CoinLoan Weekly: BTC and ETH rally, potential boom, flawless Shapella
Bitcoin started the week by dashing from roughly $28,000 to nearly $29,250. Continuing the ascent, it leveled off close to $30,200 the next day. Wednesday, April 12, brought a price of almost $30,300, and the surge climaxed at $30,979.32 on Friday, April 14. During the weekend, the coin remained just below $30,500. Monday trading (April 17) pushed it slightly below $29,400.
According to K33 Research analyst Vetle Lunde, the pattern of the latest rally is nothing new. Speaking to CoinDesk TV, he noted, "The current drawdown and recovery stage is remarkably similar to that in 2019, both in duration and price movement." The end of 2022, marked by forced selling and caution, combined underexposure with the temptation to short BTC. Those factors created a dynamic "where Bitcoin feeds on your short squeezes and moves higher."
The Crypto Fear and Greed Index dipped slightly on Thursday, April 13, and returned to last week's greed score (68). The rally appears stalled at press time, with BTC back below $30,000. However, Bitbank analyst Yuya Hasegawa has suggested "a little bit of correction should be expected, and it will ultimately be healthy for Bitcoin's upward trend to continue."
At press time, BTC is trading at $29,655.85, with a 24-hour loss of -1.0% and no 7-day change.
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Compared to Bitcoin, Ether's first day was muted. Starting at $1,850, it reached above $1,920 on Tuesday, April 11, rolled back, and rebounded the next day. It then surged on Thursday, April 13, breaching $2,000 in the late hours. On Friday, April 14, ETH hit a 7-day high of $2,123 before trading slightly lower through the weekend. Following an uptick on Monday, April 17, its price tumbled below $2,100.
The completion of the Shapella upgrade has sent ETH to the highest highs since August 2022. Over the first four days, the net inflow to exchanges totaled 179,500 ETH worth around $375 million, with deposits exceeding withdrawals. While transfers to exchanges typically imply an intention to sell, experts currently see no evidence of en masse exits.
Shortly before the upgrade, Ethereum co-founder Vitalik Buterin said solving the network's scaling issues was "the immediate next focus." Otherwise, users may face ballooning gas costs when the next bull run spurs on-chain activity. "People are going to be stuck paying $500 transaction fees," he warned.
At the time of writing, ETH is worth $2,098.55, with no 24-hour change and a 7-day rise of +9.9%.
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The Ripple token jumped twice, with the first peak of $0.523961 on Tuesday, April 11, and a 7-day high of $0.536166 on Friday, April 14. The trough between them pulled XRP below its initial price of $0.505 on Wednesday, April 12. The weekend was relatively volatile, with seesawing between $0.526 and $0.517. On Monday, April 17, XRP sank again, hitting $0.508 late in the evening.
On April 13, Ripple publicly launched Ripple Liquidity Hub, an enterprise API product designed to help institutions manage crypto liquidity. The official blog post states that the company is shifting to a multi-asset reality encompassing fiat, crypto, CBDCs, and NFTs. However, XRP is not part of that bundle yet. According to Chief Legal Officer Stuart Alderoty, it will be supported once the liquidity and customer demand in the US are sufficient.
It also came to light that the SEC, which is currently suing Ripple, has lost five of its last six cases in the Supreme Court. Furthermore, on April 16, Ripple attorney John E. Deaton shared a video of a conversation between US investor Tim Draper and Gary Gensler in 2018. In it, Draper "tells Gensler bankers are 'panicking right now' about crypto's disruptive potential, and predicts that incumbents will sue, exert media pressure and leverage government regulators to slow its progress."
As of this writing, XRP is trading at $0.513659, with a 24-hour loss of -0.2% and a 7-day shift of -0.9%.
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With BTC at $30K, analysts weigh in on the next crypto boom
Last week, Bitcoin traded confidently above $30,000 after retracing the path from $20,000 in the past month. However, the state of the market is a far cry from what it was before the fall of Three Arrows Capital, and some experts remain cautious.
Bloomberg analysts admit that we are yet to see if "the mood has improved compared with last year's apocalyptic vibe." Oliver Linch, CEO of Bittrex Global, has warned against pretending "that the last ten months never happened." On the upside, "there is certainly a feeling that maybe this signals that a line can be drawn under those scandals, and we can get back to assessing – and valuing – crypto without all the noise from the rumors and wrongdoing," he said.
Positive macro signals
Investors have reasons to hope that the Fed will refrain from aggressive monetary tightening. According to Tim Frost, CEO of Yield App, this long-awaited shift "is expected to create a more stable, and hopefully predictable environment."
The banking turmoil that brought down several crypto-friendly entities in March – Silvergate Capital Corp., Signature Bank, and Silicon Valley Bank – raised such expectations. The CPI report published on Wednesday, April 12, revealed an increased impact of the previous hikes. The actual rise was smaller than expected – 0.1% in March and 5% year-over-year. Meanwhile, the cost of energy and food stayed flat.
Jeffrey Roach, LPL Financial's chief US economist, is optimistic. "As the economy slows, consumer prices will decelerate further and should bring inflation closer to the Fed's long-run target of 2%," he explained. Roach expects a positive reaction from the markets as investors become more confident that the May 3 FOMC meeting "may be the last meeting when the Committee raises the fed funds target rate." At press time, the CME Fedwatch tool shows an 85% probability of a 0.25 increase.
Matteo Dante Perruccio, President International at Wave Digital Assets, supposes that "a lot of the industry is still in wait-and-see mode." At the same time, there has been a "flight to quality, and the beneficiaries are those companies that weren't hit by the crypto winter."
While TradFi crises are often bullish for crypto, the implications this time are not entirely positive. On the one hand, bankruptcies revive the original BTC narrative about the pitfalls of centralization. On the other hand, as Bloomberg notes, the loss of critical connections to the US financial system makes the industry's future vague.
The current investments in DeFi pale in comparison with the all-time high. DeFiLlama estimates that the total value locked (LTV) is just $53.2 billion – a 25% increase since early January but less than a third of the whopping $180 billion in December 2021.
Hiring has not recovered either, with talent supply surpassing demand. Concordium co-founder and chairman Lars Seier Christensen interprets this as a sign of maturing and "realizing that the money tree available a couple of years ago has withered a bit." Recently, his company has received several hundred applications for a handful of job openings.
Finally, there is a deluge of regulatory scrutiny. Coinbase Global Inc. has received a Wells notice from the SEC — essentially, a threat to sue it over some of its products. Meanwhile, Terraform co-founder Do Kwon is facing criminal charges for his role in the Terra-Luna collapse. Binance and its CEO Changpeng Zhao are being sued for multiple alleged violations, and FTX's Sam Bankman-Fried is still awaiting trial.
ETH eclipses BTC following Shapella
On Thursday, April 13, the price of Ether soared past $2,000 for the first time since August 2022. That rally started after it was confirmed that the Shanghai, or Shapella, update had gone smoothly the day before.
Contrary to expectations, no rapid outflows ensued, and the first four days brought a nearly 10% increase. As a result, on April 13, ETH dominance jumped to 19.87% – a one-month high – knocking BTC's market cap share off its nearly two-year record of 49.06%.
At press time, ETH's year-to-date gains stand at 75.66% against BTC's 79.93%. Both coins have a long way to go to recover from last year's turmoil — the prices are less than half of what they were before the FTX fiasco.
Withdrawals vs. deposits
Shapella has enabled withdrawals for investors who had staked ETH for rewards since December 2020. They can now queue up to retrieve their coins. However, according to Flipside Crypto, it was rewards, not stakes, that made up 96% of the initial outgoing volume.
Coin Metrics expected withdrawals of around 1.2 million ETH over five days. While impressive on its own, this number represents merely 6% of the staked total – approximately $36.7 billion ETH. On Monday, April 17, Cointelegraph reported that 1.03 million ETH had been withdrawn, with a peak outflow of 392,800 ETH on Saturday, April 15.
New deposits outpaced the outflows as bulls defied negative projections. As noted by Grayscale Research analyst Matt Maximo, this dynamic boosts the "buy pressure to offset the withdrawn ETH."
His observation matches the prediction made by Lachlan Finney, chief executive at Labrys. "Because Shapella is a massive de-risking event, over the medium to long term more, not less, ETH will be staked. We anticipate that in the not-too-distant future, we will reach a record high of Ether being staked," he told Cointelegraph.
As per Rated Network Explorer's data, Kraken dominated the initial queue. The exchange is discontinuing staking services in the US as part of its settlement with the US Securities and Exchange Commission (SEC). However, despite the "looming" un-staking pressure from other businesses like Celsius, the "overall liquidity situation is favorable for crypto assets," according to "Crypto Is Macro Now" author Noelle Acheson.