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Bitcoin has just seen its second-best weekly close ever, according to Cointelegraph. BTC is currently up 5.7% on seven days ago and is trading just under AU$68,000. That’s only around 12% from the most recent record high. Ethereum surged by 17.7% this week as news of an important protocol upgrade emerged, XRP (Ripple) was up 7%, Chainlink (16.4%), Litecoin (10%), Bitcoin Cash (6.5%), Aave (15.4%) and SNX (6.9%). Meanwhile, Polkadot lost 1.1% and Stellar was down 1%. The Fear and Greed Index is currently at 81, which is Extreme Greed.
Huge news for Ethereum fees and supply
The highly anticipated Ethereum Improvement Proposal 1559 will be included in July’s London upgrade. This is huge news: instead of auctioning gas fees to get a transaction included in a block, which pushes fees ever higher, there will now be a standard fee called a base fee. The proposal is expected to lower costs and make fees more predictable, however, the network can still increase fees in response to demand and users can add tips so it remains to be seen how it works in practice. The crucial bit is fees will be burnt (potentially 1M or more a year) reducing the supply. The mainstream media appeared to miss how significant the upgrade is, although Bloomberg did run a piece quoting Eric Turner, director of research at Messari: “Now, they’re actually controlling inflation on Ethereum” he said, “in some cases, you’re looking at negative inflation so it’s definitely important.” Ethereum miners are against the move as they’ll lose revenue, however, the upgrade has been paired with a delay to the difficulty bomb in an attempt to make a hard fork more difficult. Meanwhile, the much less exciting Berlin upgrade is scheduled for April 14.
Cumulative ETH burnt with EIP-1559. Source: Dune Analytics
Users give up on DeFi due to high fees
The need to do something about gas fees has never been more apparent: In the past month the number of unique active DeFi wallets has dropped almost 40% and protocols like Synthetix and Curve have seen a 10-15% decline in 24-hour active user counts. Meanwhile, ETH project clones on the low fee Binance Smart Chain network such as PancakeSwap have seen user numbers increase 200%. Despite the overall fall on ETH DeFi, user numbers on Uniswap grew 22% – and its native token joined the top 10 this week, likely on rumours that a new version 3 of Uniswap using a layer two scaling solution, is about to drop.
Mega whales gobble up ETH supply
New figures from Santiment show that wallets with 10,000 or more ETH now control 68.6% of the total supply, the highest percentage since November 2017. They’re not just exchange wallets either, with non-exchange addresses holding 16.86 million ETH, the highest amount since July 2016. Retail traders with between 10-10K ETH have seen their share fall to the lowest point since August 2017.
India crypto ban could be less severe
Bloomberg reported last month a total ban on crypto was coming soon to India. However, according to Indian Finance Minister Nirmala Sitharaman, the forthcoming crypto regulations won’t be as “severe” as has been reported but will instead be a “very calibrated” approach.
Crypto Valley is full of unicorns
Switzerland’s Crypto Valley (the Zug canton) is now home to 11 crypto unicorns worth more than US$1 billion: Ethereum, Cardano, Polkadot, Aave, Cosmos, Solana, Tezos, Dfinity, Near, Nexo, and Diem (formerly Libra). The top 50 projects in the valley increased in value by 680% since mid-2020 and are now worth US$254.9 billion.
Goldman Sachs clients buy Bitcoin
Forty percent of Goldman Sachs’ clients have exposure to crypto according to a new survey. More than half tip a price between US$40K and $100K in the next year (AU$52K to $130k), while one in five think it’ll break the $100K mark within 12 months. Goldman Sachs has also relaunched its crypto trading desk, although as veteran trader Peter Brandt points out, retail traders should look out when Goldman gets into a market niche.
“Most ppl assumed my implication is that $BTC has topped/is topping. This Tweet was intended to point out that Goldman’s involvement in any/all markets means the firm has figured out a new angle to take skin from their clients.” – Peter Brandt
Fundamental bullishness
On-chain metrics show that around 1.2 million Bitcoin moved between US$46.6K and US$48.6K (AU$60.9k and A$63.5K). Glassnode commented that “If we look at the UTXO Realized Price Distribution, the on-chain support level at US$47,173 is the largest since prices were US$11k… This range now represents one of the largest on-chain BTC accumulation levels in history, certainly, the largest since the last cycle’s US$20k ATH was breached.” The US government this week approved another US$1.9 trillion stimulus package and will send US$1400 cheques to eligible Americans, some of which may flow into Bitcoin. Those who invested the previous US$1200 and US$600 stimulus checks would now have US$10,250 (AU$13,390).
Other Bitcoin bulls
There are a lot of Bitcoin bulls out there tipping extraordinary prices at the moment: Bloomberg analyst Mike McGlone points to history to suggest that the current discount on the Grayscale Bitcoin Trust (shares are trading below the cost of the BTC each share represents) means that Bitcoin is on its way to US$100K (AU$130K). Analyst Kaleo is also tipping $100K in April, while Kraken CED Jesse Powell thinks BTC is on its way to $1 million (AU$1.3M), or perhaps infinity.
Stock to flow model undershoots
The popular Stock To Flow Bitcoin price model underestimated the price at the end of February by 26%. According to the model, the price should have been around US$48,154, but actually topped US$59,275. Saifedean Ammous, the author of The Bitcoin Standard, said that over the past two years “The Bitcoin market price has never diverged more than 1 standard deviation from the model’s predicted price.” The model tips a price of $130K by the end of this year.
DeFi Digest
A round-up of the top news in Decentralised Finance
🏦 Compound Finance has released more information on Gateway, their new distributed ledger for cross-chain interest rate markets.
⛓️ The future is multi-chain. Sushiswap has now deployed contracts to Fantom, Polygon (Matic), xDai, BSC and Moonbeam network.
2️⃣ Ethereum’s Layer 2 is booming. Over US$60m in volume was traded within a 24 hour period on L2 DEXs – easing demand for block space on the main chain.
📈 On-chain stablecoin volume surpasses US$360 billion in February.
Until next week, happy trading!
