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Bitcoin & Ethereum Sink Amidst FED Interest Rate Hikes

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Bitcoin and Ethereum experienced slight declines in anticipation of the Federal Reserve raising interest rates in its upcoming meeting.

At the time of writing this post, Bitcoin, the largest crypto asset by market cap is exchanging hands at $22,934, which fell by over 2% in the past 24 hours, according to Coinmarketcap.

Ethereum, the second biggest cryptocurrency, has fallen by 2% to trade at $1,573 at press time. 

The Federal Reserve’s policy meeting this week, where the top bank is scheduled to announce its eighth consecutive rate hike, is one of the most eagerly awaited events.

As reported by CNBC, Fed officials are expected to approve a 0.25 percentage point hike this time around as inflation begins to decline, a more moderate pace than the previous super-sized movements in 2022.

“The good news is that the worst is over,” stated Yiming Ma, an assistant professor of finance at Columbia University Business School.

The U.S. central bank is now knee-deep in a rate hike cycle that has raised its benchmark rate by 4.25 percentage points in less than a year.

Although inflation is still above the Fed’s 2% long-term target, pricing pressures have “come down substantially and the pace of rate hikes is going to slow,” Ma said.

As for the world’s dominant crypto, Bitcoin witnessed its best month in over a year, tapping a five-month high of $23k recently.

Its YTD price has also been impressive, registering over a 43% surge, the strongest monthly performance since October 2021, according to a recent Glassnode research report.

Bitcoin’s “Impressive” YTD Performance Could Get Invalidated Due To This

The on-chain analysis indicated that Bitcoin’s surge has been propelled by historical spot demand and a string of short squeezes, which have helped the market turn a profit and create a robust contango in futures trading.

In addition to that, Exchange outflows in the wake of FTX have been neutralized by newly motivated inflows, which have tempered the initial impulse.

Three waves of short futures contracts totaling more than $495 million have been liquidated, with the initial short squeeze in mid-January catching many traders off guard, TronWeekly reported.

However, despite the promising signs, the overall crypto industry could face a major setback with the Fed introducing more hawkish measures impacting the traditional and cryptocurrency markets. 

This was corroborated by Michael J. Kramer – founder of Mott Capital in his report released on January 29 where he suggested that the FED needs to “push back against the market before it’s too late.”

Ethereum: SBF-Linked Wallets Transfer $90M stETH To ETH During Depeg

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Nearly 64k Staked Ethereum or stETH worth approximately $890 million was converted to Eth during the then de-pegging of stETH/ETH in May-June 2022. This was revealed by leading blockchain sleuth Peckshield via tweet.

However, these were not ordinary wallets. As per the data tracker, the three wallets were linked to the now-defunct crypto exchange FTX.

Following the conversion to Ethereum, the wallets resorted to transferring the funds back to the exchange.

On 5/13/2022, stETH/ETH tanked to $0.971. 0x6b92 withdrew 15k stETH [$23.4 million] from FTX, swapped it for 14.3k Ethereum & transferred to FTX On 6/11/2022, stETH/ETH tanked to $0.955, 0x1b23 & 0x2e85 withdrew 49k stETH ($66M) from FTX, swapped it for 42k ETH & then transferred to FTX.

Not only this, Conor Grogan, a director at Coinbase shared that the two wallets in question withdrew over $75 million stETH from FTX on June 8, 2022 and sold everything on the market.

They then proceeded to market-sell everything, kicking off a “de-peg” event seen as one of the contributing factors to Celsius’s bank run and the demise of 3AC We know today that SBF/Alameda was behind these sales.

Ethereum: Alameda Suspected To Be The Culprit Behind The Depeg

According to Grogan, this movement spread like a domino effect that led ultimately to the collapse of crypto lender Celsius and crypto hedge fund Three Arrows Capital.

The June, stETH depeg event led to significant stress in the market, and many rumors of Celsius liquidity problems. Celcius announced just 4 days after the Alameda stETH sales that it was halting withdrawals.

Although there isn’t much” verifiable proof onchain”, the top exec claimed that Alameda previously doxxed wallets, publicly withdrew liquidity as well as sent stETH to FTX.

Many sharp traders like HsakaTrades had their suspicions, although the motive remains unknown. he added.

Grogan also stated FTX’s sister firm Alameda took 7 figures in slippage in the largest single swap of a crypto trade instead of processing the trade OTC on behalf of Celsius or another big party, raising further suspicions.

It needs to be reminded that Staked ether [stETH] is a crypto token that aims to represent an Ethereum token that is “staked” or deposited to support blockchain operations. The token is designed on Lido, a decentralized finance protocol.

Ethereum’s DeFi To Get Boost With This Upcoming Launch

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After a widely reported DAO voting, Ethereum is ready to welcome the debut of Aave V3 shortly. The decentralized lending protocol has submitted a proposal called “Aave Ethereum V3” and asked its community for votes to activate the Aave V3 Ethereum pool [3.0.1].

As per the proposal, the pool would list pre-approved tokens like WBTC, WETH, wstETH, USDC, DAI, LINK, and AAVE once the initial setup is finished.

A week prior, the platform’s team member Graham informed that the upgrade, which includes a host of new features such as cross-chain asset functions and community contribution tools, was set to occur this week, TronWeekly reported.

However, the highly-anticipated launch of Aave V3 got delayed as community members contemplated two main options:

One was to deploy new V3 contracts while maintaining the old V2, and the other was to update existing V2 contracts to the new V3 code.

Although technically challenging to achieve, upgrading would have allowed the protocol to retain the addresses of important contracts [such as Pool, Addresses Provider, tokens, debt tokens, etc.].

The second solution, which involved installing V3 contracts while leaving V2 contracts in place, was safer, but it required Aave users to transfer deposits to V3 instead.

Stani Kulechov, founder and CEO of Aave, wrote.

“Upgrading the Aave Protocol Ethereum V2 to V3 market directly would have indeed created some seamless experiences for the users, at the same time creates an event that would require a lot of security procedures and places substantial assets at risk.”

The community subsequently agreed with Kulechov and voted in favor of this option — deploying a new V3 pool instead — with 99.9% of voters opting for the latter.

The launch is being praised by other Eth DeFi players that use Aave’s protocol to access liquidity.

“A Big Step In Ethereum DeFi Space”

Kethfinex, a pseudonymous representative for Lido, a leading protocol in Ethereum DeFi that plugs into Aave, hailed it a “big step forward for the Eth DeFi space.”

Having said that, Ethereum retraced back to $1,530 in tandem with the broader market-wide dip. After ascending to $1671 on Jan 21, the second-largest crypto witnessed a sharp increase in massive profit-taking transactions before falling back by over 8%.

This drop, as per on-chain data provider Santiment, has led to a rise in ETH conversations that accounted for 21% of crypto asset discussions. “This FUD could benefit prices mid-term,” it noted.

Ethereum Launches Its First Mainnet Shadow Fork: Details

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Core developers of Ethereum have launched the first mainnet shadow fork to determine the preparedness of the ETH staking withdrawal feature.

This marks a step forward in enabling users to access more than $26 billion worth of staked ETH in March as planned.

Announcing the same, Marius Van Der Wijden, an Ethereum Foundation software developer, claimed that despite a few issues, the deployment of the shadow fork was overall successful.

A shadow fork is designed to test network upgrades with existing state data from the original chain and also check for any bugs.

These “rehearsals” act as an important tool for web3 developers because it allows them to test their assumptions about the network’s upcoming upgrades against the most current conditions of the mainnet’s production environment.

With these, core Ethereum developers, node providers, and independent stakers can be ready for upcoming network-wide changes so the Ethereum application ecosystem is not interrupted.

The Shanghai will be the first significant update since the historic Ethereum merge in September, which transformed the network’s operating system to a proof-of-stake one.

Users would deposit ETH with the network after the merge to become validators and aid in on-chain transaction authentication. In exchange, these users have been allowed to earn prizes in the form of freshly created ETH.

Upgrade to Ethereum Shanghai involved this

The amount of Ethereum invested into the staking contract has steadily increased since the Beacon Chain started live in November 2020. As of Jan. 7, deposits totaling 15.9 million ETH, worth $20 billion, or 13% of the total supply, TronWeekly reported.

Shanghai’s main highlights include:

Bringing down the gas charge for layers 2 solutions could make using Eth after Shanghai faster and more affordable.

Efficiency improvements in data access and storage, like the elimination of past block hash information from contracts. Removal of the contract lock on staked tokens will enable unstaking and the withdrawal of staked ETH.

On Dec. 8. the 151st Ethereum Core Developers Meeting was conducted and discussions were held on setting the timeframe of March 2023 for the Shanghai hard fork.

Additionally, the core programmers planned to roll out the Ethereum Improvement Protocol [EIP] 4844 updates, which would bring proto-danksharding to the network, in May or June 2023.

Ethereum Scaling Platform Gains Major Advantage Via This Tech

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zkSync, an Ethereum scaling solution is aiming to position itself as a dominant player among its rivals, thanks to this partnership with Espresso Systems, a crypto infrastructure company.

The advantage in question is to incorporate a new privacy technology called Configurable Asset Privacy, or CAPE built by the partner firm.

The proposed integration is still in the planning and exploration phases and has not been deployed yet.

According to the blog, CAPE would facilitate individuals’ and regulated enterprises’ ability to transact privately without any risk while still receiving all the benefits of Ethereum security.

“This is an important step forward for privacy on zkSync and will continue to break down the barriers to realizing the mass adoption of Web3 by global enterprises”, the blog read.

Additionally, CAPE allows asset issuers to define other policies around their assets, including freezing policies, offering entities like stablecoin providers the ability to retain controls to address fraud, theft, and dispute resolution.

Since the new privacy feature went live on Ethereum testnets six months ago, more than 45k addresses have been established, supporting more than 300,000 actions and transactions.

Notably, CAPE is Espresso’s first product that leverages zero-knowledge technology to support custom privacy policies and more for Ethereum assets. 

Beyond CAPE, Espresso Systems is also working on the Espresso Sequencer to support the decentralization of Layer-2 rollups. The first such testnet dubbed the Americano, was launched in December 2022.

That said, ZKSync is also working on a solution for users to quickly transfer Ethereum and ERC-20 tokens without paying the relatively high fees in the mainnet. 

Ethereum Scalability Solution “Will Win Out In All Use Cases.”

Ethereum gas prices frequently fluctuate based on what happens on the blockchain. On top of that, DeFi and NFT operations surge leading to higher gas costs during peak ETH prices.

This, in turn, becomes expensive for users who must now shell out more to transfer funds or carry out smart contracts.

Here’s where the layer-2 platform intends to fill up the gap by positioning itself as a better alternative for users who value scalability, privacy, and security. After the ZKSync 2.0 mainnet went live, a scaling and privacy engine utilizing ZK proofs were created.

Earlier, Ethereum co-founder Vitalik Buterin doubled down on his belief in ZK Rollups, which dApps on ZKSync rely on. ZK Rollups, in the opinion of the co-founder, “will win out in all use cases.”

Ethereum L2 Captures Investors’ Attention With Surge In Transactions

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Ethereum layer 2 network Optimism has caught investors’ attention with a steady upswing in terms of its Transactional activity, in the past weeks, data from etherscan depicted.

Not only that, it has even managed to flip its nearest competitor Arbitrium whose value has been reduced to half since its all-time high in Nov.

Nevertheless, the growth in the layer 2 network is positive news for investors, buyers of the tokens as well as the users of decentralized applications [dApps] built on that network,

The Optimism ecosystem is also becoming more and more appealing to cryptocurrency traders as a potential location to earn profits similar to the 100-times-plus multiples occasionally seen in previous bull-market cycles.

The Ethereum-based scaling product is one of a slew of blockchain networks that have launched in the last year, each promising to be faster and more affordable than the one before it. It allows traders to transact on the blockchain network for under a few cents in fees and transacting times of a few seconds..

According to on-chain data, in a single day last week, the ecosystem recorded more than 800,000 transactions, which was more than 10 times as many as in June of last year and nearly twice as much as network activity in November.

Earlier TronWeekly reported that the Ethereum layer-2 networks Arbitrum and Optimism have registered an increase in transaction volume in the span of just three months, exceeding even that of the mainnet Ethereum.

Ethereum L2s Surpass Ethereum In Transaction Volume

Data from Dune Analytics showed that Arbitrum and Optimism combined processed over 1.12 million transactions while Ethereum processed over 1.06 million transactions on Jan. 10.

On the other hand, since late October, transactions on the Ethereum network have reduced by roughly 33%, according to Etherscan.

With regards to the l2s, Optimism [OP] for one, has entered the year on an optimistic note as it enjoys a bull run. But, has suffered stagnancy in terms of total value locked [TVL].

In comparison to that, Arbitrum has reportedly outpaced the other top Layer 2 blockchains, such as Optimism and Polygon, when it comes to TVL. The former, however, is unaffected as it continues to increase in tempo and rule the L2 region.

Nonetheless, L2 transactions boost Ethereum’s appeal when they are included in the mix.

Ethereum Non-Custodial Wallet Apprises Users Of A New “Poison” Scam

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Ethereum non-custodial wallet MetaMask has issued a warning about a new emerging scam where malicious actors “poison” users’ transaction histories.

In a series of tweets, the web3 wallet explained how the “address poisoning” exploit is employed by scammers.

First, users are sent tokens worth $0 to their wallets which the attackers make copies of using vanity address generators. These fake ones have identical first and last characters of their targeted victim’s wallet address, laying the perfect trap for unsuspecting users.

Even though hackers would not able to gain access to the customer’s wallets, those with the habit of not verifying the wallet address from the transaction history might find themselves in trouble.

MetaMask appealed to users against simply copying from the history and urged them to double-check every single character of the wallet address to ensure the funds are sent to the correct wallet.

Earlier on May 2022, MetaMask wallets became the target of a Phishing scam after malicious pop-ups emerged in crypto data aggregator CoinGecko that prompted users to connect their ETH wallets.

That said, the leading crypto wallet recently announced terminating its ties with Wyre amid reports of the crypto payment platform planning to wind down operations in the near future.

MetaMask took to Twitter on Jan. 5 to state that it has removed Wyre from its mobile aggregator, which allows users to buy crypto directly through its digital wallet.

“We’re currently working on extension removal and appreciate your patience,” MetaMask said, asking users not to use Wyre on the mobile aggregator.

In accordance with the notice issued, MetaMask also stated that it continues to extend support to a wide variety of payment gateways, including Transak, MoonPay, and Sardine. Per MetaMask, the services are accessible through transfers, bank cards, and Apple Pay.

Ethereum Gains Further Utility

Last year, the digital payments giant PayPal teamed up with MetaMask parent firm ConsenSys to allow MetaMask users to purchase and transfer Ethereum. 

In 2020, PayPal started letting users buy Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. In May of this year, they announced intentions to expand their services to let users transfer that cryptocurrency into third-party wallets.

MetaMask is only compatible with Ethereum Virtual Machine [EVM] supported blockchains. Joseph Lubin, chief executive officer of ConsenSys is also a co-founder of Ethereum.

Ethereum’s Shark Addresses Picks Up As ETH Crosses $1400 Mark

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Ethereum price has risen above the crucial $1400 mark, the highest in more than two months. This comes amidst an accumulation spree by sharks [holding 100 to 10k ETH] where roughly 3000 new addresses have been added in the last couple of weeks.

Data from Santiment further showed that as of Feb 2021, these cohorts of investors have reached 48,556 which is the highest level recorded to date.

Among the millions of crypto assets available worldwide, the market share of the world’s second-largest crypto coin has climbed by more than 3% since Dec. 31, 2022, and it was worth over $856 billion on Jan. 11, 2023.

Ethereum’s market domination in the cryptocurrency space increased from 18.4% to 19%, according to coinmarketcap.com, a leading website that aggregates coin market capitalization data.

The ETH network underwent a major transformation after the successful shift to a proof-of-stake network. Almost four months after the event, the second-biggest blockchain by market cap has passed another major milestone.

Data from Etherscan showed that more than 16 million ether have been deposited into Ethereum’s Beacon Chain staking contract.

The 16 million ETH figure accounts for over 13% of the total ether supply and represents nearly $22.38 billion at current prices. It occurs almost two years to the day after Ethereum’s staking contract went live in 2020, marking the debut of the network’s proof-of-stake Beacon Chain.

$22B Of Staked Ethereum Cannot Be Withdrawn Until March 2023

The Eth network’s “validators” “stake” ETH in exchange for the opportunity to add authenticated transactions to the blockchain’s ledger.

The staked funds are locked up in the network and earn interest, but until the network’s Shanghai upgrade, which is not anticipated until approximately March 2023, they cannot be withdrawn.

Although the increasing amount of ETH staked can be seen as a positive indication of Ethereum acceptance and security, it will undoubtedly put more pressure on the network’s core developers to complete work on withdrawal support as soon as possible.

On the other hand, L2 transactions have boosted Ethereum’s appeal when included in the mix.

As reported by TronWeekly, Eth layer-2 networks Arbitrum and Optimism have recently recorded a surge in transaction volume in the span of just three months, flipping even that of the mainnet Ethereum.

Data from Dune Analytics showed that Arbitrum and Optimism combined processed over 1.12 million transactions while Ethereum processed over 1.06 million transactions on Jan. 10.

Ethereum L2s Beat ETH In Transaction Volume

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Ethereum layer-2 networks Arbitrum and Optimism have recorded a surge in transaction volume in the span of just three months, surpassing even that of the mainnet Ethereum.

Data from Dune Analytics showed that Arbitrum and Optimism combined processed over 1.12 million transactions while Ethereum processed over 1.06 million transactions on Jan. 10.

On the other hand, since late October, transactions on the Ethereum network have decreased by roughly 33%, according to Etherscan.

With regards to the l2s, Optimism [OP] for one, has kickstarted the year on an optimistic note as it enjoys a bull run. But, has suffered stagnancy in terms of total value locked [TVL].

In comparison to that, Arbitrum has reportedly outpaced the other top Layer 2 blockchains, such as Optimism and Polygon, when it comes to TVL. The former, however, is unaffected as it continues to increase in tempo and rule the L2 region.

Nonetheless, L2 transactions boost Ethereum’s appeal when they are included in the mix.

Ethereum’s Layer-2 And Staking Fuels Usage

L2beat data showed that towards the middle of October, the number of L2 transactions per second actually surpassed that of Eth layer 1 transactions, and it remained higher for the vast majority of the time afterward.

The term “Layer 2” is used to describe an additional framework or protocol that is implemented on top of an existing blockchain system.

Overall, 2022 was a mixed bag for the leading smart contract platform Ethereum [ETH] as the network eventually shifted from proof-of-work [PoW] to proof-of-stake [PoS].

This includes its first-ever price slide below the high of the previous cycle.

Another factor driving up ETH usage is the upcoming Shanghai hard fork of the most popular altcoin, which is anticipated to occur in March. Staking risk will be reduced with this upgrade by withdrawing staked Ether [stETH] from the Ethereum Beacon chain.

In preparation for the upgrade, the prices of the Lido DAO [LDO] and Stakewise [SWISE] tokens, two systems that permit Ether staking, have increased by double digits over the previous week.

With $23.06 billion in value locked on the multiple dApps running on the network, Ethereum remains to be the most valuable protocol in terms of total value locked (TVL), according to data from Defi Llama.

Ethereum: Shanghai’s Latest Update Bring Relief For Stakeholders

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Ethereum’s most awaited Shanghai upgrade would include the ability to withdraw staked ETH, Bloomberg News reported recently.

Stakeholders and other interested parties are relieved by the revelation since it puts an end to lingering concerns about an extended token lock-in.

The amount of Ethereum invested into the staking contract has steadily increased since the Beacon Chain started live in November 2020. Presently, deposits totaling 15.9 million ETH, worth roughly $19.8 billion, or 13.2% of the total supply.

After the Merge in September 2022, the Ethereum network will undergo a significant upgrade with Shanghai. Its main highlights include:

Reducing the gas charge for layers 2 solutions could make using Eth after Shanghai faster and more affordable.

Efficiency improvements in data access and storage, like the elimination of past block hash information from contracts. Removal of the contract lock on staked tokens will enable unstaking and the withdrawal of staked ETH.

The 151st Ethereum Core Developers Meeting took place on December 8, and discussions there revealed that core programmers have set a possible timeframe of March 2023 for the Shanghai hard fork.

Additionally, programmers plan to roll out the Ethereum Improvement Protocol (EIP) 4844 update, which would bring proto-danksharding to the network, in May or June 2023.

Despite the completion of the eagerly awaited proof-of-stake Merge upgrade on September 15, staked Ether (stETH) was locked.

All About Ethereum Hard Fork

Nearly 3.5 million stETH [$4.48 billion] of the token, which was established by the decentralized financial protocol Lido, are currently in use. Users of stETH could only withdraw their money following the Shanghai upgrade, including any applicable staking incentives for confirming network transactions.

According to the Ethereum Foundation, this organizational strategy was used to “simplify and optimize attention on a successful transition to proof-of-stake” throughout the upgrades.

The EIP-4844 upgrade is intended to introduce a new data-blob-transaction prototype that was originally created by developers on February 21, 2022, following the hard fork.

Optimistic Rollups, a layer-2 technology, allowed Ethereum processing and network storage to be moved off-chain, increasing scalability by 10x to 100x.

The capacity of rollups is expected to increase by up to 100x with the introduction of big portable bundles that can hold cheaper data in Eth transactions. While the change will reduce transaction costs for layer-2 solutions, it will have no impact on the cost of Ethereum gas.