Weekly Crypto Roundup: mergers, tourist traps, and lost faith

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An upcoming Ethereum testnet merge, El Salvadors firm belief in Bitcoin, and another falling stablecoin made for an eventful week.

An upcoming Ethereum testnet merge, El Salvadors firm belief in Bitcoin, and another falling stablecoin made for an eventful week.

Though the week started off with losses for both Bitcoin (BTC) and Ether (ETH), Friday saw Bitcoin edging close to $24,000 while Ether crossed the $1,700 mark. The last time this happened was on June 10.

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Amerge unlike any other

Analysts speculated that one reason for the excitement surrounding Ethers price could be the upcoming Merge.

Blockchains like Bitcoin and Ethereum use what is called proof-of-work to solve complex puzzles in order to confirm new transactions. However, Ethereums proof-of-work consensus mechanism means an annualized power consumption level and carbon footprint nearly matching those of Finland and Switzerland respectively. Switching to a new consensus mechanism called proof-of-stake should allow Ethereum to cut its energy consumption by around 99.95%.

For Ethereum investors and smart contract developers, it also means cheaper transactions fees and a better user experience overall.

The Merge is the name for Ethereums transition to this new model of confirming transactions. In preparation for the same, several shadow forks or practice separations involving testnets have been taking place over months. The upcoming Goerli testnet merger – the last before the real merge – will start on August 4. If all goes as scheduled, the Ethereum mainnet merge could take place around September 19. The event is a historic one for the crypto industry, as Ethereum is only below Bitcoin itself in terms of market cap.

However, the Merge day is far from being set in stone and delays have upset Merge schedules before.

As of the publication of this post, the time for the Ethereum mainnet proof-of-stake transition has not been set, countered an Ethereum Foundation blog post on Wednesday.

Still, looking at Ethers sudden price jump, its possible that investors are reacting to this timeline and the investment opportunity it might offer.

Tourist traps

International bodies like the IMF have repeatedly warned El Salvador about the risks of adopting Bitcoin as legal tender, but the countrys administration isnt budging in its support for the leading cryptocurrency.

According to Bloomberg, El Salvadors finance minister Alejandro Zelaya insisted on Wednesday that while many did not understand Bitcoin, the technology was present and would continue to grow.

President Nayib Bukele has bought around 2,381 BTC for the country since El Salvador legalized the largest cryptocurrency by market cap in September last year. According to the Nayib Tracker website, however, the value of his investments has fallen by 46.86%. Mr. Bukele also advised people to enjoy life as Bitcoins price plummeted in the second quarter of 2022.

Despite this, the country is planning to build a Bitcoin city, begin Bitcoin mining using geothermal energy, and also issue a Bitcoin bond once the assets price recovers again.

For now, Bitcoin tourism is rising in the country as crypto proponents come to experience the changing monetary system for themselves. Mr. Zelaya also noted the same during his interview.

However, several journalists and activists have criticized the colonial implications of turning El Salvador into a crypto hub for foreign investors and settlers.

All said and done, though, the ultimate test of Bitcoins success in El Salvador will depend on the assets price.

Losing faith, losing value

Solana is one of the top blockchains by market cap, and a number of decentralized finance projects have built protocols on it. However, Thursday saw the Nirvana Finance protocol attacked by hacker(s), with initial estimates suggesting that the stolen funds amount to over $3.4 million.

The hacker used flash loan attacks, which involve taking huge, ultra-fast crypto loans without collateral and then tricking the market so as to flee with the profits. In this case, the flash loans succeeded and devastated Nirvanas liquidity. This meant the protocols native token Nirvana ANA [ANA] nosedived from above $8 in value to less than $1 in about a day.

If that wasnt enough, the algorithmic stablecoin Nirvana NIRV [NIRV] came loose from its set $1 value – known as a peg – and fell to a price of around $0.09 in the same time frame.

Please be advised: ANA has lost its collateral, and NIRV has lost its peg. Until the thief restores funds, these tokens will not have exchange value. Be very careful with trading NIRV & ANA, as they currently have no guaranteed value, stated a tweet by Nirvana Finance on Thursday.

Nirvana Finance offered a $300,000 bounty to the hacker and promised to halt the investigation, acknowledging that they had revealed a system vulnerability.

Please accept this good faith request and return our treasury for the good of the whole Nirvana community. You have not taken money from VCs or large funds the treasury you have taken represents the collective hopes of everyday people, stated part of their offer on Friday.

Observers might be tempted to link the incident to the collapse of the TerraUSD [UST] stablecoin, but the two cases are different, as there is currently no evidence of UST being hacked. However, the fall of another stablecoin is likely to attract the attention of already unimpressed crypto regulators in the following week.

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