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Stacks Prepares for Nakamoto Upgrade — STX Price Correction Done?

Published April 15, 2024 8:20 AM
Valdrin Tahiri
Published April 15, 2024 8:20 AM
By Valdrin Tahiri
Verified by Peter Henn

Key Takeaways

  • The instantiation window for the Nakamoto upgrade opened on April 15.
  • Nakamoto will greatly improve the speed and security of Stacks.
  • The STX price has bounced over 30% since its low on April 13.

Stacks is a Bitcoin Layer 2 solution, allowing decentralized applications (dApps) and smart contracts to settle transactions on the Bitcoin blockchain.

The 26th-largest crypto by market cap is one of the few large cap altcoins to have outperformed Bitcoin in 2024, increasing 88% to the latter’s 54%.

The STX price fell nearly 50% after its all-time high on April 1, accelerating its decrease on April 12 and 13. However, it has bounced over 30% since, leading to the possibility that the correction is over.

What is the Nakamoto Upgrade?

The Nakamoto upgrade is named after Bitcoin’s founder, Satoshi Nakamoto. Since the community voted in favor of the Nakamoto upgrade, the instantiation window  for the fork was opened on April 15 and will continue until April 29 in order to align with the Bitcoin halving.

This is the first step in a two-step release. It will be followed by the activation window from May 15 to May 29, which will finalize the launch. Assuming these go successfully, the full features  of Nakamoto will activate in May.

Right now, Stacks transactions reach finality only after a Bitcoin block is produced. So, it can take tens of minutes for a transaction to go through. With the Nakamoto upgrade, transaction times could shrink to as low as five seconds as Stacks blocks detach from Bitcoin blocks.

As a result, a Stacks miner will be able to generate several blocks while a single Bitcoin block is mined. Additionally, Nakamoto will improve staker rewards and introduce more DeFi applications.

The Largest Upgrade: Bitcoin Finality

Be that as it may, the most important change  introduced by Nakamoto is that Stacks will achieve 100% Bitcoin finality  in its transactions, greatly enhancing its security.

Currently, an attacker can rewrite the history of the chain by outspending Stacks miners. After the upgrade, the attacker will have to outspend all Bitcoin miners in order to do the same. So, a Stacks transaction will become as irreversible as a Bitcoin one.

Finally, Nakamoto will also mitigate Miner Extractable Value (MEV) . Before the Nakamoto upgrade, Bitcoin miners with a large share of Bitcoin’s computing power could prevent other Stacks miners from including their transactions in Stacks blocks.

This let them win rewards in Stacks without paying much in Bitcoin, causing a decrease in rewards for Stacks miners and creating negative incentives for Stacks mining. With Nakamoto, they need to win five Bitcoin blocks in a row to mine cheaply. This is really rare, making it not worth the effort for them.

After Nakamoto, the next significant upgrade will introduce sBTC , a token pegged 1:1 to Bitcoin, enabling developers to utilize a programmable version of BTC. This integration will facilitate the incorporation of sBTC into Stacks smart contracts, leveraging Bitcoin’s robust security.

This advancement holds the potential to foster the creation of DeFi platforms and non-fungible tokens (NFTs) that benefit from Bitcoin’s security features.

STX Price Prediction: Is the Correction Over?

The weekly time frame technical analysis shows that STX has fallen since reaching its all-time high of $3.84 on April 1. The decrease led to a low of $2.07 on April 13, a drop of 45%. A bearish divergence in the weekly RSI (red) preceded the entire decrease. The bearish divergence often occurs near cycle tops.

However, STX has bounced over 30% since. It validated the previous all-time high region of $2.45 as support and created a long lower wick (green icon).

Additionally, a hidden bullish divergence has followed (green) after the bearish one. Given the 45% STX price decline that occurred after the initial bearish divergence, it’s plausible that the scenario has already unfolded.

STX Price Long-Term Bounce
STX/USDT Weekly Chart | Credit: TradingView

The daily time frame wave count suggests the short-term bottom is in. But, the same cannot be said about the long-term one yet. The most likely wave count indicates that STX is in wave four of a five-wave increase (white). Wave four often takes the shape of a symmetrical triangle.

If this happens, STX will continue consolidating inside a triangle before an eventual breakout. Due to the shape of the pattern, this will indicate the bottom is already in place.

STX Price Possible Wave Counts
STX/USDT 3-Day Chart: Credit | TradingView

The more bearish scenario suggests that the STX price has completed the A wave of an A-B-C corrective structure (black). If so, the price will increase toward $3.60 in the short-term, completing wave B. Afterward, another drop to the next support at $1.80 will be likely.

STX Set for Further Appreciation

The Nakamoto upgrade marks a critical milestone in the development of Stacks and indirectly, Bitcoin. The price has bounced admirably after last week’s correction. It is possible that both the short- and long-term bottom are in place, though the reaction to the $3.20 area will help confirm the latter.

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