Will Bitcoin’s Rebound Last? | PYMNTS.com

For the first time since mid-June, bitcoin is on track to end a week without falling below the psychologically vital $20,000 mark, spending most of the week above $22,000.

In this crypto market, that’s something of a win.

Not much of one, mind you, as crypto is still deep in the red. Bitcoin was down as much as 75% since approaching $69,000 in November and has given back all the gains from the 2021 bull market. But for now, the near panic that has gripped the broader crypto market since it was spooked by the $48 billion collapse of the Terra/LUNA stablecoin ecosystem in May appears to have subsided.

See also: Unsupported Stablecoin’s Collapse Lost $48B; Crypto Says “Let’s Launch Two More”

What is interesting is why it all happened.

For starters, the biggest influence on bitcoin this week was actually news about another cryptocurrency, No. 2 ether.

The Ethereum blockchain reached a giant milestone, with developers setting a September date for the “merger” that will make it a far faster blockchain, capable of massive scale – from today’s 12 or 13 transactions per second (TPS), the new Ethereum 2.0 blockchain will be capable of 100,000 TPS.

That will make it a very viable payment lane, among other benefits.

Read More: Ethereum 2.0 Targeting September With 100,000 TPS Close At Hand

It will also switch to an eco-friendly proof-of-stake consensus mechanism that will effectively eliminate its country-sized pollution footprint – something that has damaged the cryptocurrency’s image for some time.

Return of Optimism

While this boosted ether more than anything else—the No. 2 crypto was up as much as 45% this week—the rare good blockchain news had a ripple effect on bitcoin and many other cryptocurrencies.

It marked a “return of optimism,” according to influential CoinDesk podcaster Nathaniel Whittemore, and filled what The Breakdown’s host called a “narrative void” about the ways blockchain and cryptocurrencies could change the world, the industry news outlet said.

It has been sorely lacking since the algorithmic stablecoin terraUSD lost its dollar peg at the beginning of May. Aside from the $48 billion investors lost, it set off a ripple effect, sending a wave of bankruptcies through the crypto-lending industry that saw hundreds of thousands of small retail investors frozen out of their deposit accounts and watched losses as the companies investing their funds were crushed by huge and poorly reviewed loans.

Also read: ‘Bunch of Idiots’: Crypto Pays High Price for Due Diligence Delinquency

Elon Musk sells

Tesla and SpaceX CEO Elon Musk is known for his ability to move crypto markets, with everything from big investments in bitcoin — Tesla bought $1.5 billion worth in early 2021 — to random memes that have built dogecoin into an actual cryptocurrency that is gaining a foothold in payments.

You might also like: Despite massive failures, Dogecoin continues to gain wallet share

So what was interesting was that the rally wasn’t crushed on Wednesday (July 20), when Musk revealed in a quarterly earnings report that Tesla had sold three-quarters of its bitcoin holdings for $936 million — at a loss of as much as $9,000. per bitcoin, MarketWatch calculated. There was a drop, but the oldest cryptocurrency bounced back.

That could possibly be because Musk said the sale was to bolster Tesla’s cash position in the face of what he called COVID-related fears about the Chinese market, rather than a sign he was turning his back on bitcoin. And, he added, Tesla was “open” to buying more in the future.

Watch Here: Telsa Sells 75% of Bitcoin Holdings, Adds $936M to Its Books

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Meanwhile, bitcoin was largely able to shrug off the European Central Bank’s 50 basis point interest rate hike on Thursday (July 21). So far, it seems calm in the face of a 75 basis point increase expected from the US central bank next week.

That said, Whittemore — and others — have predicted that a true bitcoin bull market will have to wait until the Fed stops raising interest rates in the face of record-setting inflation.

So if you’re one of the roughly half of bitcoin buyers in the red, it’s probably going to be a while before you can sell high.

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