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Ethereum’s Shanghai upgrade could supercharge liquid staking derivatives — Here’s how

Traders are contemplating what will happen to ETH price and staked Ether derivatives after the next network upgrade opens withdrawals for stakers.
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Traders are contemplating what will happen to ETH price and staked Ether derivatives after the next network upgrade opens withdrawals for stakers.

The crypto market witnessed the DeFi summer of 2020, where decentralized finance applications like Compound and Uniswap turned Ether (ETH) and Bitcoin (BTC) into yield-bearing assets via yield farming and liquidity mining rewards. The price of Ether nearly doubled to $490 as the total liquidity across DeFi protocols quickly surged to $10 billion.

Toward the end of 2020 and early 2021, the COVID-19-induced quantitative easing across global markets was in full effect, causing a mega-bull run that lasted almost a year. During this time, Ether’s price increased nearly ten times to a peak above $4,800.

After the euphoric bullish phase ended, a painful cool-down journey was exacerbated by the UST-LUNA crash which began in early 2022. This took Ether’s price down to $800. A ray of hope eventually arrived in the third quarter as the market experienced a positive rally led by the Ethereum Merge narrative.

The shift to an environmentally-friendly proof-of-stake (PoS) consensus mechanism was a big step forward. The event also reduced Ether inflation post-merge. During a lead-up to the Merge on Sept. 15, 2021, ETH peaked at over $2,000. However, the bullish momentum faded quickly, turning the Merge into a buy-the-rumor and sell-the-news event.

A similar bullish opportunity could be brewing in Ether as the upcoming Shanghai upgrade scheduled for March 2023 grabs the market spotlight. The upgrade will finally enable withdrawals from Ethereum staking contracts, which are locked presently. The upgrade will significantly reduce the risk of staking ETH.

It will provide an opportunity for liquidity staking protocols to grow. The governance tokens of some of these protocols have jumped since the start of the new year as hype builds around.

There’s a possibility that the upgrade can push these tokens toward last year’s Merge highs. Moreover, Ethereum’s staking space is still in its early stages, providing a market opportunity for the growth of these protocols.

The percentage of staked Ether is low

Currently, 13.18% of Ether’s total supply is staked on the Beacon Chain, which is low compared to other proof-of-stake (PoS) chains like Cosmos Hub (ATOM) with a staking ratio of 62.5%, Cardano (ADA) with 71.8%, and Solana (SOL) at 71.4%. The reason for Ethereum’s low staking ratio is that the staked Ether is locked in its current state, but this will change in March.

Ethereum has the lowest staking ratio compared to other L1 blockchains. Source: Staking Rewards

The upcoming Shanghai upgrade will include a code known as EIP 4895 that will allow Beacon Chain staked Ether withdrawals, enabling a 1:1 exchange of staked Ether for Ether. Ethereum’s staking ratio should reach parity with other leading PoS networks after this update. A significant portion of which will likely move to liquid staking protocols.

De-risking of liquid staking derivatives

Liquid staking protocols like Lido and Rocket Pool let Ether holders stake without running a validator node. Since Ether is pooled, a single user doesn’t have a minimum threshold of 32 ETH (worth around $40,000) for staking. People can stake fractions of Ether, reducing the entry barrier for staking.

The protocols also enable liquidity provision for staked assets, which would otherwise be locked in the staking contracts. The DeFi contracts give a derivative token (for instance, Lido’s stETH) in exchange for staked Ether on the proof-of-stake (PoS) network. A user can trade with stETH while earning yields from the staking contract.

As Ethereum’s staking ratio increases after March’s update, the use of liquidity staking protocols will likely increase with it. Currently, the liquid staking protocols account for 32.65% of the total staked Ether. Due to the benefits mentioned above, their market share should remain near or above current levels after the Shanghai upgrade.

The governance tokens of liquid staking protocols could also benefit from their increased locked value, similar to DeFi tokens, which benefited from a rise in total locked value (TVL) in the latest bull run.

How are LSD governance tokens performing ahead of Shanghai?

Lido DAO (LDO)

Lido DAO is the leader of the liquid staking space with higher annual yield and market share than other protocols. Lido commands 88.55% of the total staked Ether in these protocols.

Let's take the amount of staked Ether as a proxy for evaluating the protocol. We again find that Lido has the most competitive market capitalization to staked Ether ratio.

Source: Coingecko, Dune Analytics

The weak point of the project’s token economics is that LDO is a governance token. It doesn’t entitle holders to a share of the generated yield or fees. Moreover, the token has additional inflation from investor token unlocking until May this year.

LDO 4-hour price chart. Source: TradingView

Technically, the LDO token broke above the short-term resistance of around $1.17 with significant buying volume. Bulls will likely target $1.80, capitalizing on the hype around the Shanghai upgrade.

The token is heavily shorted in the futures market after the recent 26% rise in its price since Jan. 1. The funding rate for LDO perpetual swap turned negative with a large magnitude, providing an opportunity for a further uptrend in a short-squeeze. The current support levels for LDO are $1.17 and $1.

Rocket Pool (RPL)

Rocket Pool is similar to Lido, albeit smaller in size. The market capitalization to the staked Ether ratio of the platform is five times larger than Lido, which likely makes it overpriced.

Nevertheless, the RPL token has additional utility besides governance as an insurance token for users. Node operators stake RPL as insurance, where users receive the staked RPL in case of losses due to the operator's fault.

The Ethereum Merge high of RPL in September 2021 was $34.30. Since the start of 2023, its price has increased by 10%, last trading at $22.40. If buyers are successful in building support above the $20 level, there's a possibility that RPL can reach last year’s high of $30, which was attained around the Ethereum Merge.

Ankr (ANKR)

Ankr is a blockchain infrastructure provider which offers API endpoints and runs RPC nodes besides staking solutions. Similar to LDO, ANKR is only used for governance purposes.

The token’s price has stayed relatively flat over the last few days. The market capitalization to the staked Ether ratio of Ankr is on the higher side at par with Rocket Pool, which is a negative sign.

Still, if the hype around Shanghai upgrade increases, ANKR can reach August 2021 highs of $0.05. The recent breakdown level of $0.03 will act as resistance for buyers. Currently, the token is trading around $0.015.

Stakewise (SWISE)

Stakewise offers the highest staking yield of 4.43%. Its governance token is comparatively less inflated than RPL and ANKR in the market capitalization to staked Ether ratio, making it cheaper than RPL and ANKR.

However, the token distribution is adversely skewed towards private investors and the founding team, which have 46.9% of SWISE’s total supply. According to data from Nansen, wallets identified as “smart money” have been slowly accumulating SWISE since April 2021.

Smart wallet holdings of SWISE tokens. Source: Nansen

The Ethereum Merge high for SWISE was $0.23, which will be the likely target for buyers. The support lies near 2022-lows around $0.07.

Shared Stake is flagged red because the protocol was suspected of an insider exploit, which caused a 95% decline in the token’s price in June 2021. The high staking return of the Shared Stake compared to others is also an eyebrow-raising detail to take note of. On the other hand, Cream Finance has discontinued its Ether staking service.

The upcoming Ethereum Shanghai upgrade provides an opportunity for the liquid staking space to grow. Lido DAO is the clear leader in this space with an optimum market price. The de-risking of ETH staking and hype around the event could translate to a series of rallies that could push the price of LDO and other liquid staking protocols back to their Merge highs from last year.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked…

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March 11, 2024

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NY Fed Finds Medium, Long-Term Inflation Expectations Jump Amid Surge In Stock Market Optimism

One month after the inflation outlook tracked by the NY Fed Consumer Survey extended their late 2023 slide, with 3Y inflation expectations in January sliding to a record low 2.4% (from 2.6% in December), even as 1 and 5Y inflation forecasts remained flat, moments ago the NY Fed reported that in February there was a sharp rebound in longer-term inflation expectations, rising to 2.7% from 2.4% at the three-year ahead horizon, and jumping to 2.9% from 2.5% at the five-year ahead horizon, while the 1Y inflation outlook was flat for the 3rd month in a row, stuck at 3.0%. 

The increases in both the three-year ahead and five-year ahead measures were most pronounced for respondents with at most high school degrees (in other words, the "really smart folks" are expecting deflation soon). The survey’s measure of disagreement across respondents (the difference between the 75th and 25th percentile of inflation expectations) decreased at all horizons, while the median inflation uncertainty—or the uncertainty expressed regarding future inflation outcomes—declined at the one- and three-year ahead horizons and remained unchanged at the five-year ahead horizon.

Going down the survey, we find that the median year-ahead expected price changes increased by 0.1 percentage point to 4.3% for gas; decreased by 1.8 percentage points to 6.8% for the cost of medical care (its lowest reading since September 2020); decreased by 0.1 percentage point to 5.8% for the cost of a college education; and surprisingly decreased by 0.3 percentage point for rent to 6.1% (its lowest reading since December 2020), and remained flat for food at 4.9%.

We find the rent expectations surprising because it is happening just asking rents are rising across the country.

At the same time as consumers erroneously saw sharply lower rents, median home price growth expectations remained unchanged for the fifth consecutive month at 3.0%.

Turning to the labor market, the survey found that the average perceived likelihood of voluntary and involuntary job separations increased, while the perceived likelihood of finding a job (in the event of a job loss) declined. "The mean probability of leaving one’s job voluntarily in the next 12 months also increased, by 1.8 percentage points to 19.5%."

Mean unemployment expectations - or the mean probability that the U.S. unemployment rate will be higher one year from now - decreased by 1.1 percentage points to 36.1%, the lowest reading since February 2022. Additionally, the median one-year-ahead expected earnings growth was unchanged at 2.8%, remaining slightly below its 12-month trailing average of 2.9%.

Turning to household finance, we find the following:

  • The median expected growth in household income remained unchanged at 3.1%. The series has been moving within a narrow range of 2.9% to 3.3% since January 2023, and remains above the February 2020 pre-pandemic level of 2.7%.
  • Median household spending growth expectations increased by 0.2 percentage point to 5.2%. The increase was driven by respondents with a high school degree or less.
  • Median year-ahead expected growth in government debt increased to 9.3% from 8.9%.
  • The mean perceived probability that the average interest rate on saving accounts will be higher in 12 months increased by 0.6 percentage point to 26.1%, remaining below its 12-month trailing average of 30%.
  • Perceptions about households’ current financial situations deteriorated somewhat with fewer respondents reporting being better off than a year ago. Year-ahead expectations also deteriorated marginally with a smaller share of respondents expecting to be better off and a slightly larger share of respondents expecting to be worse off a year from now.
  • The mean perceived probability that U.S. stock prices will be higher 12 months from now increased by 1.4 percentage point to 38.9%.
  • At the same time, perceptions and expectations about credit access turned less optimistic: "Perceptions of credit access compared to a year ago deteriorated with a larger share of respondents reporting tighter conditions and a smaller share reporting looser conditions compared to a year ago."

Also, a smaller percentage of consumers, 11.45% vs 12.14% in prior month, expect to not be able to make minimum debt payment over the next three months

Last, and perhaps most humorous, is the now traditional cognitive dissonance one observes with these polls, because at a time when long-term inflation expectations jumped, which clearly suggests that financial conditions will need to be tightened, the number of respondents expecting higher stock prices one year from today jumped to the highest since November 2021... which incidentally is just when the market topped out during the last cycle before suffering a painful bear market.

Tyler Durden Mon, 03/11/2024 - 12:40

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Homes listed for sale in early June sell for $7,700 more

New Zillow research suggests the spring home shopping season may see a second wave this summer if mortgage rates fall
The post Homes listed for sale in…

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March 11, 2024

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  • A Zillow analysis of 2023 home sales finds homes listed in the first two weeks of June sold for 2.3% more. 
  • The best time to list a home for sale is a month later than it was in 2019, likely driven by mortgage rates.
  • The best time to list can be as early as the second half of February in San Francisco, and as late as the first half of July in New York and Philadelphia. 

Spring home sellers looking to maximize their sale price may want to wait it out and list their home for sale in the first half of June. A new Zillow® analysis of 2023 sales found that homes listed in the first two weeks of June sold for 2.3% more, a $7,700 boost on a typical U.S. home.  

The best time to list consistently had been early May in the years leading up to the pandemic. The shift to June suggests mortgage rates are strongly influencing demand on top of the usual seasonality that brings buyers to the market in the spring. This home-shopping season is poised to follow a similar pattern as that in 2023, with the potential for a second wave if the Federal Reserve lowers interest rates midyear or later. 

The 2.3% sale price premium registered last June followed the first spring in more than 15 years with mortgage rates over 6% on a 30-year fixed-rate loan. The high rates put home buyers on the back foot, and as rates continued upward through May, they were still reassessing and less likely to bid boldly. In June, however, rates pulled back a little from 6.79% to 6.67%, which likely presented an opportunity for determined buyers heading into summer. More buyers understood their market position and could afford to transact, boosting competition and sale prices.

The old logic was that sellers could earn a premium by listing in late spring, when search activity hit its peak. Now, with persistently low inventory, mortgage rate fluctuations make their own seasonality. First-time home buyers who are on the edge of qualifying for a home loan may dip in and out of the market, depending on what’s happening with rates. It is almost certain the Federal Reserve will push back any interest-rate cuts to mid-2024 at the earliest. If mortgage rates follow, that could bring another surge of buyers later this year.

Mortgage rates have been impacting affordability and sale prices since they began rising rapidly two years ago. In 2022, sellers nationwide saw the highest sale premium when they listed their home in late March, right before rates barreled past 5% and continued climbing. 

Zillow’s research finds the best time to list can vary widely by metropolitan area. In 2023, it was as early as the second half of February in San Francisco, and as late as the first half of July in New York. Thirty of the top 35 largest metro areas saw for-sale listings command the highest sale prices between May and early July last year. 

Zillow also found a wide range in the sale price premiums associated with homes listed during those peak periods. At the hottest time of the year in San Jose, homes sold for 5.5% more, a $88,000 boost on a typical home. Meanwhile, homes in San Antonio sold for 1.9% more during that same time period.  

 

Metropolitan Area Best Time to List Price Premium Dollar Boost
United States First half of June 2.3% $7,700
New York, NY First half of July 2.4% $15,500
Los Angeles, CA First half of May 4.1% $39,300
Chicago, IL First half of June 2.8% $8,800
Dallas, TX First half of June 2.5% $9,200
Houston, TX Second half of April 2.0% $6,200
Washington, DC Second half of June 2.2% $12,700
Philadelphia, PA First half of July 2.4% $8,200
Miami, FL First half of June 2.3% $12,900
Atlanta, GA Second half of June 2.3% $8,700
Boston, MA Second half of May 3.5% $23,600
Phoenix, AZ First half of June 3.2% $14,700
San Francisco, CA Second half of February 4.2% $50,300
Riverside, CA First half of May 2.7% $15,600
Detroit, MI First half of July 3.3% $7,900
Seattle, WA First half of June 4.3% $31,500
Minneapolis, MN Second half of May 3.7% $13,400
San Diego, CA Second half of April 3.1% $29,600
Tampa, FL Second half of June 2.1% $8,000
Denver, CO Second half of May 2.9% $16,900
Baltimore, MD First half of July 2.2% $8,200
St. Louis, MO First half of June 2.9% $7,000
Orlando, FL First half of June 2.2% $8,700
Charlotte, NC Second half of May 3.0% $11,000
San Antonio, TX First half of June 1.9% $5,400
Portland, OR Second half of April 2.6% $14,300
Sacramento, CA First half of June 3.2% $17,900
Pittsburgh, PA Second half of June 2.3% $4,700
Cincinnati, OH Second half of April 2.7% $7,500
Austin, TX Second half of May 2.8% $12,600
Las Vegas, NV First half of June 3.4% $14,600
Kansas City, MO Second half of May 2.5% $7,300
Columbus, OH Second half of June 3.3% $10,400
Indianapolis, IN First half of July 3.0% $8,100
Cleveland, OH First half of July  3.4% $7,400
San Jose, CA First half of June 5.5% $88,400

 

The post Homes listed for sale in early June sell for $7,700 more appeared first on Zillow Research.

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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March 9, 2024

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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