Every year brings a new narrative in crypto.
Back in 2016, when crypto was only on a few investors’ radars, the narrative was that the SEC was going to approve a bitcoin ETF.
That drove crypto prices higher for most of the year, although it never happened (and still hasn’t).
2017 brought about a new narrative: the initial coin offering.
These were “altcoins” built on top of the Ethereum protocol.
Altcoins brought about a full-blown crypto mania, sending bitcoin up 20X in that year alone.
When the mania ended and 2018’s bear market arrived, “stablecoins” were all the rage.
Crypto investors were looking for safety and security. So they scooped up tokens that were pegged to real-world assets, such as the U.S. dollar.
In 2019, after retail investors had all but left, institutions started showing up.
JPMorgan Chase launched JPM Coin to track and transact clients’ assets.
Fidelity set up an institutional crypto platform.
And Facebook announced its own stablecoin called Libra (although it never launched).
2020 was the year that decentralized finance (DeFi) burst onto the scene.
Crypto investors began providing liquidity on decentralized exchanges.
Yield farmers discovered 1,000%-plus yields.
And DeFi token prices rocketed higher.
Last year was the rise of Layer 1 coins to rival Ethereum.
Protocols such as Solana (SOL), Near (NEAR) and Terra (LUNA) are the building blocks of the crypto ecosystem.
DeFi and NFTs exploded on all these chains.
But Ethereum has yet to be toppled as the king of the hill.
There are some major upgrades ahead.
And that’s why ETH is this year’s driving crypto narrative.
The Empire Strikes Back
This is the year that the empire strikes back.
No, I’m not referring to Darth Vader and the First Galactic Empire.
This year is all about strengthening Ethereum’s empire.
With a market cap of $361 billion, Ethereum is the second-largest coin by market cap.
That makes it over 5X larger than its nearest rival, Binance Coin (BNB).
It’s 12X larger than Solana.
And it could get even bigger in the near future.
That’s because the Ethereum Merge, the biggest upgrade in ETH’s seven-year history, is scheduled for June.
Ethereum Is Going Green
The Merge will take Ethereum away from a proof-of-work (PoW) chain to one that’s proof-of-stake (PoS).
This should make climate change activists giddy.
Currently, Ethereum uses 113 terawatt-hours per year. That’s about as much as the Netherlands.
And it’s at a time when energy is becoming more and more scarce.
Instead of the energy-intensive mining that happens with PoW, PoS only requires validators to stake their tokens.
By switching to PoS, Ethereum is effectively going green.
Stakers Will Be Rewarded
It’s called the Merge because its main blockchain will merge with the “Beacon Chain.”
That’s where Ethereum’s proof-of-stake system has been tested since it launched in December 2020.
About 5% of ETH’s total supply has already been staked there.
And stakers will be rewarded.
According to a few sources familiar with the upgrade, stakers will earn yields of 7% to 12%.
That’s more than the rate of inflation. And it’s 10X more than a bank pays on your savings account.
The upgrade will cut new daily issuance by 90%, from 12,000 ETH per day to 1,280 ETH per day.
I learned in Economics 101 that less new supply with constant demand leads to higher prices.
The Fastest Crypto Blockchain
Now, this is just one step in Ethereum’s upgrade.
After this, developers will introduce methods to ease network congestion and speed up processing.
These upgrades will allow ETH to transact at speeds up to 100,000 transactions per second, making it the fastest crypto blockchain.
That’s why it’s the year of Ethereum.
Regards,
Editor, Strategic Fortunes
Morning Movers
From open till noon Eastern time.
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Galaxy Digital Holdings Ltd. (OTC: BRPHF) is an asset management firm that operates in the digital asset, cryptocurrency and blockchain technology industry. It is another crypto-related stock that is up 13% today thanks to the rally in the crypto markets.
Compass Inc. (NYSE: COMP) provides real estate brokerage services through an integrated cloud-based platform. It is one of the tech stocks that is up 13% today as investors bought the dip following the Federal Reserve’s signal that it may raise rates more aggressively.
GameStop Corp. (NYSE: GME), the meme stock and specialty retailer of video games and video game-related products, is up 12% this morning. There is no fundamental news driving the move; rather, it is up due to renewed interest from retail traders.
