Weekly Crypto Analysis: Ethereum Gas Fees Hit 12-Month High Amidst PEPE Price Surge, Memecoin Craze
Last week saw Bitcoin maintain a month-long position within 10% of the $30,000 ceiling, with 0.13% decline between April 28 and May 5, closing out the week with a price of $29,197 by 8 p.m. Hong Kong time on Friday. Bitcoin has traded below $30,000 since April 19 with brief forays approaching $30,000 over the last month, while Ethereum (ETH) exhibited a 0.82% increase and reached $1,914 – a key support level – within the same time period.
The U.S. Federal Reserve and the European Central Bank both raised interest rates by 25 basis points over the last week, with the U.S. reaching 5% to 5.25% and the European rate climbing to 3.25%. This move, announced as an initiative to fight inflation, is the seventh consecutive rate hike by the European Central Bank.
Cryptocurrency market responses to concerns over the banking industry have magnified due to recent news regarding First Republic Bank withdrawals of around $100 billion last month. Significant withdrawal action caused the bank's stock price to plummet by 45.4% last week, leading to the bank being taken over by the U.S. Federal Deposit Insurance Corporation and heralding the second-largest banking failure in U.S. history.
In light of these developments, investors in the crypto market are becoming increasingly cautious, with the Fear and Greed Index shifting from greed to a neutral stance. The instability in the banking sector and the ongoing efforts to combat inflation through interest rate hikes may impact crypto markets further as the week develops.
Crypto Heat Map | Source: Coin360
Altcoin market action, following confidence instability within Bitcoin markets, saw Ethereum decline from a weekly high of $1,914 to $1,876 from Friday to Saturday, with further losses placing ETH within the $1,850 range over the weekend.
Leading altcoins, following BTC and ETH-led losses, exhibited minor losses with Cardano, Tron, Solana, and Litecoin all declining between 3% to 4%. Recently-launched memecoin PEPE, however, captured a market capitalization of over $700 million within three weeks of launch and catapulted into the top 50 cryptocurrencies.
Pepe, as one of the most explosively successful memecoins to launch in 2023, was listed on KuCoin on May 5th via the PEPE/USDT trading pair.
PEPE/USDT Chart on 5-day Timeframe - Source: KuCoin
Top Altcoin Gainers and Losers
Top Altcoin Gainers
Pepe (PEPE) ➠+47.02%
Floki (FLOKI) ➠+8.6%
Stacks (STX) ➠+4.98%
Top Altcoin Losers
Sui (SUI) ➠-75.37%
PancakeSwap (CAKE) ➠-25.92%
Terra Classic (LUNC) ➠-19.64%
Fear and Greed Index at 51, Market Shifts into Neutral Stance
Market sentiment returned a neutral range at the end of the last week, following a brief approach toward the $30,000 ceiling mid-last week. Current Fear and Greed Index data signals a slight shift towards a conservative stance, reducing overall greed levels from a month-long push into the low 60’s.
Crypto Fear & Greed Index | Source: Alternative
This Week’s Crypto News Highlights
Ethereum Gas Fees surge to a 12-Month High During Memecoin Craze
The past few months have seen a significant surge in the popularity of meme coins, resulting in a noticable impact on Ethereum network operation. One key impact has been on the median gas fees, which have hit a 12-month high amid the memecoin resurgence.
The rise in popularity of meme coins has led to an increase in the number of transactions on the Ethereum network, which, in turn, has put pressure on the network's capacity. As a result, gas fees have increased significantly, making it more expensive to conduct transactions on the Ethereum blockchain. This has caused concerns among the Ethereum community about the scalability of the network and catalyzed a shift toward other token standards, such as BRC-20.
SUI Plunges into Chaos Following its Mainnet Release with Unstable Price Swings
On May 3rd, SUI network launched the SUI mainnet, resulting in significant negative price action. The Sui Foundation, the group responsible for developing the network, announced that builders and users could access the Layer 1 blockchain, providing an infrastructure that enables developers to build without any restrictions.
Sui is a smart contract platform that aims to enhance the growth of Web3 by providing faster transaction speeds and greater scalability. The network uses delegated Proof-of-Stake (dPoS), which allows users to elect and vote delegates to confirm the next block.
Subsequent to the launch of the SUI mainnet, SUI markets exhibited significant volatility. The price of SUI soared to about $3.5 before crashing to under $1.5 within minutes. SUI listing launched on KuCoin on May 2, providing KuCoin users with the ability to trade SUI via SUI/USDT.
Bitcoin Market Remains Unmoved Despite Fed's 25bps Rate Hike to 5%
The US Federal Reserve recently announced another rate hike, bringing interest rates to 5%. Despite this, the cryptocurrency market failed to react, with Bitcoin remaining consistent in the near-$30,000 range.
US Government Proposes 30% Tax on Bitcoin Mining in Effort to Tackle Climate Change
The Biden administration recently proposed a 30% tax on Bitcoin mining, citing concerns about the energy consumption associated with the process. The proposed Digital Asset Mining Energy (DAME) excise tax would apply to all Bitcoin miners operating within the United States. This move by the administration is part of a broader push to address climate change and reduce carbon emissions. However, it has been met with mixed reactions from both the crypto industry and environmental advocates.
Proponents of the DAME excise tax argue that Bitcoin mining is an energy-intensive process that requires a lot of electricity, much of which comes from non-renewable sources. Other proponents claim that the tax will help reduce the carbon footprint of Bitcoin mining by encouraging miners to switch to renewable energy sources.
Peak Trading Volume Recorded for BRC-20 Tokens as Meme Coins Take Over Bitcoin Network
The cryptocurrency market has been tightly focused on the resurgence of meme coins, which are rapidly gaining popularity and transaction volume. The latest data shows that the use of BRC-20 tokens in minting new memecoins has surged, with daily minting fees reaching an all-time high.
Bitcoin Ordinals Inscriptions Analysis | Source: Dune Analytics
Ethereum, the preferred blockchain for the creation of meme coins, faces significant congestion due to the high demand for new tokens. This has led to a shift towards the use of BRC-20 tokens for the creation of new meme coins.
Cryptocurrency developers, however, are beginning to take a forward-leaning stance to adopting alternative token standards with the proposal of a new standard called BRC-21. This new standard would allow tokens from other chains to be minted and redeemed on the Bitcoin blockchain, potentially opening up new use cases for the technology.
The primary focus of the BRC-21 standard is on deploying decentralized stablecoins onto Lightning Network or similar payment protocols. With the rise of meme coins and the increasing adoption of cryptocurrencies for everyday transactions, the development of new standards like BRC-21 will likely play an important role in the future of the industry.
Bitcoin (BTC/USDT) Technical Analysis
Bitcoin’s market action has remained constrained within the symmetrical triangle pattern for some time now, which is a technical chart pattern characterized by a series of lower highs and higher lows. This pattern typically indicates a period of indecision among market participants, with neither the buyers nor the sellers dominating the market.
On May 2, the BTC/USDT pair formed a bearish candle, driving the price down to $27,100 – a monthly low. This price level is critical for Bitcoin, as it represents a significant support level that bullish market participants have defended in the past. Bearish market action saw a drive to push prices below this level, but positive market sentiment mid last week saw the Bitcoin price challenge the $30,000 mark and settle near $28,000.
Currently, the BTC/USDT pair is trading in the $27,000 range, with support observed at $27,700 and resistance at $29,000. Looking ahead, a successful breach of the resistance zone at $28,500 may catalyze a new bullish trend for the BTC/USDT pair, potentially rising towards the 30K levels. However, if the bears take control of the market, the BTC/USDT pair could retreat towards the $26,000 support level.
BTC/USDT Chart on the Weekly Timeframe — MACD - Source: KuCoin
The weekly technical indicators are providing a neutral trading signal, indicating that neither the buyers nor the sellers have a clear advantage at the moment. The MACD (Moving Average Convergence Divergence) indicator is displaying no clear direction, while the RSI (Relative Strength Index) is hovering around the 60 level. The 20-EMA (Exponential Moving Average) has been trading flat, indicating a lack of trend development, with the 50-EMA and 200-EMA also exhibiting similar behavior.
Overall, the current market conditions suggest that Bitcoin is still in a period of indecision, with the bulls and bears battling for control. The direction of the trend will likely depend on whether the bulls or the bears can gain the upper hand in the coming days and weeks.