Make no mistake, digital assets are down. The three months to the end of June marked the worst quarter for Bitcoin since 2011 – a year in which it broke the $1 mark for the first time – while for Ether it was the worst quarter ever. all the time.

Cryptocurrency market capitalization has crashed to $1 trillion from nearly $3 trillion eight months ago, with Bitcoin and Ether both trading at less than a third of the highs set in November 2021.

Yet the past week has seen a reversal of fortune.

Bitcoin was trading around $22,000 on Tuesday, well above its low below $18,000 hit during a selloff in mid-June, and its highest level since the crypto rout of it. a month ago that dropped prices by $30,000. Ether was changing hands at $1,550 as the token underpinning the Ethereum blockchain network left its recent low below $1,000 far behind.

But the rallies for the biggest and second biggest cryptos have not been equal. Bitcoin is up 11% from a week ago, while Ether is up 45% over the same period.

Ether’s outperformance appears to be rooted, at least in part, in a resurgence of optimism around “The Merge” – which will see the token’s mining process shift from a power-intensive process called proof-of-work to proof-of-work. – pile.

A major criticism of cryptos such as Bitcoin and Ether is that they are not climate-friendly, requiring significant amounts of energy to “mine” the tokens using intensive computations. The mining process is what validates the decentralized transaction ledger that underpins the blockchain. Rather, proof-of-stake requires users to set aside or stake tokens to validate the network.

The date for The Merge has been pushed back several times, but traders seem to be grabbing an update from Tim Beiko of the Ethereum Foundation, who said by Twitter July 14, September 19 was the tentative date for the update.

Martin Hiesboeck, head of crypto research at trading platform Uphold, threw some cold water on the optimism following Beiko’s post, noting that a date for The Merge had been announced six times before and was delayed each time.

“While Ethereum’s price action certainly raises hopes that the overall market may turn a corner in the coming weeks, the sudden jump is primarily driven by hype and perhaps a lack of understanding,” he said. said Hiesboeck.

From a technical perspective as well, Ether’s astonishing outperformance against Bitcoin may not have solid legs.

“The rebound may be fleeting as short-term overbought conditions return,” Katie Stockton, managing partner at technical research firm Fairlead Strategies, wrote in a note on Monday. “The downtrend remains intact.”

“Ether needs more significant improvement in mid-term momentum to convince us that a sustainable turnaround is on the way,” Stockton added. “From a long-term perspective, a bear market cycle has a grip with negative momentum.”

The technical outlook isn’t much better for Bitcoin either, according to Stockton.

After rallying over the weekend, Bitcoin is not back in a “consolidation phase,” according to Fairlead Strategies, with prices struggling to break the 50-day moving average near $23,200 and showing few signs of medium-term improvement.

“We remain bearish over the medium term,” Stockton said. “The long-term negative momentum and the sloping 200-day moving average increase risk beyond the near term, so we won’t continue this rally.”

Write to Jack Denton at [email protected]