wall Street Journal. The Howey test determines whether an asset qualifies as an “investment contract” and therefore falls under federal security laws.

The chairman of the Securities and Exchange Commission, on the other hand, will not specifically qualify ether or other cryptocurrencies, according to the Wall Street Journal, but the system itself will be referred to as “proof of stake.” However, given the transition to The Merge of Ethereum, such a message from the US stock cop seems certain. Until now, Gary Hensley has said that bitcoin does not fit into the category of securities.

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