Daily News | Volatility in Crypto Markets as US Interest Rate Forecasts Revised Ahead of Ethereum's Shanghai Upgrade
Crypto Daily Digest: Potential Catalyst Shapella Update in Focus as BTC and ETH Face Volatility Over US Monetary Policy Concerns
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Investors are revising their US interest rate forecasts, causing Asian shares to fall after higher-than-expected inflation data led to a sharp drop in Australian equities and futures for Japanese and Hong Kong benchmarks. The new market pricing indicates that US rates may peak at 5.4% this year, compared to less than 5% just a month ago. The US will also impose a 200% tariff on Russian-made aluminum and related products, and Treasury Secretary Janet Yellen has warned China and other countries against supporting Russia. These developments could have an impact on global manufacturing supply chains.
In Wall Street, China’s efforts to revive its economy and attract foreign investment are facing challenges as hedge funds reduce their positions and institutional investors remain cautious. Although President Xi Jinping’s recent market-friendly policy reversals initially sparked a stock rally, investors are now receiving mixed regulatory messages, and geopolitical tensions are increasing. While some investors remain optimistic, many are hesitant to allocate to China in the long term.
Bitcoin (BTC) and ether (ETH) have both experienced a decline of 4.5% and 3.1%, respectively, over the past seven days, which is attributed to concerns about inflation and monetary policy. The US Commerce Department’s report indicating a higher-than-expected increase in the PCE price index in January further accelerated the decline on Friday. However, despite this dip, BTC and ETH have still shown impressive year-to-date gains of 42% and 37%, respectively. Among L1s, Klaytn (KLAY) was the top-performing asset with an 8% increase, while Fantom (FTM) experienced a 13% decline.
Speaking of Ethereum, the Foundation has announced the upcoming activation of the Shapella network upgrade on the Sepolia network. This event is scheduled for 4:04:48 AM UTC on Feb. 28, 2023, at epoch 56832, and it will allow for withdrawals. Traders should exercise caution as there may be potential volatility.
Topic of the Day: What to Expect from Ethereum‘s Shanghai Hard Fork in March 2023
Ethereum‘s upcoming Shanghai hard fork, scheduled for March 2023, is one of the most significant developments for the Ethereum network. It marks a milestone in the development of the largest altcoin in the crypto eco, and its success could have a significant impact on the altcoin’s price.
The Shanghai hard fork introduces several key improvements, including the ability for stakers and validators to withdraw assets from the Beacon Chain. This is a crucial feature as staking has been a one-way trip until now, with funds locked in the deposit contract while Ethereum developers built out the network in real-time. The ability to withdraw staked coins and accrued rewards could drive competition between staking protocols and increase the popularity of ETH staking.
To ensure the success of the Shanghai upgrade, developers have scheduled testnets, including the Sepolia testnet, which is critical for ETH holders. The private testnet will allow developers to test smart contract functions using a special testnet currency called Sepolia ETH, and only approved entities can operate validator nodes on Sepolia testnet’s new consensus layer.
The Shapella hard fork, a combination of two forks (Shanghai and Capella), will activate on the Sepolia testnet at 4 am UTC. It follows months of testing and will introduce new functionality to both the ution and consensus layer.
The Shanghai hard fork also includes several Ethereum Improvement Proposals (EIPs) related to gas fees, the transaction cost paid to the Ethereum blockchain. Gas fees can be expensive for users during high activity, so developers are focused on introducing mechanisms to reduce high gas fees for those building on the blockchain. The four EIPs bundled in the hard fork aim to reduce gas fees for developers and create a code that lowers gas cost.
The success of the Shanghai upgrade is critical for the Ethereum network and could potentially have significant implications for the crypto market. The ability to withdraw staked coins and accrued rewards could lead to a flood of ETH tokens into the market, and it remains to be seen how this will affect protocols such as Lido, Rocketpool, and StakeWise that currently dominate liquid staking. Additionally, the upgrade could impact the altcoin’s price, and its success could drive more competition between staking protocols to users’ benefit while also improving the security of Ethereum‘s new PoS chain.
Ether (ETH) $1636.51 (-0.31%) - Neutral Outlook
Overview:
- Closest hourly support zone: 1630.4 - 1624.8
- Closest hourly resistance zone: 1647.4 - 1660.5
- Key Level: 1611.8 (Weekly Close of Feb. 08 - 15. 2021)
The rebound we saw yesterday nicely set up a short-term bullish outlook for ETH as the low of the retracement did not exceed the daily Fibonacci golden zone. An additional bullish sign is the RSI divergence spotted on the 4H timeframe. However, based on the volume profile indicator, it is likely that ETH will face hurdles between a supply zone of 1690 - 1710 even if it makes a successful breakout from the current triangle pattern, which signals indecision among traders. On the contrary, if ETH closes below the 200EMA yet again, it may see further bearish action and target 1482 - 1428.
Hourly Resistance zones
- 1647.4 - 1660.5
- 1684.3 - 1711.0
- 1725.7 - 1738.2
Hourly Support zones
- 1630.4 - 1624.8
- 1617.7 - 1608.0
- 1598.5 - 1562.4
