Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
The role Ethereum’s Shanghai fork is playing in the midst of the macro environment
Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!
This week we analyze the role Ethereum’s Shanghai fork is playing in the midst of the macro environment. We dive into ETH’s behavior in past upgrades and market forces likely to move the crypto market in the near future.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether.
- Bitcoin fees dropped as Ordinals NFTs cool down
- Ethereum activity decreased sharply after setting yearly highs the previous week
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges. Crypto going into exchanges may signal selling pressure, while withdrawals potentially point to accumulation under regular circumstances
- Bitcoin and Ether recorded modest exchange flows for a fifth straight week
ETH’s Shanghai Fork Amid the Macro Environment
The recent surge in crypto markets has created a noteworthy divergence in the correlation between traditional and crypto markets. There are several factors that can be attributed to this trend. Firstly, the true crypto ethos are making a comeback as inflation continues to prevail in the recent months. Investors may have started to seek out inflation hedges, and could be finding refuge in cryptocurrencies. On the other hand, after the turbulent bear market of 2022, new developments in the crypto world have come to light. These developments may be bringing the interest back to investors.
Two significant events in the Ethereum ecosystem have garnered attention in the past few weeks. Firstly, the upcoming Shanghai Fork is set to occur during the month of March, this will allow stakers to withdraw their ETH from staking contracts. Secondly, Coinbase recently announced the development of Base, an Ethereum Optimistic rollup that promises to provide fast and cheap transactions. It is crucial to analyze the market during the previous Ethereum milestone, The Merge, and compare it to the upcoming milestone, The Shanghai Fork. This can help us gauge the difference in investor sentiment during the different milestones.
Source: IntoTheBlock’s Capital Markets Insights
The 30-day correlation between assets allows investors to to assess the diversification of a portfolio and mitigate risk accordingly.
- During the last month crypto assets like Bitcoin and Ether have had a positive return when compared to traditional markets indices like the Nasdaq100 and the S&P 500
- Bitcoin and ETH last month performance was of -1.37% & -1.36% respectively, while the Nasdaq 100 and the S&P 500 had a performance of -5.92% & -4.75% respectively
- While the ETH correlation experienced a decline in the days of the merge, the current correlation to traditional markets stands at significant lower level.
- A lower current correlation between Ethereum and traditional markets in comparison to the time of the merge could mean that Ethereum is becoming more decoupled from traditional markets and is starting to establish its own market dynamics.
The Historical In/Out of the Money indicator is analogous to support and resistance levels used in technical analysis. By examining investor profitability, it provides insights into the price levels at which investors have previously bought or sold an asset.
Source: IntoTheBlock’s ETH Financial Indicators
While traditional and crypto markets have seen a decorrelation between the two, ETH holders seem to be at a similar spot when compared to how many addresses were in the money at the time of the merge to the current percentage.
- During the time of the merge there were 53% percent of the addresses holding Eth in the money, currently there are 59%
- During the November 2021 bull run 99% of the addresses were in the money
LSDs & the Exit Queue
Liquid Staking Derivatives (LSDs) allow investors to earn rewards from staking their Ethereum tokens without locking them up in the network. They provide liquidity and flexibility for staked ETH, while also contributing to the security and decentralization of the Ethereum network.
Growth in this sector directly improves the Ethereum ecosystem since it allows accessibility for users to earn rewards in their tokens while securing the network.
Source: IntoTheBlock’s Medium page
As new LSDs options appear an centralized stakers face problems with the US regulators addresses holding LSDs tokens continue to grow
- After the merge in September, there has been an increasing trust in LSD tokens among users. This is evident by the rise in the number of users who hold LSD tokens, apart from Lido’s stETH, which is the most widely recognized token.
- The diagram above shows the change in the number of addresses that hold one of the four decentralized LSDs (excluding cbETH) that have a supply worth more than 100 million, on a daily basis.
- Although there has been a rise in the number of holders for all tokens over the last year, the most significant increase in new addresses is observed for Rocket Pool’s rETH and Frax’s sfrxETH tokens.
In this piece we analyze the current correlation of crypto and traditional markets, and potential patterns when compared to previous milestones. While correlation between the two markets has been decreasing during the last month, it does not mark a clear path towards the future since correlation between the markets has increased back previously. Developments in the Ethereum ecosystem seem to be attracting new investors into the space which could signal a positive outlook in spite of an uncertain macro environment.
ETH’s Shanghai Fork Amid the Macro Environment was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.