12 January 2024

Hooray! Bitcoin spot ETFs are approved in the US in a monumental week for crypto! This will be remembered as a key event in the history of crypto investing. Will this be the legitimacy stamp that Bitcoin has been seeking all these years? Will this lead to extensive marketing and retail adoption for crypto this cycle? Time will tell.

For now, let us all celebrate this win. Congratulations!

As the ETFs got approved, one thing definitely happened. Ethereum surged 10% and went above $2,500 – Why did this happen? What’s ahead for the #2 crypto asset? We cover this in our Hot Take today.

Top-3 stories of the week:

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The newsletter is put together by Giottus Crypto Platform. You can read all the previous issues of Cryptogram here.

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WEEKLY MACROS

• Total crypto market cap - $1.77 trillion - UP 7.3%

• Bitcoin price - $46,045 - UP 6.2%

• The dollar index (DXY) - 102.19 - DOWN 0.3%

• Bitcoin Dominance - 52.44% -  DOWN 0.6%

• Crypto Fear and Greed Index - 71 - the market is in greed

THE HOT TAKE

Ethereum will shine this cycle

Ethereum is the next big bet for wider crypto adoption. That’s the vibe we are getting this week. After months of breaking down on its ETH/BTC pair, Ethereum finally showed strength around its 0.05 valuation and zoomed ahead by 10% once the Bitcoin spot ETF approvals kicked in.

Let us look at recent developments in the ecosystem and why ETH has a good future ahead.

1. Anticipation for Ethereum spot ETF Approval grows:

While Bitcoin spot ETFs received approval this week, many think this will be the fire starter for Ethereum-based spot ETFs. US SEC’s decision is a sign that the bureau is warming up to the idea of crypto investment products, and ETH is a natural next choice.

If Ethereum ETF products launch in the US, this will provide another catalyst for increasing demand. With strong product demand drivers lining up at the same time the supply issuance is turning negative, conditions appear prime for Ethereum to post stronger returns in the coming years.

2. Growing adoption of L2s

Ethereum Layer 2 projects – Arbitrum, Optimism and Polygon among others – have gained prominence lately. As an example, Arbitrum’s fundamentals continue to improve ahead of the future EIP-4844 (Dencun) upgrade. Last week, Arbitrium's total value locked surpassed $10 billion, according to L2Beat. The overall TVL experienced a 12% surge with top 5 protocols (except Base) registering double digit gains over the past week.

3. Dencun update will be significant

Ethereum's next major upgrade named as Dencun, will first go live on January 17. This upgrade will reduce the fees on Layer 2 by replacing gas-intensive call data with blobs through Proto-Danksharding, also improving data availability in the process. These blobs will offer fixed storage space for Layer 2 rollups, which will reduce operational costs as Ethereum will be able to significantly increase the transactions it can process at once. This will result in a more accessible platform with reduced fees for both developers and end-users, making the Ethereum ecosystem more efficient, thanks to Layer 2 rollups.

4. Whales are driving demand

A significant factor influencing Ethereum’s recent price surge is the activity of large-scale investors, commonly known as “whales." One notable whale, identified as '0x9314', made headlines by purchasing 21,192 ETH for $48 million, averaging $2,265 per coin. This individual has accumulated nearly 80,000 ETH, sourced mainly from decentralized exchanges (DEXs) and Binance.

5. ETH technical analysis suggests more upside

After fluctuating between $2,100 and $2,400 over the past few weeks, Ethereum managed to breach the critical resistance of $2,500 yesterday. If price continues to trade above this level and head toward immediate Fib channels, we might see a continuation of the rally. If the price breaks above the crucial resistance zone of $2,750-$2,900, $3,000 will be on the cards. On the flip side, should the price drop below the 20-day Exponential Moving Average (EMA), ETH may revisit the crucial support level at $2,380.

Should I buy ETH now?

Presently, ETH’s MVRV ratio stands at 1.43, indicating that its market value has exceeded its realized value. We recommend to wait a bit for the Ethereum spot ETF narrative to settle, before making a larger purchase.

What projects should I look for to maximise the ETH narrative?

Besides Ethereum, many L2 and restaking protocols could benefit from the ETF and Dencun narrative. Moreover, some projects have a stellar roadmap for 2024 that could make it more interesting for investors.

1. Optimism (OP) – The OP Superchain aiming to create a network of interconnected chains based on their open source tech stack and connect them to Ethereum via a bridge

2. Arbitrum (ARB) – Arbitrum is enabling the community with a multifaceted approach with ARB Anytrust for solution scaling, Orbit for chain launch and deployment and Stylus for code compilation in rust.

3. Metis DAO (METIS) – Metis is experimenting with the concept of a decentralized sequencer pool. This approach will greatly reduce centralization and give their native token stakers a chance to run their own sequencer.

4. Eclipse (No token yet) – Eclipse is unique in the sense that it uses the Solana Virtual Machine for the execution environment, Celestia for data availability and Risc Zero for proving. With a focus on attracting Solana dapps to Ethereum, this could pose as yet another catalyst for the Ethereum ecosystem this year.

There you have it, folks – we have covered the next big institutional narrative – Ethereum. Do you think it has great potential as we do?

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If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

Disclaimer: Crypto-asset or VDA investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.