Tough week for BTC. US jobs data caused markets to dip last Friday, despite 20 consecutive days of inflows and billions in inflows. This week we’re in for more volatility, with potential inflation signals from the upcoming US CPI report and the Fed interest rate meeting.

Despite the shaky week, the fundamentals still look good. Bullish indicators:

• Long-term Bitcoin holders that were aggressively selling through Q1 and early Q2 are now re-accumulating BTC. Inactive supply for holders has remained relatively unchanged, meaning they’re holding, not trading.

• Bitcoin whales are accumulating BTC at a pace similar to the pre-2020 bull run, and they are currently sitting at new historical highs in nominal value for their Bitcoin holdings.

However, there are some risk factors to consider. Since January, short-term BTC holders have been accumulating and now command over 3.5 million BTC. This concentration around the current spot price shows interest in this range but also increases market volatility, since short-term holders are more likely to jeet. If BTC drops below $68K, we might see some of these short-term holders dumping as it weakens their conviction.

ETH

ETH's situation remains largely unchanged from last week. There hasn’t been any updates from the SEC regarding comments on ETF issuers' S-1 filings. Analysts are expecting the S-1 forms to go through at least two more rounds of draft filings before they are ready.

I think the lack of communication between the SEC and ETF issuers are making ETH holders uneasy, resulting in a slow sell off.

Fundamentals for ETH have also not been great. DAU and daily tx volume has been on a slow steady decline the past few months, meanwhile Solana has seen an explosion of on-chain activity. However, ETH remains to be the favored chain for Larry Fink, meaning there is significant long-term growth potential.

Project Updates

Gonna start posting project updates on a weekly scoop basis. These updates will mostly be for projects I’m interested in and/or use.

• EigenLayer TVL surpassed $2 Billion

• zkSync released new domain and hints at airdrop soon

• StarkWare announced plans for Bitcoin L2 using zk-proofs

• Swell announced $SWELL airdrop plan

• IO.NET airdrop claim starts June 11 + Binance launchpool

It can be overwhelming to keep up with everything, so what I typically do is look at on-chain data to identify potential trends, then I turn to twitter to find social evidence that supports my narrative thesis, and vice versa. So with that, lets take a look at what I’m seeing in the market:

Solana vs. Base summer

So towards the end of last month, I started seeing more and more posts spotlighting Base and its ecosystem for summer. The key developments that fueled this narrative appear to be the Coinbase Smart Wallet integration and the ETH ETF, which is expected to improve retail onboarding to Base and boost value to Ethereum’s ecosystem.

If we take a look on-chain, we can see that Base has experienced a greater percentage change in DAU, daily transactions, and DEX trading volume compared to Solana. In other words, despite Solana having higher absolute figures, Base is showing a faster rate of growth, especially towards the end of May.

Personally, I think both ecosystems will perform well throughout the summer, but one major pain point with Solana is the sheer number of tokens being minted each day. There are over 10,000 tokens being minted each day in Solana, which means that liquidity is fragmented that much more.

For Base, it seems like liquidity is more concentrated to a handful of higher quality projects and there is just less choice overload bias.

I don’t recommend full porting to Base, but I think it is a good time to move some funds, if you haven’t done so already, and pick up a few good memes and high-quality projects. I expect to see more and more retail users onboard to Base over the summer, and memes are always a great vehicle for retail liquidity.

We’re so f*cking back! Ever since Bitcoin hit ATH ($73,600) in March, many long-term holders have been dumping their BTC, increasing available supply and causing prices to chop and dip. But it looks like this correction phase is coming to an end.

In the past two weeks, Bitcoin ETFs have seen a surge in demand, averaging daily net inflows of $136 million per day, despite the $260.6 million outflow from GBTC last week. This is over four times the $32 million daily sell pressure from miners after the halving.

On top of that, Bitcoin reserves on exchanges have also been thinning as long-term holders who sold at the peak are now buying back Bitcoin for the first time since December 2023.

Meanwhile the number of accumulation addresses have been steadily rising the past few months.

ETH

Ethereum has been fairly quiet the past week, crab-walking for the most part with a small dip in price. However, I think this could change in an instant.

The number of ETH accumulating addresses saw sharp rises post ETF announcement, and is continuing to grow, although growth has tapered a bit. I think ETH is slept on right now. We have a spot ETF approved and the ETF product is expected to go live next month, and its trading under $4K… absolutely shameful.

Macro tings

In the broader economy, US consumer confidence is showing mixed signals - Conference Board reported an unexpected rise, but sentiment index fell sharply. Q1 GDP growth was revised down to 1.3%, showing slower consumer spending and lower inflation. High interest rates and less fiscal support are affecting spending, with PCE prices staying relatively stable amidst low saving rates. So what does this all mean? Well, we could potentially be seeing more Fed rate cuts later this year.

Meanwhile in crypto news;

• Tether invests $150 million into Bitcoin miner Bitdeer to expand.

• NYSE and CoinDesk Indices are launching cash-settled Bitcoin options.

• Franklin Templeton, VanEck, and Invesco Galaxy are gearing up to launch spot Ether ETF products.

• BlackRock's iBIT has become the largest Bitcoin ETF, overtaking GBTC.

• Hong Kong announced approval of 11 applicants for virtual asset trading platform licenses.

• Upbit listed three tokens — Bounce, Stargate Finance, and BEAM — in the past three days, amidst the upcoming Virtual Asset Investor Protection Act, set to take effect in July.

• Japanese crypto exchange DMM’s Bitcoin wallet was hacked for $306 million.

On-chain sucks rn

Found a really good tweet by @NFTSWIMM3R who aptly summarized the state of on-chain trading lately.

Lately, I find Ethereum's on-chain landscape pretty bleak with limited market opportunities, so I haven't done much on-chain trading on Eth in the past few months. Most of my on-chain activity has been focused on farming LRTs and some L2s.

I’ve shifted most of my on-chain degen activity to Solana, more specifically memes. I haven’t quite honed my edge yet, regularly round-tripping 4~5 figures, but overall I’m net positive with hours of observations and lessons as my edge.

Meme supercycle

Ok, I know I’m like the 211th person to call for a meme supercycle, but with DWF founder tweeting that they would be getting more involved with memes, I felt it was worth bringing to attention.

I think honing your edge in trading memes and figuring out DWF’s criteria for picking quality memes could be a very lucrative opportunity, especially if you can pick out a basket of quality memes that DWF and other MMs might be interested in.

Personally, I think insiders and bots will extract most of the retail value from memecoins, but I expect there will be plenty of time-sensitive opportunities to multiply your money here and there.

Closing thoughts

I think crypto right now is in a dilapidated state. Not really seeing much innovation with products. Everyone is just gambling on memes because its easy. There are very few real communities, and users are quick to leave after airdrop or rewards.

BTC & ETH

Last week (5/19~5/26), crypto markets showed strength as BTC stayed above the crucial $62,000 level, propped by the unexpected approval of the ETH Spot ETF. BTC and ETH both jumped early in the week expecting the announcement, but then dropped after it was confirmed. Obviously this is great news for the industry, but the SEC made it clear that ETH ETFs won't give out staking rewards. I think this significantly reduces institutional appetite for an ETH ETF.

Positive political headwinds in the US and crypto galvanizing bi-partisan support also seems to have renewed institutional interest in BTC, with positive ETF inflows for 10 consecutive days, as of end of last week, resulting in BTC climbing to the $68,000 range.

ETH's price surge appears to be driven by action in the perp futures markets, evident by the sharp rise in open interest and a spike in ETH's spot price. This usually means more bold moves by traders in the futures market, which likely fueled last week’s sharp price increase. The positive funding rate also shows bullish vibes, with traders expecting the price to keep climbing.

Looks like the $4,000 resistance level is a key psychological barrier for ETH, with big liquidations on both longs and shorts as we chop sideways. If buyers can push past this level and keep up the momentum, we might see a strong uptrend aiming for a new all-time high, but I expect to see more sideways movement and increased volatility before the next big move happens.

Other Noteworthy News

• Trump Campaign Officially Accepts Cryptocurrency Donations <link>

• U.S. House Passes FIT21 Cryptocurrency Bill <link>

• Uniswap Responds to SEC Wells Notice, claims tokens are ‘Alternative Assets’ <link>

• Coinbase Announces Retail Launch of Oil and Gold Futures Contracts <link>

• Hong Kong Securities and Futures Commission in Talks to Allow Ethereum ETF Issuers to Stake <link>