Why I'm Bullish On Ethereum

Hey LinkedIn,

All eyes have turned to Ethereum this week as withdrawals finally arrive.

I’m here to help answer two of the most pressing questions I’ve seen this week:

1. Did large-scale sell-offs happen?
2. What’s the bullish case for Ethereum now the Merge is done and dusted?

Let’s jump into it! ??

Sell pressure = overstated.

The bears were wrong, with a very minimal amount of the unlocked $33B ETH withdrawn and an even smaller amount sold. ETH’s price did the opposite, rising 10% in the past 7 days as it led the market.

Despite heavy initial withdrawals, deposits increased, resulting in net inflows in the last few days. Much of this came from Kraken, who was forced to withdraw and return ETH to its users due to regulators.

The analysis holds up.

Our initial analysis has proven to be on the right track, with withdrawals shown to be a “positive unlock” rather than a negative because it:

• De-risked ETH → proves withdrawals work.
• Encourages higher adoption and staking (ETH staking is only ~15%).

Now we know ETH withdrawals work, and the unlock was positive rather than negative; let’s answer the second question,?what’s the bullish case for Ethereum now the Merge is done and dusted?

Withdrawals were critical because they finally put the Merge behind us, allowing developers to focus on other upgrades.

• Expect the next upgrade (EIP4844) to target scalability to make Ethereum-like networks much cheaper, shaping the next significant catalyst heading into 2024.

Outside of scalability, I'm optimistic about Ethereum’s medium-long-term potential due to the impact of its diminishing supply and reducing issuance. The deflationary aspect of ETH could create a supply shock in the market if we see growing demand in the coming years.

We already see this impact as the ETH supply has fallen for the 2nd consecutive month.

• Since Ethereum merged last September, ETH supply has decreased by almost 100K ETH. (If this had never happened, ETH would have increased by 2.4M)

Although I remain relatively bullish on ETH, it isn’t to say there will be no pressure on ETH, especially in the short term amid heightened regulatory pressure.

Overall, ETH has much to like, especially now withdrawals are live and users (possible institutions) can participate in Ethereum more confidently.?

ETH becoming a scalable, interest-bearing productive asset is a significant catalyst heading into the next bull market.

U.S regulator continues to ramp up action against exchanges

What happened??The U.S. Securities and Exchange Commission (SEC) charged crypto exchange Bittrex for illegally offering securities, citing 6 cryptocurrencies, most notably Algorand (ALGO). The SEC also?proposed?a new rule to require digital asset exchanges and decentralised finance platforms to register.

Why does it matter to you??The action could indicate it’s a strategy to go after smaller exchanges before ultimately targeting market leader Coinbase. It could have massive implications, as the SEC claims “clarity” is not the issue but rather “non-compliance”, meaning there is a serious risk many altcoins could be delisted from U.S exchanges.

SEC Chair faces grilling from Congress over crypto stance

What happened??Gary Gensler, the Chair of the SEC, faced a grilling from U.S. politicians over his handling of the crypto ecosystem. There is growing pressure on the SEC Chair, with a lawmaker introducing legislation to?remove?him due to a “long series of abuses”.

Why does it matter to you??U.S. politicians may have to step in to provide clarity due to turf wars and inconsistencies between the CFTC and SEC. After all, market leader Coinbase is considering moving offshore due to the hostile environment in the U.S. The argument gained some legitimacy as Gensler seemingly could not clarify crypto tokens such as ETH despite saying there is no such issue.

Is Russia planning cryptocurrency international settlement?

What happened??There's growing potential for Russia to use cryptocurrency in international settlements. The Bank of Russia hinted they’re working on using and mining cryptocurrencies exclusively for export-import deals.

Why does it matter to you??There is no more big legitimising event than countries mining and using crypto. However, if true, it could create second-order effects if the move is to skirt international sanctions.

Thanks for reading the new and improved Weekly Shift. I hope you've enjoyed it and look forward to seeing you next week.

I'd love to hear any feedback; please shoot me a message if you have any feedback!

Regards,

Ben Simpson