Hero's Image

Week in Review: Bitcoin remains resilient while growing investor excitement around Ethereum’s impending merge provokes strongest rally since March

Articles

The NCI closed Sunday 4.5% above last week’s closing. The index’s performance was heavily influenced by Ethereum, up 14.7%, while Bitcoin rose 0.8%.

The crypto market started the week in a slump, as bitcoin continued the downward trend that took hold during the previous weekend. On Wednesday before markets opened, another disappointing Consumer Price Index (CPI)  reading  showed inflation continued to accelerate in June, now registering a 40-year high of 9.1%. 

The higher-than-expected uptick in inflation caused bitcoin’s price to drop by nearly $1,000 immediately after CPI results were divulged, as investors priced in a greater possibility of an 100 bp interest hike when the Federal Open Market Committee (FOMC) meets in late July. 

The remainder of the week was positive for crypto markets, with bitcoin recovering all its early-week losses and going into green before closing out the week on Sunday on strong upward momentum. 

Early signs the token’s price may have bottomed out and entered the accumulation phase, as measured by profitability of newly minted coins, is continuing to drive demand anytime bitcoin’s price dips too far past the $20,000 mark.

While bitcoin’s resilience in the face of unrelenting inflation figures is certainly a positive development, Ethereum’s price surge was the actual highlight of the week. Optimism surrounding Ethereum’s impending update, called “The Merge'', seems to have superseded current macro woes, resulting in the strongest ETH rally since March. 

Ethereum’s merge will shift its blockchain from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) model, which will drastically decrease its energy consumption, among other improvements (read our research team’s full breakdown of The Merge here)

The primary catalyst for ETH’s lateweek rally seems to have been a tweet published by Ethereum Foundation member Tim Beiko. In the post, Beiko outlined a series of events and respective dates leading up to a mainnet merge on September 19th. The added clarity brought by the Thursday tweet sustained a rally throughout the remainder of the week, raising ETH’s price from around $1,100 to nearly $1,400 by late Sunday.

After a series of postponements throughout 2021 and 2022, Ethereum developers have managed to string together an impressive streak of achievements since early June – including the merger of two testnets – that have brought a PoS future to the forefront of investor’s minds. 

The next major date on the merge schedule is August 11, when the Goerli testnet is due to be merged. If all goes according to plan until the 11th, the actual merge of the Ethereum mainnet will be next on the docket.  

The growing optimism surrounding the merge has also narrowed the price difference between ETH and one of its staked derivatives, stETH. This derivative, created by Lido Finance, represents an ETH token that has been staked (deposited) on the beacon chain and can be used to redeem actual ETH at a future date, to be determined by the actualization of the mainet merge. 

As of the writing of this report, stETH’s is being traded at 0.977 ETH. Midway through June, stETH was being negotiated below  0.94 ETH. The greater parity between ETH and its staked derivative is not only a clear sign of growing optimism surrounding the merge, but could also alleviate some of the pressure on institutional investors with stETH-heavy portfolios.

The Celsius Network, a CeFi (centralized finance) platform at the center of the ongoing credit crunch, is one of the many entities in the crypto space with an overexposure to stETH. The troubled lender filed for bankruptcy last Wednesday, divulging a $1.2 billion hole (liabilities - assets) in its balance sheet via a court filing. 

Despite the chapter 11 filing, the lender’s future remains unclear. It is currently successfully paying off a sequence of overcollateralized loans from DeFi (decentralized finance) protocols (Aave, Compound and Maker) and unlocking access to tokens, successfully creating enough breathing room to continue to restructure its debt. One such payment, made by Celsisus to the DeFi protocol Aave, unlocked $418 million in stETH tokens earlier in the week.   

While the access to this collateral and stETH’s greater parity to its underlying asset won’t be enough to generate a significant push that thrusts Celsius towards solvency, reduced fears of a possible stETH depegging and Celsius’ debt restructuring progress are both positive signs that could help alleviate liquidity-contagion fears currently stifling crypto asset prices.     

   

   __________________________________

The information contained herein (“Information”) may not be reproduced or redistributed in whole or in part, in any format, without the express written approval of Hashdex Asset Management Ltd. (“Hashdex”) and its affiliates and subsidiaries (“Hashdex Group”). By accepting this document, you acknowledge and agree that all of the Information contained in this document is proprietary to Hashdex Group. While not explicitly referenced within this piece, Hashdex Group manages the Hashdex Nasdaq Crypto Index ETF, Hashdex Nasdaq Ethereum ETF, Hashdex Nasdaq Bitcoin ETF, Hashdex DeFi Index Fund, Hashdex Smart Contract Platforms Index ETF and other investment vehicles focused on digital assets (collectively the “Fund” and each a “Fund”) which invests in digital tokens. The Information is not an offer to buy or sell, nor is it a solicitation of an offer to buy or sell, interests in the Funds or any advisory services or any other security or to participate in any advisory services or trading strategy. If any offer and sale of securities is made, it will be pursuant to the confidential offering memorandum of the Fund (the Offering Memorandum). Any decision to make an investment in the Fund should be made after reviewing such Offering Memorandum, conducting such investigations as the investor deems necessary and consulting the investor’s own investment, legal, accounting and tax advisors in order to make an independent determination of the suitability and consequences of an investment.

Each Fund seeks to track a relevant index. The performance of each Fund will vary from the performance of the relevant index that it seeks to track. The Information is being provided to you solely for discussion purposes and may not be used or relied on for any purpose (including, without limitation, as legal, tax or investment advice) without the express written approval of Hashdex Group. Certain statements reflect Hashdex Group’s views, estimates, opinions or predictions (which may be based on proprietary models and assumptions, including, in particular, Hashdex Group’s views on the current and future market for digital assets), and there is no guarantee that these views, estimates, opinions or predictions are currently accurate or that they will be ultimately realized. To the extent these assumptions or models are not correct or circumstances change, the actual performance of Hashdex Group and the Funds may vary substantially from, and be less than, the estimated performance. None of Hashdex Group, the Funds nor any of their respective affiliates, shareholders, partners, members, directors, officers, management, employees or representatives makes any representation or warranty, express or implied, as to the accuracy or completeness of any of the Information or any other information (whether communicated in written or oral form) transmitted or made available to you. 

Each of the aforementioned parties expressly disclaims any and all liability relating to or resulting from the use of the Information or such other information. Except where otherwise indicated, the Information is based on matters as they exist as of the date of preparation and not as of any future date and will not be updated or otherwise revised to reflect information that subsequently becomes available, or circumstances existing or changes occurring after the date hereof. Investing in financial markets, the Funds and digital assets, including Bitcoin, DeFi tokens, and Ethereum, involves a substantial degree of risk. There can be no assurance that the investment objectives described herein will be achieved. Any investment in the Funds may result in a loss of the entire amount invested. Investment losses may occur, and investors could lose some or all of their investment. No guarantee or representation is made that Hashdex’s investment strategy, including, without limitation, its business and investment objectives, diversification strategies or risk monitoring goals, will be successful, and investment results may vary substantially over time. Nothing herein is intended to imply that the Hashdex Group’s investment methodology or that investing any of the protocols or tokens listed in the Information or the Funds may be considered “conservative,” “safe,” “risk free,” or “risk averse.” Neither historical returns nor economic, market or other performance is an indication of future results. Certain information contained herein (including financial information) has been obtained from published and non-published sources. Such information has not been independently verified by Hashdex Group, and Hashdex Group does not assume responsibility for the accuracy of such information. Hashdex Group does not provide tax, accounting or legal advice. Certain information contained herein constitutes forward-looking statements, which can be identified by the use of terms such as “may,” “will,” “should,” “expect,” “anticipate,” “project,” “estimate,” “intend,” “continue” or “believe” (or the negatives thereof) or other variations thereof. Due to various risks and uncertainties, including those discussed above, actual events or results, the ultimate business or activities of Hashdex Group or the Funds or the actual performance of Hashdex Group, the Funds, or digital tokens may differ materially from those reflected or contemplated in such forward-looking statements. As a result, investors should not rely on such forward- looking statements in making their investment decisions. None of the Information has been filed with the U.S. Securities and Exchange Commission, any securities administrator under any state securities laws or any other governmental or self-regulatory authority. No governmental authority has opined on the merits of the offering of any securities by the Funds or Hashdex, or the adequacy of the information contained herein.  

Logo Hashdex
The material contained on this website is for informational purposes only and Hashdex, and its affiliates, is not soliciting any action based upon such material. The material is not to be construed as investment advice nor is it to be construed as recommendation, offer or solicitation to buy or sell any financial instrument or product or to adopt any investment strategy. Further, the material contained on this website does not constitute a representation that the financial instruments described therein are suitable or appropriate for any person. Past performance is not an indication of any future performance. This website may contain advertising of financial products.