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Ethereum Price Preview: March 22 – March 28

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Last week, we took a look at Ethereum’s punitively high gas costs and the increasing proportion of whale-controlled ETH supply, as well as the skyrocketing NFT market. For this week’s piece, we’ll follow up on those circumstances and examine regulatory factors that may also impact price.

India to Ban Crypto?

The Indian government aims to propose a law banning the ownership of all cryptocurrencies due to lack of crypto regulation. The law would see anyone holding or trading crypto fined, and their assets nominally seized. In 2019, a government panel recommended a ten-year prison sentence for anyone mining or trading in crypto.

While cryptocurrency cannot be physically seized unless the government acquires the private keys, criminalizing all aspects of the crypto industry for such a huge part of the global market could be devastating.

Approximately one in five people are Indian, and the tech-savvy nature of the nation’s 1.36 billion people along with underdeveloped banking infrastructure in rural areas has created the ideal conditions for a thriving crypto market. Registrations at some Indian crypto exchanges rose 30-fold this year, despite concerns of an impending ban.

There are an estimated 8 million crypto investors in India with hundreds of millions of investments, and the future innovation that may be lost from Indian blockchain companies should crypto be banned cannot be quantified.

If the new bill becomes law, investors will have 6 months to liquidate assets before suffering penalties.

Proof of Stake May Not Come This Year

ConsenSys company Status posted a tweet followed by a correction last week commenting on the timeline of the Proof of Stake merge the market is waiting for. Status initially stated that PoS may be scheduled in the Shanghai update due October 2021.

The tweet was met with dismay by some on social media, with several people stating that they had expected PoS to happen sooner than October. However, it seems that Status spoke too soon, and PoS is likely due even later still.

Apparently, if Shanghai includes the merge that introduces PoS to Ethereum, the fork will likely be delayed beyond October 2021 (date unknown), and Shanghai will only go ahead in October if it does not include the merge.

The timeline comes as a surprise to many who were expecting the Proof of Stake version of Ethereum to go live some time in Q3 2021. However, developers are clearly working on multiple major solutions in the coming months, with the London hard fork introducing the EIP 1559 protocol due in July followed by the Shanghai fork with further updates towards the end of the year.

Ethereum will soon be able to send batch transactions, a feature which could significantly declutter the network.

Eth2 team @lightclients on Twitter stated “Generally, the rule of thumb is “one signature per action”. This is a simplistic way to view things. A signature is created over the hash of a transaction, why not hash N transactions? It turns out this is possible with EIP-3074.”

The new feature would add more complex and efficient smart contracts to the new Ethereum upgrade. In the meantime, innovation that does not rely on hard forks has been making major progress in the background.

Ethereum users can now shield and privately send ETH thanks to private layer ZK Rollup technology.

NFT and DeFi Solutions Incoming

Immutable CTO Alex Connolly outlined Layer 2 NFT solutions the company is working on, saying “We’re close to releasing the first Layer 2 for NFTs on Ethereum, Immutable X, which will enable Ethereum NFTs to reach mainstream scale.”

Connolly highlighted the issues holding Ethereum back from expanding as a global NFT platform:

  • Scaling (3-5 NFT trades/second)
  • UX (transactions take minutes to confirm)
  • Cost (fees for NFT trades are currently $30+)
  • Liquidity (most NFTs are never traded)
  • Developer Experience (NFT projects spend more time on technical challenges rather than improving their projects)
  • Environmental Impact (a barrier to mainstream adoption) 

On Immutable X, the new L2 solution, users pay zero gas for NFT trades. Users can choose Validium or ZK-rollups for the gas cost reduction. The new solution is scheduled to launch this month and could disrupt the NFT space in a major way.

In related news, the 1inch exchange launched v3 of its DEX service, lowering gas costs and making the exchange cheaper to use than competitors Uniswap and SushiSwap.

1inch states that assembly code optimization is behind the gas cost reduction.

Source: 1inch

“Previously, swaps on Uniswap v2 were cheaper than on 1inch, but now the opposite is true. Swapping ETH for DAI on 1inch, for example, requires 10.3% less gas than the same trade on Uniswap and 4.9% less than on 0x.”

V2 will still be supported for the immediate future, giving users time to get familiar with the newest version.

Price Fundamentals

The amount of Ethereum sitting on exchange wallets has hit a two-year low, indicating users aim to hold their ETH rather than selling it.

Daily volume for ETH hit $25.4 billion yesterday and price dropped over 3% as some profit-taking was seen throughout the market, but overall, investors appear to be bullish on Ethereum. 

Miners are still earning four times more with Ethereum than they are with Bitcoin, creating healthy market incentives to mint new ETH and validate transactions. Network fees are now at $8 billion annualized compared gto $2.3 for BTC.

There are currently 3.5 million ETH staked in Eth2. While news such as the potential ban in India is worth monitoring for the impact it could have on short-term Ethereum prices, overall the near-to-mid-term looks very healthy with surging demand for NFTs, DeFi services and exposure to ETH itself.

Media Roundup

The Security Token Summit will take place on March 25 featuring speakers from ConsenSys, Fundstrat Global Advisors, ParaFi Capital, and the U.S. congress among others.

Draper Goren Holm, a blockchain venture company co-founded by investor Tim Draper, produced the event to focus on themes such as custody, compliance, regulation, investing, marketing, tokenization, standards, issuance, and real estate.

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Conor Maloney
Conor Maloney Analyst