Weekly Market Update - Friday, April 14, 2023

Crypto News: What Happened This Week?

Takeaways

The Ethereum Network implemented the Shapella upgrade on Wednesday, giving ether (ETH) stakers the ability to withdraw their crypto for the first time. ETH reached a new eight-month high despite concerns around potential ETH supply coming onto the market, trading above the $2,100 USD level. Render Network benefitted from the increased interest in Artificial Intelligence (AI), with its RNDR token trading up ~30% this week.

U.S. inflation came in a touch softer than expectations and continued to trend lower in March, but more interest rate hikes could still be on the table. Market participants expect a further rate hike in May, with a potential shift in policy coming in June.

Crypto Prices Continue to Show Strength

Ether (ETH) and bitcoin (BTC) continued to rally higher this week, with ETH breaking through the $2,000 USD level and BTC briefly hitting ~$31K USD. This is a continuation of the positive price movement we’ve seen over the past few weeks, with investors looking toward the possibility of monetary policy easing from the U.S. Federal Reserve as early as the second half of the year.

Following Ethereum’s Shapella upgrade, there was no dip in ETH prices as some had predicted. The upgrade was successful and as planned, which could have helped send ETH rallying through the $2,000 USD resistance level. The ETHBTC pair rallied from 0.062 lows on Wednesday to 0.066 after the upgrade, and surpassed 0.068 by Friday.

Ethereum’s Shapella Upgrade Goes Live in a Smooth Transition

Ethereum's long-awaited Shapella upgrade went live around 6:30pm ET on Wednesday. This marked the first major update since the Merge and enables users to withdraw their staked ETH as well as optimize gas fees on the network for certain transactions. Despite concerns leading up to the event that the upgrade could bring a wave of withdrawalscausing a flood of ETH supply, the price of ETHheld above the $1,900 USD mark and has since pushed higher to briefly break the $2,100 USD level for the first time in almost a year.

As of Friday morning, pending withdrawals of staked ETH from Ethereum surpassed 1.13M ETH (~$2.38bn USD). However, given there are limitations on the amount of ETH that can be withdrawn at one time, the market is less likely to see supply hitting all at once.

As expected, Kraken made up a large proportion of initial ETH withdrawal requests following the upgrade. In February, Kraken agreed to shut down its staking program in the U.S. and pay a $30M USD fine as part of a settlement with the SEC. Kraken confirmed before the Shapella upgrade that all the locked ETH on the platform from U.S. clients would automatically enter the unstaking process once the upgrade went live. On Friday morning, data from Nansen Query showed that ETH staked through Kraken made up over 60% of the exit queue of validators moving to unstake.

Inflation Dips Again But Uncertainty Remains

On Wednesday, U.S. inflation data showed that the headline consumer price index (CPI) came in at 5% YoY for March, lower than the expected 5.2%, reaching its lowest level since May 2021. The core CPI came in at 5.6% YoY matching expectations.

Equity markets and crypto initially rallied on the news, but prices pulled back later in the day after the Federal Open Market Committee (FOMC)’s March meeting minutes were released.

The minutes revealed that further rate hikes have not been ruled out and it is likely that the economy would slide into recession later this year as a result of the fallout from the U.S banking crisis. On Friday morning, market participants were pricing in an 82% chance of another 25bps rate hike in May, with many expecting that to be the last increase before a policy pivot and rate cuts by the end of the year.

AI Buzz Enters Crypto World

Render Network (RNDR), a provider of decentralized graphics processing unit (GPU) rendering out-performed this week, trading up ~30%. The surge in interest around AI, along with increased demand and supply shortages in GPUs have brought more attention to RNDR this year.

On Monday, Jules Urbach the founder and CEO of Render, tweeted “RNDR has a massive supply of high-density GPU power to power AI inference.” Render's ability to provide some of this much-needed supply, its integration with Apple earlier in the year, and the surging AI narrative could have played a role in RNDR gaining +300% since the start of the year.

-From Onyx Finance Trading Desk.