Bitcoin breaks above $22,000 on Monday as it continued a week-long rally ahead of US inflation data and the much-anticipated Ethereum network upgrade.
According to data from CoinDesk, the world’s largest cryptocurrency was trading at $22,328.27 as of 9:15 a.m. ET, according to data from CoinDesk.
After falling below $19,000 on Wednesday to its lowest level since June, Bitcoin has since rallied around 17%.
It also follows a winning week last week for US stocks. Bitcoin has a strong correlation with the stock market, especially the Nasdaq, and often moves higher when the tech index rises.
Cryptocurrency investors are eagerly awaiting the August Consumer Price Index report, scheduled to be released on Tuesday, to see where inflation is headed, which could provide some insight into future policy measures by the US Federal Reserve.
Stocks have come under pressure this year as the Fed raised interest rates in an effort to control inflation.
Cryptocurrencies, which are also risky assets, have been beaten. Nearly $2 trillion has been wiped off the entire crypto market since its all-time high in November. Bitcoin is down more than 50% this year. This drop was also driven by crypto-specific problems, including the collapse of key projects and bankruptcies that have spread throughout the industry.
Meanwhile, the Ethereum network will complete a long-awaited upgrade known as Consolidation. This will transform the Ethereum blockchain from a proof-of-work model to a proof-of-stake model and significantly reduce the amount of power required to operate the network.
Advocates say this could pave the way for wider use of ether, the token that runs on top of Ethereum.
“Cryptocurrency faces an unusual double this week: US inflation data and [hopefully] the long-awaited and immediate Ethereum consolidation. Hold your breath for a roller coaster ride,” Nexo co-founder Antoni Trenchev said in a note Monday.
However, analysts have warned that the merger will not necessarily speed up the notoriously sluggish Ethereum network or reduce fees associated with transactions.
However, enthusiasm is growing for the merger. Since ether hit its lowest level of the year in mid-June, the price of the world’s second-largest cryptocurrency has significantly exceeded that of Bitcoin. Ether is up more than 90% since June 19 while Bitcoin is up just over 20%, raising questions about how much the merger has been valued.
The Federal Reserve is also expected to raise interest rates again next week at its Federal Open Market Committee (FOMC) meeting, which is another dark cloud hanging over the cryptocurrency field. “Mergers could cause ‘selling the truth’ in the crypto market and we still need to be careful for next week’s FOMC meeting. Yuya Hasegawa, crypto market analyst at Japanese exchange Bitbank, said in a note on Monday.
