Finexia Crypto Collective Newsletter - August

Finexia’s cryptocurrency analysts are attributing this outperformance to the renewed interest and sentiment towards Ethereum (ETH), which was by far the best performer in the Finexia Crypto Collective.

Why did Ethereum outperform the other coins in the Collective? The highly anticipated “Ethereum merge”, which simulated the shift from proof-of-work to proof-of-stake, marking a step closer to Ethereum’s long-awaited Mainnet merge, scheduled for late August 2022. At a basic level, Proof of Stake and Proof of Work are consensus mechanisms used to validate crypto transactions and are an essential component of block chain technology. These protocols work by allowing a computer to prove their presence on the network to validate transactions. Transition from proof of work to proof of stake will significantly improve the speed and efficiency of transactions, while minimising transaction fees known as “gas fees”. Further fuelling Ethereum’s price action was the general ‘risk-on’ sentiment coinciding with the NASDAQ index making four weeks of consecutive gains. The correlation between the two markets will likely persist into the near term, given heightened global recessionary risks.

Alongside the Ethereum merge’s growing hype, layer-2s on Ethereum are finalising their development and beginning to launch more scalable and efficient networks. Again, Ethereum appears to be the yardstick for a rebound in sentiment and market appreciation.

Interestingly, in the days following Ethereum’s merge date confirmation, the total crypto market capitalisation increased by over 15%. Given the inherent benefits and simmering anticipation associated with Ethereum’s merge, it is likely that ETH’s price action will dictate short-term digital asset returns.

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