Can ETH's market-leading rise indicate a market shift?

As the Ethereum merger (The Merge) is approaching quickly, ETH has risen rapidly to $1,500 in the past week, an increase of more than 45%, thereby driving the entire crypto market.

At the same time, BTC broke through $23,000, with an increase of more than 20% in the past week.

Has the market trend changed?

Although the price of Bitcoin has rebounded to over $23,000, many industry analysts believe that this short-term rise is a "false alarm" and the crypto market may be heading for a new low. Cryptocurrency analyst Dylan LeClair revealed that there are still tens of thousands of BTC short positions open, especially a large number of new Bitcoin short positions were opened between June 15 and July 15, which means that although Bitcoin may rise further in the short term, it is still possible to reverse the trend and fall again.

Karl Jacob, founder and CEO of stablecoin platform Bacon Protocol, believes that investors are “digesting” inflationary bad news, driving the current cryptocurrency rally.

Andrei, co-founder of algorithmic crypto trading platform AESIR, believes that regardless of macro trends, the current market performance can be attributed to the following two factors:

1. Ethereum Merger

After many delays, the Ethereum Merge will take place in September. This has triggered a wave of attention and anticipation in the crypto industry. Once it goes live, it is expected to have a profound impact on the cryptocurrency world and beyond. The staked ETH will affect the economy of ETH itself by increasing scarcity. The current ETH issuance rate is 5.4 million ETH per year, and after The Merge, the issuance rate will only be around 500,000 ETH per year.

This could threaten Bitcoin’s dominance and first-mover advantage — and that’s the problem.

2. BTC determines the trend

Bitcoin market dominance is currently around 42% and has historically played a very important role in determining the direction of the entire cryptocurrency market. When BTC rises or falls, other tokens follow its lead. An argument can be made that the current ETH surge cannot turn the crypto market around on a macro scale, as ETH’s dominance is 17% — or less than half of Bitcoin’s.

However, even if we believe that the current ETH surge cannot revive the market and cause a paradigm shift, it is clear that Ethereum’s dominance has been growing over the past 2 years, while Bitcoin’s market dominance has declined.

If this trend continues, we could see an Ethereum-dominated crypto market as early as 2024.

Andrei said that he is looking forward to the great changes brought about by Ethereum based on PoS. At present, although ETH has broken through $1,500, the crypto market is still facing the possibility of a sharp decline. It is too early to talk about a trend reversal.

However, Novogratz, founder of cryptocurrency investment company Galaxy Digital, believes that the crypto asset industry has almost no concept of risk management, and the Luna coin crash is the beginning of the crypto asset crisis, which has evolved into a full-scale credit crisis. Bitcoin is unique, it has the advantage of storing value, and the price of Bitcoin can still reach $500,000 per coin within 5 years. Soaring inflation is the only factor that causes GDP to fall.