High CPI Data Sends Markets Crumbling; Will The Merge Be Delayed Again?

Chart of the Day

With the release of the devastatingly high CPI data on Friday, June 10, the market plummeted into a sea red over the weekend. Major cryptocurrencies tumbled as investors brace themselves for the hawkish turn in monetary policies to combat inflation. BTC penetrated the floor of its month-long range on Sunday, June 12, closing the week on a one-year record low, before dropping further in the early hours of Monday, June 13 (Asian trading hours). As of the time of writing, the largest cryptocurrency by market cap is consolidating losses above the $25k handle after shedding 6% of its market value in the last 24 hours. The immediate major support for BTC sits near the $25k level. A break below this level could accelerate the downward spiral and move to test the $23.5k support zone in the near term. 

In a similar vein, ETH is now trading above the $1,300 level after plunging more than 27% in a matter of days. A key bearish trend line with resistance near the $1,420 handle is taking shape on ETH's hourly chart. ETH may swing toward the $1,200 support zone should it fail to rise above the $1,420 level. Meanwhile, the combined market cap of the top 3 stablecoins now constitutes 72.5% of that of ETH, an increase from 50% just one and a half months ago. Most major altcoins are also deep in the red, with mid-to-large caps posting double-digit percentage losses in a similar time frame. 

Back to (the) Futures

The weekend bloodbath has shaken out speculative traders in the derivatives market. In the past three days, despite funding rates largely remaining in the neutral zone, a whopping $790 million worth of long positions were liquidated, causing the gamma exposure of BTC and ETH to fall back into the negative territory. The options market saw considerable fluctuations in Implied Volatility (IV) amid plummeting spot prices, indicating that short-term risk aversion has dominated the market. 

Talk of the Town

Ethereum core developers announced the decision to further delay the deployment of the "difficulty bomb" last Friday, casting a shadow over the prospect of completing The Merge in August. The difficulty bomb was embedded in Ethereum's code in 2015 as a means to gradually boot miners off the blockchain by increasing ETH's mining difficulty, and thus it is a crucial catalyst in Ethereum's long-anticipated transition to a proof-of-stake consensus. Developers have proposed to delay the difficulty bomb to August 2022 (for the sixth time), after a number of bugs have surfaced following the test merge. According to lead developer Tim Beiko's tweet, the team is "aiming for a ~2 month delay and for the upgrade to go live in late June."