Crypto markets show weakness

Bitcoin and the broader crypto market took a tumble to finish lower in the last seven days, after hovering at highs earlier in the week that were last seen in June 2022. Contributing to the pullback were concerns around macroeconomic and crypto-industry uncertainties.

As at 23 April 2023, bitcoin was trading at US$27,742. Ethereum underperformed bitcoin over the week and was down -10.65% vs bitcoin’s -8.64% loss. Bitcoin’s market capitalisation was US$537 billion, with the total crypto market cap pulling back to US$1.17 trillion. Bitcoin’s market dominance sat at 45.7%.

Source: CoinMarketCap. As at 23 April 2023. 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

Shapella upgrade goes live

On 12 April, the much-awaited Shapella (aka Shanghai and Capella) upgrade on the Ethereum mainnet went live successfully. As part of ‘The Merge’ that took place last year, a switch of consensus mechanism from proof-of-work to proof-of-stake required validators to lock up their ETH, as well as any rewards earned, to help secure the blockchain until a later update.

The upgrade activated new features that the community had been anticipating, such as allowing validators to withdraw ETH that had been staked from December 2020 and reduced gas fees for developers. About 16 million tokens, or 14% of all ETH, with a current value of approximately US$26 billion, are currently staked.

Prior to the upgrade, there was a fear that the potential unlocking of over 16 million ETH would lead to selling pressure on the asset. However, the price of ETH reacted positively after the upgrade.¹

Vote favours new crypto licensing regime in Europe

Following a vote of 517 in favour of a new crypto licensing regime, with 38 voting against and 18 abstaining, Markets in Crypto Assets (MiCA) made the EU the first major jurisdiction in the world to introduce a comprehensive crypto law. The rules cover supervision, consumer protection and environmental safeguards in relation to crypto-assets, including cryptocurrencies, as well as introducing safeguards against market manipulation and financial crime.

In a bid to halt money laundering, a separate law known as the Transfer of Funds regulation was also approved, with 529 voting in favour of and 29 against the regulation, with 14 abstaining. The law will require crypto operators to identify their customers.

In a statement released by the European Parliament, Stefan Berger, the lawmaker who led negotiations on the law, said the rules put the EU “at the forefront of the token economy.” He also said, “[t]he European crypto-asset industry has regulatory clarity that does not exist in countries like the US. The sector that was damaged by the FTX collapse can regain trust.”²

CRYP company spotlight

Riot Platforms falls from YTD highs

Riot Platforms, Inc., the largest weighting in CRYP at 13.8% as at 22 April, has fallen ~26% from its yearly high on 18 April, but is still up over ~212% year-to-date (though it’s important to remember past performance isn’t indicative of future performance). The drop in price could be attributed to the recent pullback in the price of bitcoin.

Riot Platforms, Inc. is currently one of the largest bitcoin mining companies in the world. The company, along with the rest of the bitcoin mining sector, has tended to be highly correlated with the underlying price of bitcoin, hence the reason its shares have been up sharply this year.³

On-chain metrics

Bitcoin (BTC): Percent of Supply Last Active 1+ Years Ago

This metric shows the percent of circulating supply that has not moved in at least 1 year.

According to data from Glassnode, as at 22 April, over 67% of the circulating supply had not moved in at least one year, which is slightly off the 68% all-time high it hit in March this year, indicating investors may still be in a “HODL’ing” mentality following the recent run-up in prices.

Bitcoin (BTC): Relative Unrealised Profit

This metric shows the total profit in US dollars of all coins in existence whose price at realisation time was lower than the current price normalised by the market cap.

Based on data from Glassnode, as at 18 April, 47% of supply was in profit at a level not seen since May 2022. With the recent drawdown, the level has recently fallen to around 44%.

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

Altcoin news

The number one stablecoin, Tether (USDT), which is pegged to the US dollar, has continued to grow in stablecoin dominance, in addition to it approaching its all-time high. The circulating market valuation was nearing US$81 billion as at 17 April, which is just 1.5% below its all-time high of US$82.29 billion from around a year ago. It has grown 20% year-to-date. Helping fuel the growth of USDT has been the crackdown in the US on other stablecoins such as USDC and BUSD, as well as the banking crisis.⁴

1. https://news.bitcoin.com/ethereums-shapella-upgrade-to-enable-staking-withdrawals-set-to-go-live-on-april-12/
2. https://www.europarl.europa.eu/news/en/press-room/20230414IPR80133/crypto-assets-green-light-to-new-rules-for-tracing-transfers-in-the-eu3.https://cryptonews.net/news/finance/20851309/4.https://cointelegraph.com/news/tether-market-cap-eyes-record-high-after-regaining-65-stablecoin-dominance

Past performance is not indicative of future performance.

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.