Weekly Market Rollup - 12/09/2022

In this Week's Market Rollup

Crypto markets have enjoyed a strong start to what is historically one of their worst performing months. Both BTC and ETH overcame shaky starts to the week and rebounded into considerable weekend price rallies. This positive price momentum carried across the market, with all market sectors in the green for the second week running.

With the highly anticipated Ethereum Merge just days away, investors continue to speculate on ETH-related assets, as well as alternative ‘ETH Killers’. In a strange turn of events, Terra (LUNA) has enjoyed a revival this week and claimed the title of the strongest performing asset over the last seven days.

Market Highlights

• Ethereum successfully deployed the last pre-merge update, known as Bellatrix, on September 6. The Merge is set to take place this week between September 14 and September 15.
• The biggest mover in the crypto market this week was Terra (LUNA), surging over 200% in the last seven days.
• DeFi giants Aave (AAVE) and Compound (COMP) restricted their ETH borrowing capacity as demand for ETH skyrockets in anticipation for The Merge.

Price Movements

Bitcoin (BTC)

For the first time in many weeks, Bitcoin (BTC) enjoyed a strong seven days of performance. While BTC got off to a shaky start last week, dipping below US$19,000 on September 17, it made a steady recovery leading into the weekend. A late surge pushed BTC past US$21,000 and helped it close the week up 9.36% at US$21,753, maintaining the relief rally.

Ethereum (ETH)

Ethereum (ETH) also experienced strong but volatile price action this week. Early volatility saw ETH trade as low as US$1,500 on September 7. However, price action rebounded into the weekend as Ethereum draws closer to The Merge. ETH rallied an impressive 13.36% to close the week out strong at US$1,768.

The Merge is upon us. The final pre-merge update, Bellatrix, which hard forked the beacon chain, successfully took place on September 6. This gives the green light to the ‘Paris’ upgrade, set to take place this week, which will finally transition the Ethereum network to the energy-efficient Proof-of-Stake (PoS) consensus mechanism.

With the upgrade set to take place by September 15, anticipation is at an all-time-high as the price of ETH continues to rise into the event. The ETH:BTC ratio made a new high for the year, reaching 0.0856 on September 8.

Altcoins

The relief rally continued this week as BTC and ETH surged, sending all market sectors into positive territory for the second week in a row. Smart Contract Platforms stood to gain the most this week and returned 8.86%. This performance was followed closely by Web3, Currencies, and DeFi which each returned 8.00%, 7.52%, and 4.31%, respectively.

Investors continue to speculate on trades surrounding The Merge with funds finding their way into Ethereum Classic (ETC). ETC rallied as high as 30% this week as its hashrate hit an all-time-high of 45.71 Terrahash per second (TH/s) on September 9. These speculators may be attempting to front-run miners who will need to transition their mining rigs to secure different blockchains as Ethereum moves away from PoW. This may also explain the surge in fellow ‘Ethereum Killers’ a.k.a. Layer 1 protocols, as Cosmos (ATOM), Near Network (NEAR), and Solana (SOL) each enjoyed a 19.6%, 13.4%, and 8.9% week-on-week rally, respectively.

Terra (LUNA) is back in the spotlight this week as its price soared over 200%, making it the largest gainer over the past 7 days. A direct link to the price action could not be uncovered. However, it may have been a ripple effect based on the original token, Terra LUNA Classic (LUNC), rallying over 62% this week. The LUNC network, which is now governed by its community, voted on a 1.2% network tax on all transactions, hoping to diminish the total supply.

Web3 News

DeFi giants Aave (AAVE) and Compound (COMP) have restricted ETH borrowers as The Merge looms and investors speculate on an Ethereum Proof-of-Work (ETHPoW) fork. Looking to capitalise on the potential hard fork, investors are rushing to increase their ETH holdings by borrowing more ETH on decentralised lending platforms. Compound has responded to the surge in demand by placing a 100,000 unit ETH cap on their borrowing pools while Aave paused ETH borrowing altogether.

Regulatory

On a regulatory front, Richard Fuller, the Economic Secretary to the Treasury relayed that the United Kingdom government is “seeking ways to achieve global competitive advantage as crypto technologies grow in significance”. In a parliamentary debate on crypto asset regulation in the U.K., Fuller spoke highly in favour of powerful use cases for cryptocurrency and blockchain technology, including using distributed ledger technology for customs and international trade and storing medical records on the blockchain.

On Monday, the U.S. Bankruptcy Court in New York gave insolvent crypto brokerage Voyager Digital approval to return US$270 million to affected customers. A court filing the following day confirmed that Voyager will auction its remaining assets next week. There have since been 22 potentially interested entities. None have been identified, but Sam Bankman-Fried’s exchange FTX previously made an offer publicly.

At an industry conference on Thursday, Chair of the U.S. Securities and Exchange Commission (SEC), Gary Gensler, said that he supported the move by Congress to hand the Commodity Futures Trading Commission (CFTC) the power to “oversee and regulate crypto non-security tokens and related intermediaries.”

Recommended reading: The Merge is Coming: Everything You Need to Know