The Merge approaching: what impact this week on the crypto market?

Just a few more days until Ethereum moves from Proof of Work to Proof of Stake with The Merge update. The next week is likely to be really hectic depending on the events that will occur. In parallel with this major event for the ecosystem, the macroeconomic situation is still the same and the war is in full swing in Ukraine. The US dollar has shown some signs of weakness in recent days, but this is not enough to restore a favorable context for risk-on assets. In this context, let’s head to the charts to take stock of the cryptocurrency market.

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The crypto market is back to late August levels

Amount of total cryptocurrency market capitalization on H4 scale

Since last week, the market has reacted perfectly on the identified levels. After bouncing off the 50% Fibonacci of the previous range, cryptocurrencies are on the rise again. However, nothing is decided yet. You can see that the market has been moving under resistance since August 24th. The trend being bullish in H4, a recovery of 1030 billion dollars would be an interesting point to hope for a continuation of the rise. However, be careful not to anticipate a move that could be a false breakout. This is what happened in recent days with the loss of 919 billion to finally resume this level a few hours later.

If he gets rejected again on the 1030 billion, watch the 980 billion dollars. It has been a pivotal level for several weeks, it could allow the market to rebound. If the resistance is brought to let go, we can envisage a return of the cryptocurrencies on the 1060 as well as the 1080 billion. Objectives established in stages such as these make it possible to obtain reasonable and secure gains in a market sweeping up and down the stops of the various participants. Will the merge be a catalyst for the increase in capitalization?

The situation of altcoins has not changed in the market

Cryptocurrency ex-Bitcoin and Ethereum market capitalization price chart on H4 scale
Price of the market capitalization of cryptocurrencies excluding Bitcoin and Ethereum on the H4 scale

Since last week, despite moves in Bitcoin and Ethereum, altcoins haven’t responded as well on the upside. The latter are still evolving below the pivot zone at 393/395 billion dollars. However, they have broken out of the resistance at 388 billion and seem to be in full pullback preserving the H4 trend. Compressing below a key level as it battles to hold onto the 200 EMA, a close above $395 billion could give altcoins room to move higher. Of course, this will not be independent of the movements of Bitcoin and Ethereum. Thus, if the latter do not unscrew downwards, an interesting context could be set up during the next week. Are they waiting for a success of The Merge before pushing up?

However, keep in mind that a lot of macroeconomic data will be released next week that will influence market volatility. If altcoins turn green, a target of $406 billion could be possible. However, if the altcoins are once again rejected on the pivot zone, it will be an opportunity for the sellers to come forward and bring the capitalization to a minimum of $378 billion.

Bitcoin Rebounds Ahead of The Merge?

Bitcoin dominance price on the H4 scale which is on the rise despite Ethereum's outperformance and the long-awaited The Merge update
H4 Scale Bitcoin Dominance Course

After several weeks and reaching our goals, bitcoin has rebounded (for now) as expected. Currently in an uptrend on the H4 scale, it has slowed down below 40.61%. If it manages to overcome this level to continue to suck up the capital available on the market, the next objective is 41.09% dominance. However, an intermediate reaction is possible at 40.68%. It is now that bitcoin must give everything if it wishes to preserve the momentum initiated by the rebound. Will The Merge be an obstacle?

If it loses 40.25% again, it will be necessary to monitor Bitcoin’s ability to recover (or not) this level. This could be a marker of bitcoin regaining strength or showing continued weakness against the rest of the market. Thus, the H4 trend must be preserved for the next few days. The next week will be important and will allow to have a better vision on the next weeks of September. In this context, let’s now analyze the ETH/BTC pair to study the balance of power between the two assets. This will complete the bitcoin dominance analysis.

Will The Merge allow Ethereum to continue its outperformance?

Price of Ethereum against Bitcoin on a daily scale to monitor capital movements and the possible influence of The Merge.
Price of Ethereum against Bitcoin on the H4 scale

Against Bitcoin, Ethereum has reached one of the targets mentioned last week which corresponds to 0.0854 BTC. Having established local support, Ethereum is now trying to preserve the confluence of EMA. If it does, besides a return to the current high, The Merge could be a factor for Ethereum to push higher. In this context, the 2021 summit is not an unexpected objective and would be achievable. However, I would like to draw your attention to the caution to be maintained in the current state of the market.

If Ethereum experienced a nice rise during the summer of 2022, it is not impossible that The Merge will be anticipated (and priced) by the market. To tell the truth, it is a very complex question whose answer varies according to the approach of each vis-à-vis this event. We are reaching important levels against Bitcoin as it begins to regain dominance? It is therefore preferable to be attentive during the next few days by avoiding positions with too high a share of your capital. If Ethereum starts falling again after the update, it could take a lot of investors off guard. Indeed, many are counting on this moment by anticipating a potential rise.

Private cryptocurrencies failed to maintain a decent momentum?

Privacy Index Perpetual Futures price chart on a daily scale (1D)
Price of the Privacy Index Perpetual Futures on a daily scale (1D)

To close this weekend crypto point, let’s finish with the analysis of private cryptocurrencies. After reaching major resistance, the privacy index of FTX shows us that this is a sector that lost its attractiveness during the second half of August. At the moment, the index is in a range and oscillates between a support and an oblique resistance. If the FTX index representing a basket of private cryptocurrencies is to lose the current VAL, it will probably return to $963.

In this context, this local support must imperatively hold. If the index loses this level as well as its oblique support, it will undoubtedly be an expeditious return below 900 dollars. For the moment, nothing is decided yet since the index manages to preserve the VAL. This month of September will surely witness a trend recovery in the index. So, if you are interested in the index of private cryptocurrencies, we invite you to follow it closely.

Here we are at the end of this analysis of the cryptocurrency market. So, do you think The Merge will be a catalyst for a bull market rally? Or will it lead to a local top with a significant market decline? Be on your guard and continue to analyze the balance of power between Ethereum and Bitcoin while monitoring the dominance of the latter. The coming week will (probably) be very emotional and volatile! Manage your risk as best you can and monitor the key levels identified within this market analysis.

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John R. Zepeda

I have extensive experience working as a content writer in the areas of cryptocurrencies and finance, where I create interesting pieces that both inform and engage their audiences.

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