Analysis
What's up with crypto prices?
Our bags are back in the green. I'm pretty happy but I'm also...suspicious.
Crypto is glued to macro. When the big-picture economics look ugly, our coins get punched in the face. But when the winds shift and macro indicators flash green, $BTC pumps.
So, what exactly happened?
Let's rewind a bit for context. On April 2, the $BTC price was ~$87k. Then Trump announced his "Tariff plans". And by April 7th, $BTC price went to ~$75k. A 13.7% crash. The total crypto market cap shows a similar trend. On April 2nd, it was ~$2.8T. And by April 7th, it was ~$ 2.5T.
The main culprit? Trump's tariff shocker. We covered the full meltdown in detail here.
But now, the market seems to be recovering. $BTC is at $94k. Total crypto MC is at $3T. And $ETH & $SOL are at $1750 & $150 respectively.
What happened? On April 9, Trump announced a 90-day pause on all tariffs for all countries except China. The Tariffs were reduced to the new 10% baseline for all countries.
It was the positive news that markets wanted. Investors could now speculate that Trump wasn't totally crazy and the crazy Tariffs were a negotiation tactic. It'll come down to more reasonable levels when all is said and done.
The S&P 500 pumped around +10% on that day. That's crazy for TradFi markets. On the same day, $BTC pumped +8% to $83k.
But the next day was red for both markets. And afterwards, the market started ranging again until April 20th. The economy didn't crash. But the market was still uncertain.
Another uncertainty in the market was the Trump admin's threat to fire Jerome Powell, the Fed chair. Trump has said that he isn't going to do that. But he still wants the Fed to lower the rates sooner rather than later.
Meanwhile, the trade war with China was intensifying, with both sides increasing Tariffs. But the recent signs from Trump indicate that a de-escalation is coming. This is good news. But there's a long way to go before this situation is anywhere close to "resolved". Trade deals with other countries like Japan and India seem to be progressing.
Now, $BTC's bullish performance isn't due to Trump's policies alone. In the last four days, BTC has had multiple tailwinds:
- In the last five days, $BTC ETFs had ~$2.7B in inflows. That's really strong inflow. It shows that institutional gold in BTC is increasing.
- On Monday, Strategy (previously Microstrategy) announced it purchased more than half a billion dollars worth of BTC. Asian firms like Metaplanet and HK Asia is also spending millions to buy BTC.
- Jack Mallers launched Twenty One. A new public company backed by Tether and Softbank, and Cantor Fitzgerald, with the sole purpose of accumulating Bitcoin.
$BTC used to act like a higher-risk equity. But in the recent period, it has shown strength even when equities were weak. It's becoming a macro hedge like gold. The Digital Gold thesis is playing out.
Altcoins aren't as strong as BTC. But a strong BTC has given some strength to altcoins in the last four days as well.
For now, we are not out of the woods. For BTC, $94k might be the new resistance for the next phase of ranging. Plus, the macro uncertainty is still present. The US equity market is scarred for a while.
And like it or not, our bags are still at the mercy of whatever comes out of Trump's mouth next.
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Analysis
Does Ethereum have a future?
Ethereum was supposed to be the future of the internet. But financially speaking, it has been a disaster this cycle.
- It's down 64% from the 2021 all-time high.
- In the 1-year timeframe, $ETH is down 83% against Solana. And it's down 61% against BTC.
- If you'd brought $ETH in January 2018, you'd only be up 18%. If you'd brought $BTC then, you'd be up 526%!!!
Everyone seems bearish on it. But now, there's a wave of new activity in the ecosystem. New proposals and strategic pivots are being discussed.
Here's what's happening in the Ethereum land.
#1. Vitalik's Radical VM Proposal.
Ethereum has many parts. EVM is the part that runs smart contracts, aka applications. Vitalik wants to replace EVM with RISC-V!!!
Reduced Instruction Set Computer (RISC-V) is a lower-level interface between the computer hardware & software. It has a proven record for efficiently computing zero-knowledge proofs.
Why does Vitalik want RISC-V?
- Scalability. Due to its zk-friendliness, it can help Ethereum scale much higher. You can read the technical details in Vitalik's post.
- Simplicity is generally good for blockchains. The current EVM is complex. RISC-V is simple. It is said to be easier to build and maintain over time.
- Backward compatibility. The EVM can still be compiled down to RISC-V. So, Ethereum wouldn't lose any network effects.
- More optionality. It can theoretically support alternative coding languages, like Solana's Rust and Sui's MOVE
- Not limited to crypto. RISC-V is an open-source project that many non-crypto teams use. So it has much wider support than EVM.
Now, this isn't a done decision. It's just a proposal from Vitalik, and there's a hot debate going on. Whether it's optimized for blockchains or if there are better alternatives. But those are too technical for now.
It'll take around 4 weeks for the EF to finalize a decision on it. We'll know if Ethereum will pursue this path then.
But the above proposal won't solve any of Ethereum's immediate problems. In fact, Vitalik's proposal exemplifies Ethereum's problem: it's an 'ivory tower proposal'. It will take several years to implement. And by the time, Ethereum might lose market share.
Ethereum needs to solve many short-term issues before that. And thankfully, EF is working on that too.
#2. Focus on L1 scaling
Until 2021, Ethereum was the king of all blockchains. Many were much more bullish on $ETH rather than $BTC. But then, Ethereum adopted the L2 scaling roadmap.
It involved exporting Ethereum activity to L2s. EF researchers were saying stuff like, "ETH L1 is not for users. L2s are for users."
So users left ETH L1. Layer 2s grew. But they launched their own tokens, and $ETH didn't get any value from the growth of L2s.
Now, EF has realized the need for a strong L1.
Ethereum is focusing on aggressively improving the L1. It'll be bigger and faster.
- 3x the gas limit by the end of 2025. And 10x in 2 years.
- In the long term, use zkVMs to scale transactions per second by 1000x.
- Currently, users have to wait ~12 seconds for txn confirmations. Ethereum is working on Preconfirmations (which are less reliable than confirmation) can give users a promise to execute txns in 100ms. That's 4x faster than Solana's confirmation time. It'll take >1 year for preconfirmations to be popular.
All the plans are good. But Ethereum's major weakness has been the fast execution of those plans.
Ethereum Foundation recently overhauled its structure. And the new Executive Director, Tomasz, is bringing a culture of product orientation and execution. You can see it in his timeline. That's hopeful.
#3. Interoperability improvements
Now, I don't think the L2 roadmap was a complete failure. The big idea was fine: scaling via L2s has many benefits that monolithic L1s cannot have.
The problem was one thing: fragmentation.
Users feel like each L2 is a different chain. Each L2 team is marketing itself as a unique ecosystem. Developers on one L2 cannot compose with contracts on another L2.
TLDR; L2s became independent chains from Ethereum. And $ETH didn't get any benefit from the growth of L2s.
Ethereum Foundation is addressing this problem. Three months ago, they started a dedicated working group for it. You can watch their progress here.
I categorize interoperability solutions into two categories.
- User interoperability, where users will feel like the Ethereum ecosystem is a single chain. Optimistically, we'll have this in 3-6 months.
- Developer composability. This is when developers on rollups can treat contracts on ETH L1 & other rollups as part of a single chain. This will be possible with based rollups, which will take >1 year imo.
Native rollups are another notable project. But imo, it'll take around 2-3 years.
Josh Rudolf is taking the lead in interoperability efforts. You can just DM him for more details.
Everyone outside of the Ethereum circle is mega-bearish on Ethereum. So I don't see people buying it and pumping it massively.
But within the ETH maxi circles, there's still a lot of optimism. They're excited about things like interoperability that I explained in the article. But the problem is that those solutions aren't live yet.
For the ETH sentiment to shift, Ethereum needs to ship those solutions, provide a better user experience, and improve the onchain metrics. Once that tangible shift occurs, ETH sentiment will be bullish again.
🚀 DeFi Catalysts
Morpho has expanded to HyperLiquid. The frontend will be operated by Felix Protocol and HyperBeat.
Frax Finance will undergo the North Star Upgrade on April 29th. Frax Share will be renamed to Frax and will be the gas token of the Fraxtal.
Coinshift csUSDL went live on Pendle. You can now trade, LP, or earn fixed yield on an institutional-grade, yield-bearing stablecoin.
Euler Finance introduced the Vault Swap. It'll allow users to switch collateral or savings between vaults without manual withdrawals seamlessly.
Sonic introduced FeeM Vault. 90% of the transaction fees generated by smart contracts of key tokens like wS & USDC will be redirected to that vault.
Immutable announced a collaboration with Ubisoft on Might & Magic Fates, an original Web3 strategy card game set in the Might & Magic universe.
Dinero has launched SuperETH. It's an ETH LST for the optimism superchain. It's built in collaboration with LayerZero.
Arbitrum has enabled the ability to choose any token as the gas token for the developers of Arbitrum chains that use Ethereum for DA.
Initia went live on the mainnet. It lets projects build their own appchains that are interwoven with other Initia rollups.
Fuel Network launched a $1M FUEL purchase program. They'll spend $250K weekly over 4 weeks to buy back FUEL tokens.
🪂 Airdrop Alpha
Infrared Finance introduced the Infrared Points program. It'll reward users for staking and providing liquidity in its vaults.
🚀 New Launches
Halo introduced HUSD. It's a treasury-backed stablecoin that will be available on both HyperCore and the HyperEVM of HyperLiquid.
Soul Labs has launched its incentivized testnet. It's a unified, omnichain liquidity layer connecting cross-chain money markets.
OpenStableIndex introduced $OPEN. It's an equal-weight index governed by the community onchain. This was launched on the Reserve protocol.
📰 Industry News
Circle, the team behind USDC, introduced Circle Payments Network. It's a competitor for TradFi payments networks like Visa and Mastercard.
Scroll, an Ethereum L2, upgraded its network in the Euclid Upgrade. In addition to scalability improvements, it has become a Stage-1 rollup.
Risc ZERO introduced Boundless. It's a universal protocol designed to scale ZK-powered verifiable compute for every chain.
🐦⬛ X Hits
- Guide to Dubai for Token2049.
- Wrap up of AI Agent narrative updates.
- Lorebuilding as a marketing replacement.
- Union build explainer: solving interoperability using zk.
- Comparative analysis of token buybacks.
😂 Meme
Until next time,
Edgy
Today's email was written by Edgy and Yayya.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
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