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Ethereum's inflation solution
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Ethereum in a death spiral- how the proposed L1 sequencer could fix things
Key points:
Ethereum is slightly inflationary now, and fee revenue is down 90% from March.
A proposed change could see 10 million transactions per second in ten years on Ethereum.
News - According to some of the more dramatic market participants, the Ethereum blockchain has been dying. The token prices were sliding and the L1 is slightly inflationary now as L2s were preferred. The new users, transaction fees, and the resulting fee revenue are increasingly going to L2s. The Ethereum revenue is at $200k a day, or $73 million for a $283 billion market cap asset.
It is not that the L2s are stealing transactions from Ethereum, but that these transactions wouldn’t be possible on the base layer. People see the L2 scaling solutions, such as Arbitrum and Base, as competitors to Ethereum and not as extensions of Ethereum.
Proposed solution- Raising the L2 fees or increasing the Ethereum ecosystem interoperability has multiple issues. They include driving away users due to heightened fees or the differing block times of the different chains.
Ethereum Foundation researcher Justin Drake believes that a few corrections to the proposed ETH roadmap, which is being criticized, could lead to L2 interoperability and composability.
A neutral, decentralized, shared sequencer run by Ethereum validators would enable synchronous transactions between the different rollups. Ethereum researchers have been discussing this idea, but it is not yet part of the official roadmap.
If this idea were embraced, it could see a genuine Ethereum ecosystem evolve, instead of several siloed L2s. This is how Drake sees a 10 million TPS on Ethereum happening.
AI tokens FET, ICP avoid market-wide price drop as Apple announces “Apple Intelligence”
Key points:
The crypto AI sector has trended bullishly this week, outperforming Bitcoin.
The Apple Intelligence announcement has fortified crypto AI tokens’ sentiment.
News - On Monday, technology giant Apple (AAPL) announced that Apple Intelligence will be coming to the iPad, iPhone, and Mac starting next month. This saw crypto tokens in the AI sector such as the Artificial Intelligence Alliance Project’s FET and Internet Computer' Protocol’s ICP register gains worth 11% and 6.2% on the day.
The trend since then - When the news came out, Bitcoin and Ethereum, the traditional crypto market leaders, were languishing under bearish pressure after the Trump-Harris debate failed to even mention crypto. Since then, the sentiment has shifted, and both assets were up 5.64% and 2.21%. Meanwhile, FET and ICP were up by 15.52% and 10.13% since Tuesday.
AI capabilities to boost crypto demand - The “It’s Glowtime” event on Monday explored some of the AI capabilities that would be brought to the smartphone, such as writing tools and advanced photo and video editing facilities.
While the event did not mention crypto, the mention of artificial intelligence has bolstered the confidence of crypto market participants in the AI sector. Pranav Maheshwari, an engineer at the Graph Protocol, opined in a post on X that the Apple Intelligence buzz would soon turn toward crypto. “People will want blockchain and crypto payments baked into their phones.”
The negative funding rate behind Bitcoin hints at bearish market expectations
Key points:
The US CPI data showed an aggressive rate cut next week is unlikely.
The market was quick to recover since then, but bullish expectations were still weak.
News - Bitcoin saw a 3.63% correction on Wednesday the 11th of September after the release of the US consumer inflation data, but was quick to recover and was trading at the $58k level by the end of the day. The annual inflation rate was at 2.5%, the lowest it has been since February 2021.
The S&P 500 also saw a setback on the same day but began to recover a few hours later. Macroeconomic data such as the CPI announcement is likely to impact markets, explaining the short-term correlation between Bitcoin and the S&P 500.
Expectations for the next rate cut- While the consumer price index (CPI) increased 0.2% for the month, in line with forecasts, the core CPI which excludes volatile food and energy prices was up 0.3% for the month. This meant that the Federal Reserve was unlikely to aggressively cut the Federal target rate, and would opt for the 25 bps cut instead. This caused the minor market correction.
Bitcoin speculators lean bearish - The Bitcoin funding rate has been negative for the most part since the 7th of September. This meant that more speculators were going short than long, highlighting the bearish sentiment in the market. The options market also showed a slight skew toward put options. The Bitcoin 25% delta skew stands at 4% to show put options were trading at a slight premium.
UK Parliament proposes legislation deeming crypto, NFTs as personal property
Key points:
The proposed property bill would recognize digital holdings including crypto and NFTs.
Designed to protect owners and companies against fraud and scams, it could attract new crypto companies to the country.
News - The Law Commission of the United Kingdom introduced a property bill on the 11th of September that would recognize digital holdings legally. This would be the first time under English and Welsh law that digital assets such as crypto, non-fungible tokens (NFTs), and carbon credits would be definitively included under property law.
The law must evolve alongside technologies - Justice Minister Heidi Alexander stated that “world-leading” legal services form a vital part of the economy, helping to drive forward its growth.
The new bill is designed to protect owners and companies against fraud and scams. It would also assist judges in complex cases involving disputed digital holdings. This could attract new crypto companies to operate from Britain.
The report recognized that, under the property law, digital assets are neither things in possession nor things in action. It also revealed that the Law Commission of the UK has introduced a new legal category for digital assets. This category’s description meant that similar to physical property, assets can be legally owned or transferred.
More stories from the crypto ecosystem
Did you know?
According to a White House report, global mining of the largest cryptocurrencies is estimated to create 110-170 million metric tons of carbon dioxide emissions per year, nearly twice the United Kingdom’s emissions in 2022.
India led the global crypto adoption rankings for a second year running, according to a report from the blockchain data company Chainalysis, with seven of the top 20 countries being central or Southeast Asian countries such as Vietnam, Indonesia, and the Philippines.
Vitalik Buterin donated 50 trillion Shiba Inu tokens to an Indian Covid relief fund on the 24th of April 2021, worth close to $1 billion at the time, and SHIB prices fell by 43.5% three days later but were quick to recover.
Top 3 coins of the day
Sui (SUI)
Key points:
The daily market structure of SUI was about to be flipped bullishly.
The 30% move higher in the past week was accompanied by increased buying volume.
What you should know - Sui was on the verge of a bullish market structure break after being rebuffed twice from the $1.02 resistance zone over the past month. The recent move higher saw heightened trading volume, and the OBV surged past the high from the 24th of August as a result. A daily session close above the recent local high at $1.05 would likely see SUI move higher toward the Fibonacci extension level at $1.27. There is the possibility of a range formation and SUI facing rejection once again, but the buying volume in the past two weeks suggested that a breakout past $1.05 would be the more likely outcome.
Binance Coin (BNB)
Key points:
BNB has been range-bound for nearly ten weeks now.
The breach of the mid-range resistance was encouraging, but the volume indicators were bearish.
What you should know - BNB has been trading within a range since early July. This range extended from $465.2 to $604, with the mid-range mark at $534.6. On Thursday the 12th of September, BNB burst out past the mid-range resistance, but the trading volume and momentum were not bullish. The Chaikin Money Flow showed a -0.1 reading on the daily chart to indicate sizeable capital flow out of the market. Meanwhile, the Awesome Oscillator remained below the neutral zero level to signal bearish momentum was still prevalent. The negative signals from the volume indicators meant that a sustained move toward the range highs was unlikely in the short term, but could materialize once demand begins to increase.
Toncoin (TON)
Key points:
The bearish structure and slightly elevated sell volume meant TON was likely to suffer.
A Bitcoin resurgence could give the impetus to break the local lower high.
What you should know - Toncoin has a bearish market structure on the daily timeframe. A daily session close above the recent lower high at $6.1 would flip the structure bullishly, and the next target for TON would be the resistance level at $6.95. However, this outcome was not likely in the coming days. The OBV continued to trend slowly downward over the past ten days to reflect increased selling pressure. The RSI was at 47.5 to show momentum was neutral. A Bitcoin resurgence above $60k could help the bullish case of TON, otherwise, a trend reversal appeared unlikely. This could see the $4.72 support level revisited.
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