Sebastian Sinclair

Ethereum’s <a href="https://blockworks.co/tag/shanghai-upgrade">Shapella upgrade</a> is now <a href="https://blockworks.co/news/bitcoin-ether-green-post-shanghai">just over a week old</a>, with early network figures offering some insight into the current performance and health of the ecosystem.



Analysts who predicted Shapella would not greatly impact pricing, have been proven mostly right, though some market participants turned out to be incredibly wrong.



The network has either partially or completely distributed more than <a href="https://beaconcha.in/validators/withdrawals">1.3 million ETH</a> ($2.52 billion) — a significant jump from last week’s $617 million, data shows.



Out of these withdrawals, roughly two-thirds comprise rewards that were accumulated from past validator duties, <a href="https://k33.com/research/analysis/analysis/ethereum-staking-how-much-rewards-are-left-to-withdraw">research firm K33</a> said in a recent analysis. Those rewards were automatically distributed. For validators fully withdrawing, there is an exit queue that limits the rate of withdrawal. That ensures the proof-of-stake network remains secure even in times of high demand to leave.



<a href="https://twitter.com/MattFiebach">Matt Fiebach</a>, an analyst for <a href="https://www.blockworksresearch.com/">Blockworks Research</a>, said just before Shapella went live, he expected there to be minimal impact on price from the $34 billion in total staked ETH becoming somewhat more liquid.



The analyst pointed to a plethora of related derivatives available that could allow ETH stakers to hedge out their exposure prior to the unlock.



Katie Talati, director of research at crypto-focused asset manager Arca, also <a href="https://blockworks.co/news/eth-post-shanghai-price-action">told Blockworks</a> at the time due to the validator withdrawal queue limits, she anticipated a minimal impact on sell-side pressure.



That coincided with statements from Rich Falk-Wallace, CEO of research platform Arcana. Assuming the maximum outflow of validators occurs, <a href="https://blockworks.co/news/effect-ethereum-shanghai-upgrade-price">Falk-Wallace estimates</a> that it would take more than two years for the number of validators to decrease from the current 536,000 to 100,000.



That’s not a given, however — more validators can join the network as well. Over the past 7 days, there has been a net increase in the number of validators by <a href="https://app.metrika.co/ethereum/dashboard/withdrawals-overview?tr=1w">about 18,000</a>. The staking yield increases when more validators leave, which should have the effect of establishing an <a href="https://www.gsr.io/reports/a-guide-to-ethereum-staking/">equilibrium</a>.



The initial impact on price was positive, with ether (ETH) briefly pushed to new heights above $2,100 — a level not seen in almost a year — on April 16.&nbsp;



While a market correction threatens to undo most of this month’s run-up, predictions over short-term volatility have proven to be mostly correct.



Some traders admitted defeat on their bearish predictions for the impact of the upgrade, such as popular Twitter pundit, <a href="https://twitter.com/kamikaz_eth?lang=en">Kamikaz</a>, who has now flipped “bullish.” Just days before, the pseudonymous self-proclaimed analyst had predicted a “<a href="https://twitter.com/kamikaz_ETH/status/1646374178805907457?s=20">death spiral</a>” for the asset.



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Today I admit defeat, accept my shame, and flip BULL✌🏻 The Shanghai unlock of 19 million ETH ($35 billion) was BULLISH, not bearish as a rational tradfi investor would expect Why? Because ETH is now perfect yield-bearing collateral you *don’t need to sell* to take profit <a href="https://t.co/FCpOURdrhH">pic.twitter.com/FCpOURdrhH</a>&mdash; kamikaz Ξ (@kamikaz_ETH) <a href="https://twitter.com/kamikaz_ETH/status/1647603873694248965?ref_src=twsrc%5Etfw">April 16, 2023</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Kamikaz had, for some time, been locked in an ongoing feud with North Rock Digital’s Hal Press over ETH’s directional bias in both the short and long term.&nbsp;



Ahead of the upgrade, <a href="https://twitter.com/NorthRockLP/status/1638180078931836930?s=20">Press predicted</a> in late March that ETH’s price relative to bitcoin (BTC) would reach roughly 0.08 ETH/BTC. That came incredibly close, reaching a maximum of 0.07 ETH/BTC, five days after the upgrade went live.&nbsp;



ETH/BTC is a trading pair on crypto exchanges that represents the ratio of ether per bitcoin. It is used by traders and investors to speculate on the relative strength of both assets.



Press’ post-Shapella target prediction may yet be vindicated, though for now ether remains squarely in a long-term range established in May 2021, indicative of <a href="https://blockworks.co/news/bitcoin-ether-correlation">the high correlation</a> between the top two crypto assets.



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How Did Ether Price Predictions Fare After Shapella Upgrade?

The native digital asset of the world’s largest exchange is facing significant sell-side pressure after the US commodities regulator announced legal action against Binance and its CEO.



The CFTC filed suit against the exchange and CEO Changpeng Zhao for allegedly violating trading and derivatives laws. Binance’s former chief compliance officer, Samuel Lim, is also named as a defendant in the suit.



Zhao said in a <a href="https://www.binance.com/en/blog/from-cz/czs-response-to-the-cftc-complaint-2408916493005890282" target="_blank" rel="noreferrer noopener">statement</a> late Monday he disagrees with the “characterization of many of the issues” alleged in the CFTC’s complaint. 



A spokesperson told Blockworks the company has made “significant investments” to ensure it did not have US users active on its platform — from boosting compliance staff to implementing market surveillance and investigative tools.



Binance’s BNB token — the utility of which is derived from reducing fees on the exchange — fell more than 6.2% on Monday to $308, the hardest hit among the top 20 cryptos by market value.&nbsp;



BNB is the fourth-largest crypto by total market capitalization with a value of $48.7 billion, <a href="https://www.blockworksresearch.com/assets">Blockworks Research data shows</a>.



<h3>Broader market</h3>



Other exchange tokens have fared better.&nbsp;



Rival exchange Huobi’s native token (HT) was down 3%, as of 7:30 p.m. ET, while Crypto.com’s token (CRO) had shed 4% on the day. LEO, which is used for trading fees and other services for the Bitfinex exchange — was down about 3%.



Those moves are in line with the broader digital asset market sell-off over the last 24 hours.



Bellwether asset bitcoin has shed 3.2% of its value to $27,000, technically its steepest decline since the start of the month. The industry’s total market capitalization, which measures the value of all crypto in circulation, has dipped 2.3% to $1.17 billion.



It appears the CFTC is seeking to strike a legal <a href="https://blockworks.co/news/reactions-to-cftc-lawsuit-binance">hammer blow</a> against the exchange in an attempt to do what others around the world have failed so far — bring Binance under their purview.



“Obviously if Binance goes under due to overwhelming fines then it&#8217;s unlikely BNB is worth much anymore,”&nbsp; Xavier Ekkel, founder of DeFi trading platform prePO told Blockworks.



The asset, however, may retain some “ghost value,” similar to how FTX’s native token, FTT, managed to retain a portion of its value despite the collapse of Sam Bankman-Fried’s empire, Ekkel added.



A hit to BNB’s value follows from the start of the month’s turmoil for another Binance branded token — its BUSD stablecoin — which faced regulatory actions from the New York Department of Financial Services (NYDFS) and the SEC. Several on-chain metrics are now pointing to a <a href="https://blockworks.co/news/the-end-of-busd-on-chain-metrics">swift end for BUSD</a>.



Binance declined to comment on BNB.



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Binance Token BNB Falls 6% after CFTC Files Suit

Digital assets have sprung to life in the past week, despite ongoing concerns a looming recession may place higher valuations on hold in traditional markets.



<a href="https://blockworks.co/price/btc">Bitcoin</a> is up more than 23% from weekly lows of around $17,100 to $21,350 placing the average holder and mining operations back into the black. Its price is now trading at three-month highs.



The crypto’s clean break above $19,000 on Friday led to a continuation in price action for digital assets across the board. It&#8217;s worth noting the rally is beginning to weaken courtesy of overbought conditions.



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="545" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg" alt="" class="wp-image-44221" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/01/Glassnode-bitcoin-price-2-week-1024x545.jpg?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Bitcoin 3-week price; Source: Glassnode</figcaption></figure>



“To date, the 2022-23 bear market has spent 179-days below the Realized Price, making it the second-longest duration across the last four bear cycles,” data analytics firm Glassnode said in a <a href="https://insights.glassnode.com/the-week-onchain-week-3-2023/?utm_campaign=woc_03_2023&amp;utm_medium=woc_newsletter&amp;utm_source=email" target="_blank" rel="noreferrer noopener">newsletter</a> on Monday.



Realized price in crypto refers to the value all BTC was bought for divided by the amount in circulation.



There are notable similarities in market strength to 2019’s bear market despite bitcoin having yet to ascend beyond $22,400 for long-term holders (155 days or more) of the asset when viewing in Realized Price, Glassnode said. Breaking above $22.4k would place long-term holders back into profit.



With the crypto now trading at highs not seen since before the collapse of FTX, miners are also experiencing reprieve after suffering from several market routs in 2022.&nbsp;



The recent rally in digital assets has led to outsized gains for <a href="https://blockworks.co/news/crypto-miners-log-stock-price-gains">many miners</a>’ stock valuations, including Hive Blockchain and Marathon Digital which jumped 31% and 37% last week on reports of easing inflation.



A drop below $17,000 could put miners — many of whose stock valuations had plummeted considerably in recent months — back on notice.&nbsp;



<h3>Investment product inflows and lingering fears of a recession</h3>



Digital asset investment products saw minor inflows totaling $9.2 million last week alongside low trading volumes of around $866 million, digital asset trading group CoinShares said in a report on Monday.



The industry’s price appreciation has resulted in a weekly gain of 13% in assets under management — the largest in 14 months. Ether has also shrugged off eight weeks&#8217; worth of outflows, with an inflow of $5.6 million coming off the back of a favorable shift in trader sentiment, CoinShares said.



An attitude toward risk-on assets, such as crypto, has been guided by a boon in sentiment for traditional equities in recent weeks — also witnessed across Asia-based markets.&nbsp;



Stocks trading in China and Hong Kong <a href="https://www.bloomberg.com/news/articles/2023-01-16/asia-stocks-to-open-mixed-as-new-year-rally-stalls-markets-wrap" target="_blank" rel="noreferrer noopener">closed in the red</a> on Monday following announcements of less than favorable growth in economic activity last year. Crypto has followed suit, with bitcoin stalling near a peak of $21,600 on the day, before falling back to current prices.



The tightly controlled nation’s economy grew just 3% last year, clocking its second-slowest run in almost 50 years. Still, China’s shift away from its COVID-19-zero policy earlier this month has some analysts anticipating a stronger-than-expected recovery this year as the country begins to reopen to the world.&nbsp;



Quarterly and monthly economic data have continued to exceed analyst expectations as the country eyes a recovery, <a href="https://www.cnbc.com/2023/01/17/chinas-earlier-reopening-means-earlier-recovery.html" target="_blank" rel="noreferrer noopener">CNBC reported</a> Tuesday. That could lead to a rebound in Asia-based equities and a chance for increased capital to flow to risk-on assets such as bitcoin, despite a <a href="https://www.bbc.com/news/technology-58678907" target="_blank" rel="noreferrer noopener">heavy ban</a> on digital assets being in place since November 2021.



Fears of a looming recession could put any hope of a stronger return to last year’s pricing for digital assets on hold, with many <a href="https://www.bloomberg.com/news/articles/2023-01-16/chief-executives-and-economists-worry-global-recession-looms-as-davos-begins?leadSource=uverify%20wall" target="_blank" rel="noreferrer noopener">business leaders</a> predicting global growth to slow considerably over the coming 12 months, Bloomberg reported.



Some macro analysts, such as Andy Constan of Damped Spring Macro Research, are skeptical that the Federal Reserve can engineer a hoped for ‘soft landing,’ and avoid a recession. Consequently, Constan is short both stocks and bonds, <a href="https://twitter.com/ForwardGuidance/status/1615349764215951366" target="_blank" rel="noreferrer noopener">he told Blockworks’ Forward Guidance podcast</a> last week.



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Bitcoin Price Rally to $21.5K Takes Pause

Ben Strack

<div id="highlights-block_61c4e71ea46b2" class="highlights">
 <ul>
 <li>The returns of Amplify Investments’ Transformational Data Sharing ETF (BLOK) total about 35% in the trailing year, while bitcoin’s price is up 115% over that time</li>
 <li>The stock prices of companies NVIDIA and Silvergate have both surged by about 130% in the past 12 months, according to Google Finance data</li>
 </ul>
 
</div>



With no ETFs available in the US that invest directly in cryptocurrencies, some investors have sought exposure to digital assets through funds holding stocks considered to be correlated to the crypto and blockchain spaces. 



But how did the returns of such ETFs &#8211; and the companies they hold &#8211; compare to bitcoin itself?



Bitcoin’s price has increased by about 115% in the past 12 months, as of 3:30 pm ET on Dec. 23, according to CoinGecko. It stood at about $51,150 at that time.



Amplify Investments’ Transformational Data Sharing ETF <a href="https://amplifyetfs.com/blok.html">(BLOK)</a>, which has more than $1.3 billion assets, primarily invests in companies developing and using blockchain technologies. 



BLOK’s top 10 holdings are NVIDIA Corporation, Coinbase, Silvergate, CME Group, SBI Holdings, MicroStrategy, Galaxy Digital, PayPal Holdings, Hut 8 Mining Corp and Hive Blockchain Technologies.&nbsp;



The fund has returned nearly 35% in the trailing 12 months, as of Dec. 22, according to FactSet data.&nbsp;



Amplify’s offering launched in January 2018, just days before two competing funds: the Siren Nasdaq NexGen Economy ETF (BLCN) and the First Trust Indxx Innovative Transaction and Process ETF (LEGR). 



BLOK’s year-to-date returns compare favorably to BLCN and LEGR, which have roughly $260 million and $145 million assets under management, respectively. BLCN has returned 8.1% over the last year, while LEGR’s returns over that span total about 19.6%.



Nate Geraci, president of The ETF Store, told Blockworks that <a href="https://cms.blockworks.co/gap-wide-between-best-and-worst-performing-blockchain-etfs/" target="_blank" rel="noreferrer noopener">the performance of various blockchain ETFs</a> has been “a mixed bag,” but called the returns of such products disappointing overall.



“The universe of blockchain ETFs has mostly underperformed the spot price of bitcoin, in some cases rather significantly,” Geraci said. “Unfortunately, the SEC has allowed these products to proliferate instead of approving a spot bitcoin ETF – a disservice to investors seeking bitcoin price exposure in their existing brokerage and retirement accounts.”



More recently launched ETFs that hold crypto-related stocks include Bitwise Asset Management’s Crypto Industry Innovators ETF (BITQ), which launched in May, and Invesco’s Alerian Galaxy Crypto Economy ETF (SATO), which began trading in October.



BITQ, which has roughly $125 million in assets, has returned -24% in the last month, while SATO, which has about $10 million assets, has returned -22%. Bitcoin’s price is down about 10% from 30 days ago, Coingecko data shows.



<h3>Individual stocks </h3>



California-based NVIDIA is a technology company that sells crypto mining products. The company’s stock price, which has a roughly 5% weighting in BLOK’s portfolio, was up 128% from 12 months ago, as of Thursday afternoon, according to Google Finance data.&nbsp;



Like NVIDIA, Silvergate has also seen its stock price rise more than bitcoin over the past year, surging by 134%. Bitcoin mining companies Marathon Digital and Hut 8 Mining have seen their stock prices increase by 250% and 244%, respectively, from 12 months ago.



The stock prices of CME Group, SBI Holdings and MicroStrategy have increased by about 37%, 2%, and 74%, respectively, over the span.



MicroStrategy held about 121,000 bitcoin, <a href="https://cms.blockworks.co/microstrategy-announces-new-414-4m-bitcoin-buy/" target="_blank" rel="noreferrer noopener">as of the end of November.</a>



Coinbase <a href="https://cms.blockworks.co/coinbase-direct-listing-shares-are-limited-demand-is-high/" target="_blank" rel="noreferrer noopener">went public in April</a>, becoming the first cryptocurrency exchange platform to do so. Its stock price is up roughly 16% in the last six months, according to Google Finance, while bitcoin’s price is up about 60% over that period. 



Bill Miller, the founder, chairman and chief investment officer of Miller Value Partners, said during a conversation with author William Green in October that Coinbase <a href="https://cms.blockworks.co/bill-miller-is-willing-to-go-over-the-waterfall-with-bitcoin/" target="_blank" rel="noreferrer noopener">could be “the default position for growth investors”</a> that want exposure to the crypto market without investing directly in crypto assets. 



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