The Wolf Den #662 - The Future Is Liquid Staking
The Wolf Den #662 - The Future Is Liquid Staking
Ethereum Staking Is Poised To See Massive Inflows
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In This Issue:
The Future Is Liquid Staking
Bitcoin Thoughts And Analysis
Altcoin Charts
Legacy Markets
Coinbase Executive Accuses Binance Of Insider Trading
Vitalik Proposes Stealth Addresses
Bitcoin Is Lighting Up The World
The Future Is Liquid Staking
Ethereum's transition from proof-of-work (POW) to proof-of-stake (POS) has left Bitcoin alone on an island, defending itself against the relentless ESG hoards and haters. While there are other POW protocols, Bitcoin is arguably the only remaining one of note.
Many investors now believe that POS is a superior consensus mechanism and that staking is a more institution-friendly option.
This favorable opinion of staking is somewhat new. In the early days of Ethereum staking, there were barriers to entry, including the need for a significant amount of Ethereum (32) and the technical knowledge to run a validator. Additionally, there was no timeline for when withdrawals would be available. You were putting your money in with no guarantee that you would ever be able to get it out. Only the most staunch supporters were willing to take this bet.
Now, new staking alternatives, such as liquid staking, have emerged. Liquid staking allows for greater capital efficiency for popular crypto chains by allowing any amount of Ethereum to be staked and for the staker to receive collateral back in the form of a derivative of Ethereum that represents the principle and yield. This token allows investors to explore new investment options or hold onto liquidity and redeem their Ethereum when staking becomes available.
Liquid staking is unique because it allows investors to completely bypass the unstaking process if they choose to do so. Popular liquid staking derivatives (LSDs) include stETH and rETH, which are pegged to Ethereum at a 1:1 ratio and are popular in the DeFi space. However, it is important to note that these tokens are not Ethereum and have their own limitations and drawbacks.
Nothing in crypto is risk free.
Currently, 41.9% of all staked Ethereum is dedicated to liquid staking, which unlocks roughly $11 billion for DeFi. Platforms such as Coinbase now offer custodial liquid staking services, which are becoming increasingly popular. However, it is important to note that the percentage of Ethereum staked is still relatively low compared to other popular protocols with smaller communities and lower market capitalizations. Only 14% of the ETH supply is currently staked.
Avalanche - 63% staked
Cosmos - 63% staked
Solana - 71% staked
Cardano - 72% staked
BNB Chain - 97% staked
Ethereum has some catching up to do, which is expected to happen with the release of the Shanghai Hard Fork in March. This Ethereum Improvement Proposal (EIP) will enable withdrawals, which will raise confidence and increase the total percent staked after the initial uncertainty passes. There are countless participants on the sidelines waiting for proof that they will eventually be able to withdraw.
The Shanghai Hard Fork will be the final step in proving the capabilities of proof-of-stake, solidifying the success of “the merge.” The foundation is being laid for future growth.
Liquid staking is seen as the future of the market, offering new investment alternatives and capital efficiency for popular crypto chains.
Bitcoin Thoughts And Analysis
Nothing has changed since yesterday. I remain concerned about the bearish divergence on the daily chart and the overbought conditions. Just waiting for a potential retrace to consider a move.
Altcoin Charts
I do NOT share signals in this section. I share setups and charts that I am watching, in an effort to help show you how I view a chart and what criteria would be necessary for me to consider taking a trade. NEVER blindly buy something because it is listed in a newsletter or posted on twitter. You need to have a plan when you enter a trade. These are just ideas, and are almost always “if, then” scenarios. If a certain set of things happen, then I would consider a trade.
I mentioned yesterday that I was short Ethereum on a quick scalp. I closed the trade yesterday, making a decent profit but without really seeing it through to lower targets.
My premise was that there was bearish divergence on the daily chart, as well as lower time frames. That is still the case, although we have seen some hidden bullish divergence on lower time frames as well. Further, we saw whipsaw price action yesterday, which is exactly the kind of situation that stops out traders on both sides. More importantly, Ethereum held local support around $1,600 and the move down caused a potential bull flag to form.
My initial case became weaker, so I took my money and ran. I am very careful when trading with leverage.
Legacy Markets
European stocks and US equity index futures slipped on Tuesday as investors waited for crucial earnings reports from tech firms and analyzed disappointing business activity data from Europe. European bonds rallied and the euro’s four-day streak of gains came to a halt, while the Stoxx 600 Index erased an early advance and US equity futures ticked lower. The year-to-date rebound in risk assets is expected to be tested this week by a wave of US corporate earnings from tech giants and industrials. Some traders are bracing for the worst tech earnings slump since 2016, but easing inflation and cost-cutting drives have encouraged expectations that some companies might avoid a deeper slump. The S&P 500 Index may be forced to make a decision about its next direction.
Key events this week:
PMIs for US, euro area, UK, Tuesday
Richmond Fed Manufacturing, Tuesday
ECB President Christine Lagarde delivers a video message on “the euro as a guarantee of resilience,” Tuesday
US MBA mortgage applications, Philadelphia Fed non-manufacturing activity, Wednesday
US fourth-quarter GDP, new home sales, initial jobless claims, Thursday
US personal income/spending, PCE deflator, University of Michigan consumer sentiment, pending home sales, Friday
Some of the main moves in markets:
Stocks
The Stoxx Europe 600 fell 0.4% as of 11:10 a.m. London time
S&P 500 futures fell 0.3%
Nasdaq 100 futures fell 0.4%
Futures on the Dow Jones Industrial Average fell 0.2%
The MSCI Asia Pacific Index rose 0.6%
The MSCI Emerging Markets Index was little changed
Currencies
The Bloomberg Dollar Spot Index was little changed
The euro fell 0.1% to $1.0856
The Japanese yen rose 0.3% to 130.23 per dollar
The offshore yuan fell 0.1% to 6.7844 per dollar
The British pound fell 0.6% to $1.2305
Cryptocurrencies
Bitcoin fell 0.4% to $22,902.51
Ether fell 0.5% to $1,624
Bonds
The yield on 10-year Treasuries declined one basis point to 3.50%
Germany’s 10-year yield declined one basis point to 2.20%
Britain’s 10-year yield declined three basis points to 3.33%
Commodities
Brent crude was little changed
Spot gold rose 0.2% to $1,935.58 an ounce
Coinbase Executive Accuses Binance Of Insider Trading
A Coinbase director has presented evidence that a Binance user has been engaging in front-running, a practice of exploiting privileged information, in the cryptocurrency market for at least a year and a half. While it is possible that the trader is not an insider, the trading patterns suggest that the trades are based on insider knowledge. This has led to speculation that an employee or group of employees at Binance may be behind the trades. Another theory is that an unknown third party is able to track Binance's listings prior to them being made public. It is worth noting that prosecutors have a history of taking action against this type of behavior, as seen in the OpenSea and Coinbase cases.
Vitalik Proposes Stealth Addresses
“One of the largest remaining challenges in the Ethereum ecosystem is privacy. By default, anything that goes onto a public blockchain is public. Increasingly, this means not just money and financial transactions, but also ENS names, POAPs, NFTs, soulbound tokens, and much more. In practice, using the entire suite of Ethereum applications involves making a significant portion of your life public for anyone to see and analyze.”
The paragraph above was used to explain the reasoning behind Vitalik Buterin's latest technological endeavor to improve Ethereum and global finance. Vitalik's new idea is called "stealth addresses." The technology is complex, like much of Ethereum's technology, but in summary, "stealth addresses give the same privacy properties as Bob generating a fresh address for each transaction, but without requiring any interaction from Bob." The concept is different from that of Tornado Cash, but serves a similar purpose.
Bitcoin Is Lighting Up The World
Bitcoin enthusiasts around the world. The man behind the stunt said, "We just want to call attention to Bitcoin! We're fans of guerrilla actions like this and will keep on track."
In May 2021, the same individual shone a light on the Bank of England that read "fiat is the bubble, Bitcoin is the pin", which remains a popular phrase today. The moral of the story is to never believe that your voice or ideas aren't enough, as that is what Bitcoin is all about. Bitcoin empowers the people.
The views and opinions expressed here are solely my own and should in no way be interpreted as financial advice. Every investment and trading move involves risk. You should conduct your own research when making a decision. I am not a financial advisor. Nothing contained in this e-mail constitutes or shall be construed as an offering of financial instruments or as investment advice or recommendations of an investment strategy or whether or not to "Buy," "Sell," or "Hold" an investment.
Liquid staking, I love the ease with which we name the new occurrences of our market
Great newsletter!