Why Crypto Popped on Friday

What happened

Cryptocurrency values jumped again early on Friday morning before tapering off before the weekend. Overall, this week has been positive for crypto prices and even if there’s chaos, there seems to be more certainty than there was just a week ago.

Solana (CRYPTO: SOL) was up 4.1% in the last 24 hours as of 3 p.m. ET and from its Wednesday low is up over 20%. Polkadot (CRYPTO: DOT) is up 2.7% in the last day and 15% since hitting a low earlier this week. XRP (CRYPTO: XRP) was up nearly double digits early this morning and is now up 1% today and 8.8% from its low this week.

So what

Developer Tim Beiko has proposed Sept. 19 as the tentative date for “The Merge” on Ethereum (CRYPTO: ETH) that will change the consensus mechanism from proof-of-work to proof-of-stake. There have been multiple tests and years of development going into this change, and the hope is that transactions per second will increase and the cost of transactions will decline after The Merge. At least right now, we have a target date in mind.

The liquidation of Three Arrows Capital continues to be full of chaos, with liquidator Teneo hiring Singapore-based law firm WongPartnership to help get access to the hedge fund’s assets in the region. They’re also hoping to subpoena co-founders Su Zhu and Kyle Davies, who went missing after their fund collapsed.

DeFiance Capital, a crypto hedge fund, said it has been “materially affected” by Three Arrows Capital’s liquidation that was announced in June. This could be another company that’s facing financial trouble as Three Arrows Capital’s risk comes to light.

On the regulatory front, SEC Chair Gary Gensler said the agency is considering exempting cryptocurrencies from some security laws, hoping to ease the regulatory burden on some firms. Regulatory agencies have been grappling with how to handle cryptocurrencies for years and some solid rules would be welcome by the industry, but we’re not getting them yet.

Now what

The financial fallout from multiple insolvencies and bankruptcies continues to work through the crypto industry, and that will likely take more time. But the work of building and improving the blockchain continues and we’re seeing that with Ethereum this week. If The Merge goes off as hoped in September it could be very bullish for crypto in general.

Investors will also want to watch the regulatory markets. Crypto has been in regulatory limbo for years, but both the EU and U.S. seem interested in putting rules in place that will reduce risk for consumers and allow innovation to flourish. There may be some urgency in the U.S. with an election this November, so lobbyists are busy helping craft legislation for the industry. But it may be a while before that truly impacts the innovations being built on the blockchain.

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Travis Hoium has positions in Ethereum and Solana. The Motley Fool has positions in and recommends Ethereum and Solana. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.