Crypto Ecosystem

Ethereum is outperforming Bitcoin. What could it mean?

, April 6, 2023

Ethereum is outperforming Bitcoin. What could it mean?

In this week’s crypto highlights, we explore the price movements of BTC, ETH, UNI, and DOGE. 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

Paxful announced the suspension of its operations

On April 4, 2023, a peer-to-peer (P2P) platform for Bitcoin trading, Paxful, published a message from the platform’s CEO, Ray Youssef. The announcement stated that the company will be suspending its marketplace. The platform is unsure whether operations will resume.

According to this message, “some key staff departures” underpin the decision, as well as “regulatory challenges, especially in the peer-to-peer market and most heavily in the U.S.” The Paxful Wallet, said Youssef, will remain in operation in order for customers to retrieve their funds. Customers are encouraged to transfer funds to self-custody wallets. 

The Beaxy crypto exchange shut down after an SEC lawsuit

On March 29, the U.S. Securities and Exchange Commission (SEC) charged crypto trading platform Beaxy with operating as an unregistered exchange and brokerage. The regulator also accused Beaxy of illegally raising $8 million in the offering of an unregistered security, with its BXY token.

In a separate lawsuit, the SEC settled charges against Beaxy’s market makers. The exchange posted on its website that it was suspending its operations because of the “uncertain regulatory environment surrounding its business.”

Notably, the same day, SEC Chairman Gary Gensler argued in the U.S. Congress that further guidance isn’t necessary for digital assets as “clear rules” already exist. He said, “Frankly, of the 10,000 or 12,000 tokens, there are very few that don’t have a group of entrepreneurs in the middle that the public’s counting on. So those are securities.” He also stated there’s “a lot of non-compliance” among crypto exchanges, and they need to follow existing rules.

During his appearance before Congress, Gensler asked for $200 million in additional funding for the upcoming fiscal year — and said the SEC’s work to catch bad actors in the crypto industry has left the agency “stretched thin.”

PancakeSwap introduced the third version of its protocol

According to a PancakeSwap blog post, the upgraded platform can offer users lower trading fees compared to other decentralized exchanges, including SushiSwap and Uniswap. 

In PankecakeSwap v3, developers introduced four levels of trading fees (0.01%, 0.05%, 0.25%, and 1%). For comparison, its v2 protocol has a flat rate of 0.25%. Each token pair can have a liquidity pool for each fee tier, with asset pairs gravitating toward the tier where incentives for both liquidity providers and traders are most rewarding.

PancakeSwap v3 also introduced features that allow liquidity providers to concentrate their capital on specific price ranges. Presumably, this could help increase platform earnings from the same amount of deposits.

The first Arbitrum community vote failed

If there was a weekly nomination for the largest crypto drama, Arbitrum would be one of the top contenders this time. ​The Arbitrum blockchain’s first attempt at governance turned messy, as the AIP-1 proposal suggested giving the Arbitrum Foundation control of 750 million ARB tokens, worth nearly $1 billion. 

AIP-1 also sought to ratify several Arbitrum DAO decisions, including voting thresholds that permit the passage of certain governance proposals, and the allocation of ARB tokens. In the end, around 70% of votes were against this proposal. 

Afterward, the Arbitrum Foundation withdrew from holding a community vote dedicated to AIP-1, due to user backlash. The project stated that AIP-1 turned out to be too complex, so the team will split it into several proposals for separate voting. The Arbitrum Foundation plans to introduce new AIPs in early April.

BTC moved above the 50-week SMA

The Bitcoin price continued to consolidate near $28,000, encouraging sideways movement throughout the entire crypto market. There was a slight dip below $27,500 amid the recent cut in global oil production, which pushed up the U.S. dollar index (DXY). But DXY could not sustain the intraday rally, so Bitcoin recovered in less than a day, moving above $28,500.

The Bitcoin narrative as a hedge against inflation continues to gain momentum. For instance, Bitcoin’s correlation with gold hit a multi-year high last week, and is currently around 50%, surpassing its correlation with the U.S. stock market. Gold is typically viewed as a safe haven during turbulent times. 

In addition, the ratio between Bitcoin’s daily trading volumes in spot and derivatives markets has slipped to an 11-month low. This indicates a renewed risk appetite in the crypto market, which could cause increased volatility in the future. The Bitcoin price remained relatively resilient amid increased negative media coverage, hinting that this consolidation period could eventually favor the bulls. 

Another sign that Bitcoin could experience bullish movement in the longer term is that the asset broke the 50-week SMA, which previously indicated the end of the bear market. 

In the previous cycles, the Bitcoin price moved above this level (green circles) about a year before halving (white lines). The same situation happened in this cycle as the next Bitcoin halving is anticipated around April 2024.

After breaking the 50-day SMA, the asset steadily remained above this level before the next bull rally. The only exception was March 2020 (red circle), when the COVID-19 pandemic was starting its global rampage. However, that event is widely considered a black swan, or unexpected anomaly.

Weekly RSI is currently in positive territory, meaning there is room for upside movement in a relatively short period of time.

The four-hour chart also continues to show bullish signals. The asset is trading within a narrow range of $26,800-$29,000, and tested the declining RSI line (white line) several times. The latter indicates that bullish momentum could be still in place. In addition, MACD lines experienced a crossover near the zero line, which could support the bulls.

If the asset moves above the upper border of the trading range, it could push BTC to $30,000. However, if the price drops below $26,800, it could reestablish bearish momentum, and move the asset to the support area near the $25,250 level.

ETH is moving upside ahead of the Shapella hard fork

Ethereum developers officially confirmed that the Shapella update will be deployed on the mainnet on April 12, 2023. The key feature that will be introduced within this update is staking withdrawals. As such, the ability to unstake ETH, and earn rewards directly from the blockchain, could encourage more coin holders to stake, and contribute to network security.

The asset has been trading within an uptrend since January 2023 (blue line). Recently, the ETH price broke the resistance level near $1,780 (orange line), bouncing off the 20-day EMA, which acts as a dynamic support. 

Daily RSI is far from the overbought level, and the asset is above major moving averages, meaning the path of least resistance is to the upside. The next potential targets for the bulls could be near $2,000. However, ETH may need to retest $1,780 to confirm the breakout.

ETH has underperformed BTC by 14% year to date, but recently Ethrerum started to catch up with the number one cryptocurrency. Analyzing the ETH/BTC market, you may notice that the asset is about to retest the lower border of the descending channel (yellow channel), and the 50-day SMA. If successful, the next target could become the middle of the channel. If rejected, the asset may move to the local low. 

Essentially, when Ethereum continuously outperforms Bitcoin, it can act as a bullish signal for the rest of the crypto market. Typically, it precedes the so-called “altseason,” when numerous digital assets outperform Bitcoin. As for now, it’s too early to say that the recent ETH performance shows signs of a potential altseason. But if ETH moves above the descending channel, it could indicate a trend change.

UNI is within a symmetrical triangle

Last month was one of the best ones for Uniswap since January 2022, in terms of trading volume. The platform reached $71.6 billion in monthly volume, outperforming Coinbase. The trading volume on this decentralized exchange (DEX) increased for the fourth month in a row. A catalyst behind this trend could be FTX collapse, and regulatory troubles that other crypto exchanges have recently faced.

Despite this momentum, Uniswap’s native token, UNI, has been predominantly moving sideways, inside a symmetrical triangle, which is considered a neutral pattern. On April 1, 2023, the Business Source License (BSL) expired for Uniswap v3 protocol. This means Uniswap Labs no longer has exclusive rights to its code, and other developers can now fork the DEX to deploy it on various networks.

Uniswap noted that it is important to determine which forks can be considered “official.” A proposal was submitted to support only one fork in each network. Since UNI is used for governance voting, this event could potentially increase demand for this token. 

At the time of this writing, the asset is trading in the middle of the established triangle. Daily RSI broke the descending line (white line), while MACD lines made a bullish crossover. If the UNI price manages to sustain above 20-day EMA, this could push the asset to the upper border of the triangle, and vice versa.

DOGE surged amid Twitter logo replacement

On April 3, Twitter replaced the social-media platform’s familiar blue bird atop its homepage with the DOGE logo. Crypto Twitter wondered whether it was a late April Fools Day joke, or something bigger. The DOGE price reacted immediately, jumping by over 20% the same day. 

Open interest in DOGE futures contracts ​​surged to nearly six billion DOGE tokens, setting a new all-time high. Such an amount of leveraged positions means larger liquidations may follow, which could increase price volatility. 

The asset reached the overbought zone, and is currently experiencing a correction. The next potential target could be $0.08, where the middle of the Bollinger channel is located. MACD lines crossed the zero point, which could support bullish momentum.

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

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