21,797 ETH Sent to Deposit Contract, “Beacon Chain ETH” (BETH) Formation Might Not Be ‘Avoidable’
After enjoying an uptrend to over $407, Ether’s today back trading at $404. The second-largest cryptocurrency continues to live in the shadow of Bitcoin in this rally as the leading digital asset makes it above $14,945 today.
Meanwhile, Ethereum OI rose marginally from $1.0 billion to $1.1 billion with signs of bullish sentiment much more evident in the options market where “the skew has shifted aggressively lower, Ethereum and Bitcoin alike,” noted Denis Vinokourov of Bequant.
Although it is where one can go long on ETH if one is inclined to as “resistance flipped support on the retest of $400,” trader Crypto Gainz also noted that he isn’t particularly interested because it is still bearish against Bitcoin.
“Eth has plenty htf resistance, so I'm still bearish ETH/BTC on a longer timeframe,” he said.
The biggest reason for yesterday’s bullishness for Ethereum was that ETH 2.0 might finally be here before even 2020 is over. Along this came the announcement of the launch of the deposits contract 32-ETH for staking.
As we reported, the first part of the Proof-of-Staking transition will happen once the threshold of 32-ETH validators is met.
I know the ETH2 deposit contract looks tempting, but there are two big reasons to wait:
1) The size of rewards depends on how much ETH is staked in total. If too many people stake, your yields could turn out lower than your opportunity cost. Late mover = better info
— Hasu (@hasufl) November 4, 2020
As of press time, the contract currently holds 21,797 ETH worth over $8.82 million.
However, the market concern remains of the illiquid tokens, as the one-way mechanism was designed to stop the formation of a second tradeable ether asset.
“There is one ETH asset; no “ETH1” or “ETH2,’” said Justin Drake, a researcher at Ethereum Foundation, adding “Transfers (and withdrawals) are disabled in phase 0 in large part to avoid the formation of a “beacon chain ETH.”
However, exchanges like FTX are working on a “plan” that may see the markets for “beacon chain ether,” which means a second asset may be formed.
Project Lido has already announced to stake ETH, using which will give users a token (bETH), representing hit ETH on the Ethereum beacon chain on a 1:1 basis, acting as a bridge bringing ETH 2.0’s staking rewards to ETH 1.0.
While Ethereum co-founder Vitalik Butrein argued, “Why would anyone provide liquidity for that? Just moving ETH over to the eth2 chain has zero profit,” Hasu, an independent researcher at Deribit, believes disabling transfers in phase 0 will do exactly the opposite.
“Disabling transfers incentivizes the securitization of BETH via staking through centralized exchanges. Those exchanges will allow users to trade in and out of BETH, which will be a significant value-add over non-custodial staking,” said Hasu.
According to him, not only ETH/BETH would happen, but this will also set two dangerous precedents; centralized/custodial staking and securitization of stake, which is terrible for security and introduces principal-agent problems.