Ethereum is outperforming the broader cryptocurrency market as the highly anticipated Merge approaches, but the bigger picture is still largely bearish.<\/p>\n
Ethereum (ETH)\u00a0has gained a whopping 48% over the past seven days, outperforming its big brother Bitcoin, which has only managed to achieve 19% in the same period. It’s also up 66% from its market cycle bottom of $918 on June 19, reaching its current price of $1549.<\/p>\n
However, the current Ethereum rally could be a bull trap with the macroeconomic clouds darkening. A bull trap is a signal indicating that a declining trend in a crypto asset has reversed and is heading upwards when it will actually continue downwards. <\/p>\n
The primary driver of recent momentum for the asset has been linked to announcements regarding its final switch to proof-of-stake, which has been slated for September 19. <\/p>\n
The Merge will reduce the network\u2019s energy consumption by more than 99%. However, it will not necessarily reduce transaction fees significantly as this will occur when scaling takes place via sharding which is expected sometime next year.<\/p>\n
On July 19, a Coinbase report on the Merge explained that the next major step, and last dress rehearsal, is the Goerli testnet Merge which has been planned for August 11. <\/p>\n
Goerli is the most battle-tested Ethereum environment with the most user activity and the closest simulation of the real thing.<\/p>\n
While the major upgrade is the fundamental driver of current Ethereum market sentiment, the asset is still trading down 68% from its November 2021 all-time high. <\/p>\n
There have also been concerns that a significant amount of ETH may flood the market after the Merge and its release from its staking smart contracts.<\/p>\n
However, director of research at 21Shares, Eli\u00e9zer Ndinga, told Cointelegraph that this is unlikely to happen: <\/p>\n
\u201cThe withdrawals of Ether won’t occur until 6-12 months post Merge after the Shanghai upgrade. The withdrawals will be limited to six validators every epoch or ~ 6 minutes to avoid bank runs and keep the network secure.\u201d<\/p><\/blockquote>\n
Related:<\/em><\/strong> <\/em><\/strong>Ethereum devs confirm the perpetual date for The Merge<\/em><\/strong><\/p>\n
A recent survey by Finder, conducted before the most recent rally sai there is still a lot of negative sentiment regarding short-term Ethereum prices.\u00a0<\/p>\n
The panel of 54 industry experts polled thought ETH would be worth $1,711 by the end of 2022, climbing to $5,739 by 2025, before hitting $14,412 by 2030. However, they also thought it would dump to $675 before the year was out.<\/p>\n
Finder said there are a couple of macroeconomic factors that could cause this retreat. The U.S. Federal Reserve is expected to hike rates again by 75 basis points during their July 26-27 meeting, which is generally bearish for crypto markets. If Bitcoin takes a dive, Ethereum is sure to follow.<\/p>\n
Additionally, the U.S. Bureau of Economic Analysis (BEA) will release its advance estimate of second-quarter GDP growth on July 28. Another negative quarter, which is expected, will mean that the country is in a technical recession which is also very bad for risk-on assets such as Ethereum.<\/p>\n