MARKET WRAP

1. DOGE and ETH Make Biggest Rally Since Summer, Thanks to Elon and Tokenomics

CoinDesk – October 31, 2022 at 4:34 am EST

Cryptos

After over a month of what seemed like a lackluster performance, the price of Ether soared with flying colors, beginning to demonstrate the bullish price action that investors had hoped for since the Merge. Rising over 16% over the past week leading up to October 30th, ETH saw its best weekly percentage gain since mid-July, beating even Bitcoin’s (BTC) 5% increase. Other cryptos also closely tracked this bullish performance, with Dogecoin (DOGE) leading the charge into the green, being up 8% since its surge at the end of this month.

 

Notably, DOGE price fluctuations, as we have known for some time, are likely a direct result of Elon Musk’s public endeavors. This past week, Musk completed his $44B acquisition of Twitter and has already begun to oust the previously incumbent Twitter board, consisting of nine executives. DOGE’s rise this month could correlate with more liquidations and a potential short squeeze for eager investors.

Insights

It is interesting to note the slight delay in upward momentum that Ethereum is experiencing at the moment. The Ethereum Merge occurred back in mid-September, by which miners were replaced by validators. The reason why this positive price action took over a month to reflect these new changes deals with Ether’s supply. Since the Merge, ETH supply has increased by only 1300 tokens, as opposed to a calculated 481,000+ tokens had the blockchain continued with a PoW mechanism. As such, ETH’s net issuance, or its annualized inflation rate has not only declined from 3.6% to below BTC’s 1.7%, it has actually declined below zero, meaning that it has become deflationary. In the midst of a market where assets are in short supply to battle the effects of inflation, it is no wonder that ETH is now, in its own right, a preferred store of value.

Equities

This past week, traditional markets faired slightly worse than cryptos. Compared to the 0.5% increase of the CoinDesk Market Index (CMI), which measures a broad-based market index performance of many cryptocurrencies, the Nasdaq, S&P 500, and DJIA all closed lower at the end of this past week. That begin said, all these indexes enjoyed a stronger-than-expected month amid expectations of a more lenient monetary policy stance from the Fed. November’s Federal Open Market Committee (FOMC) is expected to elicit a 75 basis point interest rate hike, and if that comes to pass, equities will likely continue along this trend.

Takeaways

This week saw two sides of the crypto coin. ETH, whose PoS validation mechanism now permits the token to stay deflationary for the long run. According to  Josh Olszweicz, a digital asset fund manager at Valkyrie Investments,

“Ether may continue to outperform bitcoin as ETH’s annual issuance continues to fall rapidly. Therefore, thanks to the transaction fee burn mechanism, any increase in on-chain activity should bring Ethereum firmly into deflationary issuance territory and may have a substantial outsized effect on Ethereum’s price.”

And then there’s DOGE. A token that, unlike BTC and ETH, does not rely on macroeconomic factors, but rather community sentiment, Elon Musk “Musking” about, and short-selling opportunities.

2. Dogecoin Price Skyrockets as Elon Musk Twitter Deal Reaches Completion

CoinDesk – October 28, 2022 at 1:03 pm EST

Tesla and SpaceX founder Elon Musk has officially completed his acquisition of Twitter. The deal, which takes the corporation private according to a filing with the Securities and Exchange Commission, was conducted at the originally agreed-upon price of $54.20 per share, equating to roughly $44B.

Since his entrance into Twitter’s HQ (“let that sink in,” as he tweeted), Musk has already fired Twitter CEO Parag Agrawal and another two executives, along with the board of directors. According to Bloomberg, in a conference call with a team of bankers, Musk acquired $13B in financing debt from a collection of selected banks to assist in the purchase.

For many, especially Dogecoin investors, the acquisition represents a huge victory for the crypto community. According to Ben Weiss, CEO of Bitcoin ATM company CoinFlip, “Decentralization is a real possibility for Twitter. In recent years, shutdowns and bans have become more prevalent. Regardless of your stance on the matter, decentralization takes the power away from corporations and gives it back to users.”

Since Friday, October 28th, the price of DOGE has risen 102%, from $0.059 to over $0.15 in the span of a week.

3. Norwegian Government Partners with EY on Its New Metaverse Space

CoinTelegraph – October 26, 2022

The Brønnøysund Register Center, one of Norway’s government agencies, has partnered with EY to open a virtual office in the Decentraland metaverse.

The aim of this is to reach the next generation of users. According to the government agency, the reason for the new office in the metaverse is to follow “metaverse” tendencies where its potential customers now use the metaverse. EY, among the top four accounting firms globally, stands to facilitate the Norwegian agency in taking a big step into the metaverse. In practice, the function of the new virtual office in the Decentraland metaverse is to manage several public registers in Norway. In addition, it is also responsible for operating systems for the digital exchange of data for the government. 

This new partnership represents a greater mainstream shift toward the metaverse, including not only private companies, key opinion leaders, and tech-oriented corporations but also national governments. 

4. Ethereum Network Consumption Drops by 99.9% Thanks to The Merge

CoinTelegraph – October 29, 2022

Prior to the Merge, the Ethereum network consumed between 46.41 to 93.98 TWh every year, making it a highly taxing blockchain to operate, both with regard to available resources and the health of the environment.

However, with the Merge, Ethereum’s energy consumption has now decreased by 99.9%. 

On Sept. 15, Ethereum switched its consensus mechanism from proof-of-work to proof-of-stake in order to make the blockchain greener. As a result, its carbon footprint has been reduced to 0.1 million tonnes of CO2 (MtCO2) per year.

Despite the success of reducing its carbon footprint, community members are concerned about Ethereum’s centralization and higher regulatory scrutiny.

5. Reddit NFT Trading Volume Hits an All-Time High

CoinTelegraph – October 24, 2022

Reddit avatars,  which users use as their profile pictures on the massive forum platform, are now being minted as NFTs on the Polygon blockchain. Users can purchase these NFTs on Vault, Reddit’s cryptocurrency wallet. Owners of Reddit NFTs can then trade them on secondary marketplaces like OpenSea.

On October 24th, Reddit NFT avatars’ trading volume reached over $1.5 million in one day. The increase represents over one-third of the total trading volume of the collection since its launch in July. At the same time, the number of Reddit NFTs sold daily also reached its all-time high of 3,780 avatars traded. 

Over 2.9 million Reddit NFTs have been minted since launch, and the total number of wallets holding these NFTs currently stands at 2.8 million.

6. Binance One Step Closer to Identifying Hacker Behind $570M Exploit

CryptoNews – October 27, 2022 at 7:30 am EST

CEO Changpeng Zhao (CZ) has stated that Binance is getting closer to identifying the person who stole $570 million of BNB on the Binance Blockchain. 

On October 6th, Binance suspended all deposits and withdrawals on the BNB chain after the detection of an unauthorized transfer of BNB coins. After the incident, the BNB chain had to contact community validators one by one in order to halt the chain and stop the incident from spreading. The hacker(s) was able to withdraw BNB 2 million, which is approximately $576M today. 

CZ has reported that Binance is working closely with law enforcement, and has indicated that by “working with law enforcement,... we can try to make the space safe.” CZ has also indicated that Binance is working with security companies and investing in them to conduct code audits. Finally, he demonstrated his desire to provide education for users about potential risks in the industry.

7. BTC Mining Giant Core Scientific Facing Crash Due to Lower BTC Prices and Celsius Bankruptcy

CoinTelegraph – October 27, 2022

BTC mining company Core Scientific has filed with the Securities and Exchange Commissions a form indicating that it has lost the ability to pay off its debts due to tumbling BTC prices, high electricity bills, and most notably, Celsius’ refusal to pay back $2.1M worth of debt.

The company’s BTC holdings have dropped from 1,051 BTC and $29.5M in cash on September 30th to only 24 BTC and $26.6M in cash on October 26th. The firm previously held as much as 8,058 BTC at the end of May. After its announcement, the stock price of Core Scientific fell nearly 70%. According to Core Scientific, who filed a lawsuit against Celsius on October 19th, it has been losing $53,000 daily in order “to cover the post-petition increased electricity tariffs that Celsius refuses to pay.”

Core Scientific is not the first victim of the Celsius crash in this chaotic landscape. Bitcoin mining company, Bitcoin Compute North, filed for bankruptcy, while Nasdaq warned another mining company Digihost that it would delist its stock. These headlines have certainly placed the BTC mining sector on red alert.