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Crypto week at a glance: Bitcoin gets institutional attention; Ether continues to shine

Bitcoin had a few interesting developments in the month of August in terms of institutional demand. MicroStrategy purchased an additional 3,907 Bitcoins for about $177 million in cash at an average price of $45,294 per Bitcoin, bringing its total holding to 108,992 BTC.

Goldentree, a 45-billion-dollar asset manager, has decided to add Bitcoin to its balance sheets. According to SEC filings, Morgan Stanley and Bill Miller’s Fund Bought $240M & $45M shares of Grayscale Bitcoin Trust, respectively. It is safe to say that institutions have started to slowly increase their exposure in Bitcoin.

China’s crackdown on Bitcoin had led to mass panic and a lot of people considered Bitcoin dead as the hashrate had fallen substantially. However, it has made a significant recovery as miners fled to North America and China’s neighbouring countries. It is now approaching the June levels and with the current trend, it is likely that the hashrate could hit an all time high.

Taking inspiration from El Salvador, the Caribbean nation of Cuba decided to regulate and recognize cryptocurrencies for payments on the island.

The rationale behind this decision could be attributed to the difficulty to send and use US dollars on the island, in part because of toughened embargo rules imposed by the United States.

The month of August marked as one of the most important months for Ethereum. On August 5, EIP-1559 was deployed as part of the London hard fork. EIP-1559 broke down the fee structure into two parts – base fee and tips.

The base fee is the algorithmically determined price you pay for a transaction on Ethereum in ether, which will be burnt/destroyed or taken out of circulation. Tips are defined as optional fees that you may include to speed up transactions.

Prior to this Ethereum Improvement Proposal (EIP), Ethereum’s tokenomics was completely inflationary in nature with no fixed supply. In simple terms, Ethereum had an unlimited supply with 2 ethers coming into circulation as a block reward.

So, it’s been almost a month since EIP-1559 went live and 1,92,117 Ether have been burnt (taken out of circulation) as base fee. This is equivalent to $755,852,075.

Does this mean that Ethereum is deflationary now? Not yet! Since the EIP-1559, 4,02,642 new Ethereums have been minted or new ether has come into block rewards. That is $1.58 billion and with $0.75 billion worth of Eth burned, the rate of new ether coming into circulation has reduced by 47.72 per cent.

There are, however, some Ethereum blocks where the burn is more than the rewards, making those blocks a deflationary one. So, it is safe to say that EIP-1559 was a significant improvement to the fundamentals and the tokenomics of Ethereum. Although it is not yet deflationary, it does have a deflationary mechanism.

Ethereum’s supply and demand has also achieved several milestones. Non-zero Eth addresses have hit an all-time high. This is a massive indicator that people are buying more and more Ethereum.

The Ethereum balance of exchanges also hit a 2-year low. This means that supply to buy on exchanges has dropped but also that the likelihood of a mass selling is unlikely.

The number of Ethereum staked (locked away) has reached an all-time high of 7.15 million ether and there is no sign of slowing down.

As of September 4, the number of addresses in profit has also reached an all-time high. Although an excellent piece of information, we might witness some profit booking in the coming weeks.

With the Bitcoin and Ethereum’s price surging along with the strengthening fundamentals of the 2 big giants in the cryptocurrency market, we could potentially be hitting new all-time highs very soon.

5 best performing cryptos for the week:

  • Revain (REV) 110.75 per cent
  • Fantom (FTM) 105.34 per cent
  • Iota (MIOTA) 85.85 per cent
  • Solana (Sol) 46.23 per cent
  • Kusama (KSM) 33.68 per cent

5 worst performing cryptos for the week:

  • Terra (Lune) 10.26 per cent
  • PancakeSwap (CAKE) 6.74 per cent
  • Amp (AMP) 6.19 per cent
  • Bitcoin Gold (BTG) 5.90 per cent
  • Avalanche (AVAX) 4.55 per cent

(Siddharth Menon, COO, Wazir X. Views are his own)

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