The Flippening, but quietly
Views expressed in this article are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.
Tuesday saw Ethereum take its final leap toward next week’s merge with the completion of the Bellatrix upgrade on the network. Bellatrix paves the way for the mainnet merge to Beacon chain by updating ETH’s consensus layer clients, allowing transactions to be executed from Beacon. Bellatrix’s successful completion and growing Merge anticipation has seen ETH gain significant ground on BTC this week, despite a market-wide downturn that has left the leading crypto fighting $19,6k resistance after scraping $18,6k local lows. In comparison to Bitcoin’s >3% decline this week, ETH has gained >3% in USD terms, and nearly 10% against BTC.
ETH:BTC has surged almost 75% from June lows
Teething problems
Despite Bellatrix’s successful completion, the update was not free of issues. 5% of validators fell offline during the hard fork, contributing to a missed block rate of 9% across the last 600 slots being updated. For context, this rate has historically stayed around 0.5%. While a potential cause for concern, it’s worth noting that this may be due to ~25% of Ethereum clients indicating that they are not yet Merge-ready. It’s likely that these clients will be ready come next week, and all other data indicates the Merge should deploy successfully.
Dominance
Dominance presents a refreshingly strange dynamic. Historically, this deep into bear markets, BTC dominance has held steadily above 60%. However, with laser focus on ETH from all market participants, and the wealth of stablecoin value now entrenched in the space, BTC dominance has sunk below 40% while ETH’s share of the market has grown to >21%. It’s worth noting that ETH’s highest recorded dominance was 23%, recorded during the tail end of 2017’s bull run. Leading stablecoins comprise roughly 13% of the market at present, as investors continue to derisk into USDT (~7%), USDC (~5.78%), and DAI (~0.79%).
Are the tides finally shifting?
Forward focus
While the market waits with bated breath for the final leg of the Merge, macros continue their slide into further disarray. European Central Bank (ECB) President Christine Lagarde did not mince words in a statement released on Thursday, following the ECB’s decision to implement a 75 bps rate hike.While Lagarde’s action and warning of a “dark winter” for Europe comes months too late, it’s refreshing to see that central bankers seem to now realise they can no longer rely on obfuscations and ever-shifting definitions to conceal the state of the global economy from ordinary people. With civil unrest brewing in Europe, It’s high time the ECB acknowledged the harsh reality directly brought about by years of inaction and hubris.
Across the pond, Fed chair Powell reiterated the severity of the situation, once again affirming that the US Fed will do everything necessary to rein in inflation, even at the cost of equities and digital assets.
The upcoming week is poised to be one of the most interesting in recent history, with an array of catalysts converging as the Merge grows ever closer. Buckle up!
