Market Commentary
Market Commentary: Assessments
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August 9, 2022

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A flat week for risk assets allows investors to reassess their positioning as the bounce from mid-June remains intact; active addresses on Ethereum hit all-time highs despite “crypto winter”.

Key Takeaways:

  • A flat week for risk assets allows investors to assess positioning for the remainder of the year, with the bounce from mid-June remaining intact
  • “Never let a good crisis go to waste” – the US readies the addition of $430 billion in new spending over the next 10 years with the “Inflation Reduction Act,” but Moody’s expects just a 0.33% reduction in CPI by 2031
  • What “crypto winter?” - active addresses on Ethereum reach new all-time highs ahead of the Merge
  • “Flippening?” Ethereum’s recent outperformance has led to renewed conversations of its potential to surpass bitcoin’s market capitalization; what this means for long-term investors in this article


Last week’s flat performance for risk assets offered investors a “break from the action” and an opportunity to reassess positioning for the remainder of the year.

It is no doubt that the market’s strength since the lows in mid-June has perplexed both pundits and bears, with this strong bounce contrarian to the long, drawn-out bear market and “crypto winter” many were calling for in late June.

But at the risk of sounding like a broken record, factors that contributed to macro stress in the first half of the 2022 year have begun to alleviate, as discussed most recently in last week’s commentary titled, “Discipline.”

Quarter-to-date, bitcoin has rallied 24.2%, while ether has gained 70.5%, alongside performance in the S&P 500 and the Nasdaq Composite of 9.6% and 14.8%, respectively.

Bitcoin and ether have now gained 30.8% and 90.6% from their lows on June 18th, illustrating the importance of maintaining conviction when allocating to the digital asset class. Bitcoin, ether, and digital assets rallied in the face of uncertainties tied to overleverage in the system, and all those that sold since are now “down on the trade.”

This most recent performance should provide some reassurance to those investors that were concerned with digital assets’ ability to bounce when conditions warrant.

Now, investors must assess their positioning after many months of defensive price action. As we discussed last week, the burden is back on the bears, who must prove that the environment is worth another roll-over in risk assets.

And despite the debate of whether we’re in a “recession,” Friday’s non-farm jobs data illustrated that US economy added 528,000 jobs just in the month of July. As expected, this strong data was ultimately questioned as to whether “good news is good news” or “good news is bad news,” as a rate hike was re-priced in after the report. Policy expectations are now 3.6% for February of 2023, down from the 3.9% that was expected mid-June, but up from the 3.3% expected prior to the jobs number. Wednesday’s CPI report for the month of July will offer more clues as to whether or not inflation has decelerated.

But as the Fed goes along with their subjective policymaking, the most recent “Inflation Reduction Act” passed by the Senate adds fuel to the fire. Apparently, the US Congress believes $430 billion in new spending over the next 10 years (largely connected to climate change) will fix this global inflation phenomena. Naturally, this bill passed the Senate with a 51-50 party-line vote over the weekend, with just one party making the decision for the entire country.

Even Moody’s expects the impact on inflation to be modest, forecasting just a 0.33% reduction in the Consumer Price Index by 2031.

“Never let a good crisis go to waste.” Clearly, the willingness to spend continues.


While the macro picture has improved since mid-June, news of the tentative September 19th Ethereum Merge date has certainly been a catalyst for outsized performance.

This tentative date is the closest Ethereum has been to its milestone shift to proof-of-stake, which has been highly anticipated for several years.
While this transition comes with some execution risk, the Ethereum Foundation has already merged the Sepolia and Ropsten “testnets” without issues. The third and final testnet (Goerli) will undergo its transition by the end of this week.

For more information on the Merge, please read our May 31st commentary titled, “Cold Feet.”

On page two, we discuss Ethereum’s active addresses reaching new highs, and the potential “flippening” – or the moment in which Ethereum’s market cap surpasses that of bitcoin.


Daily active addresses on Ethereum have recently reached new highs, with activity that contradicts the “crypto winter” many called for in June of this year.

The number of active addresses on Ethereum hit an all-time high in the last week of July, with a second all-time high reading occurring just last week.
On July 26th, 2022, approximately 1,062,036 Ethereum addresses made at least one transaction, which is 33% higher than the previous high of 794,922 on May 8th, 2021.

More recently, 844,084 addresses were active on August 4th, 2022, the second highest in Ethereum’s history.

Ethereum transactions occur for a variety of reasons, such as plain ether transfers, as well as the use of its underlying sectors such as blockchain services, decentralized finance, and NFTs/metaverse.

As we continue to write, the fundamentals continue to strengthen despite price weakness.


Ether’s significant outperformance from the lows on June 18th has led to renewed calls for the Ethereum “flippening,” or the event in which Ethereum’s market cap surpasses bitcoin’s.

While this has not yet occurred in Ethereum’s history, another round of outperformance such as the one seen in 2021 (in which bitcoin rallied 59.8%, while ether rallied 399.1%) would lead to this outcome. As of Sunday’s close, bitcoin and ether’s market capitalizations were ~$443 billion and $203 billion, respectively.

We point out that if the “flippening” were to occur, it does not impact the investment theses for bitcoin: the emerging store of value tied to the evolution of money.

Ethereum as a platform for decentralized applications, tied to the evolution of the internet, is not a direct competitor to bitcoin itself.

Rather, growth in the underlying digital asset ecosystem benefits Ethereum more directly, as use of its underlying applications drive demand for the smart-contract platform’s native token, ether.

Click here to download full report. As always, please reach out with any questions or comments.

Stay tuned,

Joseph Orsini, CFA
Vice President of Research

Investment advisory and management services are provided by Eaglebrook Advisors, Inc., a registered investment advisor. Information presented is for educational purposes only. Past performance is no indication of future results. Please see our Form ADV Disclosures and Privacy Policy in our website.
Price Volatility of Digital Assets – A principal risk in trading Digital Assets is the rapid fluctuation of market price. High price volatility undermines Digital Assets’ role as a medium of exchange as consumers or retailers are much less likely to accept them as a form of payment. The value of client portfolios relates in part to the value of the Digital Assets held in the client portfolio and fluctuations in the price of Digital Assets could adversely affect the value of a client’s portfolio. There is no guarantee that a client will be able to achieve a better than average market price for Digital Assets or will purchase Digital Assets at the most favorable price available. The price of Digital Assets achieved by a client may be affected generally by a wide variety of complex and difficult to predict factors such as Digital Asset supply and demand; rewards and transaction fees for the recording of transactions on the blockchain; availability and access to Digital Asset service providers (such as payment processors), exchanges, miners or other Digital Asset users and market participants; perceived or actual Digital Asset network or Digital Asset security vulnerability; inflation levels; fiscal policy; interest rates; and political, natural and economic events.
Digital Asset Service Providers – Several companies and financial institutions provide services related to the buying, selling, payment processing and storing of virtual currency (i.e., banks, accountants, exchanges, digital wallet providers, and payment processors). However, there is no assurance that the virtual currency market, or the service providers necessary to accommodate it, will continue to support Digital Assets, continue in existence or grow. Further, there is no assurance that the availability of and access to virtual currency service providers will not be negatively affected by government regulation or supply and demand of Digital Assets. Accordingly, companies or financial institutions that currently support virtual currency may not do so in the future.
Custody of Digital Assets – Under the Advisers Act, SEC registered investment advisers are required to hold securities with “qualified custodians,” among other requirements. Certain Digital Assets may be deemed to be securities. Currently, many of the companies providing Digital Assets custodial services fall outside of the SEC’s definition of “qualified custodian”, and many long-standing, prominent qualified custodians do not provide custodial services for Digital Assets or otherwise provide such services only with respect to a limited number of actively traded Digital Assets. Accordingly, clients may use non- qualified custodians to hold all or a portion of their Digital Assets.
Government Oversight of Digital Assets – The regulatory schemes—both foreign and domestic—possibly affecting Digital Assets or a Digital Asset network may not be fully developed and subject to change. It is possible that any jurisdiction may, in the near or distant future, adopt laws, regulations, policies or rules directly or indirectly affecting a Digital Asset network, generally, or restricting the right to acquire, own, hold, sell, convert, trade, or use Digital Assets, or to exchange Digital Assets for either fiat currency or other virtual currency. It is also possible that government authorities may take direct or indirect investigative or prosecutorial action related to, among other things, the use, ownership or transfer of Digital Assets, resulting in a change to its value or to the development of a Digital Asset.

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