9 Days to Halving
What if the Halving Is Already Priced In?
The crypto market has seen incremental volatility within the past seven days, throwing bitcoin between 65,000 and 72,000 US dollar levels. With only nine (9) days to bitcoin's halving event, the cryptocurrency will likely face even more tense price action.
Bitcoin's spot price reaction to the halving can be divided into three scenarios: Negative, neutral, and positive. Fred Thiel, the CEO of Marathon Digital Holdings, recently stated that the "event is already partially priced in", hinting towards a neutral or moderately negative scenario.
From a historical perspective, bitcoin's spot price doesn't have a tendency to immediately compensate for the halved block reward. In 2020, it took bitcoin approximately six months to move into a positive cycle, and 1.5 years to reach a cycle peak. If 2024 mimics the year of 2020, fresh spot all-time highs could be at least six months away, possibly occurring in the last quarter (Q4).
Sources: Timo Oinonen, CryptoQuant
Despite the recent technical correction, bitcoin's futures market still has a negative skew, as the amount of aggregated open interest stays at $19.79 billion. This structure hints towards a new funding reset, in order to clear the excessive derivatives positions.
The Bitcoin Sentiment Index Shows "Extreme Greed"
Bitcoin's smoking hot pre-halving cycle has uplifted the sentiment index into value of 76, indicating "extreme greed". Investors and especially traders should remain cautious.
Source: 21metrics
Although Ethereum's merge gained a lot of attention in the late 2022, ether has been facing a lack of proper investment narratives. This lack of appeal shows in ETH/BTC ratio dropping over -30 percent from early 2023 to 2024, while ether has clearly underperformed bitcoin.
Source: Grayscale
However, ether's trajectory might be shifting, as the rumored spot ETF scenario could be realized later this year. Additionally the new EigenLayer restaking protocol will likely increase investor appetite.
Analysis on Ethena and its New Stablecoin USDe
The new "synthetic dollar protocol" Ethena has been one of the most hyped launches this spring, reaching a market capitalization of 1.74 billion US dollars within its first week of operation. At the same time, the volume of Ethena's ENA token has reached top 10 position across major exchanges, and its new stablecoin USDe has surpassed $2 billion in circulating supply in just under two weeks.
But what is Ethena? Some analysts have placed it into the decentralized finance (DeFi) category, however CryptoQuant's Ki Young Ju called it "CeFi with custody/execution-related risks". Currently, over 75% of the stablecoin USDe's supply is concentrated in the five biggest wallets, mirroring its centralized structure.
Ethena's stablecoin USDe differs significantly from more traditional ones like Tether (USDT) and USD Coin (USDC). The peg stability of USDe is ensured through the use of delta hedging derivatives positions against protocol-held collateral. Additionally, this represents a different set of risks compared to older stablecoins. USDe is a synthetic dollar, collateralized with crypto assets and corresponding short futures positions.
For some people, USDe might give a déjà vu feeling, remembering the notorious case of Terra and its stablecoin UST. However, unlike the former stablecoin of Do Kwon, USDe generates yield through an allegedly safer mechanism.
Source: Pendle Intern
Despite the criticism, Ethena has become the highest revenue generating app of the industry (Token Terminal), eclipsing older players like MakerDAO and Aave. The platform currently offers a 37.1 percent annual percentage yield (APY), although the yield will likely become more moderate over time. The users will receive "sats" for locking their USDe tokens, and calculations above shows each sat being worth approximately $0.000111.
Capriole Investment's Charles Edwards recently commented Ethena, seeing it extending bitcoin's current cycle:
"Ethena will unironically extend this bitcoin bull market a lot. By both constraining over-leverage in derivatives markets and by taking spot supply off the market. Bitcoin will go higher for longer because of ENA." - Charles Edwards
GBTC's Outflows Continue
While February and March saw a huge inflow of new money into the eleven spot bitcoin ETFs, the interest has since declined, at least for now. The latest data shows -223.8 million US dollars worth of net outflow for Monday (8.4) and -$18.7M for Tuesday (9.4).
Source: BitMEX Research
The decline seems to continue despite the listing of a new spot bitcoin ETF, called Hashdex Bitcoin ETF. The newcomer uses a slightly misleading ticker of "DEFI" and differs from others by its high management fee of 0.9 percent. Only Grayscale's GBTC has currently higher management fee (1.5%) than the DEFI ETF.
One interesting ETF metric is the projected supply absorption, found on the 21metrics dashboard, under the ETFs tab. Following the decline of ETF inflows, the projected supply absorption was negative at the turn of March and April, however the percentage has now turned positive to 2.05%.
Source: 21metrics
In a scenario where the ETFs can't absorb the new supply coming from the miners, the demand for the approximately 900 bitcoins issued daily must come from other sources. Bitcoin's approaching halving will ease the situation, effectively halving the supply by -50%.
EigenLayer Launches on Ethereum Mainnet
EigenLayer, an Ethereum "restaking" protocol that has already racked up $12 billion in user deposits, announced today that it is officially launching to the Ethereum blockchain's mainnet. The launch comes alongside the release of EigenDA, a data-availability (DA) service from the team behind EigenLayer.
EigenLayer is a middleware protocol built atop Ethereum, proposing a significant network expansion through a new cryptoeconomic primitive known as restaking. The restaking ecosystem comprises of three key elements: restakers, operators, and actively validated services (AVS).
The 2024 cycle has been characterized by airdrops. Investors are increasingly participating in protocols like EigenLayer and Ethena, driven by hopes of receiving additional rewards.
