A defining week for crypto

Bitcoin flirted with an all-time high last week while the crypto world anxiously awaits election results and interest rate adjustments. In addition, Ethereum's future plans are becoming more concrete, with ambitious upgrades on the horizon. Read more in this edition of Bitvavo Market News.

Market update

Bitcoin started and ended last week at €63,000, despite reaching a new record high of €68,000 during the period—just above the previous peak of €67,500 on 14 March. In spite of this, it's too early to celebrate. For the crypto market, prices in dollars are the primary reference point, and there we have not yet seen an all-time high.

The coming week is likely to be turbulent. On Tuesday and Wednesday, the results of the US elections will be revealed, and on Thursday the US central bank will decide on interest rates. Both events have the potential to significantly impact financial markets.

From a slightly broader perspective, there is a clear shift in the crypto market trend. After six months of lower highs (LH) and lower lows (LL), we are now seeing a higher high (HH) for the first time. If the trend has indeed reversed from a decline to an upward trajectory, we would also expect a higher low (HL).

Over the past year, bitcoin has taken the lead in the crypto market. Its market share has been rising steadily for three years. Many altcoins are still well below the peak of the previous bull market, however there is one exception: Solana, which made a remarkable comeback after the depths of the bear market.

Where many new blockchains resemble ghost towns, the Solana ecosystem is buzzing with activity. Admittedly, much of this is driven by private investors speculating on new memecoins, but still. It could well be that SOL's price is a good benchmark of overall enthusiasm within the crypto market as a whole.

The chart below shows the price of SOL over the past year. Two clear boundaries emerge: €170 at the top and €111 at the bottom. These could give an indication of the direction the crypto market will take in the coming year: either upwards or downwards.

Featured

Ethereum founder Vitalik Buterin has been busy this year. Noteworthy is his series where he writes about the potential future pathways for Ethereum. Here he discusses the upgrades in the pipeline for Ethereum going forward:

• Part 1: The Merge

• Part 2: The Surge

• Part 3: The Scourge

• Part 4: The Verge

• Part 5: The Purge

• Part 6: The Splurge

The entire network is undergoing a planned metamorphosis divided into six parallel paths, each with its own goal and ambition, but all aimed at strengthening the foundation of the network.

• This began with a significant milestone: The Merge. This transition from Proof-of-Work to Proof-of-Stake has been accomplished, but Vitalik and his team have more plans in store. Their goals include accelerating the confirmation of new transactions and lowering the minimum staking requirement from 32 to 1 ETH, allowing more people to contribute to the security of the network.
• Next is The Surge, which ideally dramatically increases the speed at which transactions are processed. The target? More than 100,000 transactions per second. Thanks to techniques such as data compression and "blobs" for storing data from second-layer networks, transactions become smaller and cheaper.
• The Scourge focuses on decentralization. At present, block compilation tends to favor large players, increasing the risk of manipulation. By splitting the tasks of so-called  block builders and introducing improvements such as inclusion lists and encrypted mempools, Ethereum seeks to distribute power more broadly and safeguard users from abuse.
• The Verge aims to simplify running Ethereum, even on a 'standard' laptop. “Stateless clients” allow users to participate without having to process huge amounts of data. Behind the scenes, Ethereum is expected to leverage zero-knowledge proofs to ensure correctness without disclosing the underlying data.
• The Purge is designed to make Ethereum leaner by removing old data and unused functions that unnecessarily burden the network. Using techniques such as history expiry and state expiry, Ethereum ensures that nodes do not have to store all historical data, but still operate safely.
• Lastly, there's The Splurge, a phase where the finishing touches are covered. This includes optimizations for the Ethereum Virtual Machine, where all code execution takes place, as well as features to make user accounts more flexible and secure. The goal is to keep Ethereum robust and future-proof, even in the face of quantum computing just around the corner.

According to Vitalik, these upgrades are more than just individual components; together, they create a layered and carefully designed network ready to set the global standard for decentralized, digital interactions and applications.

In other news

• Tether reports $2.5 billion in profits in Q3 2024. This brings the stablecoin giant's total profit in 2024 to $7.7 billion. Demand for USDT continues to rise, with total issuance approaching a record of $120 billion, 30% higher than the beginning of the year. Tether holds robust reserves, with $102.5 billion in U.S. government bonds. Tether CEO Paolo Ardoino asserts that "by increasing our reserve buffer to over $6 billion and maintaining a focus on strategic investments, Tether is once again setting the standard for stability in the financial space."

• Florida investing $800 million in crypto-related assets. Jimmy Patronis, Florida's CFO, told CNBC that the state is also considering putting a portion of its pension fund into bitcoin. Patronis, who believes crypto is here to stay, wants "to make sure that we're doing everything humanly possible to get 'Floridians' the best return on their investment" and has seen growing interest in the asset class since the 2020 bitcoin conference in Miami. Patronis also raised concerns about government control via central bank digital currency (CBDC) and stressed the importance of financial privacy.

• Bitcoin ETFs reach half the value of gold ETFs. While both gold and bitcoin are hovering around their all-time highs, U.S. spot bitcoin ETFs have already attracted roughly $70 billion in investments in just 10 months. This represents more than 50% of the $130 billion invested in gold ETFs, despite gold funds having a 20-year head start.

• Canary Capital third applicant for spot Solana ETF. The American asset manager is now waiting (along with VanEck and 21Shares) for the regulator's decision. If the Securities and Exchange Commission (SEC) gives the green light, investors will be able to invest in SOL indirectly through stocks that mirror the price, without needing to buy crypto directly. Several analysts link the likelihood of approval to the outcome of the presidential election: with a Trump win potentially benefiting Solana.