Market Dip & Ethereum Concerns - The Start Of A New Downwards Spiral?

Last week we saw a dip once again. It seems like it will continue going into this week and I want to talk about the reasons for this dip. We will discuss whether it is only a temporary outlier from the previous rehabilitation of the markets or whether it is the start of the ongoing recession fears. Furthermore, we need to talk about some Ethereum concerns that are raising up now that the Merge is almost here. We will talk about the particular problem and try to discuss possible solution.

Market Dip

The current dip began about a week ago and went trough the past week. The main question should be: why did this dip occur? There were a lot of concerns about the quarterly earning reports by some retail giants in the US such as Target and Walmart. As we are all aware, the US economy is in a technical recession and it should only be a matter of time that everybody admits that we are in a real recession!

To back this up, there are several other indicators than just the GDP and one of them are numbers of retail giants. These indicate the overall consumption spending by costumers and they did not look very good. People are spending less and buying more regular products than brand products because the goods are getting more expensive. This leads also to the retail companies to overspend on the brand goods that are not being sold anymore.

Furthermore, we had some news that the FED will continue their aggressive interest rate raising approach. This obviously does not put happy faces onto the Wall Street and crypto investors as this means yet again that borrowing money 2will become even more expensive. And to top it all off, the SEC released yet another statement with plans of their continuation of their crypto crack down.

The main question is now: Was this just a small correction and we will continue to see the continuation of the recent recovery rally or are we finally shifting into crisis mode and will see the downwards spiral emerge again? I think we could see another short term relief rally until we had into the cold winter months of October till January. I think the macro economics are not looking to bright right now and with winter approaching it will look like a very harsh winter to deal with.

Ethereum Concerns

We also need to talk about the upcoming Ethereum transition from Proof of Work to Proof of Stake. The biggest concern right now is that the blockchain will lose a lot of its decentralization after the merge! But why is that? Well, while there are a ton of validators on the blockchain the majority of them are belonging to a small amount of validators such as Coinbase, Kraken or Binance. Because many people are staking their ETH on these exchanges there is a majority of over 50% of the staked ETH on these platforms.

This is obviously a big security risk as these validators could team up and change the blockchain such as erasing transactions or freezing addresses. While I don’t think these companies would do it on purpose as it would harm not only them but also the whole crypto community and therefore their costumers, I think there is a big risk of the government to try and implement some on-chain laws. Because these companies are heavily centralized and could be somehow affected by laws they might be subject to some future laws that would make them do it and as we all know, if the government does not care about something than it is crypto investors.

This concern is a very big one which also leads for some community members to propose to delay the merge. I really hope that this will not be the case as the date was delayed so often in the past few months. Furthermore, I don’t know if there is an easy solution to this problem. The quickest one that I would think off is slashing. It would delete all of the staked ETH of a validator that would try to perform such activities as mentioned above. I think that this would lead to many people taking their funds away from these third party staking providers as they want to be owner of their own stake yet again.

Conclusion

In conclusion I really hope that the Ethereum Merge will stay happen as planned in the middle of September. I am really curious how the Ethereum price will change after that or if the merge is already priced in. Furthermore, it would interest me if this could lead us into another crypto bull cycle despite all of the macro economic uncertainty.

Speaking of Uncertainty, it will be very interesting to see how the stock market will react on the upcoming FED meeting and whether the FED might even consider to raise the interest rates for more than 75 basis points. I highly doubt that and I think that nobody is expecting that, but if this happens I am predicting a blood bath in both crypto and the stock market. I think it would erase all of the winnings of July and august and catapult us into a real recession this time around.

Published by ga38jem on
Steemit
On 22nd August 2022