The Pelosi Effect? Ethereum Faces Headwinds Over Area At $1,600

Ethereum lost ground after a week of trading in profits. Elements of a possible extension of the bullish momentum have been put into the macroeconomic stage. However, escalating tensions between China and the United States have brought uncertainty back to the world of global finance.

US Congresswoman and Speaker of the House of Representatives Nancy Pelosi visited Taiwan earlier this week. Her visit is controversial, as Taiwan is considered an area of ​​open rebellion by China.

The latter responded to Pelosi’s visit by firing artillery near Taiwan and announcing military exercises, and the Asian giant considered this a “provocative act.” Therefore, tensions have arisen over a possible conflict between the United States, Taiwan and China in the near future.

Investment firm Cumberland believes that the above highlights the close relationship between Ethereum, the crypto market, and the traditional finance sector. The second cryptocurrency by market cap is trending lower in the short term as a result of this uncertainty.

Ethereum and Bitcoin are closely related to the Nasdaq 100 Index, the index that tracks stocks of large technology companies. Cumberland Believes That if the ETH price can break this correlation, the cryptocurrency will be able to reclaim previous highs. Until then, ETH’s bullish momentum appears limited.

Source: Cumberland via Twitter

The investment firm said the following regarding the fate of the ETH price as long as it remains tied to the legacy markets:

Until the coded decorator correlates with the broader macro background, it will be difficult for these attributes to create a meaningful alpha. However, the upcoming merger threatens to re-establish the digital asset market as a separate asset class.

The merger is the highly anticipated event that will bring together the Ethereum execution layer and its consensus layer. This event could be significant enough to provide the bulls with fresh momentum and break the correlation with the Nasdaq 100 Index.

ETH price is moving sideways on the 4 hour chart. source: ETHUSDT TradingView

Prior to the merger, the Ethereum ecosystem outperformed

The merger has already had a positive impact across the Ethereum ecosystem, and on other assets, Lido DAO and Ethereum Classic (ETC). A report by Kraken Intelligence shows that the ETH ecosystem has and continues to outperform the cryptocurrency market.

In July, the price of ETH, decentralized finance (DeFi) and non-fungible tokens (NFTs) posted average gains of 59%, 52% and 35%, respectively. Thomas Perfumo, Kraken’s Head of Business Operations and Strategy, said the following regarding the potential impact of the merger:

ETH holds value during this crypto winter against BTC, which is a significant departure from the previous cycle. All eyes are on The Merge, the most important milestone in the Ethereum scaling roadmap since the beacon chain launched in late 2020. If successful, the industry will have the clarity to take a long-term outlook on Ethereum.

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