Ember Nuggets #10

What are Ember Nuggets?

Ember Nuggets are a weekly update with commentary from the investment team on what’s happening within the crypto market - news, developments, market trends, and more.

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Nugget 1: ETH All-Time High and Busier than Ever

Ethereum hit an all-time high on 10/29/21 when it briefly touched $4,453 and reached a market capitalization of $500B+. Ethereum has had increased usage over the past few months with increased adoption, launch of NFTs and increased activity on DeFi protocols (TVL has surpassed $150B+). It remains as the main landing pad for many crypto enthusiasts, builders and newbies, along with the support of bridges to most other chains.

What does this all mean? Increased adoption and utilization leading to high gas fees and record burning. The last two days suggest that more than 30,000 ETH has been burned – and led to negative net issuance in ETH (more ETH is being burned than mined = deflationary).

The burning dynamics highlight that enough demand can lead to a deflationary Ethereum even without ETH 2.0 which is slated for some time in 2022 – but also due to increased gas prices which make many low value transactions difficult. Nonetheless, this is bullish for ETH longer term, especially since there are many L2 projects focused on scaling ETH.

Some of the recent gas spikes can be attributed to the resurgence of memes, especially the Shiba wars between Shiba Inu and Doge.

Nugget 2: Bitcoin Dominance Falls

After hitting an all-time high last week on the heels of regulatory approvals, BTC has seen a small pullback partially driven by leveraged liquidations of open interested positions. The other reason – Crypto Fear and Greed Index is nearing all-time highs last seen in Q1’20 – this had led to a rotation from BTC to alt-coins causing a drop in BTC dominance. Investors are starting to make bets on riskier coins hoping that the recent positive momentum in the space will fuel alt-season. Look no further than the memes.

We believe it’s too early to worry about a pullback since the overall market momentum seems positive and is supported by strong and continued innovation in the space (memes aside).

Nugget 3: Broad Market Adoption Continues

The Wharton School at University of Pennsylvania is launching a new crypto program and will accept crypto for payments. It is the first IVY league school to accept crypto and likely will be the first of many dominos.

Mastercard also continues to make waves with a big week in crypto. The company made a partnership with Bakkt to allow crypto transactions between businesses and consumers, powered by swiping their Mastercard. Here is a quote from the PR:

“Mastercard customers can now enable consumers to buy, sell and hold cryptocurrency, deliver unique, crypto-centric loyalty opportunities, and streamline issuance of branded crypto debit and credit cards”

TLDR; A top-5 business school started accepting crypto and the #2 payment processor is making it easier for merchants and consumers to use crypto for their purchases.

Thank you for reading!

Harsharn Singh
Investment Associate | Ember Fund