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Bitcoin shrugs off CPI results and reclaims the $70,000 price level

Bitcoin shrugs off CPI results and reclaims the $70,000 price level

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With the US Consumer Price Index results going slightly above economists’ expectations, it looks as if there is minimal impact to Bitcoin’s price action. The alpha crypto has reclaimed the $70k level despite a brief correction hours after the CPI release. Analysts are suggesting that the higher-than-expected inflation numbers could prove to be favorable for Bitcoin in the long-term.

A new liquid staking yield option is in town: stBTC, a Bitcoin Liquid Staking Token (LST). This new token is the result of a collaboration between Nomic and Babylon, working with a non-custodial approach to allow stBTC to move across IBC-compatible chains, remaining liquid while earning periodic rewards for stakers, similar to what Lido’s stETH for Ethereum does.

On the macro level for liquid staking, a recent report from crypto research firm Kairos highlights the importance of liquidity for the longevity of the liquid staking ecosystem, particularly for EigenLayer’s Liquid Restaking Tokens (LRTs). The report suggests that incentives from protocols using EigenLayer’s shared security structure and liquid restaking protocols could play a crucial role in maintaining a healthy LRT ecosystem, especially after EigenLayer enables withdrawals.

Today’s Newsletter

  • Bitcoin shrugs off CPI results and reclaims the $70,000 price level
  • Liquid staked bitcoin provides new yield option for BTC holders
  • Liquid staking ecosystem longevity relies on token liquidity: Kairos Research

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BITCOIN

Bitcoin shrugs off CPI results and reclaims the $70,000 price level

The US Consumer Price Index (CPI) climbed 3.8% on an annual basis, exceeding economists’ expectations by 10 basis points. This higher-than-anticipated inflation reading has created uncertainty among analysts regarding the Federal Reserve’s approach to rate cuts in 2024, which could directly impact the performance of assets like Bitcoin (BTC).

Despite experiencing a brief 2% correction following the CPI announcement, Bitcoin quickly recovered and reclaimed the $70,000 price level, registering a 1.8% growth in the past 24 hours.

According to trader Rekt Capital, Bitcoin is currently confined within a tight price range, with support at its previous all-time high of $69,000 and resistance at $71,300, suggesting the possibility of consolidation in the near term. Rekt Capital also notes that there may be only one “bargain-buying opportunity” left before Bitcoin breaks through its resistance and enters price discovery territory.

Darren Franceschini, co-founder of Fideum, believes that the higher-than-expected CPI numbers could be favorable for Bitcoin in the long run, given its limited supply and reputation as a hedge against inflation. He also highlights the upcoming halving event as a potential catalyst for increased interest and speculation in the cryptocurrency. [cryptobriefing]

MARKETS

Liquid staked Bitcoin provides new yield option for BTC holders

The Nomic DAO Foundation has introduced a new yield option for Bitcoin holders: stBTC, a Bitcoin Liquid Staking Token (LST). The new yield option is a result of an integration with Babylon’s Bitcoin staking protocol into its decentralized non-custodial Bitcoin bridge.

This new approach aims to provide a more decentralized alternative to BitGo’s wrapped bitcoin (wBTC), which currently dominates the market for tokenizing bitcoin on other chains. The key difference is that stBTC allows BTC holders to passively earn a yield on their Bitcoin while maintaining liquidity across IBC-compatible chains.

Unlike traditional BTC yield options that lock up the asset, stBTC remains liquid while earning periodic rewards for stakers, similar to Lido’s stETH for Ethereum.

The Bitcoin staking yield comes from the tokens of other chains that want to leverage bitcoin’s economic strength to enhance their own security. For example, Nomic itself will use stBTC to launch a dual-stake security system, underpinning its chain with both staked BTC and its native token NOM.

This makes Nomic one of the first proof-of-stake (PoS) chains to implement such a solution, with stakers receiving rewards in both NOM and nBTC. The stBTC solution is currently available in a testnet environment and will move to a mainnet release alongside the Babylon mainnet. [blockworks]

ECOSYSTEM

Liquid staking ecosystem longevity relies on token liquidity: Kairos Research

Longevity for the liquid staking ecosystem depends on the liquidity of liquid restaking tokens (LRTs), a report from crypto research firm Kairos Research claims.

The report focuses on EigenLayer’s LRTs and the importance of their liquidity once the platform enables withdrawals, as users may seek alternative yield streams. The report highlights that if an LRT lacks sufficient liquidity, its peg with ETH will fluctuate, creating issues for usage, especially when LRTs become further integrated into the broader DeFi ecosystem, such as lending markets.

Kairos Research emphasizes that an abundance of liquidity makes it harder to disrupt LRT prices, citing an example from Coinbase director Conor Grogan, who explained how Sam Bankman-Fried (SBF) managed to create a significant ‘depeg’ in stETH by selling $75 million into the market. The lack of liquidity caused a shock that Grogan identifies as the reason behind a series of events, including the collapse of hedge fund Three Arrows Capital.

The report also suggests that incentives from protocols using EigenLayer’s shared security structure and liquid restaking protocols could play a crucial role in maintaining a healthy LRT ecosystem, particularly following potential airdrop events from other LRT providers. [cryptobriefing]

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