Last week saw a series of major announcements in the crypto markets, including multiple regulatory developments. Let’s take a look at the fundamentals underlying Ethereum’s price action, and what to expect in the coming week.
ETH2 Staking in Full Swing
With the launch of the ETH2 beacon chain last week, Ethereum has seen many interesting developments. Coinbase announced plans on November 30 to allow ETH2 staking for users, stating that the exchange “fully intends to support ETH 2 trading and staking.”
Users will be able to convert ETH to “ETH2” and earn staking rewards for validating transactions on the network. The staking features will launch in early 2021 with further details to be announced soon. Kraken made a similar announcement on November 24 and Binance announced even more advanced plans.
With Binance, the lock-up period for staking remains unknown and will depend on the progress made towards rolling ETH1 into the ETH2 chain. While the period is being determined, users will be paid in “BETH” with a 1:1 ratio to ETH beginning in January 2021 and users will be able to sell BETH for cash or trade with other cryptocurrencies, offering a real-life reward for ETH2 staking almost immediately.
ETH2 staking is close to crossing $700 million with over 1 million ETH already being staked for network validation (about 1% of circulating supply), marking a major milestone in the adoption of the network upgrade and the eventual transition from Proof of Work to Proof of Stake.
ETH price is now testing $600, with some analysts forecasting an imminent breakthrough to $700. If ETH can move past resistance at $600, little resistance stands in its way en route to $700. On the downside, there is immense support for ETH at multiple price points all the way down from $598 to $518 thanks to the heavy trading that has taken place in recent weeks.
There are now more Ethereum nodes than Bitcoin nodes for the first time, marking major progress in Ethereum adoption.
With the markets embracing the new Ethereum update and mainstream adoption on the rise, the fundamentals behind the latest ETH bull run are looking healthy and many analysts forecast further upward price momentum.
Crypto Regulations May Be Tightening Up
US congresswoman Rashida Tlaib proposed a bill last week to ban any stablecoins not approved by the US federal government and relevant banking authorities. The law would essentially make all stablecoins illegal barring central bank digital assets and the bill was likely written in light of Facebook’s Diem cryptocurrency announcement.
Tlaib claims the Stable Tethering and Bank Licencing Enforcement (STABLE) Act aims to protect users from scams and risks associated with stablecoins. “Getting ahead of the curve on preventing cryptocurrency providers from repeating the crimes against low and moderate income residents of color that traditional big banks have is and has been critically important,” says Tlaib.
The move has been widely condemned by the crypto community and it is unclear how much congressional support the bill has currently.
The SEC also announced last week that its FinHub office would become a standalone entity dedicated to regulating cryptocurrencies and blockchain.
The Strategic Hub for Innovation and Financial Technology, AKA FinHub, was established in 2018. With its new status as a standalone office, FinHub will work closely with all relevant SEC departments and offices to advise the SEC on how to handle crypto regulation.
While the crypto space is typically divided on regulatory issues, there is no question that the announcement will be welcomed by institutional investors. A study released by Evertas in 2020 indicated that a majority of institutional investors currently interested in Bitcoin are more likely to invest if more crypto regulations are introduced.
Crypto Adoption Strengthens Market Fundamentals
The conditions underlying the crypto market continued to strengthen last week. PayPal reported that 1 in 5 app users have now traded Bitcoin on the platform, with 65% saying they would use it to pay for goods or services.
The activity likely contributed to a spike in PayPal stock, as the world’s largest payment system has become more valuable with the successful integration of Bitcoin. While many crypto users in the space are uninterested in a centralized option like PayPal, there is no question that the integration is increasing Bitcoin adoption and awareness worldwide.
The S&P Dow Jones Indices will launch a cryptocurrency index in 2021, making S&P Global Inc the latest major financial company to invest in or integrate cryptocurrencies. New York digital asset firm Lukka will provide data on over 550 cryptocurrencies, allowing S&P clients to create custom indexes and benchmarking tools. S&P believes the move should make it easier for investors to enter the crypto space.
“With digital assets such as cryptocurrencies becoming a rapidly emerging asset class, the time is right for independent, reliable and user-friendly benchmarks,” said S&P Dow Jones Indices global head of innovation and strategy Peter Roffman.
NFT adoption is also making progress, with Crypto Kitties coming back on the public’s radar following an NFT loan arrangement.
A Crypto Kitty was used as collateral for a $25,000 loan on NFTi, with kitties overtaking Decentraland for highest NFT loan collateral.
MoneyDance Virtual Hackathon comes to a close on December 09 after beginning in September. The event offers $37,000 in prize money for various competitions, and markets itself as a demo and a summit as well as a hackathon. Attendees include SFX CEO Sam Bankman-Fried and Aave CEO Stani Kulechov.
Prizes are offered by Avalanche, Polyient Games, Biconomy, and Quantstamp, and the event boasts business and technical programming led by experts from both decentralized and traditional industries, with workshops for engineering, marketing, community development.
Paris Blockchain Week Summit takes place on December 09 – 10, bringing 1,700 entrepreneurs and investors together to discuss blockchain and cryptocurrency developments.
Speakers include heavy hitters from the industry including Binance CEO Changpeng Zhao, Messari CEO Ryan Selkis, and Pantera Capital CEO Dan Morehead. The event organizers have stated their aim to make France the first G20 nation to create a hospitable and business-friendly atmosphere for blockchain and crypto.