Cooling Inflation and Ethereum’s Successful Upgrade Supports Markets

Weekly News Wrap Up

U.S. CPI fell from 6% in Feb to 5% in Mar but Core CPI, which excludes volatile energy and food categories, increased from 5.5% to 5.6%. Later in the week, PPI increased by 2.7% YoY, the lowest level since Jan 2021, from a revised figure of 4.9%, indicating that inflation might be cooling down. In crypto, Ethereum’s highly-anticipated Shanghai upgrade went smoothly and one of DeFi’s largest exchanges, SushiSwap, was exploited for $3.3 million.

U.S. equities:  SPX+0.79%, DJIA +1.20% and NASDAQ +0.29% reacted positively to the PPI report in hopes that cooling inflation might put the U.S. Federal Reserve on pause sooner-than-later. Cryptocurrency majors: BTC +6.97% and ETH +14.10% trading above $30K and $2K respectively as Ethereum’s highly-anticipated Shanghai upgrade turned out to be positive rather than negative for prices.

On-chain, after crossing $2K for the first time in 8 months, ETH’s market-value-to-realized-value (MVRV) metric, which indicates potential profit taking, suggests that traders may be willing to sell. The 30-day MVRV of ETH is currently at 9.95%, and a value above 15% indicates a probable sign of a correction, according to @Santiment. On a longer time frame, the 365-day MVRV is +29%, the highest it has been since 27 December 2021, suggesting that traders are currently holding heavy profits and may not be adding new positions.

Cryptocurrency News

  • Bill protecting Bitcoin mining rights passes in Arkansas Senate and House. According to the bill, the Arkansas Data Centers Act of 2023 intends to regulate the Bitcoin mining industry, creating guidelines for miners and protecting them from discriminatory regulations and taxes.
  • Hong Kong’s Financial Secretary declares now is the ‘right time’ for Web3 adoption. In a blog post, Paul Chan said that despite recent volatility, now is the time to push forward Web3 technologies. He also mentioned that Web3 was identified as one of three focus areas to target in planning Hong Kong’s budget.
    Our View: The rhetoric from the Hong Kong government has been very positive towards the crypto industry, shaping the country up to be a significant contender as the next crypto-hub, which we are already seeing an increasing trend of crypto companies moving their headquarters and operations to the country.
  • Binance.US unable to find bank partners in the U.S.. According to a Wall Street Journal article, the U.S. arm of global crypto exchange Binance has been facing challenges in establishing a new bank partner, impacting its U.S. dollar deposit services.
    Our View: As we’ve covered before, Operating Chokepoint 2.0 is already underway and the recent lawsuit from the U.S. CFTC against Binance puts the latter in a much more difficult position to find a U.S. banking partner.
  • Binance.US to delist digital asset tokens TRON, Spell. The company said this was a result of its periodic review, and factors they consider include trading volume and liquidity, changes in a token’s risk profile or evidence of fraud or unethical conduct, among others. TRON’s founder, Justin Sun, was accused of fraud by the U.S. SEC in March. 
  • Ethereum’s Shanghai upgrade is complete, starting new era of staking withdrawals. The price of ETH remained largely flat at the time the Shanghai hard fork was triggered. Roughly half an hour after the Shanghai upgrade was activated, some 285 withdrawals in epoch 194,408 had been processed, for about 5,413 ETH ($10 million worth), according to
    Our View: There were fears that the unlocking of ETH deposited into the Beacon Chain might start a rush by stakers to liquidate their tokens causing a sell pressure, but it seems like the bulls have won this round against the bears as ETH closed the week above $2K, rallying ~14% for the week.
  • MetaMask launches new fiat purchase function for cryptocurrency. The new feature will allow users to purchase cryptocurrencies using various payment methods, such as debit or credit cards, PayPal, bank transfers and instant ACH (Automated Clearing House).
    Our View: Given MetaMask’s popularity, making it easier to on/offramp will be critical to driving adoption
  • Alchemy Pay partners with stablecoin CNHC to provide crypto ramp and payments for offshore Chinese Yuan. CNHC will become part of Alchemy Pay’s ecosystem and leverage its on and off ramp solutions to enable users to buy or sell CNHC using various global fiat currencies. CNHC also will be listed on Alchemy Pay’s ramp, which provides support to add payment scenarios.
  • a16z releases new State of Crypto Index tool in 2023 report. The index aims to track the health of the crypto industry from a technological, rather than financial, perspective. It is constructed from the weighted average monthly growth of 14 industry metrics (e.g. number of verified smart contracts, number of transacting wallets, etc.). View their report here.
    Our View: This is interesting given how the emphasis in the current bear market has been to “focus on the technology” – creating an index to track that trend will be key to continually assess whether prices are driven by fundamental value or hype
  • Brazil’s Bitcoin Beach says Lightning Network works better than Visa. The two-year-old Praia Bitcoin project, which means Bitcoin Beach in Portuguese, set a world record for peer-to-peer transactions on the Lightning Network, Bitcoin Magazine reported in February. Participants were able to run 71 transactions in just three minutes and 33 seconds, making it the largest number of peer-to-peer bitcoin transactions via Lightning to occur in the shortest time possible.
  • South Korean crypto exchange Gdac hacked for nearly $13 million. The exchange said hackers transferred the crypto assets from its hot wallet to an unidentified wallet. The hackers stole nearly 61 bitcoins (BTC), 350.5 ether (ETH), 10 million wemix tokens (WEMIX) and 220,000 USDT. Gdac said it has notified the authorities about the hack and is working to recover the funds.
  • Sushi DEX approval contract exploited for $3.3 million. A smart contract on Sushi’s exchange services was exploited on 9 Apr, developers said in a tweet. The exploit specifically involves the “RouterProcessor2” contract, which is used to route trades on the SushiSwap exchange.
  • Decentralized exchange dYdX announces ’winding down‘ of services for Canadian users. The move followed the Canadian Securities Administrators announcing additional restrictions for crypto exchanges’ registration requirements in the country. The rules required platforms to be “prohibited from permitting Canadian clients to enter into crypto contracts to buy and sell any crypto asset that is itself a security and/or a derivative.” Starting from 14 Apr, Canadian users will be moved to “close-only mode”, allowing them to only withdraw funds.

Investment Consideration

Our best strategy for medium to long term investment is to take at least 1-3 years in Moderate Portfolio because it has a good defense with 50% Fixed Deposit , 30% In DCD and 20% in Staking because we still have potential return in DCD and Staking especially in BTC.

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