Crypto Market Rebounds: $1.92T Cap, ETH Burns Surge

Market Outlook

The total crypto market cap shot up by another 16.3% this past week to regain a valuation of $1.92 trillion for the first time since the market crash of late May 2021. The entire market added $700 billion over the past 21 days. Bitcoin broke the quintessential support level of $45K, its 200-day moving average — trading back to levels prior to the China ban. The silver lining of this uptrend is the fact price developments are driven by the spot market with orders of magnitude less leverage than in early Q2 this year.

This week’s green rally was precipitated by investors’ overly positive sentiment surrounding the long-awaited Ethereum Improvement Proposal (EIP-1559). So far, 21,484 ETH or ~ $64.9 million had been burned and removed from the supply since London’s hard fork activation on August 5th. This represents less than 0.01% of the total supply of Ethereum of 117 million ETH.

To put things into perspective, over the past 5 days since the activation of EIP-1559, 21K ETH has been burned. In other words, this is ~ 4.2K ETH burnt per day. Bear in mind that 2 ETH alongside collected transaction fees are rewarded to miners at each block happening every ~ 13 seconds. Since we have 86,4000 seconds in a day, as such 13.2K new ETH are created every day. Since the London hard fork, this means that approximately 32% of the daily Ethereum supply has been removed permanently — reinforcing the narrative of ETH as a scarce and deflationary asset.

The NFT sector is fundamentally the growth catalyst on Ethereum (+18% in the past 7 days), as DeFi applications were last summer, with weekly trading volume surpassing $300 million for the first time in history. NFTs this year show that innovation goes beyond art with e-gaming such as Axie Infinity — generating 17x or ~$200M more revenue than DeFi services in the last 30 days.

We have 4 more months before the end of 2021. At 21Shares, we expect a lot more upgrades on various networks, which will accelerate the adoption of crypto and ease user experience — such as the Merge to PoS on Ethereum and the official launch of Parachains on Polkadot all happening sometime in Q4 this year.

Weekly Returns

The returns of the top five crypto assets over the last week were as follows — BTC (20.83%), ETH (25.68%), BNB (9.83%), XRP (14.14%), and ADA (7.9%).

Net Inflows per 21Shares ETP

The net inflows of our ETPs combining $10.4 million in the past week, were as follows: AADA (+$ 405,717.85), ABCH (+$ 483,594.1), ABTC (+$ 2,339,471.25), AETH (+$ 6,266,881.89), KEYS (+$ 367,933.13), MOON (+$ 347,944.06), SBTC (+$220,852.70).

Media Coverage

In anticipation of the impacts of the Ethereum upgrade “London Fork,” which just went live on Thursday, various publications reached out to our team to give their insights. Our Global Head of ETPs, Laurent Kssis, explained to CoinDesk that there’s a possibility of a short-term correction as the network stabilizes, before resuming an upward trend. While he can't see a definite trend in the short term, Laurent said that a relative value trade could be implemented between Ether and Bitcoin. "With NFTs in full swing, we see a consolidation as demand remains strong in the DeFi segment," he added.

More on that front, the insights of our Research Lead Eliézer Ndinga were also featured on the German stock trading news and analysis platform, AktienCheck. “At 21Shares, we believe that the long-awaited EIP-1559 will boost demand for ETH. In addition, it strengthens the narrative of ETH as a scarce raw material, the fuel for the DeFi and NFT ecosystems,” AktienCheck quoted Eliézer.

News - $1.2 Trillion Infrastructure Bill Still Spurring Controversy in the US Senate

What happened?

On Saturday, the Senate took a procedural step toward passing the infrastructure bill — a final vote should happen later today. In a struggle for compromise between both polarized approaches, the amendments by Senators Pat Toomey, Mark Warner, Cynthia Lummis, Kyrsten Sinema and Rob Portman announced were as follows:

• clarify the underlying text and ensure that those who are not acting as brokers will not be subject to the bill’s reporting requirements.
• exempt cryptocurrency proof of stake validators and software developers from new tax reporting obligations that would prove impossible technically to meet as the aforementioned stakeholders provide non-custodial services.

Unfortunately, yesterday, the Senate couldn't reach unanimous consent on the proposed amendments including the one agreed upon and extended by Senators Toomey, Warner, Lummis, Sinema, and Portman — which narrowed the definition of a broker to exclude validators, developers, and stakers from the bill's reporting requirements.

Why does it matter?

The lack of unanimous consent will likely stifle innovation and encourage crypto entrepreneurs and stakeholders to operate in crypto-friendly locations outside American soil to harness the full potential of crypto. Prominent figures in the crypto space also wonder whether this bill is a backdoor crypto ban in the US with the intention to criminalize validating nodes and software developers and down the line attack Bitcoin mining. Nonetheless, negotiations are not over, there's still a chance to suggest amendments to the House of Representatives that is in charge of the passage of federal legislation.