Analysis
Why are the markets pumping?
Green candles are everywhere. Degens are euphoric again.
In the last two days,
- BTC went from $94k to $103k.
- ETH pumped from $1.7k to $2.4k.
- SOL jumped from $140 to $170.
Almost every token in the top 100 is green on the weekly chart. Where did the massive pump come from? What are the reasons?
#1. Macro winds are getting better.
More liquidity is entering the market.
Chinese central bank cut its benchmark 7-day interest rate from 1.5% to 1.4%. This means more liquidity in the market. And that's good for assets like BTC & crypto.
Market seems to expect the US Federal Reserve to follow suit & reduce rates as well.
And the trade war is de-escalating.
Investors are expecting the US to reach agreements with countries. The US and UK have reached a trade deal. And there are ongoing negotiations with 18 other countries.
The US and China have scheduled a trade talk. China had already cut tariffs on US Imports by 25%. And people are expecting more good news.
While they are good news, there are many concerns. The trade war is far from over. The Fed hasn't announced any cuts. And India and Pakistan have already fired missiles at each other. A full-scale war is still possible.
But the crypto market is optimistic for now.
#2. Ethereum Pectra upgrade
Ethereum was the biggest performer in the last couple of days. It's >27% in the last week.
Ethereum had its biggest upgrade in history with 11 EIPs. It had several important upgrades, like enabling smart accounts and making cheaper blobs. I'll talk more about the upgrade in the next article.
#3. Bitcoin catalysts
BTC had never touched the 100k barrier since early February. But yesterday, it broke the 100k resistance.
That's a bullish catalyst. It broke a psychological barrier and fueled media hype and retail FOMO. This obviously led to more buying pressure.
Last month, we talked about new companies that follow the BTC accumulation strategy of Michael Saylor. Like Twenty One, which is backed by Tether, SoftBank, and Cantor Fitzgerald. There's a new one called Nakamoto. He's reportedly raised $300 million to get the investment firm off the ground.
The ETF flow for BTC looks great as well. Since mid-April, there have only been two days when the flows have been negative.
#4. Several good news from the TradFi
There is much positive news from TradFi businesses. They show their confidence in the industry.
According to Bloomberg, Robinhood is developing a blockchain-powered program that will allow European users to trade the US tokenized financial assets. This is a big win for Real World Assets & crypto adoption.
Stripe is launching stablecoin-funded accounts in more than 100 countries. It'll allow merchants to hold funds and pay vendors internationally using stablecoins.
You can transfer money from your stablecoin balance to your external bank account or crypto wallet. You can pay from your stablecoin balance in USD (over ACH or wire) or in stablecoins over crypto rails.
On the governmental side, the US Office of the Comptroller of the Currency (OCC) has updated its rules. It'll allow banks to buy and sell cryptocurrency held in custody at the direction of their customers. We can now see many people entering crypto through banks.
It's hard to pinpoint a single reason for any broad market movement. Since this is crypto, leverage also contributed to the rally. There was a short squeeze. When the market turned, a lot of short sellers were liquidated, and it sent the prices even higher.
But for now, it's a combination of macro situation & the above factors.
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Updates
Pectra Upgrade: Everything You Need to Know
On May 7th, Ethereum got its biggest upgrade in its history. And since then, it's up a whopping >35%.
While the rest of the market is up as well, none of them have pumped as much as $ETH. So the market is definitely loving the new upgrade.
This is the biggest upgrade in terms of the number of improvement proposals included in it. If you know some technical chops, you can read the blog from the Ethereum Foundation to know everything about the upgrade.
Below is a simplified explanation of everything that matters to you as a user.
#1. Smoother UX
EIP stands for Ethereum Improvement Proposal. EIP 7702 is the most important upgrade for users. It makes all wallets smart accounts.
Until now, Ethereum wallets could only sign transactions given to them. But 7702 allows wallets to execute "contract code". It allows wallets to do a ton of new things.
- Batch transactions. Until now, you had to approve a txn before executing it. You can now bundle many txns into a single click.
- Gas abstraction. The app or other 3rd party will be able to sponsor user transactions. Or user can choose to pay in any token they want, say USDC.
- Social recovery. You can set up a "guardians" system to recover the private keys of your wallet.
And more. Basically, it gives normal wallets the power of code. And code can do a lot of powerful things.
But for you to feel these powers, your wallet providers have to enable these features. Popular wallets like MetaMask and Rabby haven't yet released support.
If you want to try, Ambire Wallet already supports it. Revoke.Cash has also enabled batch revoke. You can now revoke approval from multiple contracts in a single transaction.
#2. Better staking experience
This upgrade makes the Ethereum staking experience much smoother.
Until now, stakers were forced to create validators in discrete 32 $ETH chunks.
It wasn't possible to stake, say 40 $ETH. You were also forced to create a new validator for every new 32 $ETH that you wanted to stake.
It has changed now. Stakers can now stake with any amount between 32 & 2048 ETH. Additionally, you can now compound your staking rewards.
These changes are expected to increase staking rewards by 0.5%.
The specific EIPs related to staking improvements are EIP-6110, EIP-7002, EIP-7251, and EIP-7685.
#3. Efficiency & cost reductions
There are several EIPs to make Ethereum cheaper and efficient. But the most important one is EIP-7691.
Rollups use Ethereum blobs to post transaction data. This EIP increases the number of blobs that can be posted. So, this makes rollup transactions cheaper.
Other EIPs in this category are EIP-2537, EIP-2935, EIP-7549, EIP-7623, and EIP-7840. They are optimizations to the various parts of the system. You can read more about them in the respective links.
A few weeks before, I wrote about the strategic shift Ethereum is making. This upgrade has a lot of elements of that strategic shift: scaling blobs and user-focus.
Writing off Ethereum is a mistake. It should always be on your radar.
🚀 DeFi Catalysts
Chainlink introduced Chainlink rewards. It's a new program designed to incentivize active participation in the Chainlink Network.
Polygon integrated Optimism's OP Stack into its Chain Development Kit. Devs can now create OP Chains that are part of AggLayer.
Polynomial shared their full vision. They're aiming to build a chain focused on derivatives that will return the value to users.
Derive has passed the proposal to reallocate DeFi tokens from the Derive DAO treasury to fund additional $DRV buybacks.
ZkSync has become fully EVM-equivalent. It'll help developers because all the EVM tooling will work right out of the box.
Gamma Strategies has deployed its Uniswap v4 multiposition manager vaults on Unichain. They're eligible for $UNI rewards.
Taiko is the first Ethereum L2 that adopted based sequencing. They are decentralizing governance with Taiko DAO going live on the mainnet.
Skate chain, a chain that'll allow users to interact with apps on other VMs, has released Stake AMM on Solana.
Sky Ecosystem, previously known as MakerDAO, introduced SP-BEAM. It's a new governance module that'll enhance stability management.
Treasure Chain, an Ethereum L2 from TreasureDAO, is shutting down. Users with assets on the chain should withdraw them by the end of May.
Revoke.cash now allows users to revoke multiple approvals in one transaction. This was enabled by Ethereum's Pectra upgrade.
Linea has made bridging from Ethereum to their L2 free using their native bridge. There are some limitations, though, like a 250k gas limit.
ZkSync introduced Solx, a Solidity-to-EVM compiler. It has several benefits, including the ability to target RISC-V architecture if Ethereum adopts it.
World Liberty Financial is voting on airdropping USD1 to all the eligible WLF holders. The vote will end on May 14th.
🪂 Airdrop Alpha
Solana Name Service is launching its own token, $SNS. They're distributing 1.5B to .sol domain holders as part of the Genesis airdrop.
Doodles, a popular NFT project, has announced the upcoming launch of the $DOOD token on Solana. You have to pre-register to claim the airdrop.
Enso launched an incentive campaign called Shortcut Speedrun. Users can earn NOS by completing DeFi, AI, social, and ecosystem missions.
🚀 New Launches
Pipe Network is a decentralized Content Delivery Network (CDN) on Solana. It has launched its testnet.
Fraction AI describes itself as a decentralized auto-training platform for AI Agents. It launched on the Base mainnet.
Space and Time is a Microsoft-backed blockchain for ZK-proven data. They've released v2 of their whitepaper. Their first airdrop is live as well.
🐦⬛ X Hits
- Liquidity wars 3.0.
- Consensus Mirage: a problem of prediction markets.
- Impact of the Binance Alpha program on users and projects.
- What's credible neutrality? And does it matter?
- Is Aave v3 really decentralized?.
😂 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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