Wednesday, 3 November 2021

Market Summary

Market Summary 3 November 2021

The State of Ethereum

  • Since August 2020, ETH % supply on exchanges has been trending down from ~27% to ~12% as of today. On the other hand, the % supply of ETH deposited in smart contracts has been making new highs during the same time period, climbing from ~10% in June 2020 to ~21% today.
  • We are witnessing a structural shift in which more digital assets are shifting from centralized custodians & service providers to decentralized counterparts. The biggest tailwind that’s driving this phenomenon is hot money searching for higher yields on Ethereum. Many DeFi users also bridge ETH onto other chains for the same reason. As DeFi and multichain activity continues to take off, we expect this trend to continue.
  • Since the implementation of EIP-1559, OpenSea leads the way as the #1 contributor to ETH burning. Unsurprisingly, the NFT mania that happened during August and September proved to be unsustainable as OpenSea’s burn contribution plateaued.
  • Despite NFT activity cooling down, Uniswap v2, USDT and ETH transfers stepped up to fill the void left behind by OpenSea. This is in part due to increased market volatility as of late and has led to increased on-chain activity.
  • Thanks to the increased on-chain activity and high gas prices, Ethereum experienced its first-ever deflationary week since its inception. In addition to more liquidity leaving exchanges and being locked up in smart contracts, a sustained deflationary scenario will likely contribute to a supply shock as ETH becomes scarcer amid rising demand.
  • If we expect volatile price action to continue in the coming months it could keep gas prices high, which risks pricing out a large cohort of smaller retail users. There’s also a balancing force at play here; when gas prices on Ethereum are too expensive, on-chain activity (and therefore demand for block space) may fall, reducing demand for ETH, which can have an adverse impact on price (all else held equal).
  • Therefore, it is critical that Ethereum scaling solutions like StarkNet, zkSync, Arbitrum, and Optimism gain traction soon, otherwise steep transaction costs will increase activity on alternate L1s such as Solana, Avalanche, Fantom, and Polygon (to name a few).


Microsoft Makes Metaverse Move After Facebook’s Meta Makeover

  • Microsoft has announced 3D avatars and immersive virtual environments for meetings, per The Verge and others. 
  • “We got hit by meeting fatigue in the virtual world,” said Nicole Herskowitz, Microsoft Teams general manager during an interview with The Verge. 


CME to launch micro ether futures next month

  • The Chicago Mercantile Exchange (CME) is set to launch micro ether futures on December 6, according to a statement.
  • At present, the CME offers trading on ether futures, with a contract size of 50 ETH ($222,000). With micro ether futures, the contract size will be much smaller, allowing for more precise trades.


SEC Extends Decision Deadline for Valkyrie Bitcoin ETF to 2022

  • The Securities and Exchange Commission (SEC) has delayed the deadline for a decision on the proposed Valkyrie Bitcoin Fund to January 7, 2022. 
  • The Valkyrie Bitcoin Fund is the company’s Bitcoin spot ETF, meaning the fund gives customers shares backed by the underlying asset—in this case, Bitcoin. 
  • That is fundamentally different from futures ETFs like the Valkyrie Bitcoin Strategy ETF, which gives customers shares tied to a bundle of contracts to buy Bitcoin in the future. 


Australia’s largest bank is reportedly planning to add crypto support to its app

  • The Australian Financial Review reported Tuesday that Commonwealth Bank, the country’s top bank, is planning to integrate crypto into its digital app.
  • Citing sources with knowledge of the process, the AFR said that the bank will announce the ability to buy and hold bitcoin, as well as other digital assets. Per the report, the added support will begin next year.


Analysts say ‘impulse move’ could send Ethereum price into the $6K to $14K range

  • A simple, straightforward price projection for Ether was offered by Cointelegraph contributor Michaël van de Poppe, who posted the following chart estimating an “impulse move” from $6,000 to $6,400, which could occur sometime between November 2021 and January 2022.
  • A final perspective offered by on-chain analyst Matthew Hyland compares Ether’s price action in 2017 with the current market structure of ETH.
  • If the suggested fractal pattern does, in fact, play out, Hyland pointed to a potential rally to at least $14,000 over the next two to three months.
  • The overall cryptocurrency market cap now stands at $2.728 trillion and Ethereum’s dominance rate is 19.4%.


Solana Flips Fellow Ethereum Rival Cardano as SOL Nears All-Time High

  • SOL, the native coin of the smart contract-enabled blockchain Solana, has risen in price by 7% over the last 24 hours to become the fifth-largest cryptocurrency by market capitalization, according to CoinGecko.
  • In doing so, it has flipped Cardano’s ADA, which has been unable to keep pace with its fellow “Ethereum killer.” ADA’s price is up 2% on the day, but it has shed 8% of its value over the last week. Solana’s market cap now stands at above $64 billion, compared to $63.5 billion for Cardano.

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