This is the first newsletter to go out to our mailing list, as we seek to develop a closer relationship with our stakers and expand our service offerings. Written by co-founder Max Sherwood, we will aim to publish the newsletter at least quarterly, if not monthly.

Disclaimer: Nothing written in this newsletter should be construed as financial advice.

📉 Market Update: Crypto Suffers, But Not Alone

We’re all feeling the crunch in the crypto markets, as Bitcoin and Ethereum have experienced 30% and 55% drawdowns, respectively. However, this is not out of the ordinary for a bull market, and indeed these drawdowns take us back to prices that were originally broken only a few months ago in November, before Trump’s election. As 4-year-cycle advocate Bob Loukas puts it, it’s “nothing we haven’t seen before.” In my memory, the May 2021 drawdown was worse than this.

The obvious culprit is the market uncertainty and fear caused by the ever-changing Trump tariffs. As traders from the 2022 bear market will keenly remember, in times of global bearishness and uncertainty, crypto is not immune from a pullback, and trades  a lot like the NASDAQ. And since the rest of the crypto market is highly correlated with Bitcoin, for better or worse we’re all in the same boat, while markets digests the uncertainty around Trump’s tariffs and changing relationships between the US and the rest of the world.

On the whole, it’s important to remember that the crypto regulation news coming out of the US is as bullish as it’s ever been. It’s not hard to imagine a bull market continuation as soon as the dust settles around tariffs, and the Fed gives us another few rate cuts. If you’re a believer in the 4-year cycle like me, you’re looking for a bull market peak in Q3 of this year. Not financial advice.

🌐 Ethereum

The market’s apathy for Ethereum is indeed concerning, as its value relative to Bitcoin falls to 5-year lows, at an accelerating pace. But with a shake-up at the Ethereum foundation and the Pectra upgrade coming in April, there is reason to be hopeful. (Conversely, these could be seen as major risks.) Bullish traders may be tempted to call a bottom if/when ETH can find support, but risk catching a falling knife.

In the Ethereum staking world, Lido V3 enables vaults which should allow institutional stakers to customize their setups beyond what was possible previously. This also shows Lido’s attempt to enlist node operators in attracting stake, slowly doing away with the old paradigm of the curated set of operators simply running infrastructure and splitting Lido’s 10% fee 50/50. We continue to operate Lido validators within SimpleDVT, but it remains a minor part of our business until Lido commits to actively transitioning stake away from the curated set.

🌐 Solana

Finally the drama of SIMD-228 and SIMD-123 are over. SIMD-228 failed to pass, despite receiving more “yes” than “no” votes, it failed to reach the threshold needed. SIMD-123 passed quite easily. See the final results here.

We voted “no” to both SIMDs. As I explained in the forums, my concern was that their timing coincided with what could be a bull market peak. With block rewards already down ~80% from their highs in the wake of a bearish market, removing token emissions by 80% would mean the death of hundreds, if not thousands of validators in an extended bear market. Personally I think the value added to the network by these validators, and the projects they have built, is worth paying for. (Projects like Stakewiz and Solana Compass come to mind)

If you are a staker and would like direct representation in future governance votes, please don’t hesitate to reach out - it is always possible to split our votes in accordance with the wishes of our stakers.

🎇 New Projects

The Sui ecosystem is alive and well: last week, we were excited to help launch the mainnet of the Walrus decentralized storage protocol. Soon, we’ll support the next testnet of Ika, a unique MPC wallet solution which we’ve also made a financial investment in.  

In the Solana world, we’ve been approved to begin use of the DoubleZero network, but are waiting for them to enable support for Firedancer. We’ve also spoken with Raiku, who are in the early stages of creating a block builder for Solana, and may be an interesting project to become involved with in the future.

In a similar vein is FastLane, builders of a MEV-enabled client for Monad who’ve we’ve begun working with.

📝 🎙️ Reports & Live Discussions

As we step up our marketing and content game, we’ve released a long-form decentralization report on Sui. Have a look on our blog. In writing the report, I aimed to be honest, pointing out shortcomings without being inflammatory. However, my investigation into the liquid staking pools in particular motivated me to be more of a squeaky wheel. Let’s see if the report succeeds in drawing attention to some of the areas where improvement is needed.

Meanwhile, I’ve begun hosting decentralization discussions on Twitter. Last week’s subject was Monad, this week’s is Sui. If you haven’t already, follow us there for a steady drip of hopefully thought-provoking content.

💰 Infrastructure Investments

We continue to make significant investments in infrastructure, having purchased multiple servers as well as a switch for our rack. These ensure we have a backup server ready for Solana and Monad, and empower us to participate in the new testnets of Ika and the mainnet launch of Walrus, without relying on rented hardware.  

🤝 Support for Stakers

Via now-formalized partnerships with German and Austrian legal and tax firms, we are happy to support you with any of the below, on request:

• SLAs to guarantee staking returns

• Custom reward reporting

• Partnerships with German and Austrian tax companies

• Partnerships with custody providers

• Private and whitelabel validators

• Direct  communication with our team

• Staker-determined participation in governance voting

If we can support you with a specific request, don’t hesitate to reach out. You can fill out the contact form on our website, or email contact@h2o-nodes.com and I will aim to respond within 24-48 hours.

✈️ Conference Presence

I be traveling to Istanbul for Solana Crossroads at the end of April, before heading to Dubai for Staking Summit and Sui Basecamp, where I will be giving a talk on the state of Sui’s validator network. Daniel and I will be visiting ETH Bratislava together in May, a comfortable 1-hour drive away from Daniel’s home base of Vienna. There,  I will give a talk about how to turn Ethereum node operation from a hobby into a business. The jury is still out for ETHcc.

If you don’t see me on-stage, you’ll have to catch me at the conferences and side events. Don’t hesitate to reach out - let’s meet!


I hope my perspective is insightful to you, if you are curious about any other topics, let me know. Thanks for staking with us, and helping us to invest in our business and support the blockchain ecosystems we’re so passionate about.

-Max Sherwood, H2O Nodes co-founder