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Welcome back to 0xResearch. Here's what we’ve got for you today:
Crypto technicals
Ethereum’s Pectra upgrade scope
New Bitcoin OP_CAT booster
dYdX V5 goes live
There’s no denying that bitcoin and crypto markets are now in a bullish posture. On the daily timeframe, bitcoin has been setting in a series of higher highs and higher lows, once again threatening to break out to new all-time highs after a multi-month period of consolidation.
The current situation is unlike its initial run-up to $72k in early March; as you zoom out to longer timeframes — 2-day, 5-day, weekly — volatility is relatively low. Futures funding rates too — while positive — are about a quarter of what they were the last time bitcoin was at these levels.
The Bitcoin CME futures already has a chance to close at a new weekly all-time high, if it ends the day above $71,530.
Macro factors are the main wildcard in this setup, with the FOMC scheduled to meet next week.
Friday’s hot jobs numbers are giving traders pause — both equity markets and bitcoin dipped following data release.
But yesterday the European Central Bank cut rates by 25 bps, and unless Jerome Powell sounds an unusually hawkish note next Wednesday, there’s little reason to think that monetary policy represents a major headwind at the moment.
Ethereum’s Pectra fork ambitions
Ethereum development coordinator Tim Beiko came out of Thursday’s bi-weekly ACD call sounding bullish, posting on X that Ethereum developers’ “#1 priority is shipping, and shipping, and shipping more.”
The Pectra upgrade slated for later this year is jam-packed with Ethereum improvements, and its scope has now been more or less finalized — as planned — with Beiko calling it “clearly the largest network upgrade ever,” with 19 EIPs!
Remarkably, some client teams were still debating the priority of EOF, an upgrade to the Ethereum Virtual Machine that is widely supported.
Pushback mainly came from the Geth team, represented on the call by Guillaume Ballet and Marius van der Wijden.
At issue is how much the inclusion of EOF might push back the timeframe for the next hard fork, which will focus on a major change to Ethereum’s data structure — a transition to Verkle trees. Further delay will mean additional mainnet state growth and a longer transition.
Some suggest splitting Pectra into two parts, but most client teams prefer including EOF in a single larger fork. The consensus was that EOF makes the cut, with caveats: It won’t be in the next devnet and it could still be scoped out if it proves to be a blocker to a timely upgrade down the line.
Optimistic about OP_CAT
Advocates for bringing back a Bitcoin feature that Satoshi mysteriously removed got a boost this week from zero-knowledge powerhouse StarkWare.
The company behind Starknet launched a $1 million fund to support OP_CAT development and said it plans to use the future upgrade to support scaling of the Bitcoin network using STARK-based validity proofs.
Effectively, Starknet will one day settle transactions to both Ethereum and Bitcoin in parallel.
StarkWare co-founder Eli Ben-Sasson said it was “always a dream” for Starknet to connect to Bitcoin and that he was “red-pilled at the bitcoin conference in 2013” on the idea.
The 2021 Taproot upgrade made it closer to reality but, critically, with OP_CAT you can validate Merkle trees.
Ordinals showed that Bitcoiners want to have fun with NFTs, and initiatives like bitcoin staking with Babylon indicate that BTC holders probably want to do still more stuff with their corn.
Version 5 of dYdX chain is live, following a successful upgrade Thursday.
The biggest feature add is isolated markets, each with their own insurance funds and support for segregated pools of collateral.
While many professional traders prefer to construct a book using cross-margining, isolating risk allows the protocol to support the permissionless addition of many more markets — a core part of dYdX’s vision.
DYdX’s enshrined oracle, Slinky, will pull prices directly from the Raydium DEX, home to hundreds of Solana-based assets, which will become eligible to list derivatives markets on dYdX thanks to this upgrade.
Derivatives volumes for May:
Source: @Torero_Romero / Data sources: Artemis, TokenTerminal and DeFiLlama
Heading into its V5 upgrade, over the past month dYdX has been trading places with SynFutures and Hyperliquid in the race for derivatives trading volumes, with the trio handily lapping all other contenders.
This month's PPGC mainly focused on discussing PIP-37: Ahmedabad Hard Fork, and the PIPs included with it. PIP-36, PIP-30 and PIP-35, included alongside PIP-37, were discussed also in the last PPGC notes. The only notable change since then has been the adoption of EIP-7702 over EIP-3074, with regard to PIP-22. Both are related to account abstraction, while EIP-7702 was proposed by Vitalik while EIP-7702 to eliminate vulnerabilities and ensure forward compatibility, by improving upon EIP-3074.
Despite the crypto market’s $2.5T valuation, security still remains an unsolved issue, evidenced by ~$24.2B worth of assets distributed among illicit addresses in 2023.
Airdrops have been useful token distribution mechanisms but face fundamental challenges when considering sybil detection.
The headline figure for May’s jobs report may seem like a shock, but a closer read shows the labor market may still remain fairly tight.
Plus, is crypto regulation really worth it?
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.
