Crypto Conquistador #056
Everything you need to know of today’s fast-moving crypto markets.
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Overview
The Merge ELI5Market: Can BTC break through resistance?US authorities ban the use of Tornado Cash.Don’t fall for the traps during the merge.
Good morning Fam,
The Merge and all its emerging complications have begun entertaining the cryptoverse. And if you’re having difficulty understanding all of it, you’re not alone. It’s a complicated transition and tough to understand.
But don’t fret. We got your back.
We wouldn’t be doing our part if we failed to educate our readers about this historical event in crypto.
Today we break down The Merge into its simplest form.
Explain It like I’m 5 (ELI5): The Merge
What’s The Merge?
Ethereum is currently a Proof Of Work blockchain that requires miners to secure the network. Those miners earn a fee for providing the service.
In September, Ethereum services will shift onto a Proof of Stake (PoS) blockchain that requires NO Miners and instead utilizes staking nodes to secure the network. This merge will make the NEW Ethereum blockchain more efficient cost-wise, scaling-wise, and environmentally.
The Complications
Unfortunately, miners will have no purpose in the new chain, which doesn’t sit well with many of them. In response, some miners have chosen to continue mining Ethereum despite merging its ecosystem.
Post merge, there will be TWO Ethereum chains, a PoW one, and the new PoS chain.
Additionally, there will be TWO of every TOKEN and NFT. This dynamic creates financial opportunities for players such as Justin Son. Vitalik Buterin warned the community of this occurrence.
What happens to the old tokens?
Most projects on Ethereum will STOP recognizing the old tokens. For example, Tether (USDT), Frax (FXS), and Chainlink (LINK) have already dedicated themselves to the newer PoS blockchain.
What happens to the old PoW Ethereum chain?
Post-merge, the old Ethereum PoW chain, will still be the third most secure battle-tested blockchain on the block, behind Bitcoin and Ethereum PoS. If enough developers continue supporting the old PoW chain, it could transform into its own entity. Unfortunately, for the PoW version, many of the Ethereum developers will transfer their skills to the new PoS chain.
I don’t see many teams choosing to remain on the PoW version of Ethereum. So unless the new PoS completely fails (which is very unlikely), the old PoW will fail to encompass the ecosystem of Ethereum. The tokens will continue to exist, but protocols or exchanges won’t recognize them.
Should I buy the ETH POW token?
If you own some ETH, you’ll automatically receive the new ETH token, and the old ETH will convert to ETH-POW.
Unless you’re betting for a complete blowup of The Merge, don’t purchase the new ETH-POW tokens. Buying ETH-POW can be seen on a hedge on an ETH position, but it will cost a price. The best way to play the merge is to buy ETH and hodl through any madness that might ensue.
Market update 🌍
BTC/USD
Bitcoin is giving it another go at the 24k resistance level after failing to break through on Jul 20th and 30th. So is the third time a charm?
BTC rejected its attempt to rise above the resistance level today after reaching a high of $24,245. The price action has created a classic ascending triangle pattern, which historically can break to either side.
If you’re looking to go long, waiting for the break on the impulse retest noted in the image below is best.
High-resolution chart
The Relative Strength Index (RSI) suggests another downward leg to trendline support levels (Green) for BTC on the 4H charts. Ultimately it’s best to wait for confirmation whether you believe it’s time for a breakout or if the support trendline (green) fails to hold.
High-resolution chart
NDAQ/USD
The NASDAQ price has begun to stall near a significant 182 resistance level highlighted in the daily chart (red). Like BTC, the RSI has entered an oversold area, suggesting buyers’ exhaustion. The CPI numbers scheduled to release on Wednesday may become the catalyst for a breakout OR another leg downwards.
High-resolution chart
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Newswatch 📰
US authorities blacklist Tornado. The US treasury department has banned citizens from using Tornado Cash, a decentralized crypto-mixing service. The ban comes as a matter of national security after the North Korean hacker group known as Lazarus was confirmed to be utilizing the service. The penalty for using Tornado Cash? Up to 30 years in prison.
The surveillance extends to the UAE. To combat money laundering, the government of the United Arab Emirates (UAE) has mandated all real estate purchases in crypto must be reported to authorities. The move comes after several regional real estate developers announced they would begin accepting payments in bitcoin and ether.
News tidbits:
Crypto Lender Hodlnaut freezes withdrawals, citing market conditions.
At the protocol level ⛓
Protocol level tidbits:
StarkNet Roundup #28Thread: Here’s why you should pay attention to Redacted Cartel.Chainlink (Link) supports The Merge.
NFT & metaverse update 🐵
Anomica Brand introduces the TOWER token web store.Netflix builds “Grey Man” metaverse experience in Decentraland.
My five cents…
It’s a trap!
The opportunist will spin narratives around the Ethereum Merge to trap retail investors into complicated schemes. So please stay vigilant and don’t fall for it.
I’ve got my money on the devs and believe The Merge will succeed, even if there’s some issues The Ethereum team has tested The Merge in more than five testnets and are well prepared for complications in the eventuality that they come.
Yes, there’s the slightest chance The Merge fails (anything is possible), but it won’t cancel the merge, merely delaying its eventuality.
Either way, be prepared when we enter this unique phase in crypto history. Things may just get a little wild.
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Gabri
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Avoid THESE traps during the Ethereum Merge. was originally published in The Capital on Medium, where people are continuing the conversation by highlighting and responding to this story.