Bitcoin hits $31,000 mark, potentially upward trend this week

After a week of losses, investors were relieved to see a bounce in digital assets on Monday. The sector failed to rally last week, as it was still lagging behind technology stocks.

On Monday, Bitcoin rose almost 7 percent, hitting the $31,000 mark, as global investors bought the asset on the back of strong equity markets.

According to Marcus Sotiriou, an analyst at Global Block, Bitcoin needs to break through the $29,300 level to confirm its potential to continue its upward trend. Sotiriou noted that the market's rally last week was mainly due to Fed chair Jerome Powell's speech, which gave investors more clarity regarding the U.S.' soft economic landing.

"Relief has been long overdue in the crypto market, as the U.S. stock market already rallied last week, after Jerome Powell's speech that gave the market clarity on their plans to carry out a soft economic landing," the analyst said.

In the latest crypto rally, Ethereum (ETH), considered a safe haven asset, rose almost 8 percent to around $1,940 on Monday. On the other hand, Cardano, a peer-to-peer digital currency, gained 14 percent to approximately $0.54.

The rally in cryptocurrencies was triggered by reports that China's major cities have started to ease their coronavirus restrictions, which could boost consumer spending and company revenues. According to traders, this could lead to a significant increase in the country's economic activity.

Ethereum's gas fees drop

As gas prices continue to rise, crypto traders are also taking advantage of the lower prices offered by Ethereum. According to Sam Reynolds, an analyst at Institute for Energy Economics and Financial Analysis (IEEFA), the cost of gas has dropped to a record.

According to on-chain data, the average transaction fee for all cryptocurrencies has increased to around $3.70. It was about $38 at the beginning of the year, and it was $52 at the end of last year due to the congestion in the chain. Among the gas-heavy transactions that have experienced record low fees are those involving the sale of an NFT on OpenSea or a UniSwap transaction.

Fearing that the recent decline in the price of Terra could trigger a further decline, many traders have been reluctant to enter the market. On-chain data also revealed that during May, there were several spikes in gas consumption and a spike in activity on UniSwap.

Despite the various factors that have affected the price of cryptocurrencies, the lack of active traders is still holding back the market. For instance, the cost of gas is low, while the demand for Ether is weak due to the lack of active traders.

The price of Solana and Avalanche have started to recover, but the number of daily users has not. This suggests that investors are still reluctant to take on new positions due to the lack of active traders. Both of these chains were built during the high fees charged by Ethereum.

One of the most significant factors that will affect the price of cryptocurrencies is the upcoming merger between Ethereum and its peer-to-peer network. Due to the high fees the previous generation of digital currency charges, investors are less likely to migrate to proof of stake. The prediction markets expect the merger to happen in October or November.