In this biweekly analysis series, Mads Eberhardt, a former Cryptocurrency Analyst at Saxo Bank and trader at Bitcoin Suisse, unveils the complex world of crypto assets. With 8 years of hands-on experience in crypto, Mads delves deep into the heartbeat of the industry, offering a nuanced understanding that goes beyond the surface. We invite you to tap into this extensive knowledge of crypto and fearlessly explore opinions that others might shy away from. While you may not agree with everything, we guarantee that your horizon will broaden.
Besides our crypto portfolio, our offering includes two publications. ‘Crypto Moves’ is our detailed editorial that mostly analyzes a single topic in-depth, published every Thursday. ‘Crypto Crisp,’ on the other hand, is our concise note, published on Mondays, that prepares you for the week ahead in crypto, not least by looking back at the past week.
Restaking of Ether, with initiatives like EigenLayer, has the potential to significantly enhance Ethereum, benefiting holders, stakers, developers, and the broader ecosystem. However, these benefits are not without their drawbacks. Engaging in restaking carries substantial risks for the individual holders involved and also poses systemic risks to the Ethereum network as a whole.
We anticipate the market will soon acknowledge the decreasing tensions between Israel and Iran, coupled with an improvement in US liquidity as tax season wraps up. There are now more compelling reasons to be bullish rather than bearish, despite the recent negative turn in the crypto futures market.
Bitcoin does not currently function as a safe haven. According to our quantitative model, it behaves more like a risk-on asset, similar to technology stocks. However, there is potential for Bitcoin to become a safe haven in the future. At this point, there is evidence suggesting that Bitcoin effectively serves as an inflation hedge.
Over the weekend, geopolitical tensions sent Bitcoin and Ethereum tumbling, but the crypto market quickly rebounded, arguably thanks to Hong Kong’s new ETF approvals and the upcoming Bitcoin halving. Despite this recovery, ongoing Iran-Israel tensions could still disrupt the market.
Since their debut three months ago, the US-based Bitcoin spot ETFs have attracted a significant inflow of capital, totaling $12.5 billion. The momentum does not stop here, with additional countries poised to roll out their own exchange-traded Bitcoin products.
Bitcoin is at the forefront of the market, with other cryptocurrencies attempting to keep pace. We anticipate a continued upward trajectory until a shift occurs, particularly for Bitcoin, in the months following the upcoming Bitcoin halving.
We foresee the next Bitcoin halving as a short-term “buy the rumor, sell the news” event, echoing the 2016 halving’s pattern, this time around even with heightened anticipation from Bitcoin ETF holders. However, long-term, we expect it to bolster Bitcoin’s price significantly, as the market tends to underappreciate the impact of these supply shocks.
Recent weeks have seen a notable absence of volatility in the crypto market. However, current indicators suggest that we are on the cusp of a change. We anticipate increased volatility in the coming weeks, predominantly characterized by an overall upward trend.
Avalanche, despite its standing as the 10th largest cryptocurrency and a significant player among Layer 1 blockchains with smart contract capabilities, faces a grim outlook. With a nearly $40 billion fully diluted market capitalization, its onchain activity is declining, lagging behind competitors like Solana and Ethereum’s rollups. There is simply not much to celebrate for AVAX holders.
A showdown is unfolding in the crypto world, specifically between BlackRock’s CEO, Larry Fink, and Gary Gensler, the Chair of the US Securities and Exchange Commission. Moreover, echoing our view from last week’s Crypto Crisp, we are not anticipating significant volatility in the upcoming weeks, especially considering the recent net outflows from Bitcoin spot ETFs.
A week has passed since Proto-Danksharding was implemented on the Ethereum blockchain. This upgrade has transformed Ethereum and its rollup ecosystem, setting the stage for expansion into brand new territories. Our advice? It is not wise to go against this trend by placing bets on so-called “Ethereum killers.”
Suddenly, the tipping point was reached. Late last week, the crypto market underwent a correction, eliminating excessive leverage and optimism. We see this as akin to typical corrections seen in any bull market, rather than the beginning of a new downward trend.
Ethereum’s transition to a Proof-of-Stake consensus mechanism has been a significant boon, instantly positioning it as the most productive cryptocurrency among its peers. However, this success comes with a vulnerability; if future Ethereum spot ETFs gain the ability to stake Ether, Ethereum’s fate could largely fall under the control of traditional finance. The most feasible countermeasure to this scenario lies in the full adoption of liquid staking protocols.
This morning, Bitcoin hit record highs. Despite my colleagues hoping for a downturn to mitigate my cockiness, the mix of the UK’s crypto embrace, a liquidity boost, and the upcoming Bitcoin halving and an Ethereum upgrade this week only add fuel to the bullish fire. The market’s momentum largely seems unstoppable.
The crypto market is getting less speculative by the minute. There is no need to chase the next big thing by risking funds on obscure altcoins or memecoins. Instead, by aligning with institutional movements, crypto investors stand to gain significantly without taking on too much risk.
Looking ahead to the next week in the crypto market, we envision two potential scenarios. One possibility is that Bitcoin reaches a new all-time high, with Ethereum quickly on its heels. On the other end of the spectrum, the market could experience a minimum 10% decline as it sheds excess leverage. Intriguingly, it is possible that both events could unfold.
Only one has previously had more supremacy in Bitcoin than Michael Saylor of MicroStrategy, namely Satoshi Nakamoto. Saylor has emerged as a leading figure within the Bitcoin community, with his dominance appearing unending – a scenario Nakamoto aimed to avoid. We are concerned that Saylor’s influence may soon become undeniably irreversible.
Over the past week, Ethereum, the second-largest cryptocurrency, emerged as the top performer in an otherwise subdued crypto market. During this period, Bitcoin experienced a decrease in net inflow into exchange-traded products, including Bitcoin spot ETFs, compared to the previous week. On Friday, the Uniswap Foundation suggested a new fee mechanism, potentially enhancing its token significantly.
We are incredibly optimistic about the Ethereum Layer 2 space. We are backing this conviction up with a selection of rollup tokens in our portfolio. It appears the wider market has not yet caught on to the fact that rollups could soon render almost all other Layer 1 cryptocurrencies redundant, largely thanks to leveraging Ethereum’s unmatched network effect. These tokens also stand out as some of the rare cryptocurrencies that could genuinely become yield-generating in the not-so-distant future.
The Bitcoin spot ETFs are experiencing considerable net inflows, the market greatly anticipates Ethereum spot ETFs, and Coinbase reports that retail investors have returned to the market. All in all, the crypto market looks better than it has in ages, but it is not without increased leverage and early signs of euphoria.
We have a high level of confidence that the US will witness the launch of an Ethereum spot ETF within this year, assigning a 90% probability to this event. Our optimism is grounded in five key reasons. We have every reason to believe that an Ethereum spot ETF will be just as successful as the Bitcoin spot ETFs have already been.
The concept of crypto maximalism is illogical, as the crypto market lacks a definitive frontrunner to justify favoring one cryptocurrency exclusively. In shaping our crypto portfolio, we have steered clear of maximalist tendencies. Moreover, the value of our portfolio is determined not only by the cryptocurrencies we have selected but also by the prominent ones we have intentionally left out.
It seems that a significant portion of the crypto market turned bearish following Jerome Powell’s speech yesterday. However, we remain bullish. We believe the speech did not bring about significant changes; liquidity is still expected to increase, Bitcoin is experiencing substantial ETF inflows, and the crypto market is on the verge of embracing three powerful narratives.
Unlike many research firms, we are introducing a crypto portfolio designed to provide extensive exposure across the cryptocurrency market. Our goal is to identify and focus on the promising 1% of the crypto market, while actively avoiding the vast majority that do not show any potential for a bright future. The portfolio is based on four key fundamentals.
Everyone is looking forward to the Bitcoin halving, yet there is little focus on Ethereum’s equivalent of a triple halving. In our crypto portfolio, Ethereum takes the spotlight. We predict that Ethereum will evolve into a widely-utilized digital commodity, coupled with a decreasing supply and the ability to generate dividends – a truly unique asset, not just in crypto, but beyond.
In this issue, we explore the initial week of Bitcoin spot ETFs through various charts. For months, many claimed that the ETFs were not just a case of “buy the rumor, sell the news.” Now, these same voices argue that the net inflow will soon boost prices. Once again, we adopt a contrasting viewpoint to this popular opinion.
While the approval of the Bitcoin spot ETF did not spark a significant reaction in the market for Bitcoin, Ethereum emerged as the clear winner, securing a substantial 15% gain over Bitcoin post-ETF approval. Our expectation is that Ethereum stands to reap further rewards in the coming months, while Bitcoin experiences slow bleeding.
As we step into 2024, it seems like everyone is long crypto left, right, and center. This environment does not elicit much enthusiasm from us, as it brings back memories of the exact opposite situation just a year ago. We have identified five key factors that we believe will shape 2024. Among them, three are anticipated to pose potential downsides, one holds the potential for an upside surprise, and there is a joker that seems to be completely overlooked.
In a few decades, Bitcoin may face challenges in covering its own security and maintaining decentralization if no alterations are made, given the halving events occurring every fourth year. The fundamental question arises: Can Bitcoin truly serve as digital gold if the outlook suggests it struggles to fund its security within the next two decades?
Bitcoin is a pet rock. It will never achieve a transactional output much greater than its current maximum of 7 transactions per second. This falls short of what Satoshi Nakamoto envisioned for Bitcoin. That being said, Bitcoin has embraced other extremely powerful narratives that set it apart from the rest of the market, which arguably hold greater significance than what Satoshi Nakamoto envisioned 15 years ago.
