Market Analysis with Mike Ermolaev
Join us at the ninth edition of GoMarket Weekly, where crypto analyst and journalist Mike Ermolaev breaks down the latest developments and trends in cryptocurrency markets exclusively for the GoMining community. We’ll be focusing on Bitcoin’s reaction post-halving; the broader ripples from the Fed’s decision on interest rates, emerging patterns on the Bitcoin mining scene, and a changing regulatory environment that keeps the crypto world on its toes.
Bitcoin Recovers from Post-Halving Sell-Off Amid Economic Uncertainty
The Bitcoin halving initially triggered a notable sell-off, driving BTC prices down as low as $57,395 before swiftly rebounding. We haven't seen a market dip this sharp since the days of the FTX crisis. However, bouncing back from early struggles, Bitcoin got a much-needed lift from the calm waters of the US Federal Reserve's stable interest rates alongside a weak non-farm employment report.
According to the US Bureau of Labor Statistics, non-farm payroll employment increased by 150,000 in the last month, which is below market expectations. The professional and business services sector saw a net decline of 62,000 jobs, and the unemployment rate remained steady at 3.9%. This standstill in growth got people thinking the Fed might loosen its grip, with small-cap stocks, the tech sector, and crypto showing some signs of optimism.
In line with this sentiment, Fundstrat suggests that the Fed now does have room to lower interest rates, and maintains a base-case scenario in which Bitcoin reaches $150,000 in 2024.
Meanwhile, data from Deribit indicates that traders have opened record positions totaling $682.21 million at a $100,000 strike price. This represents an open interest of 10,319.40 calls, making it the highest valuation level on the exchange.
Source: Deribit
Also, Glassnode's analysis of previous halving cycles predicts sideways movements in the near future and a slight downward drift. According to it, the 60 days following halving events are generally characterized by choppy, flat movements between -5% and -15%.
Source: Glassnode
Additionally, the launch of a Bitcoin ETF in Hong Kong helped soften the outflow witnessed in US Bitcoin ETF funds. During the period of May 3 to May 9, US Bitcoin ETF funds saw a net inflow of approximately $580 million, despite an outflow of $27 million, according to Farside data. Compared to this, Hong Kong ETFs had a total net Bitcoin inflow of $20.4 million during the same period.
Ethereum Faces Challenges While Buterin Proposes Enhanced Account Abstraction
Regarding the second largest cryptocurrency by market cap, 10x Research highlightsEthereum's weak fundamentals and recent trends, suggesting that Bitcoin will maintain its dominance. This aligns with Glassnode's findings, which show a widening performance gap between Bitcoin and Ethereum in the current cycle, with Ethereum's weaker price performance being attributed to the sluggish rotation of capital.
In the midst of these challenges, Ethereum co-founder Vitalik Buterin proposed an enhancement to Ethereum's account abstraction features through EIP-7702, by temporarily converting Externally Owned Accounts (EOAs) into smart contracts during transactions and introducing features like transaction batching and third-party fee payments. With an eye on past proposals like ERC-4337 and the concerns of EIP-3074, the creators of EIP-7702 are crafting a vision for stronger, decentralized wallet management that might redefine Ethereum's upgrade path.
US House Repeals SEC Crypto Rule; SEC Delays Ethereum ETF Decision
The US House recently voted to repeal a SEC rule known as Staff Accounting Bulletin (SAB) 121, which required digital asset custodians to account for crypto as liabilities. This decision aims to facilitate banks' involvement in crypto custody by removing stringent capital requirements, potentially increasing Bitcoin adoption. However, the Biden administration has opposed this move, signaling a potential veto. Now, the Senate's up next to give this resolution its review.
At a time when clarity is more valuable than gold, Paul Grewal of Coinbase called on SEC Chair Gary Gensler to stop creating confusion in an already intricate regulatory landscape.
In parallel developments, the SEC has delayed its decision on an Ethereum spot ETF from Invesco and Galaxy until July 2024. The regulation saga continues with a hint from CFTC's Rostin Behnam that we can expect increased regulatory scrutiny for the crypto industry moving forward.
Bitcoin Network Celebrates Billion Transactions as Mining Proves Environmentally Positive
Bitcoin's network has recently processed over a billion transactions since its inception. According to Clark Moody’s Bitcoin dashboard, the billionth transaction was processed in block 842,241 on May 5, 15 years after Satoshi Nakamoto mined the Genesis block on Jan. 3, 2009.
Meanwhile, a recent study led by former Greenpeace activists and environmental economists highlights Bitcoin mining's unexpected environmental benefits – in contrast to long-held beliefs that Bitcoin is unsustainable.
The study examines the potential of integrating Bitcoin mining with landfill gas-to-energy (LFGTE) projects to mitigate methane emissions and generate economic value. By using a Monte Carlo simulation, the research demonstrates that a 1.14 MW LFGTE facility could potentially offset 2,187 metric tons of methane annually, worth approximately $7.6 million, by converting this gas into electricity to power Bitcoin mining rigs. This model relies on efficient mining equipment to maintain profitability and serve as a buffer against market fluctuations. It underscores the potential scalability of this approach, which could be extended to sectors like agriculture, wastewater treatment, and energy – all of which are in critical need of innovation.
Conclusion
Bitcoin is regaining its footing after experiencing a shaky period after the halving event with the Fed’s stable interest rates and potential monetary policy easing. Traders are still very bullish about Bitcoin for 2024, with record-setting options bets confirming this trend. Plus, we're standing at a crossroads where technological leaps meet environmental discoveries. So staying sharp to track down the latest in crypto is crucial as it could give you an edge in this fast-paced market.
May 11, 2024
