50% jump of Ethereum on the eve of the network update; Bull trap or continuation of the upward trend?

The recent surge in the price of Ethereum has occurred while many market experts believe that sentiment is still bearish towards this digital currency. However, it can be said that the positive news of the final date of the transition of the Ethereum network to proof of stake has caused its growth, and it is not yet clear whether this trend can continue or not.

To Report As Cointelegraph nears its long-awaited Ethereum network integration, Ether, the network’s native token, has outperformed other cryptocurrencies. Despite this, the overall outlook for Ethereum remains largely bearish.

Ethereum has gained nearly 50% in price over the past seven days, outperforming its older brother, Bitcoin, which has grown by only 20% in the same period. In addition, Ethereum has risen about 66% from $918 on June 19, its lowest level in the current cycle, and is now at $1,600.

However, as macroeconomic factors continue to worsen, Ethereum’s current uptrend could be a bull trap. A bull trap is a signal that makes traders think that the downtrend of a digital asset has reversed and the price is going up; While the market continues to decline again after some time.

The main reason for the recent jump of this asset is related to the announcements of the final timing of the transition of the Ethereum network to proof of stake on September 19 (28 September).

Merging (changing the current proof-of-work mechanism to proof-of-stake) Ethereum will reduce the energy consumption of this network by more than 99%. However, network integration does not necessarily reduce transaction fees significantly; Because this will happen when scaling through sharding, which is predicted for next year.

In a report on Ethereum integration, Coinbase explained on Tuesday that the next and final step in preparation for running on the mainnet is the integration of the Goerli testnet. This test integration is scheduled for August 11.

Guerley is Ethereum’s most serious test environment with the most active users and the closest real simulation to mainnet integration.

While the major update is cited as a fundamental driver of current Ethereum market sentiment, the asset’s price is still 68% lower than its all-time high of November 2021 (Aban 1400).

In addition, there are concerns that a significant amount of Ethereum may flood the market after the merger and release from the Ethereum 2.0 staking smart contract, increasing selling pressure.

Also read: What is Ethereum 2.0? ; Everything you need to know

However, Eliézer Ndinga, director of research at 21Shares, said that this is unlikely to happen.

Andinga says:

Ethereum withdrawals will not take place until 6-12 months after the network merge and after the Shanghai update. Withdrawals are limited to six validators per period, or approximately once every 6 minutes, to prevent one-time withdrawals and keep the network secure.

A recent survey by the website Finder, conducted before the start of the recent uptrend, also shows that there is still a lot of negative sentiment towards the price of Ethereum in the short term.

A group of 54 digital currency industry experts who participated in this survey believe that Ethereum will reach $1,711 by the end of 2022 and $5,739 by 2025. These experts have also predicted the price of Ethereum in 2030 at around $14,412. However, according to these experts, before the end of this year, the price of Ethereum will fall to $675.

The Finder website said there are several macroeconomic factors that may have caused such a fall. It is expected that the Central Bank of America will raise the interest rate by 0.75 percentage points again during its meeting on July 26-27 (August 4-5). This is generally considered negative news for the cryptocurrency market. If Bitcoin falls, Ethereum will surely fall.

In addition, the US Bureau of Economic Analysis (BEA) will publish its forecast of the country’s second quarter GDP growth on July 28 (August 6). As expected, the forecast rate for this quarter is negative, which would mean that the US is in a deep recession. Such news would also be very bad for risky assets like Ethereum.