Crypto Markets Make A Breakthrough

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Crypto markets made a breakthrough last week, with Bitcoin posting its best performance since the start of 2021. But with continued uncertainty in wider capital markets, it’s still too soon to say we’re out of the woods. 

Bitcoin began the week around $22,000 but made significant gains off the back of Tuesday’s US CPI data, regaining ground above $25k for the first time since last summer. Potentially also boosted by liquidations of short futures positions, which added further buying pressure, it climbed to over $27,000 on Friday, where it continues to trade this morning. 

Ethereum followed suit, hitting a six-month high above $1,700 on the eToro platform on Tuesday and peaking over $1,800 at the weekend. It is still trading around the $1,700 mark at the time of writing. 

GFC echoes trigger bitcoin revival chatter 

While the exact extent and implications of the current US banking crisis remain to be seen, the unavoidable echoes of 2008 have left many anticipating a shift in fortunes for crypto investors and a revived use case for bitcoin in particular. 

CoinDesk’s Michael J. Casey was among the commentators who reminded us last week that Bitcoin is a child of the Global Financial Crisis, its blockchain emerging from the wreckage on Wall Street as an alternative to the centralized financial system whose checks and balances were found wanting.

With all eyes on the Fed’s interest rate decision this Wednesday, it’s clear for now that bitcoin’s performance in a high-rate environment remains heavily wedded to central bank policy. 

Nevertheless, after months of depressed crypto market activity, this past week’s events will already have convinced many new and existing investors that Bitcoin’s philosophy – and DeFi in general – remain as relevant today as ever.

Ethereum developers target April 12 for the Shanghai upgrade

On Thursday, Ethereum developers set an official target date of April 12 for the much-anticipated Shanghai hard fork, technically referred to as “Shapella”. 

The upgrade will complete Ethereum’s long-awaited transition to a proof-of-stake (PoS) network, which was set in motion by the Merge in September when it shifted to a PoS consensus mechanism using validators instead of miners. 

Until now, those validators had to stake 32 ETH in order to join the blockchain but couldn’t withdraw those deposits or any associated rewards. That’s all set to change on April 12. 

After Shapella, the validators’ staked ETH will be unlocked and it’s up to them what they do with it: hold, sell, or shift it to a different liquid staking service. 

Although we cannot speculate on specific market pressures that may influence those decisions in four weeks’ time, the event naturally raises the possibility of large redemption requests, so ETH investors should be mindful of potential volatility around that time.

Shifting ETH supply distribution shows sharks closing in on whales 

Sticking with Ethereum, another notable development last week was data from the on-chain analytics firm Santiment which showed that the distribution of assets between large ETH investors has shifted significantly in the past twelve months. 

You can read more on their findings here, but the bottom line is that the so-called ‘sharks’ (holding 10 to 10,000 coins) have made a net increase in assets over the past year, while the ‘whales’ (holding 10,000 to 10,000,000 coins) have made a net decrease – a net ‘sale’. 

Whales still hold around 51% of the total ETH supply, so the balance of influence on market pricing hasn’t yet reversed, but the difference is slim enough to warrant some attention.

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Disclaimer: This article should not be taken as investment advice, personal recommendation, or an offer of, or solicitation to buy or sell, any financial instruments. This material has been ...

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