Crypto Market Forecast: Week of June 13th 2022

Bitcoin (BTC) varied between ~US$27 – 32K over the past week. The price of the asset dropped by ~8.5% over the week, and currently sits at about US$26K. Ether (ETH) dropped by ~16% since last week (currently at ~US$1.5K). Binance coin (BNB) fell by ~11% and currently sits at ~US$264.

The market plunged on Sunday night as Celsius Network announced that it is pausing all withdrawals, Swap, and transfers between accounts. Celsius said "Acting in the interest of our community is our top priority. Our operations continue and we will continue to share information with the community."

Legislation was proposed in the USA this week and could eventually lead to regulatory clarity that the industry could benefit from in the medium and long term. Senators Cynthia Lummis (R) of Wyoming and Kirsten Gillibrand (D) of New York released a bipartisan and comprehensive bill on how (if made into law) digital assets would be regulated in the United States.

The so-called Responsible Financial Innovation Act (full text) proposes to use existing regulatory infrastructure to integrate digital assets and splits assets into two categories — commodities and securities — with existing watchdog agencies, the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to oversee the industry.

In an interview with Bloomberg, Lummis and Gillibrand advised that they are looking to be working with key players in the industry as well as relevant governmental committees (for taxes, banking, agriculture, and intelligence) in order to solicit feedback and build support. It is worth noting that Senator Lummis currently acts as a member of the Banking Committee, and the same is true for Senator Gillibrand on the Agriculture and Intelligence committees.

For those wishing they could use cryptocurrencies as a medium of exchange without acquiring taxable events, there is positive news. The bill, in its present form, allows a capital gains tax exemption for payments up to the value of US$200.

It is too early at this point to know whether the bill will make its way to a law, and if so, whether the final law will remotely resemble the currently proposed legislation by Senators Lummis and Gillibrand. It may also take a year or two before any law is passed at all. But if it does, and if the final product of the law is seen by the market as (on net) non-hostile, coherent, and fair, it could allow for the industry to flourish and even attract a great deal of institutional investment over the long term.

Ethereum launched a new so-called “Beacon Chain” in May and is now working on “dress rehearsals” for its long-awaited ‘merge’ to a proof-of-stake (PoS) blockchain. This was one important milestone for the Ethereum Foundation’s push to migrate the blockchain to a lower fee and more eco-friendly proof-of-stake model.

The Ethereum blockchain still has Q3/Q4 2022 listed as the timeframe for the merge, but Vitalik Buterin hinted at a recent conference that it may take place early: sometime in August.

Once the ‘Merge’ does take place, if it goes relatively smoothly, and if hiccups are resolved fast enough, it would be reasonable to expect an upward push on the price as lower transaction fees allow for a great deal of functionality.

Crypto news for the week ahead

13 June
FTX will delist RUNE spot markets but plans to consider its relisting after future mainnet integrations.

End-of-month in June
The Cardano (ADA) community awaits the “Vasil hard fork” of its blockchain. The upgrade will increase the block size limit (allowing for more transactions per block) and hopes to achieve lower transaction fees.

19-21 July
The Ethereum community will launch a major event in Paris in July: the upcoming Ethereum Community Conference. It will host “more than 100 speakers… from all over the world, multiple side events, meetups, panels and parties”.

Top 10 Crypto Summary

A hard hit for all (non-stablecoin) assets in the top 10 digital assets by market cap this week with Ether (ETH), Solana (SOL) and DogeCoin (DOGE) in double-digit price drops. The Ethereum blockchain still awaits the long delayed migration from proof-of-work (PoW) to proof-of-stake (PoS), which is currently scheduled for the second half of 2022 — although it is rumored to possibly launch “early” (albeit after years of postponements) in August if all goes smoothly.

Bitcoin Price Chart

Glassnode’s special report this week provided a fascinating visual of the dynamic nature of Bitcoin mining in both bull and bear markets. The report noted that in 2021’s bull run, which peaked in November, mining companies used their profits to buy new mining equipment. Once employed, this spiked the digital asset’s difficulty adjustment. (That is, it became more difficult to successfully mine bitcoins). Consequently, real world energy costs went up for the miners. Glassnode makes the point that miners are feeling the pinch in the present bear market with increased costs and reduced revenue.