Ethereum merge complete

Bitcoin and the rest of the crypto market tumbled due to the latest inflation data out of the US. The market was expecting August’s consumer price index (CPI) year-on-year increase to come in at 8.1%; however, it came in at 8.3%.

At the time of writing, bitcoin is trading at around US$20,000. Ethereum underperformed bitcoin over the last week, down -17.43% vs bitcoin’s -7.24%.

Bitcoin’s market cap declined to US$384.4B, with the total crypto market down to US$975.4B. Bitcoin’s market dominance sits at 39.44%.

Price High Low Change from previous week
BTC (in US$) $20,064 $22,673 $19,400 -7.24%
ETH (in US$) $1,456 $1,784 $1,415 -17.43%

Source: CoinMarketCap. As at 18 September 2022. Past performance is not indicative of future performance. Performance is shown in US dollars and does not take into account any USD/AUD currency movements.

Source: Glassnode. Past performance is not indicative of future performance.

Crypto news we’re watching

Merge upgrade successfully completed

All eyes in the crypto space were on Ethereum as it completed the highly anticipated switchover from proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism. Even Google got into the action, featuring a timer counting down the estimated time remaining till the upgrade. Although delayed several times in the past, the “Merge” occurred around block height 15,537,391 on 15 September without a hitch. The switch in consensus mechanism could cut the network’s energy usage by up to 99.5%, and sets the blockchain up for further upgrades.

 

The Merge is considered the biggest event for Ethereum to date, but it is only the first milestone in a five-stage roadmap laid out by the network’s developers. The key changes in this upgrade include removing its reliance on energy-intensive miners, becoming a yield-bearing asset, and changing the token issuance rate with the potential to become a net-deflationary asset with a decreasing token supply. Future upgrades will focus on scaling, and could improve the cost or speed of transactions.

 

White House releases comprehensive framework

 

Just over six months after US President Joe Biden signed an executive order (EO) on ensuring responsible development of digital assets, the White House has released its first-ever comprehensive framework regarding the matter. The six key priorities identified in the 9 March EO are consumer and investor protection, financial stability, countering illicit finance, the United States’ leadership in the global financial system, financial inclusion, and responsible innovation. There were nine reports submitted to the President which reflected feedback from a range of stakeholders across government, industry, academia and civil society.

 

According to the White House factsheet, “[t]he reports call on agencies to promote innovation by kickstarting private-sector research and development and helping cutting-edge US firms find footholds in global markets. At the same time, they call for measures to mitigate the downside risks, like increased enforcement of existing laws and the creation of commonsense efficiency standards for cryptocurrency mining. Recognising the potential benefits and risks of a US Central Bank Digital Currency (CBDC), the reports encourage the Federal Reserve to continue its ongoing CBDC research, experimentation, and evaluation and call for the creation of a Treasury-led interagency working group to support the Federal Reserve’s efforts.”2

New crypto exchange being launched

A consortium of financial heavyweights plans to launch a new cryptocurrency exchange called EDX Markets (EDXM). The companies include Fidelity Digital Assets, Charles Schwab Corp., and Citadel Securities. EDXM will cater to both institutional and retail investors and plans to “remove significant conflicts of interest that affect existing cryptocurrency exchanges”. Former Citadel Securities executive Jamil Nazarali has been appointed as the platform’s CEO. The launch date is currently unconfirmed. Other backers of the new exchange include Virtu Financial, Sequoia Capital and Paradigm.3

On-chain metrics

Ethereum (ETH): Exchange Net Position Change – All Exchanges

The above metric looks at the 30d change of the supply held in exchange wallets. Inflows to exchanges fluctuate with changes in market sentiment. An increase in inflows suggests increased selling pressure in the market. Conversely, outflows can suggest holders are bullish and willing to hold their coins off exchange.

Looking at data from on-chain analytics company Glassnode in the days leading up to the merge and post-merge, ETH continues to be deposited to exchanges. This may place selling pressure on the asset in the short-term.

Source: Glassnode. Past performance is not indicative of future performance.

Ethereum (ETH): ETH 2.0 Total Value Staked by Provider

This metric looks at the total amount of ETH transferred to the ETH2 deposit contract via staking providers. With the new proof-of-stake consensus mechanism now active, this metric will be worth keeping an eye on to determine how much concentration there is amongst validators. There is speculation that PoS will lead to centralisation since it favours those with a higher token supply over those with lower amounts.

According to Glassnode, at the time of writing, there are around 428,967 validators which help secure the network. As per the data, that would equate to 13.7 million staked Ethereum. The top four entities are Lido, Coinbase, Kraken, and Binance, currently holding 8.173 million ETH or 59.6% of the total.

Source: Glassnode. Past performance is not indicative of future performance.

Altcoin news

In altcoin news, the only top 20 cryptocurrency well into the black was Ripple (XRP), with a 9.12% return over the last seven days. Ripple recently announced that it will partner with Travelex Bank to bring crypto-enabled payments solutions to Brazil. According to a post on Ripple’s website: “Through this partnership, Travelex Bank can now offer more affordable cross-border payments to their customers by eliminating the need for pre-funded destination accounts, while delivering near instant settlement and providing 24/7/365 access to liquidity.” More than US$780B in payments are sent t0 Brazil annually.4    

Investing in crypto assets or companies servicing crypto-asset markets should be considered very high risk. Exposure to crypto assets involves substantially higher risk when compared to traditional investments due to their speculative nature and the very high volatility of crypto-asset markets.

Investing in crypto assets or crypto-focused companies is not suitable for all investors and should only be considered by investors who (i) fully understand their features and risks or after consulting a professional financial adviser, and (ii) who have a very high tolerance for risk and the capacity to absorb a rapid loss of some or all of their investment.

Any investment in crypto assets or crypto- focused companies should only be considered as a very small component of an investor’s overall portfolio.


1. https://www.fidelitydigitalassets.com/sites/default/files/documents/Fidelity%20Digital%20Assets%20Research_Ethereum%20Merge%20Report.pdf

2. https://www.whitehouse.gov/briefing-room/statements-releases/2022/09/16/fact-sheet-white-house-releases-first-ever-comprehensive-framework-for-responsible-development-of-digital-assets/

3. https://www.wsj.com/livecoverage/stock-market-news-today-09-13-2022/card/citadel-securities-fidelity-schwab-back-new-crypto-exchange-wiOjfsTo4q9UrdhylBT2

4. https://ripple.com/insights/ripple-partners-with-travelex-bank-to-bring-crypto-enabled-payments-solutions-to-brazil/


Off the Chain is published every Tuesday. It provides the latest news on bitcoin and the rest of the crypto market, along with analysis and insights into the world of crypto.

It provides general information only and is not a recommendation to invest in any crypto asset, crypto-focused company or investment product.

Photo of Justin Arzadon

Written by

Justin Arzadon

Director, Adviser Services & Head of Digital Assets.

C4 Certified Bitcoin Professional (CBP) and Blockchain Council Certified Bitcoin Expert™ with over 18 years’ experience in the ETF market. Passionate about the future of money.

Read more from Justin.

Leave a reply

Your email address will not be published. Required fields are marked *

Previous article
Next article