Crypto weekly update
21. July 2022  • clock 5 min •  Daniel Mitrovsky

Ethereum’s Transition to POS Is Around the Corner – Crypto Weekly Update

This week, the total market capitalization exceeded 1 trillion EUR. The increase at the 7-day interval is 12.11%. Bitcoin increased by 12.19% during the week to a current value of over €22,360. Bitcoin dominance is 42.7%.

Source: Coinmarketcap

Ethereum’s Transition to PoS Is Around the Corner

The long-awaited transition of the Ethereum network from the Proof-of-Work algorithm to a new model called Proof-of-Stake is just around the corner, according to Ethereum developers.

On the Ethereum most recent developer conference call, held last Thursday, lead developer Tim Beiko proposed September 19 as a tentative target date for the merger of the Beacon chain with the new Proof-of-Stake system. The proposed target date didn’t face any objection from the core developers.

A few hours later, one of the developers known on Twitter as superphiz.eth published a post about an updated roadmap of the development phase of The Merge, in which he marked September 19 as the date for the PoS transition. The final testing of the PoS transition is expected to take place the second week of August on the Goerli test network. After the transition of the testnet to PoS, the main Ethereum network should become the developers’ priority.

The transition of the Ethereum network to Proof-of-Stake will bring with it a reduction in the energy cost of the network by up to 99.9%. The network will no longer feature miners but will be replaced by validators, who will guarantee the validity of blocks with their staked ETH coins. Ethereum also plans to introduce so-called sharding over time, which should increase the scalability of the network, potentially up to 100,000 transactions per second. Source

Bitcoin in the Longest Ever “Extreme Fear” Phase

There is no doubt that the last few months have been very challenging for investors in the cryptocurrency market. This is also depicted by one of the classic crypto market indicators, whose value has reached a new record streak.

The Fear & Greed Index, which measures the sentiment of the cryptocurrency market based on various criteria, spent the past 70 days from May 5 to July 15 in a phase of extreme fear. This is a new record streak for the index, directly reflecting investor behavior in the market.

The last day the index was above the 25-point level, which is already outside the “extreme fear” phase, was on May 5, 2022. 

As of today, the index is at 34 points, signaling that the index has moved out of the “extreme fear” phase and into the “fear” phase after a long time. The low values of this index have historically proven to be excellent entry points for investors, after which the cryptocurrency market as a whole used to rise significantly. Source

Celsius Declared Bankruptcy

In last week’s market overview, we informed you that Celsius Network, a lending company that has run into significant liquidity problems in the current bear market, was able to pay off several loans on decentralized protocols and, as a result, access several hundred million dollars in collateral.

Just one day after the company managed to pay off the last loan on the Aave protocol, Celsius, under the leadership of Alex Mashinsky, declared chapter 11 bankruptcy.

Celsius representatives appeared in court on Tuesday for the first hearing regarding the bankruptcy. They appeared at the hearing with a presentation outlining their plans to compensate clients. A document from the hearing states that the company wants to create a plan that will allow users to take cash “at a discount” or opt for a “long crypto”.

Financial Times reporter Khadim Shubber posted a partial transcript of the first hearing on Twitter, in which lawyers representing Celsius said the recovery plan does not include liquidating the company and that the company will not in any way force investors to take their recovery in fiat. According to the lawyers, most clients are confident about getting through a challenging period in the cryptocurrency market. Should market sentiment adjust and asset prices go up, the company could become liquid and solvent again.

Celsius’s bankruptcy filing last week indicated that Celsius had $4.3 billion of assets. It also had $5.5 billion of liabilities and owed $4.7 billion of that amount to its user base. Additionally, the company’s legal counsel revealed that the company currently has crypto assets worth $1.75 billion, down from $14.5 billion in March. Source

BTC Mining Costs Fall to 10-Month Low

The costs associated with mining the most popular cryptocurrency on the market have fallen to a 10-month low in recent weeks. The drop in mining costs is related to the fact that mining hardware has become more efficient and that the mining difficulty parameter has dropped by 6.7% since its May peak.

JP Morgan’s strategy department, headed by Nikolaos Panigirtzoglou, said in its latest report that the average cost of mining one Bitcoin has fallen from $24,000 to around $13,000 over the past few months.

Lower BTC mining costs can potentially ease the pressure on BTC sales by miners while improving their profitability. At the same time, strategists at JP Morgan have warned that “the decline in the production cost might be perceived as negative for the Bitcoin price outlook going forward.”

Some analysts see the cost of mining one BTC as the lower bound for the BTC price range during a bear market. If the price of Bitcoin was to fall to a level of roughly $13,000, it would mean the price of Bitcoin would fall by 80% from its price peak reached in November, which would be consistent with previous bear markets during which Bitcoin has lost an average of 80% of its value from its peak to the dip. Source

Vladimir Putin Signs Law Restricting Cryptocurrencies

Russian President Vladimir Putin has signed a law banning the use of digital currencies as one of the possible payment methods.

The news was reported late last week by the State Duma, which noted that Putin had signed a bill suspending some parts of the existing law on banks and banking activities. The suspension of selected parts of the law effectively prohibits users from using cryptocurrencies to pay for goods and services.

The Russian Parliament is currently considering two other bills related to digital assets. One will potentially regulate the activities of cryptocurrency miners in the country, requiring them to follow a certain procedure to register as sole proprietors or self-employed. 

Another proposal, called “digital currency,” proposes to impose various requirements on firms that engage in digital asset transactions, including licensing and risk disclosure and privacy. Source

Interesting Fact: Inflation in the US Is at a New High Again

Based on last week’s data, the Consumer Price Index (CPI) in the United States rose by 9.1% year-on-year. This is the highest increase in inflation in 40 years, which is also above the expectations of experts, who had expected inflation to rise by 8.8% YOY.

US energy prices surged 7.5% on the month and were up 41.6% on a 12-month basis. The food index increased 1%, while shelter costs, which make up about one-third of the CPI, rose 0.6% for the month and were up 5.6% annually. This was the sixth consecutive month that US food prices rose by at least 1%.

The Federal Open Market Committee has its July meeting scheduled for 27-28 July. During that meeting, the key interest rate is expected to rise by 75 basis points (0.75%), with some analysts predicting a rate hike of up to 100 basis points following the latest inflation news. Source

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Daniel Mitrovsky


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