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The cryptocurrency sector posted another slump over the weekend, with the global market capital falling below $800 billion at the peak of the decline. Bitcoin led the descent as it dropped towards November 2020 levels, touching a multi-month low of $17,708. The pioneer cryptocurrency has since charted a recovery path and was last observed consolidating at the $19,380 range.
Ether printed a similar path, following Bitcoin in shedding value. The premier altcoin fell below the psychological $1,000 mark during Saturday's trading session before plunging further to an $896.11 bottom yesterday, as per CoinMarketCap data. The ETH/USD pair has climbed up in the last couple of hours to $1,035 at the time of writing. Worth noting, the two leading assets are, at current prices, both trading more than 70% below their all-time high.
The recovery rally will take time, opines Galaxy Digital CEO Mike Novogratz
Amid an extended losing streak in the market, Galaxy Digital CEO Mike Novogratz has predicted that recovery for Bitcoin and Ethereum could take much longer as the Fed continues to battle inflation in the US. The Wall Street veteran and crypto investor shared this projection while speaking in an interview with Bloomberg Technology.
Novogratz explained that the recent troubles were expected this year as the Fed ambitioned to withdraw liquidity to fight inflation. He pointed out that assets whose value had risen owing to an influx of cheap money were likely to suffer, citing crypto as one such asset.
The Galaxy Digital chief explained that with hiking rates, firms that had taken more leverage than they could handle, mentioning Three Arrows Capital and Celsius, have caused fear in investors, hence credit withdrawals. Novogratz added that it will be “a little while” before the crypto sector “regains confidence,” arguing a chain effect across the space and the time it will take to sort through the mess.
A washout is coming
Explaining that it is characteristic of all big cycles, Novogratz suggested that potentially many hedge funds (regular, crypto, and TradeFi hedge funds) will not make it out of this bear market. He insisted that most will find it hard to retain investor confidence and might have to consider closing shop or restructuring.
On whether the money would keep flowing, the Galaxy Digital executive believes that global macro hedge funds are on watch, waiting for the Fed to flip and halt the interest rates. Once that happens, Novogratz believes that most traditional hedge funds will cop some Bitcoin, arguing that the blockchain technology underlying crypto is considered by most as one that could see success again in the future.
Notably, the Galaxy Digital CEO is also convinced the Fed won't provide any soft landing and is leading the US to a fast-approaching recession in its battle against inflation.
Ethereum developers delay the difficulty bomb further
The Ethereum Foundation last week confirmed that it would be delaying the difficulty bomb again as it grapples with developmental snags that have made the much-anticipated merge seem never-coming.
Key dev Tim Beiko explained that the scheduled network upgrade would take place on June 29, on block 15,050,000. This upgrade, Gray Glacier, moves the date set for implementation of the Ice Age by about 700,000 blocks, approximated at 100 days, just as has been seen previously with London, Muir Glacier, Arrow Glacier, and Byzantium upgrades.
Further, deployment of the upgrade would only happen on the mainnet now that Ropsten has been Merged (migrated to Proof of stake). Bringing no other changes, Gray Glacier requires that all validators and nodes update their client versions.
The difficulty bomb is an increasing difficulty level on Ethereum as part of the greater ambition to migrate to Proof of stake. The bomb's designed to disincentivize crypto proof of work mining by trimming profitability over time. This would make Ethereum PoW nearly unusable hence having ‘no option' but to migrate to adopt PoS consensus.
Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.