Aug 3, 2022

The latest moves in crypto markets, in context

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Good morning, and welcome to First Mover. I'm Lyllah Ledesma here to take you through the latest in crypto markets, news and insights.

In today's newsletter:

Price Point: BTC and ETH both show gains on Wednesday despite network hacks on the Solana blockchain.
Market Moves: Some analysts are taking the possibility of an Ethereum fork seriously: BitMEX issued a blog post arguing that a new chain might generate interest from market participants.
Chart of The Day: Solana's SOL put-call volume ratio spikes.

Also check out our Market Wrap newsletter which drops today, and every weekday, at 5 PM EST. This is an end-of-day recap of all the most important things that happened in crypto markets.

Glenn Williams, Jr., our Markets Team analyst, writes this newsletter. He has the designation of Chartered Market Technician and draws upon deep experience in both crypto and traditional markets, having worked as a digital-asset financial analyst and finance manager at Celsius and before that as a sell-side equity research analyst covering the energy industry at various firms.

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Price Point

The crypto market was mostly trading in the green on Wednesday despite the news of popular layer-1 blockchain Solana suffering an exploit Tuesday night.

The hack saw an unknown attacker drain at least $5 million worth of SOL, SPL and other Solana-based tokens from unsuspecting users.

Bitcoin (BTC) was up 2% on the day, reclaiming $23,000. The price of BTC has moved above the highly watched 200-week moving average ($22,900), a positive sign for bulls.

Ether (ETH) was up 4.7% over the last 24 hours at $1,660. Uniswap's UNI was up 15%, Curve (CRV) 10% and Aave 8%.

Although the two largest cryptocurrencies' price action has not been affected by the network exploit news, Solana's SOL token has dipped slightly by 2%.

"The hack will definitely cast a shadow over Solana's credibility as a better alternative to Ethereum, especially when it comes to security," said Mikkel Morch, executive director at Digital Asset Investment Fund ARK36 in an email with CoinDesk."It may even give Ethereum some additional boost from the narrative perspective as the safest and most reliable DeFi ecosystem."

Earlier in the week, the cryptocurrency bridge "Nomad" suffered a $200 million drain. Since this hack, blockchain security company PeckShield said $9 million has been returned so far, equating to around 4.75% of the total loss.

In other news, Ethereum developers addressed a potential glitch ahead of the Merge in the 92nd Consensus Layer Call. One researcher said that the chance of said glitch (an MEV-boost failure) is slim, but contingencies should ensure that the Merge still happens smoothly.

Traditional markets saw U.S. stock futures climb as some of the investor anxiety surrounding tense U.S.-China ties eased.

Bitcoin (BTC)

See the latest price here

Ether (ETH)

See the latest price here

Market Moves

Crypto Exchange BitMEX Offers Strategy on Potential 'ETHPoW' Split as China Miner Contests Ethereum Merge

It's little more than speculation now that some Ethereum miners might break away when the world's second-biggest blockchain shifts as soon as September to a new "proof-of-stake" system that's supposed to be better for the environment.

But with the Ethereum "Merge" still at least a month away, some analysts are already sharpening their pencils on various strategies to profit from any revolt in the ranks.

According to Decrypt, Chinese crypto miner Chandler Guo has started a campaign to fork the Ethereum blockchain and create a spinoff, hewing to the "proof-of-work" (PoW) system that Ethereum uses now.

The story was based on a Chinese-language tweet from Guo: "Ethpow will be coming soon," the post reads. "I fork ethereum once, I will fork it again!"

The cryptocurrency wouldn't be ETH post-Merge. With the fork, or code change, Guo would create a new cryptocurrency called ETHPOW, according to Decrypt.

Investment research analysts at BitMEX published a blog post arguing that a new chain might generate some interest from investors and traders.

"Although there are many technical challenges that ETHPoW faces, as long as the chain survives, it looks likely that there could be positive narratives around the coin and leading centralized exchanges are likely to list it," the analysts wrote.

As outlined by BitMEX:

"Doing the above trade, you have potentially got more USD for free with almost zero risk! Well, zero risk when only considering certain types of risk, such as price movements," the BitMEX post states.

"ETHPoW may generate a lot of excitement, and we predict that ETH vs ETHPoW will be a popular trading pair post-split, at least until another interesting dynamic comes along," BitMEX analysts said.

But others are dismissing the effort almost entirely.

According to Will Harborne, founder of Rhino.fi, there is likely little profit to be made from trading ETHPoW.

Read the full story here.

Chart of The Day by Omkar Godbole: SOL Put-Call Volume Ratio Spikes

Solana's put-call volume ratio, a gauge measuring number of put options traded relative to calls, surged above 3 early Wednesday, pointing to bearish market sentiment.
The surge implies that more than three put options were traded for every call option.
Perhaps investors sought protection against a price drop following reports of a multi-million dollar hack from Solana's digital wallets Phantom and Slope.
A put option offers insurance against price drops while a call option offers protection against price rallies.
Sol's Deribit-based options market is quite small relative to ether and bitcoin. As of writing, the notional open interest in the SOL options market was $19.2 million – a meager 0.42% of bitcoin's $4.5 billion.

SOL Options chart: top volume by instrument. Shows increased volumes in SOL put options at $30 and $38 strikes. (Deribit)

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Crypto Prices

The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours:

Biggest Gainers

Asset	Ticker	Returns	DACS Sector
Polygon	MATIC	+4.8%	Smart Contract Platform
Chainlink	LINK	+4.7%	Computing
Avalanche	AVAX	+4.4%	Smart Contract Platform

Biggest Losers

Asset	Ticker	Returns	DACS Sector
Solana	SOL	−2.9%	Smart Contract Platform
Terra	LUNA	−1.2%	Smart Contract Platform

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive, and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

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Latest Headlines

Bank of America Dismisses Assertion That Blockchains Have no Intrinsic Value, Citing Transaction Fees
The Ethereum blockchain has generated around $3.9 billion in fees this year, the report said.
Hackers Send Back $9M to Nomad Bridge After $190M Exploit
The popular Ethereum to Moonbeam bridge is engaging with law enforcement and data analytics firms.
SOL Token Holds Price Support After Million-Dollar Hack Brings Bad Optics for Solana
Early Wednesday, an unknown attacker drained at least $5 million of SOL and other tokens from Solana digital wallets.
Solana Wallets Targeted in Latest Multimillion Dollar Hack
Over 8,000 internet-connected "hot" wallets have been compromised so far, but the source of the attack remains unknown.

What to watch:

Check out the CoinDesk TV show "First Mover," hosted by Christine Lee, Emily Parker and Lawrence Lewitinn at 9:00 a.m. U.S. Eastern time.

Ben McMillan, CIO, IDX Digital Assets
Scott Bauer, CEO, Prosper Trading Academy
Zhuoxun Yin, COO and co-founder, Magic Eden

Where innovators, changemakers, investors and leaders present their best ideas for investing in the future of the Web 3, digital assets, blockchain and crypto ecosystems. Register now.

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.