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Good morning. Here’s what’s happening:

Prices: Bitcoin and Ether experienced a slight decline on Sunday, but an analyst suggests that there is a possibility for a broader market rally and substantial price fluctuations. The recent meme coin frenzy has been contributing to notable shifts in market sentiment.

Insights: The challenges posed by network congestion resulting from the surge in Ordinals are being mitigated by higher mining rewards, improved network security, and the availability of Layer-2 and sidechain solutions.

Prices

Bitcoin's weekend was uneventful, even with Binance's temporary suspension of withdrawals.

Bitcoin (BTC) $28,593 −327.2 ▼ 1.1%	Ethereum (ETH) $1,893 −8.2 ▼ 0.4%	CoinDesk Market Index (CMI) 1,228 −0.4 ▼ 0.0%
S&P 500 4,136.25 +75.0 ▲ 1.8%	Gold $2,024 +6.3 ▲ 0.3%	Nikkei 225 29,157.95 +34.8 ▲ 0.1%

 

Good morning Asia. At the start of the trading week in the East, both Bitcoin and Ether experienced minor drops. Bitcoin was down by 0.34% to $28,787, while Ether declined by 0.4% to $1,913.

According to Joe DiPasquale, CEO of BitBull Capital, the surge in market sentiment can be attributed to meme coins, while the activity for major cryptocurrencies remained relatively stable.

“The market hasn’t moved strongly this week, but the market sentiment has been on a rollercoaster with meme coin mania at peak,” DiPasquale wrote to CoinDesk in a note. “With PEPE and other meme coins posting high five-figure percentage gains, we wouldn’t be surprised if a market-wide rally materializes in the near term.”

DiPasquale observes that despite the current market conditions, bitcoin has yet to test its support levels on the downside. Additionally, the Bollinger Bands are continuing to contract, signaling a reduction in market volatility. As the gap between the upper and lower bands narrows, it often indicates that a significant price movement may be on the horizon. This is because periods of low volatility typically precede larger market trends, and could be an indication of an imminent shift in market sentiment.

“Moving forward, we’d expect a strong bounce off $25K to continue another leg above $30K,” DiPasquale concluded.

Asset	Ticker	Returns	DACS Sector
Cosmos	ATOM	+1.0%	Smart Contract Platform

Asset	Ticker	Returns	DACS Sector
XRP	XRP	−2.6%	Currency
Terra	LUNA	−2.2%	Smart Contract Platform
Decentraland	MANA	−1.9%	Entertainment

 

Insights

Bitcoin maximalists may find ordinals irritating, but they represent a vital revenue source for miners.

The Bitcoin community is at a crossroads right now.

While the bitcoin community is becoming increasingly critical of the congested and costly state of the network caused by the growing popularity of NFT-like Ordinal inscriptions, some of the largest miners are facing financial difficulties due to the fallout from a bearish 2022. Bankruptcy proceedings, bailouts, and debt restructuring are becoming common among these miners. The recent temporary pause of bitcoin withdrawals by Binance highlights the brewing problem, indicating that the network may be struggling to cope with the surge in demand caused by these Ordinal transactions.

For those unfamiliar with the concept, Ordinal Inscriptions are digital assets that are similar to NFTs, but are inscribed on satoshis, which are the smallest currency unit of bitcoin. Enabled by the Taproot upgrade, these inscriptions allow for the creation of smart contracts and the direct minting of NFTs on the Bitcoin blockchain.

The growth of Ordinals has been staggering in scale, even though many of them consist of just text. In the beginning of this month, the number of Ordinals had already surpassed three million, and now it has climbed to just over four million.

Ultimately, the growing interest in the bitcoin blockchain, including the surge in Ordinal transactions, is likely to benefit cash-strapped miners in the long run.

As per the data collected by dgtl_assets on Dune, Ordinal inscriptions are currently generating daily fees exceeding $2.7 million, while the total fees have reached approximately $14 million.

 

 

Grayscale stated in an April note that the increase in fees generated by Ordinals serves as a valuable incentive for mining, contributing to the overall security of the network.

“While some are critical of ordinals, cautioning against bloating the blockchain or harming fungibility, we believe that ordinals represent one of the larger opportunities for Bitcoin adoption, especially as the Bitcoin network has historically been viewed as a rigid blockchain ecosystem,” Grayscale wrote. “The advent of ordinals has led to an increase in total fees paid to miners, could potentially establish a sustainable baseline level of transaction fees to incentivize miners.”

Grayscale and CoinDesk have the same parent company, Digital Currency Group.

Which factor outweighs the others when considering network security, a new channel for mining incentives, and the problem of congestion? The answer is likely the new incentives channel.

In practical terms, this could significantly assist in filling the gaps in miners' financial statements. While bailouts may appear as a potential remedy, they could lead to the centralization of mining power among stakeholders such as Binance and Galaxy Digital.

Moreover, for those who voice grievances, a plethora of readily available solutions exist, including Layer-2s and sidechains such as the Lightning Network or Liquid.

Bitcoin enthusiasts ought to commemorate milestones and embrace the fact that the market is indicating that the cryptocurrency is here to stay.

Source Coindesk