Ethereum has lost steam after a week of profitable trading. The elements of a possible expansion of the bullish momentum were determined in the macro-economic phase. Nevertheless, rising tensions between China and the United States have brought uncertainty back to the global financial world.
US Congressman and Speaker of the House of Representatives Nancy Pelosi visited Taiwan earlier this week. His visit is controversial, as Taiwan is considered an area of open rebellion by China.
The latter responded to Pelosi’s visit by firing artillery near Taiwan and declaring military exercises the Asian giants consider an “act of provocation”. Therefore, tensions arose over a possible conflict between the US, Taiwan and China in the near future.
Investment firm Cumberland believes that the above highlights the close relationship between Ethereum, the crypto market, and the traditional finance sector. Due to this uncertainty, other cryptos by market cap are trending downwards in the short term.
Ethereum and bitcoin are highly correlated with the Nasdaq 100, an index that tracks large tech stocks. Cumberland believe that That if the price of ETH can break this correlation, the cryptocurrency will be able to reclaim the previous high. Until then, the bullish momentum of ETH seems limited.
The investment firm said the following on the price fate of ETH, as long as it remains correlated with the older markets:
Unless crypto is related to a broader macro background, it will be difficult for these disciplines to generate meaningful alpha. That said, the upcoming merger threatens to re-establish the digital asset markets as an independent asset class.
The merge is a much-anticipated event that combines Ethereum’s execution layer with its consensus layer. This event could be significant enough to give new momentum to the bulls and break ties with the Nasdaq 100.
Ethereum Ecosystem Outperformed Before Merge
The merger has already had a positive impact on the Ethereum ecosystem and two other assets, Lido DAO and Ethereum Classic (ETC). A report by Kraken Intelligence shows that the ETH ecosystem has outperformed the crypto market and continues to outperform.
In July, the price of ETH, decentralized finance (DeFi) and non-fungible tokens (NFTs) registered an average of 59%, 52% and 35% gains, respectively. Thomas Perfumo, Head of Business Operations and Strategy at Kraken, said the following on the potential impact of The Merge:
ETH holds value against BTC during this crypto winter, a significant departure from the previous cycle. All eyes are on The Merge, the most important milestone in Ethereum’s scaling roadmap since the launch of Beacon Chain in late 2020. If successful, the industry will have the clarity to take a long-term view on Ethereum.