Crypto Ecosystem

Could Ethereum see bullish movement ahead of the staking withdrawals launch?

, March 2, 2023

In this week’s crypto highlights, we explore the price movements of ETH, LQTY, LINK, and XTZ. Additionally, this recap includes other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Noteworthy market events

Gary Gensler: “Everything but bitcoin” can be regulated under SEC jurisdiction

In a New York magazine interview, Gary Gensler, the chairman of the U.S. Securities and Exchanges Commission (SEC), suggested that all cryptocurrencies other than bitcoin are securities. He claimed that “at the core, these tokens are securities because there’s a group in the middle and the public is anticipating profits based on that group.”

This sparked bearish sentiment in the crypto industry, and inflamed industry experts. Crypto lawyers weighed in on Gary Gensler’s regulatory claims, saying that the SEC Chairman does not determine the law or how it is applied. Furthermore, they outlined that it would be difficult for the SEC to cement this rule, as the regulator would need to file a lawsuit against each token creator separately to codify this.

Coinbase introduced its own layer 2 solution for Ethereum

The Coinbase crypto exchange announced the testnet launch of Base, an Ethereum layer 2 protocol. It was built using Optimism’s OP Stack. Coinbase has no plans to issue a new network token, as Base will use ETH to pay transaction fees. Coinbase’s layer 2 solution will interact with the company’s major products, and is planned for introduction in other networks, aside from Ethereum. 

Coinbase also joined the Optimism ecosystem as a developer of the OP Stack. A portion of transaction fees via Base will go to the Optimism Collective treasury.

Base’s testnet debut wasn’t smooth, as transactions reverted. According to Coinbase, operational glitches were caused by an issue with the company’s wallets, which incorrectly estimated the amount of gas required to execute users’ transactions.

MakerDAO Endgame tokenomics attracted comparisons with the Terra ecosystem

MakerDAO introduced a new feature called “Endgame tokenomics” that aims to stabilize the price of its stablecoin, DAI. This new system proposes to break the DAO into smaller units called SubDAOs. Each SubDAO may have unique tokens with specific goals. Depending upon whether a certain SubDAO token is undervalued or overvalued, MKR emissions can be used differently.

However, developers also suggested borrowing DAI with MKR tokens. PaperImperium, a pseudonymous crypto Twitter account, drew attention to this, claiming that it could cause a liquidation spiral. The conversation caused a stir on crypto Twitter, attracting comparisons to the mechanism many believe led to the downfall of the Terra ecosystem. The “Endgame tokenomics” has not been implemented yet. 

NBA Top Shot NFTs may be considered unregistered securities

U. S. District Court Judge Victor Marrero ruled that Dapper Labs’ NBA-branded “Top Shot” non-fungible tokens may meet the requirements to be considered an unregistered security. The case arose in 2021 when an NBA Top Shot collector sued Dapper Labs, claiming that the NBA Top Shot NFTs issued via the Flow blockchain are securities.

The Howey Test was applied to the NBA Top Shot “Moments” NFTs, and the Howey analysis supports the judge’s decision. According to the ruling, Dapper Labs’ FLOW tokens – while not explicitly securities themselves – are “necessary to the totality of the scheme at issue.”

Though Marrero’s ruling is, by his own admission, “narrow,” and is neither final nor sets a precedent, legal experts agree that this event may affect the broader NFT space.

Ethereum could outperform Bitcoin in the short term

Preparing to introduce staking withdrawals, Ethereum developers recently activated the Shapella hard fork in the Sepolia testnet. Before the fork goes live on the mainnet, it will be released on another testnet. Both events are scheduled to take place this month, sparking increased interest in Ethereum staking. However, this is not reflected in the ETH price movement.

Ethereum is struggling to sustain above the $1,680 resistance area, indicating that there may not be not enough momentum to continue bullish movement. The asset formed a bearish divergence, which corresponds to this view. 

The 50-day SMA (blue line) acts as a dynamic support. If the price drops below it, it could reestablish bearish momentum. In this case, 200-day SMA (cyan line) could be the next potential target.

However, the daily RSI broke out from its descending trendline (white line), and moved above 50. In addition, Ethereum formed a golden cross. These could be considered bullish signs. If the price consolidates above $1,680, the next resistance level could be near $1,800.

 

Another potential bullish sign could be found by analyzing the ETH/BTC currency pair. Although Ethereum is trading within a descending channel (green channel), the asset formed a bullish divergence (white line).  

The divergence occurring right at the channel’s support line further increases its significance. In addition, as it took more than a month for its development, it could indicate potential month-long upward movement for the ETH/BTC price. This means ETH may outperform Bitcoin in the short term. However, a breakdown from the descending channel would invalidate this bullish view.

LQTY became one of the top weekly performers

The LQTY price experienced a second rally in less than a month. In February, the asset enjoyed an over 50% weekly price increase after the New York State Department of Financial Services (NYDFS) ordered Paxos, the issuer of BUSD, to stop minting the stablecoin. LQTY is the native token of Liquity, a decentralized lending protocol on the Ethereum blockchain that also offers Luquity USD (LUSD) stablecoin.

Recently, the LQTY price made another jump, showing a 120% positive weekly performance increase this time. The rally occurred amid token listing on Binance, and interest in Liquity tokens that offer double-digit daily APR.

The asset moved to the overbought zone, but didn’t form a bearish divergence. This suggests the LQTY price may still have room to continue upward movement after consolidation. The golden cross on a daily chart supports this bullish view. However, if the asset moves below the 0.382 Fibonacci level, this could lead to a deeper correction.

LINK is trading within a rectangle

Beginning May 2022, the LINK price started consolidating within the $5.5-$9.5 range, forming a rectangle. It is considered a long-term neutral pattern, meaning further price movement depends on the direction of the future breakout. Like most chart formations, rectangles indicate that the next move after the breakout could be as big as the pattern’s height (trading range).

At the moment of this writing, the LINK price is trying to sustain above the middle of the trading range. The 50-day SMA (orange line) acts as a dynamic support. If broken, the asset may move down to $6.4 and $5.5 levels. A bearish divergence (white lines) could support the bearish momentum. 

However, if the asset manages to gain a foothold above the middle of the trading range, $8.4 and $9.5 levels could be considered the next potential targets.

Google pushed up the XTZ price

On February 22, Google Cloud joined the Tezos ecosystem as a validator (baker), allowing its corporate customers to deploy Tezos nodes in order to build Web3 applications on the network. This helped the XTZ price to break the $1.21 resistance level, and the 200-day SMA (blue line). 

However, soon after that, the asset formed a bearish divergence (white lines), and dropped below $1.21. MACD lines made a bearish crossover, meaning that path of least resistance is down. 

If the price fails to break 200-day SMA, it could move to the support area near $1. If successful, it could help bulls make another attempt to test $1.47.

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

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For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.

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