Ethereum
Bitcoin carnage, Eth2 milestone, Libra launch, PayPal blunder: Hodler’s Digest, Nov. 21–27
Coming every Saturday, Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — a week on Cointelegraph in one link.
Top Stories This Week
Bitcoin price tumbles, falling below $17,000 in biggest crash since March
At the start of the week, the crypto markets were brimming with optimism. Bitcoin was one resistance zone away from all-time highs, altcoins were rallying by triple digits, and the surge was making a splash on the homepage of The Wall Street Journal.
With Bitcoin’s market cap at all-time highs, it was time to celebrate with a nice turkey dinner and all the trimmings. Unfortunately, Thanksgiving left the crypto world with a rather bitter aftertaste.
On Nov. 26, BTC’s price suffered one of its biggest dollar losses since March. All told, the world’s biggest cryptocurrency collapsed by more than 15%. Massive liquidations were blamed for the crash from $19,484 to $16,334 in the space of a day.
As Cointelegraph analyst Michaël van de Poppe noted, market corrections are rarely elegant things. “They are often vertical and painful. Staircase up, elevator down,” he wrote.
Three reasons traders now expect Bitcoin hitting $13,000 before a new rally
So… what happens next? Are hopes of hitting $20,000 dashed in the short term, or was this a mere blip in the road that should be shrugged off?
Well, it depends very much on who you ask. Some traders are anticipating another steep pullback in the not-too-distant future, pointing to historical patterns that suggest BTC could fall back down to the $13,800–$14,500 range.
A pseudonymous trader known as “Salsa Tekila” said BTC needed to break $17,500 to remain in bullish territory, adding that $18,700 is the only big resistance before all-time highs. However, the trader warned that things are looking bearish below $17,500… and this could prompt a drop to the $11,000–$13,000 range.
Others, such as the crypto index fund provider Stack Funds, have described the pullback as a “healthy correction” that was needed before Bitcoin continues its upward trajectory.
The firm said BTC has been at overbought levels since October, meaning some heat desperately needed to leave the market.
Meanwhile, Quantum Economics founder Mati Greenspan said the correction may have already bottomed out, adding: “A 17% pullback is rather tame for this stage of the cycle.”
Ethereum 2.0 confirmed for Dec. 1 launch, just hours before deadline
Eth2’s beacon chain has been confirmed for Dec. 1 after 16,834 validators transferred 524,288 ETH into a deposit contract.
There had been doubts over whether the deposit contract would hit the minimum threshold by Nov. 24, paving the way for Phase 0 to begin in earnest a week later.
But transfers rapidly increased as the deadline neared. There was a celebratory atmosphere in the ETH community, not least because it finally marks the beginning of an upgrade that has been plagued by delays and complications.
While genesis participants will not be able to withdraw their coins until Eth2 reaches Phase 1.5 — which will merge the Ethereum mainnet with Eth2’s beacon chain and sharded environment — many hodlers are waiting for third parties to launch withdrawal-enabled staking services, despite the potential risk of exit scams.
Yearn Finance is going on an acquisition spree
Away from the major cryptocurrencies, Yearn Finance has had a very busy week. In a sign that consolidation is coming to the DeFi markets, the protocol has performed three high-profile mergers in as many days.
On Nov. 25, Yearn Finance announced a partnership with Pickle Finance to boost yield farming incentives. It’s also hoped that the move will compensate those affected when $20 million was lost in a recent Pickle exploit.
A day later, YFI was yearning for more. The protocol’s founder, Andre Cronje, announced details of yet another integration. This time, Yearn planned to join forces with Cream, a lending protocol similar to Compound and Aave.
But the acquisition spree was far from over. On Saturday, a new collaboration was also unveiled with the market coverage provider Cover.
Observers say Yearn is “scooping up developers and monopolizing talent,” but critics have claimed that none of these acquisitions have actually been approved through a community vote.
Facebook’s Libra to reportedly launch in January 2021 as USD stablecoin
After months of uncertainty and regulatory drama, Facebook’s embattled Libra project might be nearing launch at last… kind of.
Reports suggest that Libra will initially take the form of a U.S.-dollar-backed digital currency — and it could see the light of day as soon as January 2021.
According to the Financial Times, the Libra Association will eventually add more fiat currencies to the basket of assets that back Libra’s value.
The exact launch date is still unknown and would depend on the Libra Association receiving approval from regulators in Switzerland to operate as a payments service.
Winners and Losers
At the end of the week, Bitcoin is at $17,707.60, Ether at $541.01 and XRP at $0.62. The total market cap is at $530,787,776,807.
Among the biggest 100 cryptocurrencies, the top three altcoin gainers of the week are Stellar, Horizen and XRP. The top three altcoin losers of the week are Energy Web Token, NXM and Synthetix.
For more info on crypto prices, make sure to read Cointelegraph’s market analysis.
Most Memorable Quotations
“It’s quite common that market corrections don’t happen in a smooth manner. They are often vertical and painful. Staircase up, elevator down.”
Michaël van de Poppe, Cointelegraph analyst
“#Bitcoin has been compared negatively to a lot of things over the years, such as tulips, rat poison, Ponzi schemes, snake oil, etc., but the one that has hurt the most by far has been the comparison to the Segway.”
Tyler Winklevoss, Gemini co-founder and CEO
“The New York Times is planning to publish a negative story about Coinbase […] The story will likely imply that Black employees were discriminated against during this process; this is false.”
Coinbase
“Everyone should put 2% to 3% of their net worth in Bitcoin and look at it in five years, and it’s going to be a whole lot more.”
Mike Novogratz, Galaxy Digital founder and CEO
“WHAT CRAP — new to coinbase — and all my XRP trades went into limbo then finally showed up only AFTER the bottom fell out — causing me to lose a ton of money!!!”
Mike Palagi, Coinbase user
Prediction of the Week
Institutional money may propel Bitcoin to $250,000 in a year, says macro investor
Global Macro Investor CEO Raoul Pal has predicted that Bitcoin could hit $150,000 by November 2021 in the most conservative scenario — and could even surge to $250,000 owing to the large amount of institutional money currently flowing into the market.
According to Pal, most of Bitcoin’s additional supply is currently being absorbed by PayPal, Square and Grayscale. He believes that the resulting supply squeeze is the catalyst for Bitcoin’s latest surge.
“I’ve never seen a market with this supply and demand imbalance before,” Pal said, pointing out the macroeconomic factors that are playing in Bitcoin’s favor.
Pal went on to predict that additional monetary stimulus to sustain economies in the wake of COVID-19 will devalue fiat, and this, together with low interest rates, will propel Bitcoin’s price to new highs.
“It’s life-changing. No other asset has an upside of 5x, 10x, 20x in a short space of time,” he told Cointelegraph.
FUD of the Week
XRP price spikes to $0.90, crashes in seconds as Coinbase goes down
Altcoins weren’t immune from the Bitcoin bloodbath, and it was red across the board in the immediate aftermath of the nightmare before Thanksgiving.
But just before this correction happened, something crazy was happening with XRP.
The No. 3 cryptocurrency, not known for being a digital asset that delivers big gains, has had a blockbuster November. At the time of writing, it’s risen 154% since the month began — rallying from $0.24 to $0.61. Most of these gains were concentrated over a few days.
At one point this week, XRP hit highs of $0.76, but over on Coinbase, it briefly spiked to $0.90 before crashing back down by 30% in a matter of seconds. This was the highest price level since May 2018.
The rally was apparently driven by Coinbase users as the price of XRP did not see the same heights on other exchanges.
Some disgruntled traders flocked to Downtector and claimed they had lost “a ton of money” after their trades failed to process.
PayPal suspends user for crypto trading using PayPal’s own service
Well this is awkward. A PayPal user has claimed their account was restricted… because they were performing too many trades on the platform’s new crypto service.
On Reddit, the user in question claimed that PayPal had sent them a message, informing them that their account was being permanently limited “due to potential risk.” But “TheCoolDoc” claimed they had only made 10 crypto transactions over a week — purchasing during dips and selling when prices were high.
Bizarrely, PayPal had asked for an explanation for each transaction. Hours later, the user was told they would not be able to conduct any further business using the platform — and the funds in their account were placed on a 180-day hold.
Other Reddit users pointed out that the service is supposed to be more of a Bitcoin bank account than a trading account. Nonetheless, TheCoolDoc has vowed that they will “never buy a Satoshi of crypto” from PayPal again.
Chinese police seized crypto assets worth $4.2 billion today from PlusToken Ponzi
The PlusToken scandal has reportedly resulted in a titanic seizure of crypto assets by Chinese authorities — worth $4.2 billion at today’s prices.
Court rulings posted by The Block show authorities have seized 194,775 BTC and 883,083 ETH — alongside millions of Litecoin, Dogecoin and XRP.
Gains from the seized crypto assets will be forfeited to the national treasury. The precise details of how the assets will be dealt with and processed in accordance with national laws have not been fully spelled out.
The PlusToken scheme had presented itself as a South Korean crypto platform that could generate 8%–16% returns per month, drawing in 2 million members. It later turned out to be one of the industry’s biggest-ever exit scams.
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Ethereum 2.0 to boost DeFi but delayed launch may set the network back
The launch of Ethereum 2.0 is bound to support DeFi growth, but would it be capable of handling the pace at which DeFi is growing?
After dropping 27% over three days, Ether (ETH) price finally reached a bottom at $1,040 on Jan. 22.
The sharp correction liquidated $600 billion worth of future contracts but interestingly, Ether price rebounded to a new all-time high even as Bitcoin price continues to trade in a slight downtrend.
According to Cointelegraph, the increasing TVL and transaction volumes of the decentralized finance sector are behind Ether’s impressive surge.
To determine whether the recent pump reflects a potential local top, we’ll take a closer look at on-chain flows and derivatives data.
Exchange withdrawals point to whale accumulation
Increasing withdrawals from exchanges can be caused by multiple factors, including staking, yield farming, and buyers sending coins to cold storage. Usually, a steady flow of net deposits indicate a willingness to sell in the short-term. On the other hand, net withdrawals are generally related to periods of whale accumulation.
As the above chart shows, on Jan. 23, centralized exchanges recently reached their lowest Ether reserve levels since November 2018.
Although there is some discussion whether part of this Ether exodus is an internal transfer between Bitfinex cold wallets, there has been a clear net withdrawal trend over the past month. Despite these ‘rumors’, the data points towards accumulation.
This data also coincides with the DeFi’s total value locked (TVL) reaching a $26 billion all-time high and signals investors chose to take advantage of the lucrative yield opportunities that exist outside of centralized exchanges.
Futures were overbought
By measuring the expense gap between futures and the regular spot market, a trader can gauge the level of bullishness in the market.
The 3-month futures should usually trade with a 6% to 20% annualized premium (basis) versus regular spot exchanges. Whenever this indicator fades or turns negative, this is an alarming red flag. This situation is known as backwardation and indicates that the market is turning bearish.
On the other hand, a sustainable basis above 20% signals excessive leverage from buyers, creating the potential for massive liquidations and eventual market crashes.
The above chart shows that the premium peaked at 6.5% on Jan. 19, equal to a 38% annualized rate. This level is considered extremely overbought, as traders need an even higher price increase ahead of expiration to profit from it.
Overbought derivatives levels should be considered a yellow flag, although maintaining them for short periods is normal. Traders might momentarily exceed their regular leverage during the rally and later purchase the underlying asset (Ether) to adjust the risk.
One way or another, the market adjusted itself during the Ether price crash, and the futures premium currently stands at a healthy 4.5% level, or 28% annualized.
Spot volume remains strong and traders bought the dip
In addition to monitoring futures contracts, profitable traders also track volume in the spot market. Typically, low volumes indicate a lack of confidence. Therefore significant price increases should be accompanied by robust trading activity.
Over the past week, Ether has averaged $6.1 billion in daily volume, and while this figure is far from the $12.3 billion all-time high seen on Jan. 11, it is still 240% higher than December’s. Therefore, the activity supporting the recent $1,477 all-time high is a positive indicator.
Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can obtain a clearer view of whether professional traders are leaning bullish or bearish.
With this said, there are occasional discrepancies in the methodologies between different exchanges so viewers should monitor changes instead of absolute figures.
The top traders index at Binance and Huobi have held roughly the same Ether position over the past couple of days. Huobi’s average over the past 30 days has averaged a 0.83 long-to-short ratio while at Binance traders held a 0.94 average. The current reading at 0.85 indicates a slight negative sentiment.
OKEx stands out as the top traders long-to-short ratio peaked at 2.0, strongly favoring longs in the early hours of Jan. 22, but it decreased until Jan. 24 and finally bottomed at 1.05. The strong net selling trend was reverted today as traders bought the dip and the indicator flipped to 1.17 in favor of longs.
One should keep in mind that arbitrage desks and market makers encompass a vast portion of the exchanges’ top traders metric. The unusually high futures premium would incentivize those clients to create short positions in futures contracts while simultaneously buying Ether spot positions.
Considering Ether’s on-chain data indicating whales hoarding, along with the healthy futures contracts premium, the market structure seems reliable.
The fact that top traders at OKEx also bought today’s dip is further indication that the rally should see continuation.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Several traders believe that the price of Ether (ETH) could pull back after it achieved a new all-time high on Jan. 25, gaining nearly 100% in January. Ether has outperformed Bitcoin (BTC) so far this year, buoyed by the growing number of users on Ethereum.
Primarily due to the growing demand for DeFi, the Ethereum network has seen an increase in user activity and transaction volume.
This has also led the popularity of the term “Ethereum” to increase significantly on Google Trends, breaking its previous high from January 2018.
Ether pulls back against Bitcoin as BTC begins to rally
In the past week, the price of Ether has seen some inverse correlation with Bitcoin. The ETH/BTC pair broke out against Bitcoin, hitting the highest levels since September 2019.
But oftentimes, when the price of Bitcoin rose, ETH pulled back, and vice versa. When Bitcoin rallied, altcoins also performed poorly, which suggests that profits are flowing into and out of Bitcoin based on market sentiment.
If the market is more confident and is attracted to high-risk bets, then altcoins tend to rally while Bitcoin consolidates.
Hence, when the market becomes focused on Bitcoin once again, altcoins and Ether typically consolidate, as BTC sees an explosive upside movement.
On Jan. 25, Bitcoin broke out of its four-day range, rising by more than 7% on the day. In the same period, the ETH/BTC pair dropped by around 4.9%.
Loma, a cryptocurrency trader, said that the price action of ETH suggests a pullback is likely to flush late buyers. He said:
“Something about this $ETH PA tells me we’re going to rinse some ATH breakout longs over the next few days.”
The trader predicted the drop as ETH surpassed $1,470, and the price of ETH has dropped by more than 5% since.
Record options expiry coming
A variable that could affect the near-term price trend of Ether is a record options expiry.
Around $400 million worth of options is set to expire on Jan. 29. Considering that many traders are likely to adjust their positions before the expiry, ETH could see a big spike in volatility.
The expiry may play into ETH’s favor or could place selling pressure on it. If the price of ETH drops steeply in the coming days and pushes it toward the max pain price at $800, then it could amplify the downtrend of ETH.
The term “max pain” in options refers to the price point where the highest number of traders would face the most losses.
ETH is highly unlikely to fall by nearly 50% to $800 by Jan. 29, especially considering its momentum. But due to the unprecedented demand for ETH and the cryptocurrency’s high volatility, a minor pullback before the expiry could have a negative impact on the short-term price cycle of ETH.
The fundamentals for ETH still remain strong, however, as analysts at Intotheblock said. They wrote:
“The price of #Ethereum broke a new ATH today of $1,475. On Friday, we wrote about a few of the reasons why we are bullish on $ETH including: – Increasing supply scarcity – DeFi exponential growth throughout 2020 – Network adoption and growth.”
The price of Ether (ETH), the native cryptocurrency of the Ethereum blockchain network, achieved a new all-time high on Jan. 25.
At the same time, technical analysis shows that the ETH/BTC pair is breaking out of its multi-year downtrend hitting the highest levels since September 2019, which should be great news for altcoins in general.
The higher highs come less than a week after ETH/USD finally broke its all-time high, surpassing $1,400 for the first time in three years.
Community sentiment is extremely positive
The sentiment around Ethereum has become significantly positive after ETH managed to break its previous record price set in January 2018.
Anthony Sassano, a long-time Ethereum investor and the head of marketing at Set Protocol, said that the rally is representative of the groundwork accomplished by developers in the Ethereum ecosystem throughout the past three years.
Throughout the 2019 bear cycle, ETH was hit the hardest among other large-cap cryptocurrencies. It consistently underperformed against BTC, struggling to gain upside momentum.
But the newfound momentum as a result of the rising demand for DeFi has allowed ETH to outperform Bitcoin in the recent bull cycle. Sassano said:
“This may be hard to believe but the main reason I get so giddy about $ETH going up in price is not the profits. It’s the fact that so many dedicated Ethereum community members spent 3 long years building during a brutal bear market. And now their work is being rewarded.”
On-chain data also demonstrate a similar trend alongside numerous other indicators that suggest the ETH price rally may only be beginning.
For example, according to researchers at Santiment, the development activity on Ethereum followed a similar trajectory as the price of ETH.
This trend shows that the ongoing ETH rally is led by strong fundamentals and high developer activity, which makes it more sustainable. The researchers said:
“Both #Bitcoin and #Ethereum have made respective runs of dominance over one another here in January. We’ve just noted that each projects’ #Github development activity rate is fluctuating closely to the respective price of $BTC and $ETH.”
What happens next?
Following the rally, analysts say that the momentum of ETH and the Ethereum network’s network effect shows that it is a blue-chip asset in the cryptocurrency market.
Alex Saunders, a cryptocurrency investor, said that “most agree” about Ethereum’s qualities as a blue-chip asset. He said:
“2 year ago $ETH fell 90% in 9 months & hit $80. Most had written it off. Yet here we are at new ATH $1500, it’s network effects are undeniable & most agree it’s blue chip. Love it.”
In the foreseeable future, there are two scenarios for ETH. The price of ETH could rally after the CME futures listing in February, due to large institutional capital inflows.
On the other hand, ETH could also see a pullback after breaking its all-time high, as the momentum of the ETH/BTC pair cools down. For example, the pair pulled back on Jan. 21 shortly after Ether broke its all-time high in the USD pair.
There is a case to be made that the Bitcoin dominance index begins to rebound after a two-month-long altcoin season, which could lead ETH to see a consolidation phase in the short term.
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