Even though Ethereum is the second-largest cryptocurrency by market cap, ETHUSD continues to outperform BTCUSD in terms of price growth. Bitcoin struggles to hold support at $21k, while Ethereum managed a rebound from the $1,300 level, currently trading at $1,484. While Bitcoin is up 2% in the past 24 hours, Ethereum’s price saw a substantial increase of 8% today, even with uncertainty plaguing both global and crypto markets.
Crypto Market Update
After dipping below the $1 trillion market capitalization on Monday, the global cryptocurrency market is attempting to rebound, currently at $990 billion. One of the significant drivers today is Ethereum which saw an impressive rebound from the $1,300 level, which was unexpected by most traders.
While the 24-hour charts might look promising, the sharp decline in trading volume over the past 24 hours for Bitcoin and Ethereum suggests that the current market action – rebound – is unconfirmed.
The reason for the unstable market conditions is the Fed’s upcoming interest rate hike of 75 basis points in their latest aggressive efforts to curb inflation.
After the CPI numbers released on July 13th signaled that inflation is still rising, the Fed has been preparing to increase interest rates to help the economy. While initially rumored a 100 basis point rate hike, the Fed will instead increase interest rates by 75 basis points today.
Opinions on whether or not the Fed interest rate hike will affect crypto markets significantly vary, with some saying that Bitcoin’s price shouldn’t be affected much by the interest rate hike. On the other hand, the stock market is likely to increase in volatility which could cascade down to crypto markets since Bitcoin seems to follow the stock market’s price action.
However, as Ethereum has been leading the market for the past several weeks, we might not see much movement from Bitcoin even after the interest rate hike.
Bitcoin Price Likely to Fall to the $20k Levels
While Bitcoin managed to hold the current support of $21k relatively well due to Ethereum’s bullish price action, the crypto asset is likely to test the waters at the $20k range later in the week, especially with the upcoming Fed action.
Moreover, news of an SEC probe into the cryptocurrency exchange Coinbase isn’t helping crypto markets, as the government agency’s latest action highlight the unregulated wild west nature of crypto markets. Plenty of bad actors are attempting to defraud investors and take advantage of insider knowledge due to the anonymous nature of crypto.
While regulation of crypto markets might curb unfair actions by sensible white-collar individuals, there will always be plenty of downright malicious actors looking for their share of the pie. No regulation or oversight will prevent them from running scams, hacking wallets, and obtaining cryptocurrency illegally.
Will Ethereum Surpass Bitcoin in Market Cap in 2022?
One question on everyone’s mind is whether or not Ethereum could overtake Bitcoin in terms of market cap by the end of 2022. As Ethereum’s network merge is scheduled for September, the cryptocurrency could show substantial price growth in late Q3 and Q4 of this year.
While Ethereum’s market cap is approaching 50% of Bitcoin’s, Ethereum still needs to more than double in price to overtake Bitcoin. ETH’s best chance of overtaking BTC is if the cryptocurrency slowly outperforms Bitcoin daily.
As the cryptocurrency market recovers and Ethereum’s network switches from proof-of-work to proof-of-stake, we could see additional bullish momentum for ETH that could push it higher. The first step for ETH to overtake BTC in market cap is to consistently trade at above 50% of Bitcoin’s market capitalization. Once that achievement can be unlocked, then the bulls could enter Ethereum’s arena and continue pushing ETHUSD higher.
It’s more likely for Ethereum to show substantial price growth after the successful network merge in September and a network upgrade that will enable ETH to handle orders of magnitude more transactions per second than it currently can. Until Ethereum’s network proves itself to the broader crypto market, ETH overtaking BTC is unlikely.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
Image Source: winst2014/123RF