GuShiio.com Although the basic orientation is good, the market is currently facing many uncertainties, including the specific implementation of tariff policies and the possible reactions of China and the EU.
Original article: BlockBlick
Compiled by: Yuliya, PANews
After months of violent fluctuations in the crypto market, the new podcast of “BlockBlick” provides a detailed analysis of the recent dynamics of the crypto market, especially the performance of Ethereum and Solana, as well as the future direction of the entire cryptocurrency market. PANews commented on this issue The podcast was compiled.
Ethereum: Low prices and ecological progress
Recently, the Ethereum market has experienced violent fluctuations, setting a record high in single-day liquidation volume. According to Coinglass data,Ethereum’s long and short liquidations in one day exceeded previous major events, including the FTX crash and the Three Arrows Capital crisis. Market sentiment is extremely depressed,Short positions in Ethereum on the CME futures market also hit a new high, indicating that investors lack confidence in Ethereum. Despite this,Some investors use price corrections to make layoutThis week, Ethereum-related ETFs attracted more than $300 million in inflows.
Advances in ecological technology
Despite weak prices, Ethereum’s technology ecosystem is steadily developing:
- Trading throughput reaches a new high:The transaction processing capabilities of the main network and Layer 2 network have reached historical levels, indicating that the network’s expansion capabilities are increasing.
- Gas restriction increases:The Gas limit on the Ethereum main network has been increased by more than 20%, resulting in an increase in transaction volume per second (TPS), while transaction fees have dropped significantly. In the past week, transaction fees on the Ethereum main network have dropped to historical lows. Layer 2 solutions like Base have increased the gas limit to 60 million in an effort to increase network throughput and further expand market demand.
- Tokenized asset growth:The total value of tokenized assets on the Ethereum main network has exceeded US$17 billion, occupying a dominant market position. A large number of physical assets, including loans, commodities and U.S. Treasury bonds, have been transferred to the blockchain, with more than 80% of tokenized assets distributed on the Ethereum main network and its Layer 2 network.
inflation problem
However, low Gas fees also reflect declining Ethereum network usage and slowing ecosystem activity. Ethereum has entered inflation for the first time since the merger. Currently, the supply of Ethereum has exceeded the pre-merger level, which means that the number of Ethereum tokens circulating in the market has increased. By looking at the Ultrasound Money chart, we can see that Ethereum’s deflationary trend has lasted for several years. Since the emergence of Layer 2 expansion solutions, these solutions have reduced their reliance on the main chain, resulting in a reduction in the destruction volume of Ethereum., and the supply of Ethereum has gradually returned to inflation.
However, compared to Bitcoin, Ethereum’s inflation rate is still low,Expected to fluctuate between-1% and +1% in the future。Therefore, despite market concerns, this volatility is expected and does not mean that the long-term health of the Ethereum ecosystem is at risk.
It is worth noting thatOnly 1% of Bitcoin miners ‘income over the past week came from transaction feesThe rest mainly rely on block rewards. Considering the mechanism of halving Bitcoin every four years, if the transaction volume on the main network cannot increase significantly, the income of miners may face challenges in the future.
Solana: Technical stability and Meme coin craze
Improved technical stability
Compared with the challenges of Ethereum, Solana has shown strong momentum. Although its price fell back to $202 from an all-time high of $250, the decline was relatively moderate. Solana Network has recently achieved important milestones:For the first time, a full year of operation without major faults was achievedThis is of great significance in its development process. Especially in the past 35 days, even in the face of peak periods such as the Meme coin craze and the release of Trump’s meme coins, the network has remained stable.
According to Artemis data, Solana is far ahead in terms of the number of daily active addresses:
- Solana: 5 – 6 million active wallets per day
- Base: About 700,000 – 800,000
- Ethereum main network: about 400,000
These developments may affect the competitive landscape of the cryptocurrency market. While Ethereum remains a leader in enterprise-level applications and tokenization of physical assets, Solana’s advantages in performance and user activity cannot be ignored. For market participants, this competitive landscape provides more diversified investment options.
The two-sided effect of the Meme coin craze
The recent activity of the Solana ecosystem is partly due to the popularity of Memecoin, especially the Pump.fun platform. Data shows that the platform can generate about 70,000 new tokens every day, bringing the total number to 7.5 million. According to CoinMarketCap, the total number of Tokens issued is close to 11.04 million, which means Pump.fun has a considerable market share.
However,The craze of Memecoin has also brought some negative impacts: a large amount of money poured into the Memecoin market, resulting in reduced attention to other projects and the dispersion of market funds.In addition, many investors lost money due to the high speculative nature of Memecoin, further weakening market confidence. This is also an important challenge facing the current cryptocurrency market:Although there is a large amount of capital inflows, most of the funds go to short-term, high-risk investments, lacking long-term sustainable projects.In the process, while some projects like Bitcoin and Solana have shown steady growth, others have struggled to continue to generate meaningful value. This situation has put the entire market in an unsustainable state, especially for Ethereum, which remains one of the best projects with long-term value.
Although Solana has made progress in terms of technical stability, on-chain activity has declined recently. Data shows that Solana’s active address number and Memecoin’s trading volume have dropped from their peaks, indicating that the market’s enthusiasm for Memecoin has gradually subsided.The launch of Trump Meme coins is considered the culmination of this crazeBut as speculation wanes, Solana needs to find new growth drivers. In addition, there has been a similar decline in activity in Base and other blockchains, indicating that retail participation across the crypto market is weakening.
At the same time, Bitcoin’s online activity has experienced a similar weakness, and overall blockchain activity is experiencing a wave of decline.An important issue in the current market is that many investors seem to have lost enthusiasm for cryptocurrencies, especially in the absence of enough “cheap money” and large-scale market incentives.Due to the influence of macroeconomic factors such as interest rate hikes, the market’s demand for risky assets has decreased, resulting in the crypto market performing less than expected.
High interest rates, inflation, money supply
Historically, cyclical bubbles and recessions have been common phenomena in the cryptocurrency market. When market sentiment is low, it is usually the moment when new entry opportunities arise. Currently, we are in a period of relatively negative market sentiment and market activity has declined. However, this may just be a precursor to a future rebound. As the Crypto Fear and Greed index shows, when markets are in a phase of fear, they are times when opportunities may arise in the long run. At this point, investors may start to re-layout, and market sentiment may turn positive accordingly.
The main problem in the current market lies in the interest rate environment.A true altcoin bull market, the so-called altcoin season, can only happen when people have access to low-cost funds.However, during the current cycle, as U.S. interest rates remained high at about 4.5%, this situation did not occur in the market.
In terms of market liquidity, from November last year to January 20, when Trump took office, billions of dollars of stablecoins flowed into cryptocurrency exchanges such as Binance and Coinbase every day. However, this strong momentum has weakened at present. Although it still maintains positive inflows, the momentum has dropped significantly and may even turn negative.
Regarding the future trend, the market is mainly concerned about the policy trends of the Federal Reserve. At present, inflation in the United States is still high, and the Federal Reserve is not yet ready to cut interest rates, which has limited market development to some extent and delayed the arrival of the real altcoin season.
The next Fed interest rate decision will be held on March 18-19. Trump is actively pushing for interest rate cuts, which is one of his key policy agendas. Only when market funds are abundant can enterprises flourish and venture capital be active. Trump has strongly criticized the decision to keep interest rates unchanged on January 29, but interest rates will still face challenges until inflation issues are fully resolved.
Judging from the data, the U.S. inflation rate is close to the target level of 2%. Since June 2022, the inflation rate has continued to decline, and despite some stagnation during the period, the overall downward trend continues. The market expects the probability of the Federal Reserve cutting interest rates in March to be as high as 92%, which is quite strong. However, there is a view that Trump’s tariff policy may lead to a rebound in inflation, but this impact may be limited to specific commodities and will take time to be reflected in the data.
Falling oil prices are crucial to controlling inflation, and Trump is pushing hard to increase domestic oil production. Also,The weakness of the US dollar also provides favorable support for Bitcoin prices.Therefore,Judging from the data, this stage may be a good time to enter.
Although the basic orientation is good, the market is currently facing many uncertainties, including the specific implementation of tariff policies and the possible reactions of China and the EU. These uncertainties put pressure on the market, but this situation will not last forever.
Institutional and regulatory progress
The market is undergoing many major changes. Although not all problems have been resolved at present, some of these developments are still worthy of attention:
- cryptocurrency Task Force：Under the leadership of HESTP, a dedicated cryptocurrency working group has been established. They will work to establish a regulatory framework as soon as possible to clarify the rules for operating in the cryptocurrency and blockchain markets for all investors. The working group will continue to publish updates on its official website.
- Bitcoin ETF plan:The news that Trump Media Group plans to launch a Bitcoin ETF called the “Truth Bitcoin Plus ETF” shows that Trump Media Group has also begun to enter the ETF field, trying to expand its influence in the cryptocurrency market by launching a Bitcoin ETF.
- Klarna moves into crypto payments:Klarna, a well-known European payment company, is expanding its cryptocurrency business. They plan to integrate cryptocurrency payment functions into existing applications, which means that users can make payments directly using cryptocurrency through the Klarna platform in the future.
- China market rumors:Rumors have once again emerged in the market that China may re-admit cryptocurrencies. Although this kind of news appears every few years and its authenticity has yet to be verified, it is still worthy of attention.
Overall, the cryptocurrency industry is undergoing unprecedented fundamental changes:
- The United States is establishing a proactive regulatory framework that demonstrates a willingness to lead in the cryptocurrency space, similar to its early Internet era’s support for technology companies such as Facebook and Amazon.
- Today, other countries around the world are also aware that the cryptocurrency market is becoming an important part of the future economy and have expressed their desire to participate.
- Although these changes will take time and may not be able to meet the market’s expectations for rapid change, the development direction is clear.
The current market cycle is indeed longer than in the past, for good reason:
- High interest rate environment continues
- Inflationary pressures remain
- It is completely different from the environment of large-scale monetary easing during the COVID-19 epidemic
- Currently in a more stable economic environment, there is no urgent pressure on the Federal Reserve to cut interest rates
From a positive perspective, the economy’s ability to withstand current high interest rates is in itself a healthy signal. This shows that the economic fundamentals are still solid and laying the foundation for sustainable development in the future.
the findings and recommendations
The current market environment is very different from the past. If the policy is too loose, it may trigger a new round of inflation in the long run, which is obviously not the result expected by the market.
For market participants, it is crucial to remain calm and rational. Currently required:
- Avoid using leverage for the time being
- Be patient and accept that the market will take longer to turn around
- Continue to pay attention to the market and not completely disengage from the market
- Take warning and avoid repeating the mistakes of investors who were forced to liquidate last Monday
Maintaining prudent and calm investment thinking is more important than ever. Market dynamics will continue to be updated, and it is important to always remain vigilant and strictly control risks.
