Market Trend 6/6 - 12/6 ｜US Inflation rises again, ETH suffers the most

Looks like the volatility is far from over, and so does the downside trend for the entire crypto market.

Over the past few weeks, we have consistently established that the global crypto market and its verticals were in a very uncertain position - volatility was at bear-market highs between key 28-31k levels for Bitcoin while investor sentiment and adoption continued to take tougher hits as most weren’t sure where the market would be heading to next.

As it turns out, the market was heading for another drop. While these levels have been visited before in 2022, we hadn’t reached them quite so suddenly as we’ve done this week. Especially for Ethereum, which came to a high of losing nearly 20% in a single week - a massive beating for an asset with, until then, more than $200 billion in capitalization.

If there is one takeaway that we should keep in mind over the following week is to do nothing, truly. This dive was rough, sudden and macro factors are also not looking great for global finance, so it’s much better to wait it out for now. If you’re looking for long-term profits, disregard the fluctuations and see this as an opportunity to dollar-cost-average further into your goals.


American inflation continues to break records

The month of May was one of great hope for the American and subsequently world economy. With the Federal Reserve continuing to hike interest rates in the country, officials truly believed that inflation was starting to taper off into a downside trend.

Then, May’s CPI was released on June 10th. The Consumer Price Index is the main inflationary measure in the country, released every month, and it showed data of what everyone feared the most - inflation was growing stronger again. With May’s data, inflation was back to 8.6% levels, the highest its ever been in 41 years.

Right after the news came out, markets started to react negatively to the report. Nasdaq, S&P 500, Dow Jones, whichever index you choose, they all began a fast decline with investor fears taking over. The same, of course, applied to cryptocurrencies. The entire market dropped, with Ethereum taking the biggest beating.


Ethereum is back to January 2018 highs



This is definitely something that we did not want to see; Ethereum is now worth around the same as it was back in its 2017 bull run peak, on January 12th, of around $1450 dollars. Comparatively, if Bitcoin was following the same pattern as Ethereum this week, it would be worth around $19500 dollars. Not good, not good at all. All markets are tanking pretty damn hard, but why is Ethereum taking the biggest beating? After all, Ethereum’s promising “Merge” update is allegedly coming soon so shouldn’t that strengthen investor sentiment?

Apparently, it all comes down to an imbalance between the Ether and Staked Ether (stETH) pool for the Merge update. With investor long being able to stake Ether for the Proof-of-Stake update, the pool sems to be suffering a disconnection in asset price which hasn’t recovered since May 12. As of June 12th, stETH is trading at roughly a 3% discount compared to regular EThereum.

If this was April 2022 or earlier, there wouldn’t be much cause for concern. However, we’ve recently had the historical LUNA/UST crash, which showed us that any project can fail drastically - and that includes Ethereum. Will that be the case? Very unlikely, but retailers are concerned and plenty are selling their positions as fast as they can. The following seven days will be absolutely decisive for this stETH controversy, and can dictate how the market will behave for the next few weeks.





Author: Gate.io Researcher: Victor Bastos
* This article represents only the views of the researcher and does not constitute any investment suggestions.
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