The August inflation report announced yesterday in the USA caused a great escape from cryptocurrencies. In August, annual inflation in the USA was reported as 8.3 percent, which was above the market expectation of 8.1 percent.
While it was considered certain that a 75 basis point rate hike would come from the Fed on September 21 before the inflation data, the possibility of a 100 basis point increase after the data began to be priced in. The yield on the 10-year Treasury bond in the United States rose from 3.36 percent to 3.45 percent. The dollar index also exceeded the 109 level.
These developments caused a daily decline of 8.7 percent in Bitcoin as of this morning. The world’s largest cryptocurrency fell to $20,350. Ethereum dropped 5.6 percent to $1,615.
LEFT FALL TOO HARD
One of the top 10 cryptocurrencies in terms of market value, Binance Coin lost 3.9 percent, Ripple 5.3 percent, cardano 5 percent and Solana 12 percent. The decline in Polkadot remained at 5.5 percent.
MARKET VALUE DROPPED
According to Coinmarketcap data before inflation data in the USA, the total market value of cryptocurrencies was at the level of 1 trillion 78 billion dollars. As of this morning, its total market cap has dropped to $1 trillion. In other words, 78 billion dollars evaporated from the market in about 17 hours.
ETHEREUM MERGE IS IN THE SHADOW
In fact, if inflation in the USA had come in line with expectations, the ‘Ethereum merge’ update was expected to be the focus of the crypto money market in the coming days. However, as of today, the main agenda has once again been the Fed and inflation.
With the Merge update, the Ethereum blockchain will transition from a “proof of work” system to a “proof of stake” system. This update refers to the merging of Ethereum’s existing execution layer (Mainnet) with the new proof-of-stake layer, the Beacon Chain.
The “proof-of-stake” system reduces energy consumption to a low level by eliminating the need for powerful hardware to maintain the blockchain. In order to be a validator in this system, 32 ETH must be presented to the system as collateral. The share of validators keeping the ledgers on the blockchain right affects the amount of reward they will earn. The “Merge” update, which shelves processing power-related rewards, is expected to reduce energy consumption by 99.95 percent.