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Crypto Week: Investors are Trapped by Ethereum 2.0 Protocol

Bitcoin is moving within a divergent channel that was formed in April with a primary support at $19,000 per coin. The bulls are seen to be weakening and therefore creating additional opportunities for Bitcoin prices to decline towards $18,600 and $17,600. The rebound over the last week took place within the unstable formation of an upward wedge and the return of Bitcoin prices to the support level was just a matter of time. The mid-term target price for Bitcoin at $15,000 per coin is intact.

There are no reasons for the market sentiment to be changed now. NEXO has recently withdrawn 152,000 ETH from the Maker lending protocol and has sent most of these coins to cryptoexchanges. Therefore, hopes for a rally are still vague and is the primary reason for investors to withdraw their funds. There is no information to suggest any financial difficulties of NEXO, and this fuels some optimism considering huge troubles faced by some other investors that are stuck on the 3AC crypto lending platform with huge piles of uncollateralised loans.

There is no optimism towards the soft landing of the U.S. economy as the Federal Reserve (Fed) is usually unable to perform such landings. Moreover, this time the situation is further aggravated by the highest inflation in the last 40 years that requires unprecedented actions by the monetary watchdog. The recession needs time to develop, and some 6-12 months are needed for it to take a grip on the economy. As market participants are likely to tread with caution during this period, the safe-haven U.S. Dollar is likely to get even stronger.

Bitcoin is trading 70% off its peak values, and investors are more inclined to surrender with every new drop of prices. It is worthwhile to remember that many crypto enthusiasts deposited their funds with Ethereum 2.0 contracts in order to receive an opportunity to validate transactions and get passive income after the Enthereum network would finally transit to the Proof-of-Stake mechanism. Such opportunities emerged last November and some 11% or 12.98 million of overall Ethereum in circulation are now bound to this contract. In the beginning some 8 million coins $40 billion worth were locked within the contract, now despite large coin inflows the overall amount of the funds deposited are estimated at $25 billion. Such deterioration of funds once again confirms high risk of a long-term depositing of funds without any chance to withdraw them at any moment when needed. So far, the date of such withdrawal opportunities is not even set.

The Ethereum network has moved to the Proof-of-Stake mechanism with Ropsten subnetwork successfully migrating to it on June 8, and Sepolia subnetwork – on July 6. Goerli subnetwork is planning to announce its migration date on July 14. Once the last one is complete its migration to the Proof-of-Stake mechanism there will be no problems for the entire Ethereum network to switch to it. At other times this news would have certainly supported the market, but this time there are only a few investors around who could initiate new investments because of this reason. Any fundamental news is highly overestimated in its impact on the market now, while technical analysis is probably the only answer for the possible price movements for the moment.