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Welcome to Crypto Long & Short! This week, Paul Marino, at GraniteShares, gives an outlook for Bitcoin following the halving. Despite a fall in price recently, he's bullish on prospects for the year ahead.
Then, Eliezer Ndinga, at 21.co, explores the Ethereum staking market and argues that, when you compare staking levels on Ethereum with other proof-of-stake chains, it has plenty of headroom for growth. As always, get the latest crypto news and data from coindeskmarkets.com. – Benjamin Schiller, head of opinion and features at CoinDesk
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Halving Impact and Macro Shifts Create Tailwinds for Bitcoin |
The fourth Bitcoin halving in April reduced the new bitcoin issuance rate to 3.125 BTC every ten minutes, sparking significant interest and speculation. Since then, Bitcoin has been down from its highs, with some investors concerned that the days of higher BTC prices are in the distant future. We believe March's new high (above $70,000) was a "head fake" driven by new spot Bitcoin ETFs. However, considering the halving event and ongoing supply/demand issues, we expect a brighter future for BTC and crypto as the year progresses. Why do some pundits think Bitcoin has topped? And why did the selloff occur? Unlike past halvings, Bitcoin's price soared to a new high of $73,750 with a market cap of $1.44 trillion on March 14, a month before the halving. The rapid increase from the start of the year, when it was as low as $39,000, scared speculative investors and those in it for the "halving trade," prompting them to cash out. However, the retreat likely stemmed from macro factors, specifically hawkish comments by the Federal Reserve. These ignited a "risk-off" mentality as an interest rate cut became more unlikely in 2024, with a hike becoming possible. Since then, economic data has been weaker than expected, making a hike very unlikely for now. This shift has put the risk trade back on, setting an immediate floor in BTC prices, which have since recovered above $60,000. It also suggests a shift back to supply and demand factors for bitcoin, which appear favorable for higher prices. There are several reasons to be bullish on Bitcoin and crypto. First, the past three halvings have consistently led to new all-time highs in Bitcoin price in the months following the event. We believe this trend will accelerate as more institutional investors include BTC in their portfolios, further tightening the supply. This "rising tide" in BTC should lift all crypto boats. Second, the launch of spot Bitcoin ETFs in January 2024 is a pivotal development. These ETFs, allowing investors to trade shares through existing retail brokerage accounts, promise wider availability through financial advisors. Firms such as Merrill Lynch, Morgan Stanley, and LPL are conducting due diligence on their platforms for availability. Approval on these platforms seems inevitable, enhancing accessibility and simplifying the investment process in Bitcoin, which will likely lead to much higher demand. Third, regulatory developments in the global crypto markets will significantly influence Bitcoin's price dynamics. The potential passage of a U.S. bill establishing a regulatory framework for cryptocurrencies and Europe's Markets in Crypto-Assets (MiCA) regulation is crucial. They will help dispel the notion that BTC and crypto are mere "pet rocks," acknowledging them as stores of value with technological utility. This shift in perception can transform Bitcoin and crypto from speculative instruments to strategic investments and, potentially, a flight-to-quality investment. Remember that a complex interplay of market dynamics, investor sentiment, technological advancements and macroeconomic events influences Bitcoin's price. I am bullish on BTC and crypto and will watch closely as the post-halving market continues. |
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The Ethereum Staking Opportunity |
Ethereum is the largest proof-of-stake network by market cap. Currently, 32.5 million ($99 billion) ETH has been staked, and the amount of staked ETH has grown by 78% since Ethereum's Shanghai Upgrade in April 2023. Despite the impressive growth, only 27% of the ETH in circulation has been staked. Comparatively, other proof-of-stake networks such as Solana, Cardano, SUI, Avalanche and Aptos have a much higher staking ratio, between 48%-81%. In other words, staking on Ethereum can grow larger, potentially fueled by the adoption of Liquid Staking or Liquid Restaking Tokens on Layer 2 networks and DeFi protocols. | Source: 21co on Dune Analytics EIP 7251 to drive more volume The next Ethereum upgrade, Pectra, will likely take place by the end of 2024, or in early 2025. One of the key proposals, EIP 7251, can provide a better UX for validators to earn staking yield. This proposal will increase the max effective balance of validators from 32 to 2048. Leading staking service providers, like Coinbase, are managing more than 130,000 validators already. The lift in maximum effective balance allows these providers to consolidate the number of validators and ultimately increase efficiency and lower the cost of operation. Another benefit is that solo stakers can enjoy auto-compounding their staking rewards. At the current stage, solo stakers' staking reward will be withdrawn to the execution layer automatically. The reward received will no longer accrue staking yield. Solo stakers will need to wait until they have 32 ETH before spinning up another validator to capture the staking reward. Restaking is the new catalyst Restaking has been an exciting primitive on Ethereum. Together with the points program from both EigenLayer and liquid restaking protocols, it creates a new wave of demand for ETH staking. In March and April 2024, respectively, 38% and 48% of the staking volume came s from liquid staking protocols. At the same time, over 65% ($9.7B) of EigenLayer's TVL comes from native ETH, showing the level of traction that restaking is able to bring to Ethereum. With the maturity and adoption of restaking, we could see more staking volume comes from restaking and liquid restaking in the future. However, it is also important to note that restaking comes with risks, such as smart contracts and the quality of the actively validated services. Given the reward and slashing mechanism of EigenLayer has not been activated, we are yet to see the full ramifications of restaking, both good and bad. |
Source: 21co on Dune Analytics |
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From Nick Baker, CoinDesk's deputy editor-in-chief, here is some news worth reading: |
- UNHALTING: GameStop (GME) was yet again the stock of the day, soaring Monday due to support from traders gripped anew by meme-stock fever (which spread into meme coins, too). But it was a stilted rally, halted repeatedly by the U.S. stock market's famous – or infamous, depending on one's perspective – system of "circuit breakers" designed to prevent prices from getting out of control. And that has enthusiasts of cryptocurrencies, where markets go 24/7 with no circuit breakers (except for the occasional exchange malfunction), laughing. The U.S. stock market got circuit breakers in stages following the harrowing crash of October 1987, initially set up as a brief whole-market shutdown in case of a rapid collapse and then later, following the so-called flash crash of May 2010, more tailored toward restraining individual stocks. These are government-mandated things. Former U.S. Treasury Secretary Nicholas Brady is credited with inventing the marketwide one after the 1987 crash. "The circuit breaker that I invented restores calm," he told me at a prior job. Yet there are criticisms. If markets plunge but they're frozen, traders can't immediately swoop in and buy, driving prices back up. After Ethereum's ether (ETH) plunged to 10 cents from $317.81 in less than a second back in June 2017, Coinbase said it was considering introducing circuit breakers. It never did. Within 10 seconds, it was back above $300, an executive said at the time in an interview with me while I was at Bloomberg. Back in 2024, everything from bitcoin (BTC) to dogwifhat (WIF) kept chugging along Monday as GameStop was temporarily stuck.
- ZERO-COUPON BONDS?: There's a pretty established setup in the employee compensation game: If you're granted stock options or cryptocurrency tokens, you're likely unable to cash them out for a while. The same also holds true for early investors: post-IPO or crypto airdrop, they're prevented from selling for a set period of time. But Colony Lab has an innovation: "liquid vesting," which gives crypto token holders liquidity before their vesting time arrives. "Liquid vesting allows early investors to trade their tokens before they invest without impacting the projects, without impacts in the secondary market, " said Wessal Erradi, co-founder of Colony Labs, a developer in the Avalanche blockchain ecosystem. Someone chimed in on X after CoinDesk's Margaux Nijkerk reported on this development: "We are thinking of doing something similar," CavalRe's Eric Forgy said. This feature "is basically creating a liquid zero-coupon bond that is tradeable, but should trade at a discount to the spot version of the token."
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