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Crypto markets have recouped losses after last weeks crash, which saw Bitcoin fall as low as $56,000.

The renewed bullishness comes amid slowing job growth a possible sign of easing inflation and hopes of rate cuts later this year.

Today, the largest cryptocurrency is back trading at just above $65,000. The second-largest Ethereum is up 11% since its low last Wednesday.

Overall, the wider cryptocurrency market added some $200 billion, according to CoinGecko, since Federal Reserve Chair Jerome Powell spoke on May 1.

He signalled that a rate hike when the central bank raises interest rates and increases borrowing costs for banks and businesses would be unlikely.

Still, the coast is far from clear for the Federal Reserve to begin lowering interest rates soon, according to Noelle Acheson, author of the Crypto is Macro Now newsletter.

Interest rates in the United States have risen to record highs as the Federal Reserve combats rampant inflation stoked by the COVID-19 pandemic. High interest rates also increase the amount people earn on their bank holdings, another incentive to keep cash rather than spend it.

Rate hikes are thus less beneficial for stocks and riskier investments like cryptocurrencies, as seen in last weeks dramatic drop in Bitcoin and Ethereum.

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In the first quarter, economic growth in the US slowed to its lowest level in nearly two years. The deceleration was partly attributed to a moderation in consumer spending and a widening trade deficit, or when a country imports more goods than it exports.

When rates are higher, business loans become more expensive, which discourages owners from expanding or hiring. The ripple effects can slow the wider economy as well.

Recent employment data released Friday, for instance, revealed the slowest job growth in six months and lower than the average monthly gain over the last year.

High unemployment combined with inflation and slowed economic activity would spell even more trouble for Powell.

Powells key objective these days is to avoid stagflation, an economic climate in which the economy continues to face high inflation while in a recession.

According to crypto venture capital firm Ryze Labs, that situation looks less likely to occur.

With rate hikes off the table and markets already pricing in little to no cuts for 2024, we think this bodes constructively for risk assets, Ryze Labs analysts told DL News.

The worst of stagflationary headwinds might be behind us, they said.

Sebastian Sinclair is a markets correspondent for DL News. Have a tip? Contact Seb at sebastian@dlnews.com.

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Bitcoin and Ethereum bounce back after week of brutal losses here's why - DLNews

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Ethereums transaction fees have reached a six-month low, caused by the shift of transactions to layer-2 (L2) blockchains, according to the latest edition of IntoTheBlocks On-chain Insights newsletter.

This migration has contributed to a decrease in the total fees accrued by Ethereum. In April, transactions on the largest three L2s, Arbitrum, Optimism, and Base, accounted for an unprecedented 82% of all Ethereum transactions.

With the inclusion of additional L2s, this percentage is likely even higher. The launch of EIP-4844 on March 13 played a crucial role in this transition by slashing L2 fees by more than tenfold, leading to a 10% drop in mainnet transactions and a shift in Ethereums token economics.

In the competitive landscape of L2s, different platforms are carving out their niches. Institutions have shown a preference for Arbitrum, which dominated 73% of Ethereums transaction volume among the top L2s. Conversely, Arbitrum accounted for only 39% of the number of transactions, while Base captured a 50% share. Notably, Blackrock and Securitize have recently applied to introduce the BUIDL real-world assets fund on Arbitrum.

On the retail side, Optimisms OP Stack has been gaining traction through SocialFi applications. Coinbases Base L2 experienced a surge in transactions following FriendTechs airdrop, and the social media-based card game Fantasy.top generated $6 million in fees this week on the Blast L2. This diversification of applications has intensified the competition among L2s, particularly in terms of market capitalization.

Optimisms OP token has seen a 48% increase from its April lows, outperforming ARBs 22% gain. The OP token now surpasses ARB in both circulating market cap and fully diluted valuation. Additionally, venture capital firm a16zs $90 million investment in OP has bolstered the projects resources and credibility.

The ongoing competition among L2s is leading to lower fees for Ethereum in the short term. However, it is simultaneously fostering a rich ecosystem of applications that promise to stimulate economic activity and offer long-term benefits, concludes IntoTheBlock.

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Ethereum fees hit lows while L2 capture users' attention: IntoTheBlock - Crypto Briefing

The Solana network could be on track to overtake the Ethereum network in transaction fees, a potentially significant development for Solanas status as a so-called Ethereum killer.

Solana could flip Ethereums transaction fees as soon as this week, according to Dan Smith, senior research analyst at Blockworks, who wrote in a May 7 X post:

Captured maximal extractable value, or MEV, refers to profits that are mostly captured through arbitrage trading on protocols. MEV measures the maximum amount of value that can be extracted from a blockchain by a user or a group of users.

Moreover, Solanas $2.8-million total economic value was near Ethereums $3.1-million total economic value on May 7, according to Smiths X post:

However, Solanas daily transaction fees are still far from Ethereums. Ethereum generated over $2.75 million worth of fees in the past 24 hours, compared to Solanas $1.49 million, according to DefiLlama data.

Looking at the total value locked (TVL), Solanas $3.94 billion in TVL is still a small fraction or around 7.4% of the Ethereum networks $53 billion TVL.

Related: How Binance played a key role in arrest of ZKasino scam suspect

Solana launched on mainnet in March 2020, with a claimed throughput of 50,000 transactions per second (TPS), promising to improve on the lack of scalability and inefficiencies of Ethereum, as a so-called Ethereum killer.

Unlike Ethereums modular approach to scalability via layer-2 (L2) scaling solutions, Solanas monolithic approach aims to create scalability and low fees as a standalone blockchain network.

However, Solanas approach saw widespread criticism following its previous outages. At the beginning of April, the demand for memecoins caused approximately 75% of Solana transactions to fail, as the network was unable to handle the large demand.

On Feb. 6, block production on Solana stopped for approximately five hours, before engineers and validators were able to restart the network, according to Solanas status page.

Related: Bankruptcy law firm S&C absolved from misconduct, according to new FTX proposal

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Solana could flip Ethereum in transaction fees within a week: Report - Cointelegraph

Ethers (ETH) price continues to underperform compared to Bitcoins (BTC) 2024 gains, but Glassnode analysts suggest that brighter days could lie ahead.

Data from Cointelegraph Markets Pro and TradingView shows that Ether has been underperforming Bitcoin over the last two years, resulting in a weaker ETH/BTC ratio, which reached a low of $0.04622 on May 1, the lowest since April 2021.

Glassnode said Ethers under-performance this cycle relative to Bitcoin is due to a measurable lag in speculative interest from short-term holders (STHs).

The report defines the STH cohort as investors who acquired their coins within the last 155 days and are often considered a proxy for new investor demand.

Glassnode analysts explained that BTC experienced a noticeable increase in speculative activity in terms of capital accumulation among STHs in the run-up to all-time highs in March. This has not been reflected in ETH, which is yet to breach its previous all-time high.

The firms on-chain data reveals that while Bitcoins STH-realized cap is nearly at the same level as the last bull run peak, ETHs STH-realized cap is still less than half of previous cycle levels, suggesting a markedly lackluster inflow of new capital.

Related: Bitcoin exchange inflows drop to 10-year lows after $74K all-time highs

Historically, Ethers price performance has been closely linked to Bitcoin price moves, and the recent price action reflects this relationship.

Bitcoin experienced a sell-off after the fourth halving, dropping 11% to a two-month low of $56,500 on May 1. Bitcoins price has since recovered, consolidating within the $62,700$65,550 price range over the last two days.

Ether experienced a similar correction after the halving with a 6% drop, recording the worst post-halving performance ever, according to Glassnode.

However, measured from the $73,835 all-time high, Glassnode noted that Bitcoins price fell by 20.3% the deepest correction on a closing basis since the FTX lows in November 2022.

Using the Net Unrealized Profit/Loss (NUPL) metric, the on-chain data analytics firm found that both ETH and BTC still have a relatively low realized cap associated with long-term holders (LTHs), suggesting the market is within the early stages of a macro uptrend.

In an earlier report, Glassnode established that capital inflows into ETH tend to lag behind those into BTC. For instance, during the 2021 cycle, the peak influx of new capital into BTC occurred 20 days before the peak influx into ETH.

Using a 30-day change in the realized cap to monitor the rotation of capital between these two assets, Glassnode analysts found that ETHs STH realized cap is yet to pick up momentum in the current cycle.

Glassnode concludes that while the post-halving market action has played out remarkably similar to previous cycles, several data points indicate that Ether has underperformed relative to BTC.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

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Ethereum price lags due to 'weaker capital rotation,' but crypto macro uptrend remains - Cointelegraph

In proof-of-stake (PoS) blockchains such as Ethereum, the networks security syncs with the number of active validators, the percentage of circulating tokens staked, and the allocation of these tokens among the active validators. Restaking mechanisms incentivize these staked tokens otherwise lying inactive to improve the overall functioning of the blockchain.

This article discusses what restaking is, the types of restaking, how liquid restaking works, collective security using staked Ether and concerns regarding restaking.

Restaking presents a novel concept in cryptocurrency security, enabling stakers to use their Ether (ETH) in the consensus layer more than once. It allows stakers to increase their rewards while strengthening the security of the staking network by facilitating the deployment of liquid staking tokens with validators across several networks.

Staked tokens usually sit idle on PoS blockchains. Restaking activates staked tokens, facilitating higher staking rewards for restakers. Whether someone is staking Ethereum directly or using a liquid staking token (LST), they could use a restaking protocol such as EigenLayer to receive additional rewards on their staked tokens.

The sheer number of validators on the Ethereum network participating in the PoS consensus mechanism makes it stand out. But staked ETH lies dormant. Thanks to liquid staking protocols, the staked ETH gets converted into fungible tokens, enabling stakers to use it in decentralized finance (DeFi) applications. The mechanism sets aside the minimum 32 ETH staking cap, enabling users with smaller holdings to earn staking rewards.

Restaking can broadly be segregated into native and liquid restaking. Native restaking is available to users who run an Ethereum validator node. It functions through a set of smart contracts that supervise the management of assets staked inside a validators node.

Validators can benefit from the crypto-economic security offered by restaking protocols and can stake their tokens with them. To participate in a restaking program, validators need to install and execute additional node software for the restaking module.

Liquid restaking involves users utilizing liquid staking tokens (LST). When a staker stakes their assets with a validator in this procedure, the validator grants them a token that represents their stake. The staker would restake the LST to earn additional rewards.

Let us use the example of EigenLayer to understand how liquid restaking works. With a total value locked (TVL) of over $250 million, EigenLayer effectively acts as a bridge between Ethereum and other blockchain applications, offering both pooled security and a marketplace for it.

EigenLayer functions as the foundational framework for restaking. Anyone who has already staked their ETH directly or through liquid staking solutions can engage with EigenLayers smart contracts. This allows them to restake their holdings and contribute to the security of various platforms, effectively creating a collective security mechanism powered by Ethereum.

Here is the process to restake on EigenLayer

Step 1: Click Restake at the right of the top menu on the EigenLayer website.

The EigenLayer app will appear in the next tab, where the user can complete the restaking process.

Step 2: Click the Connect wallet button at the middle of the top. Users can select between MetaMask, Coinbase Wallet, WalletConnect and OKX Wallet.

At the top right, users can see an icon with three horizontal lines. Users can access support documentation, blogs, Discord and forum sections through it.

Step 3: In the section Liquid Restaking, click on the chosen LST.

Suppose a user selects Rocket Pool Ether. They can deposit or unstake on the window that appears. At the time of writing, deposits are paused.

Typically, launching a new protocol involves establishing a fresh network of trust for security purposes, which includes setting up a network of validators and introducing a native cryptocurrency.

Restaking changes the game by allowing these protocols or active validator sets (AVS) to leverage the collective security from Ethereums stakers, making development much more efficient. These AVS, also called EigenLayer modules, can range from sidechains and bridges to oracle networks, keeper networks and data availability layers.

In the past, an attacker could potentially breach the security of one of these AVS to cause disruption. However, with EigenLayers model of pooled security, any such attempt would require challenging the entire collective stake, valued at billions of dollars. Participating in EigenLayers smart contracts, however, introduces additional risks, including the possibility of increased slashing conditions for a users staked ETH.

For those staking their Ethereum, this model offers the chance to earn higher returns by securing various AVS with their restaked ETH without needing different tokens. EigenLayer facilitates this through a marketplace where AVS can attract the support of Ethereum validators, who are then able to select which modules to back based on the incentives provided.

A common concern about restaking is about the allocation of funds repeatedly to similar validators, increasing both yield and risk. Developers have warned that excessive leverage could result in the instability of projects. According to them, if more financial risk is embedded into the blockchain itself, it would only destabilize the whole ecosystem. Vitalik Buterin, a co-founder of Ethereum, has cautioned that restaking protocols could expose the blockchain to significant systemic risk.

The rapid growth of restaking protocols means the associated risks are also escalating, demanding immediate attention. A voluminous failure could undermine the security of the underlying blockchain. In 2022, Ankr, a restaking protocol built on the BNB network, was exploited, and it should serve as a preview of a possible catastrophe for a blockchain network.

However, considering the possible risks posed by restaking, it can be deployed in scenarios with low-risk misbehaviors, like double signing, without compromising Ethereums decentralization norms.

As restaking continues to evolve, it is likely to emerge as a key DeFi component, drawing more liquidity and users into Ethereum staking, which historically has lagged behind other PoS networks in staking ratio. Through the synergies of LST and restaking, Ethereums staking ecosystem may see significant growth.

Possible risks to layer-1 blockchains due to restaking suggest a cautious approach regarding the development and deployment of staking services. Resolving potential conflicts after restaking gains significance will help prevent negative effects. Factoring in the long and short-term effects of restaking on the Ethereum ecosystem may result in a win-win situation for every staker.

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What is restaking, and how to restake Ethereum to boost rewards? - Cointelegraph