Ether Breaks $1.6K on Merge Hype, Crypto Funds Price in July Rate Hike

Major cryptocurrencies gained on Friday with ether (ETH) breaking the $1,600 level amid a run-up in broader equity markets in Asia and Europe.

Asia Dow ended the day 0.37% higher, with gains of over 0.4% in Japan’s Nikkei 225 and Singapore. In Europe, Germany’s DAX rose 0.28%, and the Stoxx 600 jumped 0.4%. U.S. stock futures, however, slipped as investors await the next batch of second-quarter earnings reports. S&P 500 traded 0.26% lower, and the Nasdaq 100 fell 0.42% ahead of the opening bell in New York.

Global stocks remain on course for their best week in over a month, with speculation that the worst of the sell-off has passed, according to Bloomberg. Meanwhile, crypto market observers said bitcoin (BTC) gains came as traders assessed the upcoming round of U.S. rate hikes. Odds show a 77% chance of a 75-basis point hike.

“Since the high CPI (consumer price index) print, the market has been decisively pricing out the probability of a 100bps hike in the July FOMC [meeting of the rate-setting Federal Open Market Committee],” QCP Capital traders said in a Telegram broadcast on Friday. “Currently, a 20% chance of 100bps is still being priced in, but our view is that 75bps is the most the Fed will do.

“Expect another boost as 100 bps gets completely priced out,” the QCP traders said. However, QCP said it was “not sure” if the upside momentum continues in a big way as “the market is starting to show some signs of exhaustion.”

Ether rose nearly 10% in the past 24 hours, continuing a run from earlier this week. The asset has propped up ahead of the “Merge,” an upgrade on the Ethereum network in September, which has led to some calling the price rise the “Merge trade.”

In the past 24 hours, bitcoin rose 4.5%, showing signs of strength as it consolidated over the $23,500 level. BNB, XRP, Solana’s SOL and Cardano’s ADA all rose over 5%, while dogecoin underperformed bitcoin with a 3.4% rise.

Mike Tedeschi, market adviser at TradeZing, said the firm considers $28,000 as a “major” area of resistance for bitcoin with $18,000 as a support level.

“There are three major price zones that we are watching. The major upside resistance zone is at $28,000. This area was the low from 2021 and acted as support in the summer of 2021,” Tedeschi said. “However, if bitcoin falls below the $18,000 zone, the major level of support is around $12,000, which is where the 2020 breakout zone is.”

Meanwhile, FRNT Financial founder and principal Stéphane Ouellette said inflation pressures continue to affect sentiment around bitcoin.

“Similar to other risk assets, the pressures increased inflation is putting on the current rate environment is having a major impact on speculative assets such as bitcoin,” Ouellette said. “Furthermore, selling bitcoin is a very easy way for speculators to decrease risk in their portfolio.”

Ouellette added cryptocurrencies were the first assets to face selling pressure.

“Bitcoin and other liquid cryptos tend to see heavy selling pressure as it is one of the only highly speculative assets in a portfolio that investors can easily sell,” he said.