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EU crypto crackdown
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Ethereum staking skyrockets to record $65B, locking in 25% of circulating supply
Nearly 25% of all circulating ETH is now staked, reaching a record high of $65.45 billion.
Ethereum's liquid supply has declined, suggesting a shift from trading to long-term holding and staking.
News - Ethereum staking is getting more attention than ever, with the total supply locked in the deposit contract reaching a record high. Nearly a quarter of all circulating ETH, or 29.39 million coins, are now staked, amounting to $65.45 billion and solidifying Ethereum's position as a leader in the proof-of-stake (PoS) world.
What is the reason behind this surge? This surge comes courtesy of the Shapella Upgrade last April, which finally allowed the withdrawal of staked ETH and boosted users' confidence. Since then, staked supply has jumped an impressive 55%, even defying ETH's price dip in January. Interestingly, holders seem to be prioritizing long-term stability over short-term trading, as liquid ETH supply has steadily decreased over the past two years.
Is this a good news? While the rise in staking is positive, it does come with a trade-off: falling rewards. As more ETH gets locked, annualized average returns have dropped from 5% to 3.54% in just a month. This is expected behavior in PoS systems, but one wonders if users will stay committed as yields continue to shrink.
Despite the drop, the sheer volume of ETH staked shows a clear shift in sentiment. Holders increasingly view Ethereum as a long-term investment, seeking the security and stable returns provided by staking over the uncertainty of market trading.
EU crypto crackdown: Draft rules favor local firms, ban non-EU solicitation
EU proposes prioritizing local crypto firms through a solicitation ban on non-EU entities.
The second consultation paper clarifies that crypto assets falling outside other EU legal frameworks are likely subject to MiCA.
News - The European Securities and Markets Authority (ESMA) has drawn clear battle lines in the crypto realm with two new draft guidelines. These documents tackle key questions of competition and asset coverage under the upcoming Markets in Crypto-Assets Regulation (MiCA).
Protecting home turf - The first paper champions EU crypto service providers (CASPs), proposing a de facto ban on solicitation by non-EU firms. Advertisements, sponsorships, and even influencer endorsements are all in the crosshairs, aiming to shield both investors and local CASPs from potential unfair competition. The rationale lies in ensuring investors' full MiCA-backed protections and preventing a race to the bottom in regulatory standards.
Tightening the net - ESMA casts a wide net when it comes to defining "solicitation." Any individual or entity acting on behalf of a non-EU firm falls under the purview, even if contractual ties are absent. The only escape hatch offered is for cases where a client reaches out to a non-EU firm, showing clear and independent initiative.
Clarifying the scope - The second paper sheds light on which crypto assets come under MiCA's umbrella. While assets not already covered by existing financial instrument regulations will likely be subject to the framework, there's no automatic inclusion. Notably, non-fungible tokens (NFTs) fall outside the scope, providing some much-needed certainty for the market.
Whales drive Stablecoin surge, over 50% of supply controlled by large holders
Stablecoin market cap grew 7.8% in 4 months, indicating renewed interest in crypto.
Whales holding over $5 million control 50% of all stablecoins, suggesting institutional buying.
News - The past four months have witnessed a remarkable revival in the stablecoin sector, fueling optimism for a broader crypto market recovery.
Whales hoard Stablecoins - On-chain data from Santiment revealed a 7.8% growth in the global stablecoin market cap, reaching $123.42 billion by January 2024. Notably, this coincides with a significant spike in whale activity, with wallets holding over $5 million now controlling more than 50% of all stablecoins. This suggests institutional investors are actively buying the dip, particularly during Bitcoin's recent price decline.
What does Stablecoin supply signal? Increased stablecoin supply is often seen as a precursor to more capital entering the crypto market. Traditional investors looking to participate in crypto trades typically use stablecoins as their entry and exit point. This rising supply, coupled with whale involvement, indicates renewed confidence in the market's prospects.
On a side note, CryptoQuant analysis highlighted a strong correlation between Tether (USDT), the world's largest stablecoin, and Bitcoin's price. This suggests that USDT's circulating supply directly impacts Bitcoin's movement. The recent surge in both could signal a sustained bull run for the entire crypto market.
Data further revealed a rise in stablecoin exchange reserves, reaching their highest level since May 2020.
Outflows from Grayscale have slowed and BlackRock’s Bitcoin ETF sales have also decelerated.
Analysts said last week that they expected the profit-taking in GBTC to slow, which would also limit the fall in Bitcoin's prices.
News - JPMorgan analysts, led by Kenneth Worthington, have observed a deceleration in outflows for Grayscale's Bitcoin ETF, indicating a potential shift in market dynamics. The spot Bitcoin ETF witnessed approximately $15 million in net sales on Friday, marking a reversal from the preceding four-day streak of redemptions. Although the analysts acknowledge the slowdown in outflows, they emphasize that the sales volume remains relatively small.
Simultaneously, BlackRock's Bitcoin ETF sales have also experienced a deceleration, aligning with the broader trend noted by Bloomberg Intelligence analyst James Seyffart. Outflows from Grayscale's Bitcoin Trust (GBTC) have surpassed $5 billion, while gross flows for other Bitcoin ETFs stand at $5.8 billion. Over the 11 days since the ETFs' launch, the group has seen net inflows amounting to $759 million.
What’s more? As transaction volumes in the Bitcoin ETF space show signs of slowing in the past week, analysts suggest a possible indication of the initial hype around these investment vehicles subsiding, entering a more normalized flow environment. Worthington and Seyffart both note the importance of this slowing volume in the market.
In a note last week, JPMorgan analysts anticipated a slowdown in profit-taking for GBTC, which could potentially limit further downside for bitcoin prices. The observed trends suggest a maturation and stabilization of the bitcoin ETF market as it transitions from the initial enthusiasm to a more measured phase.
More stories from the crypto ecosystem
Did you know?
Stablecoins, cryptocurrencies pegged to real-world assets like the US dollar, have become a crucial element of the crypto ecosystem. They offer price stability and facilitate seamless cross-border transactions, fueling the growth of decentralized finance (DeFi) applications.
Central banks around the world are exploring the issuance of their digital currencies, potentially paving the way for a hybrid financial future where traditional and digital currencies coexist.
NFTs gained immense popularity, allowing digital assets like art, music, and virtual real estate to be tokenized and traded on the blockchain.
Top 3 coins of the day
The Bitcoin-Ether correlation, at press time, was higher. Thus, ETH might go downhill if BTC registers a decline.
The number of ETH-based long positions didn’t increase by a significant margin, it has instead stagnated over the past month.
What you should know - ETH was trading above the $2,300 level at press time, the bullish momentum was evident as the coin noted a positive change in the last day as well as in the past week. However, it is important to consider that the bullish force has weakened especially after 12 January. If more traders exit the market, the coin could further dip to the demand zone of $2100-$2000. At the time of reporting though, the OBV indicator was rising above with the rise in ETH’s price, which signifies strong buying pressure and potential continuation of the uptrend.
Polkadot blockchain witnessed a sharp rise in on-chain activity in December.
As per Token Terminal data, weekly transaction fees on the relay chain reached an all-time high of $2.6 million between the 18th to the 25th of December.
What you should know - DOT has noted a substantial decline in its price when compared to the 1 January. The volume as well has taken a beating. In the last seven days, however, it spiked by 14.78%, highlighting that sellers were outnumbered and buyers had an advantage. Its strong support point stood near the $6 mark. And the resistance area can be found near the $9 mark. The momentum, at press time, was not in favor of buyers, it was biased towards sellers instead. Notably, RSI pushed downwards and rested near the 48-mark - A fall in price, in the next few days, can be quite imminent.
Binance Coin (BNB)
The sentiment analysis of BNB revealed the Fear and Greed Index to be in the ‘Greed’ category on the 1-D timeframe.
Post-December, the BNB market has been less volatile when compared to its competitors.
What you should know - BNB saw a massive influx of demand on 26 and 27 of December. After which, it entered a rangebound movement. Even so, it has been trading in a healthy range with a positive 4.35% change in the last seven days. At the time of this report, the coin was trading above 50-D SMA which was a bullish signal for the traders. Whales, however, have dumped the token in the recent past, igniting fear among the token holders. Notably, 30 January saw less demand coming as traders resorted to cutting losses.
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