The Fed’s Monetary Madness Continues, but Crypto May Be the Big Winner

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Overnight Jerome Powell and his colleagues delivered the expected news: a 75-basis-point rise has been declared for US interest rates.

Investors took the development in their stride with this expectation already largely priced into the market. But the bigger story was Powell’s insistence that the US is not headed for a technical recession.

We’ll have to wait and see what the data has to say about that one…

After all, this is the man who recently admitted that the Fed was clueless as to how they could create the high inflation they’re now fighting. Needless to say, it’s hard to trust someone this ignorant.

Markets were clearly happy to take what little good news they could get.

All three of the major US indices made a noticeable jump following the announcement. Clearly, they’re hoping that this signalling from the Fed suggests that earnings may not be as grim as initially forecast.

But, somewhat surprisingly, the biggest winner of all was crypto.

After a slew of crashes and scandals that cratered the price of every major token, the top cryptos have been making ground once again. And in a fascinating turn of events, it is Ethereum [ETH] that seems to be driving the most interest…

The flippening

As long-time crypto experts can tell you, Ethereum has always played second fiddle to Bitcoin [BTC]. This is despite the fact that the Ethereum network is not only more versatile but also more focused in terms of its aspirations.

Bitcoin has simply had the luxury of better marketability. As the first cryptocurrency ever made, it certainly has a level of prestige that other coins and tokens can’t compete with.

But when it comes to long-term utility, a lot of people would probably agree with me in saying that Ethereum is the more promising project. This is why many agree that at some point in the future, Ethereum is likely to overtake bitcoin in terms of most key metrics.

This event is known as ‘the flippening’.

Of course, the biggest factor in order to achieve this flip is in the respective market caps. Like I said, bitcoin has always been the top dog in the crypto space because of its legacy. Though, Ethereum has been making up ground recently:

Fat Tail Investment Research

Source: Blockchain Center

[Click to open in a new window]

As you can see from the chart above, Ethereum was close to making the flip back in mid-2017. This was just prior to the massive bull run in bitcoin to close out that year — back when the leading crypto topped US$20,000 for the first time ever.

Now, after another bitcoin bonanza over the pandemic period, Ethereum is once again clawing back ground. And while it certainly still has a ways to go to overtake Bitcoin’s market cap, one big upcoming development could give it the push it needs…

A seismic shift for crypto

After years of discussion, speculation, and development — it looks as though Ethereum 2.0 is finally coming.

This update, known as ‘the merge’, will transition Ethereum from its current proof-of-work algorithm to the new and improved proof-of-stake algorithm. And if these terms sound alien to you, then I’d urge you to watch our video discussing the differences between the two systems.

As for when the merge is going to take place, the tentative date is 19 September. Meaning, we’re likely just shy of two months away from a landmark crypto moment. The reason why investors should be paying attention to this is because it could dramatically impact the next crypto bull market.

Because when interest in crypto surges, as it has done in the past, it can often bring these networks and the transactions on them to a crawl. Ethereum’s proof-of-stake shift could potentially change all of that:

It’s unlikely that we will see gas prices change significantly. While they are mercifully low at the moment, once the next bull market kicks off and transactions pick up, we will see if the promised 100,000 transactions per second that the move to Proof of Stake is meant to bring will in fact make a huge difference.

It is precisely for this reason that investors should be seriously considering crypto assets right now.

Because while we certainly are in the immediate aftermath of a huge sell-off, some of the biggest investors are holding on tight. Our own crypto expert, Ryan Dinse, has even gone so far as to dub the current circumstances as the ‘Great Crypto Lock-Up’.

He believes that the truly keen investors are stashing their holdings for the big developments to come. Developments like this Ethereum merge…

So no matter whether you’re a seasoned crypto pro or a complete novice, you should be watching with interest. And if you’re looking for the perfect place to start, then check out Ryan’s online seminar tonight at 7:00pm AEST.

You can secure your spot by signing up here.


Ryan Clarkson-Ledward Signature

Ryan Clarkson-Ledward,
Editor, Money Morning

Ryan is also co-editor of Exponential Stock Investor, a stock tipping newsletter that hunts down promising small-cap stocks. For information on how to subscribe and see what Ryan’s telling subscribers right now, click here.

About Ryan Clarkson-Ledward

Ryan Clarkson-Ledward is an Editor at Money Morning.

Ryan holds degrees in both communication and international business. He helps bring Money Morning readers the latest market updates, both locally and abroad. Ryan tackles all the issues investors need to know about that the mainstream media neglects.

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