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Ethereum Shows Signs Of Exhaustion, But Could It Still Touch $1,700?

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The crypto market has increased its bullish momentum, despite recent tailwinds, Ethereum continues to lead this recovery. The second cryptocurrency by market cap is trading at $1,600 for a 35% gain last week.

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Trading firm QCP Capital general a market update stating that the current bullish price movement was a “pleasant surprise for everyone.” This price movement began after the release of the latest US Consumer Price Index (CPI); indicator used to measure inflation.

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The CPI is at a 40-year high, which is expected to have a negative impact on the cryptocurrency market. The opposite happened, the trading firm claims, due to market participants expecting lower inflation in the coming months.

This potential decline in inflation could provide some room for risky assets to continue their rally and convince the US Federal Reserve (Fed) not to rule out a 100 basis point (bp) interest rate hike. The financial institution will announce its decision on July 27. QCP Capital says:

There is currently a 20 percent chance of 100 b. p. is still included in the price, but we believe that 75 b.p. p. is the maximum that the Fed will go to. So expect another rise as the 100bp completely depreciated.

Ethereum is leading the way in this because there is more clarity about the upcoming “Merger”, an event designed to merge this network’s execution layer with its consensus layer. Thus, consolidating Ethereum’s transition to a consensus Proof-of-Stake (PoS) protocol.

The “merger” is tentatively scheduled for September, which contributed to the change in the general mood in the cryptocurrency market and supported this rally. According to QCP Capital, the bullish price action is “poignantly felt in the options market.”

The sector saw a rush with purchases of buy contracts (calls) expiring in September. In other words, options traders are optimistic about the potential impact the Merger will have on Ethereum.

ETH price with a slight increase on the 4-hour chart. Source: ETHUSDT TradingView

Can Ethereum extend the current rally?

Conversely, options markets are hinting at a potential depletion of Ethereum in the short term. QCP Capital is seeing an increase in the number of calls traded at the price of ETH and believes insolvency announcements from other companies could be a tailwind for the second cryptocurrency by market cap.

In part, the contagion caused by the default of crypto hedge fund Three Arrows Capital (3AC), which failed to repay billions of dollars in debt from its counterparties, has negatively affected many companies. This includes Celsius, BlockFi, Voyager and Genesis.

These companies had to suspend their operations at some levels as new companies announced they were affected by 3AC almost every week. Cryptocurrency exchange Zipmex suspended withdrawals yesterday, and rumors are mounting that other companies are taking similar measures.

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QCP Capital said:

Although the markets were optimistic, they may not have completely rid themselves of the credit contagion. We increase our position skewed down and keep a slightly long gamma and vega (longer term options).

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