Variable Ethereum supply issuance raises questions of centralisation

Hi everyone,

If you’ve followed Crypto Twitter lately, you won’t be surprised of the revitalised bitcoin-ethereum war, which has now raised significant questions about ethereum’s mystical supply rate. While discussions are ongoing, emerging implications might just mean that while ethereum could win a few battles, bitcoin will ultimately win the war.

Interestingly enough, bitcoin has nearly reached parity with the Bank of America’s valuation — at some point it might be worth more than all banks put together. Meanwhile, the stablecoin market cap continues to surge as Tether passes the $11 billion mark. Last but by no means least, bitcoin’s weekly data paints the picture of every bitcoin hodler’s dreams.

Bitcoin’s market cap reaches parity with bank of America

As industry-wide prices continue to climb, bitcoin’s market cap has slowly inched towards parity with the US’ Bank of America.

Sitting at just over $220 billion at the time of writing (according to data from CoinPaprika), bitcoin is dangerously close to outpacing America’s top bank. Yahoo finance data shows Bank of America’s market cap holding at just over $226 billion, informing a near miss for btc!

While the number one digital asset has endured its fair share of price fluctuations, bitcoin has proven to have excellent staying power in the face of dramatic world changing events. Back in March, just before COVID-19 measures turned the world on its head, the United States Central Bank pumped the economy with $168 billion in capital (and trillions more thereafter). At the time, Bitcoin’s market cap held at around $145 billion.

Interestingly enough, Jeff Bezos’ net worth was about $140 billion at the time, meaning he could have theoretically bought all the bitcoin in circulation with a couple of billions to spare. Of course, this mass purchase wouldn’t have worked in practice. Since then, Bezos’ net worth has shot up to $193 billion, while bitcoin’s valuation sits at $220 billion.

Some might say that this like comparing apples and oranges, but I’d beg to differ. Considering how valuations and numbers are thrown around these days, and the trillions of dollars in market caps around various commodities, stocks and other markets, it’s worth contextualizing bitcoin in this bigger picture of seeming random number generation.

Stablecoins continue to grow as Tether hits $11 billion

Data from the stablecoinindex.com has shown a steady increase in the stablecoin marketcap after the black Thursday event in March. Back then, many suggested that investors and traders who were already in the space were exiting bitcoin into stablecoins like USDT, and inferring that the growth in stablecoins was directly related to that event.

However, in the months following, the bitcoin and stablecoin market-caps continued to surge in tandem, indicating an attitude shift in the broader market and increasing interest from new investors.

Just a couple of days ago, Tether’s market cap broke past $11 billion. While this may be in part due to traders — who would convert their crypto into stablecoins in order to easily transfer money between exchanges and wallets — a slew of applications such as the Swiss Borg application (this is a referral link) and many others are gaining ground in bridging the knowledge gap between the masses and the crypto sector.

Several other applications are opting for a similar approach that places user-experience first, meaning that there will probably be a growing percentage of stablecoin growth that will be attributed to retail traders.

What is Ethereum’s supply rate?

Crypto Twitter has been as lively as ever these last couple of days, with questions about ethereum’s real supply rate arising across the community.

Pierre Rochard asked on Twitter:

I will send 1 million sats to anyone who writes and successfully runs this script against their own ETH node within the next 12 hours.

👇 https://t.co/k6IKspum3O

- Pierre Rochard (@pierre_rochard) August 7, 2020

This argument was just the tip of the ice-berg and led to a flurry of questions about how to check ETH’s supply with an on-chain node. The allegation is that Ethereum’s supply isn’t consistent and is arbitrarily defined and set after consensus on Ethereum Improvement Protocols (EIPs).

One bitcoin developer replied:

“It’s 2020 and total ETH supply validation on Ethereum is CLOSED SOURCE and run by a central 3rd party. You can’t make this up.” He notes in another tweet, “It literally is a number that Vitalik makes up. I shit you not. Erik has his head deep in the sand.”

Ultimately, this presents a problem for the crypto community, which presents itself as a decentralised consensus project, yet demonstrably relies on layers of trust.

Commenting on the debate, one bitcoiner simplified the implied fundamental differences between bitcoin and ethereum.

Bitcoin: Don’t trust. Verify.
Ethereum: Trust. Because we can’t verify.

- WhiteRabbit (@WhiteRabbitBTC) August 9, 2020

While Ethereum is probably here to stay, it’s hard to hold the platform up as a fully decentralised ecosystem for various reasons, namely the 70% pre-mine that went into the paltform, but also for a number of issues beyond my expertise. Check out this medium post by The Professor for all the details.

Technically speaking

ETH/BTC HTF looks primed for a correction

While many have been calling for an endless alt-season, the Ethereum / Bitcoin chart (ETH measured against BTC) is showing signs of a relative top on the daily time-frame.

While ethereum has gained ground, setting two consecutive higher highs, both the RSI and MFI have made lower highs, suggesting a probable retracement against bitcoin in the coming days to weeks.

If this happens, it’s reasonable to expect altcoins, particularly ERC-20 tokens to retreat into Ethereum and lose value. However, should there be enough impetus for the market to continue surging against the USD, then a slide in the above pair would probably mean that bitcoin will experience higher percentage gains against ethereum (which would also appreciate in value against the dollar).

Another reason for a probable retracement here would be the bitcoin dominance chart, which is currently hanging at a critical level.

Based on historical precedent, a bounce at this 60% level should be expected. In prior tests, bitcoin got rejected from this level, until flipping it into support in mid-June 2019.

Ultimately, technical and fundamental factors seem to be bearing against Ethereum — at least for the time being. It goes without saying that bitcoin dominance could continue to slide below 60%, in which case alt-season would be just getting started.

Market signals strength (weekly HTF) with Three white soldiers

Bitcoin has experienced another three weeks of strong, confident growth, printing three consecutive weekly candles firmly in the green.

While it’s conceivable that bitcoin might revisit the 3-year trendline at some point, market participants don’t seem eager to take that path just yet (and may never want to).

Any dips in bitcoin’s price remain firm buying opportunities on the weekly, with the $10,500 resistance-turned-support area being a prime target for bulls to reload. Notably, the $9,600 CME gap still exists, but there are exceptions to every rule.

Time will tell what happens here.

BTC/USD 4-hour soldiers on

Meanwhile, bitcoin continues to test the $12,000 level, which if breached would open the gates to the 2019 highs at $14,000. The number one asset is currently trading within an (adjusted) ascending triangle continuation structure, indicating that a breakout is more likely than a break down at least on a technical level.

Having said that, if bitcoin were to break the lower-trending support, then a $10,500 price target should be considered more strongly. Since breaking out, bitcoin has tested this level as support twice and very briefly. Another move to confirm these levels as support would not be unheard of and could happen shortly after tapping a higher level should the market need to cool-off.

Tit for tat liquidations?

In the span of a month, the bitcoin futures market saw tit for tat liquidations in their billions. The initial pump forced shorts to close their positions in spectacular fashion. However, overly-bullish (and over-leveraged) longs weren’t smiling for long, getting liquidated just a few days later when bitcoin plunged to $10,500 in a flash crash. If this tit for tat game continues, then perhaps the time for another mighty bear trashing is nigh.

Either way, any dip in bitcoin’s price is a great buying opportunity, and greed remains an investor’s worst enemy.

May your gains be high and your losses low.

Catch you next time.

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Read More: Investors Dollar-Cost-averaging into btc since 2017 made 61.8%

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Cheers!

Best regards,
Christopher Attard
Founder of Chris on Crypto
Contributor to www.cityam.com
Insight. Content. Consultancy.

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Originally published at https://mailchi.mp.

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