Stocks of many cryptocurrencies continued their downward plunge this week as inflation continues to remain at a 30-year high and other more crypto-specific news.
Bitcoin price fell almost 7% today and is trading at around $27,660. The price of Ethereum is down more than 13%, and the price of the Dogecoin meme token is down more than 14%.
The stock market and cryptocurrencies sank on Friday, after the release of inflation figures in the United States. The latest data from the Consumer Price Index (CPI), which tracks a basket of daily goods and services, shows prices rose 8.6% in May on an annual basis. Economists had forecast a rise of just 8.3%, and the new data shows that inflation may not have peaked yet.
This could be problematic for cryptocurrencies, which have not been doing well since the Federal Reserve began raising its benchmark rate for overnight lending and shrinking its balance sheet by nearly $9 trillion. thus withdrawing cash from the economy in a process known as quantitative tightening (QT). If inflation remains elevated, the Fed will be forced to continue its aggressive rate hikes and QT, which has hurt riskier assets such as cryptocurrencies.
Ethereum developers have delayed a key step in their long-planned network upgrade that will move the network to the more energy-efficient proof-of-stake. Currently, networks like those of Bitcoin and Ethereum use the concept of proof-of-work mining, in which miners use high computing power to attempt to solve a cryptographic puzzle as quickly as possible in order to earn new tokens. .
The developers announced on Friday that they would delay setting up a “difficulty bomb“, a mechanism that makes cryptographic puzzles increasingly difficult until it becomes impossible to mine tokens using the proof-of-work concept. Once the “difficulty bombis enabled and allowed to run, it essentially triggers a countdown to the new proof-of-work system, which has now been years in the works.
The developers added that they have no plans to delay the merger, which is scheduled for August, but investors may think another delay is inevitable.
Regardless of the delays, expect Ethereum to complete its network upgrade, which it has been working on for some time. This will make the network not only much more energy efficient, but also much more scalable, allowing Ethereum to process many more transactions per second on its network.