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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: As bitcoin and ether trade lower Tuesday, investors and analysts are focused on the upcoming Merge and the potential of a forked proof-of-work ETH.
- Market Moves: A report from Coinbase said layer 2 blockchains could siphon revenue away from Ethereum. The future of layer 2s could be a "zero-sum game" because the layer 2 that houses the majority of dapps could "power the entirety of the Ethereum ecosystem," the report said.
- Chart of The Day: Bitcoin's correlation with Nasdaq hits its lowest since January.
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Bitcoin (BTC) and ether (ETH) were down 3% on the day while U.S. stock futures inched lower as investors awaited the U.S. consumer-price data to release on Wednesday. The dollar extended a decline. The data coming out Wednesday could set expectations for how the Federal Reserve will approach monetary policy going forward and whether there will be any further aggressive rate hikes. According to Matteo Bottacini, trader at Crypto Finance AG, there will not be a spike in volatility before or after the key economic data is released. "As a consequence, I see risky assets inching higher," said Bottacini in a morning note to investors. "Then again, geopolitical tensions coupled with the released earnings might weigh on equities – and, consequently, on crypto." Eth, Eth, Eth Bottacini points out that the hot topic right now is the upcoming Merge on the Ethereum network. The basis (the spread between futures price and spot price) widened with September futures on crypto exchange FTX at a $10 discount, and in December at a $40 discount. "This is the consequence of many stories and rumors about the possibility of having a forked proof-of-work ETH and a proof of stake coin," said Bottacini. "Traders are buying the spot ETH and selling the longer-term future to take advantage of this possibility. Therefore, holding ETH will let you receive the forked asset that might be quite valuable." JPMorgan analyst Ken Worthington said yesterday anticipation of the Merge was a sizable force behind the cryptocurrency's big July move higher. He said that it was responsible for the price uptick for not only ETH but also for crypto in general. After the completion of two testnets ahead of the event – ether's price jumped 70% in July. That's compared to bitcoin which rose 27% in July. Also talking Ethereum, Tron's controversial founder, Justin Sun said in an interview with CoinDesk TV that he supports the post-Merge Ethereum fork. He said he thinks the proof-of-work way of operating is an "essential" component of Ethereum. CoinDesk's Daniel Kuhn reported that ethereum fees are at their lowest level in two years. The average cost for a transaction is under 12.5 gwei, a unit of account that represents a fraction of an ETH used to measure the gas (or transaction fees) needed to run Ethereum. That's less than half the gwei needed to use Ethereum at the end of July. As for the rest of the crypto market, altcoins took a hit Tuesday with Filecoin (FIL) leading down 11%, Uniswap's UNI by 8% and Avalanche (AVAX) by 6.5%. On Monday Robinhood announced that customers can now buy and sell AVAX through Robinhood Crypto. In the news Cryptocurrency exchange Zipmex will release ether to users' wallets on Aug 11 with bitcoin following a week later, having blocked customers from taking direct custody of their coins last month. Crypto-focused data analytics platform, Messari, plans to raise fresh financing at a $300 million valuation, according to The Block. Messari's founder and CEO Ryan Selkis declined to comment on the raise, but tweeted: "I don't comment on market rumors related to Messari, but… We've scaled to 130 people on zero net operating burn, had a record July, and are hiring $35mm worth of developers to help bring transparency and institutional-grade data tool to the crypto market." And finally, Singapore-based Amber Group, which provides liquidity and market-making services mostly in Asia, has expanded its retail trading operation to Brazil. Called WhaleFin, the retail platform – allowing users to buy and sell crypto as well as take out loans – has been operational in Brazil since June. |
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Ethereum Layer 2s Could Take Revenue From the Blockchain as They Become More Competitive: Coinbase |
By Will Canny Ethereum needs layer 2 blockchains to help deal with its "shortcomings on cost and throughput," though those same scaling products could leech revenue from the network as they become "competitive rather than complementary," Coinbase (COIN) said in a research report Monday. "It's feasible that Layer 2s could become the application layers hosting the bulk of economic activity while Ethereum exists exclusively to store transaction data," wrote David Duong, head of institutional research at Coinbase. A layer 1 network is the base layer, or the underlying infrastructure of a blockchain. Layer 2 refers to a set of off-chain systems or separate blockchains built on top of layer 1s. A decentralized application (dapp) is a digital app that uses blockchain technology to keep users' data out of the hands of the organizations behind it. The future of layer 2s could be a "zero-sum game" because the layer 2 that houses the majority of dapps could "power the entirety of the Ethereum ecosystem," the report said. There is about $68.9 billion in total value locked (TVL) on Ethereum compared with $5.2 billion across layer 2s, the report said. While the TVL in layer 2s is relatively small, the implementation of zero knowledge Ethereum Virtual Machines (zkEVM) is looking more achievable and could lead to "major traction" in layer 2 growth, the note said. Coinbase says that if more user activity moves to layer 2s and these blockchains need their own tokens to enable transactions, this could reduce the staking yields to Ethereum validators , cutting their revenue. That could reduce staking on the platform and increase the amount of ether (ETH) circulating, potentially damaging the cryptocurrency's price. A decline in validators could also have a negative impact on the overall security of the network, the report said. For the time being, transacting on the Ethereum mainnet will provide a solution for users who need or value "security over speed," the report said, noting that losses on cross-chain bridge exploits have reached $2 billion this year. More activity accumulating to an application on layer 2 would reduce congestion and fees on the layer 1 and this could result in better price discovery for ETH, the note said. |
Chart of The Day by Omkar Godbole: Bitcoin's Correlation With Nasdaq Hits Lowest Since January |
- Bitcoin seems to be decoupling from traditional markets amid the optimism stemming from Ethereum's impending merge.
- The 90-day correlation co-efficient between bitcoin and Wall Street's tech-heavy Nasdaq index has dropped to 0.37, the lowest since January, according to data provided by charting platform TradingView.
- In other words, the positive correlation between the two is weakest in 7 months and the leading cryptocurrency is now relatively less sensitive to equity markets and perhaps macro factors than it was early this year.
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The following are the biggest movers in the CoinDesk 20 digital assets over the past 24 hours: |
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Biggest Gainers | Asset | Ticker | Returns | DACS Sector | | Dogecoin | DOGE | +0.1% | Currency | Biggest Losers |
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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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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. - Brian Norton, COO, MyEtherWallet
- Alexander Kravets, CEO, Symbridge
- William Callahan, director of government and strategic affairs, Blockchain Intelligence Group
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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. |
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