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Crypto Follows Stock Market (Again) as ETH Phase 0 Gets Major Boost


Ethereum Price: $132.17
Ethereum Price (BTC): 0.020571BTC
ETH Locked in DeFi: 2.81M (2.55% of circulating supply)
Market Cap: $14.58B
ETH Network Dominance*: 60.95%
7 Day Candle**: $140.24 / $142.77 / $123.81 / $132.17

The outbreak of Covid-19 has been devastating for markets across the board and cryptocurrencies have been no exception. ETH and BTC are among the worst hit so far with eye-watering losses of nearly 50%.

Credit @lawmaster

The one major winner has been the US Dollar, with the DXY moving to multi-year highs before pulling back slightly on the news of a $2 trillion stimulus package last week.

For Bitcoin, things get a little hairier. The blockchain’s difficulty level dropped by nearly 16% last week as the falling price of Bitcoin forced miners out of the market. With the Bitcoin block reward halving in May, the security of the chain will only get weaker as more miners leave.

In reality, the exit of miners is unlikely to be significant enough to have any material impact on the viability of the network. Despite last week’s drop, the current mining hash power is the same as what it was at the start of the year and Bitcoin’s automatic difficulty adjustment helps to mitigate any risks associated with miners leaving.

The more troubling issue is that Bitcoin is failing to convince the wider public that it is a suitable hedge against the inflationary money supply of fiat currencies. With $2.2 trillion now entering the US economy and potentially trillions more on the way, dollar holdings of the average individual are being diluted at a scale never seen before, yet this has done little to move Bitcoin’s valuation upwards.

CEO of California-based hedge fund, Pantera Capital, recently Tweeted “Bitcoin was born in a financial crisis. It will come of age in this one“, but with the asset still so tightly correlated to the current stock market, it’s hard to see how this might happen. Whether it’s due to apathy, a lack of trust or a lack of knowledge, the price rallies that many Bitcoiners had predicted would come with the next financial crash are far from being realized.

Fortunately, for Ethereum, we can forget about US Dollar valuations for the most part. The blockchain has an enormous breadth of use-cases beyond the single-purpose “fiat money hedge” of Bitcoin.

Last week, Ethereum’s largest financial application, MakerDAO, made a full (almost) recovery from the fall-out of Black Thursday. While the DAI stablecoin is still trading 2% above its US dollar peg and the Dai Savings Rate is still temporarily halted at 0.00%, the system has indeed survived the most dramatic downturn in Ethereum’s history.

In more positive news, the first phase of Ethereum’s “version 2.0” is expected to launch on test net at some point in April. The test net is the final stage before going live on Ethereum and, if there are no major bugs found after a set period of time (likely months), we can expect the first phase of ETH 2.0 (“Phase 0”) to launch swiftly after.

Phase 0 marks a significant step in the development of Ethereum, introducing the deposit contract for users to stake and earn ETH as part of the network’s move to a new consensus algorithm – one that is far less energy intensive.

Other projects that have recently made significant ground include tBTC’s “trust minimized” Bitcoin-Ethereum bridge (expected to launch on main net in the coming weeks) and the ZK² Rollup from Aztec Protocol that is targeting high-throughput private transactions on Ethereum.

Nick, Owner

* calculated as: (ETH Market Cap / Ethereum Network Market Cap)
** open / high / low / close

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