Starkware’s $2B Airdrop & The Rise of Initial Points Offerings

https://medium.com/intotheblock/starkwares-2b-airdrop-the-rise-of-initial-points-offerings-82b364f8eb5b

Airdrop controversies and the evolution of token generation events

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week, we look at Starkware’s airdrop, analyzing the controversy surrounding it despite being the largest airdrop of all time. We then step back to evaluate other airdrop tokens and their performance. Finally, we analyze how the token-generation meta has been shifting away from airdrops and into initial points offerings.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees dropped by 32.2% as ordinals-related activity continues to decay
  • Ethereum fees declined by 14.6%, but remain near their yearly highs as gas prices surpassed 100 gwei multiple times this week

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • $540M worth of Bitcoin was withdrawn from CEXs, the largest weekly net outflows since June 2023
  • $370M of Ether left CEXs, making it seven consecutive weeks of net outflows for the second largest crypto-asset

Starkware’s $2B+ Airdrop

This week Starknet, an Ethereum layer 2 network, launched its STRK token following a community airdrop. Despite distributing over $2B worth of tokens, the STRK has been one of the most controversial.

Source: ITB’s Upcoming Airdrops Perspectives

$2.4B+ to Users — The value of STRK airdropped to users surpassed this value based on its average price in the first hour of trading

  • STRK traded at a fully diluted valuation as high as $50B but quickly dropped below $20B
  • Based on 7.3% of supply distributed in the airdrop, the STRK airdrop has been the largest in crypto’s history in terms of the initial value rewarded
  • Despite its magnitude, many complained that Starkware over-indexed on developers over users in its airdrop
  • Some users reportedly earned 1,800 STRK (~$3,6000) for fixing a typo in Starknet’s GitHub
  • On the other hand, many users of Starknet’s largest protocols, and of dYdX v3 (built on Starkware) did not receive a token allocation, leading to complaints from the crypto community
  • Additionally, Starkware’s team decided to extend its investor lock-up following criticism from the community

The STRK token is the latest in a streak of strong performance of airdrop tokens.

Source: ITB’s Upcoming Airdrops Perspectives

Strength in Crypto Markets — Previous airdropped tokens have been rallying strongly along with newly minted ones

  • Layer 2 tokens like ARB and OP have led the market higher over the last year
  • Like these two, Starkware is also expected to benefit from Ethereum’s upcoming Dencun upgrade as transaction fees are projected to drop by 90%
  • Newly minted tokens in general have been performing strongly as also witnessed with Celestia’s 10x in three months post-launch

Despite the strength of recent airdropped tokens, the market appears to have its eyes on the latest token bootstrapping mechanism.

The Rise of Initial Points Offerings

Previous crypto bull markets have been facilitated by new funding mechanisms. Following the launch of Ethereum, initial coin offerings (ICOs) allowed anyone globally to invest directly into tokens. Then in 2017, NFT mints offered a similar way for projects to raise funds while providing investors with JPEGs in exchange.

Yield farming, though not a direct funding mechanism, helped protocols bootstrap their liquidity and generate revenues in exchange for token rewards. Airdrops served more as a retroactive reward for “OG” users while promoting broader ownership of a crypto-asset.

In the last year, points have emerged as the latest way to bootstrap a project and create liquidity for crypto teams.

Points Mania — The number of protocols with active points programs has exploded in the last six months

  • Initially pioneered by Blur, points systems are a more dynamic and forward-looking approach to airdrops
  • These programs assign points to users performing key actions such as providing liquidity, referring users and more
  • Currently the main active points program is EigenLayer’s, which has allowed the protocol to reach over $7.8B prior to its Mainnet launch
  • Following a period of points accruing to users’ balances, protocols such as EigenLayer launch tokens through an equivalent to initial points offerings
  • This meta of points as system for projects to launch tokens continues to gather steam, with projects such as Ethena incorporating them since the beginning

Overall, points systems are not perfect but do have several improvements in comparison to previous bootstrapping mechanisms. By not requiring direct investments, users get to keep their funds while also minimizing chances that tokens distributed are securities. Being dynamic and not retroactive also points system gain an advantage over airdrops. It is unclear how long the current points rush will last, but if the past cycles are a sign, it is likely that this bootstrapping mechanism enables a new wave of flows and capital formation for the space.


Starkware’s $2B Airdrop & The Rise of Initial Points Offerings was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Analyzing Bitcoin’s Odds of Hitting All-Time Highs

https://medium.com/intotheblock/analyzing-bitcoins-odds-of-hitting-all-time-highs-94f7493d4bb9

5 key catalysts pushing BTC to $70k

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week, we attempt to answer the question everyone in crypto is asking: will Bitcoin hit a new all-time high? We explore five key catalysts that are likely to propel BTC higher over the next few months and even assign a probability to this outcome.

Remember: none of this is to be taken as financial advice. Please do your own research and attempt to come to your own conclusions.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees dropped by 35% despite its price reaching its highest in nearly two years
  • Fees on Ethereum increased a whopping 61.5% as on-chain demand ramping up to its highest since the May 2023 meme token frenzy

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • $160M worth of BTC left CEXs, slightly less than the $240M in withdrawals from the previous week
  • ETH recorded $500M in net outflows, but these also decelerated relative to the $1B in withdrawals last week as EigenLayer removed its deposit caps

Analyzing Bitcoin’s Odds of Hitting All-Time Highs

Bitcoin has broken out above $50k and surpassed a market cap of over $1T. BTC’s price is now up over 30% in the last three weeks. Given the recent momentum in Bitcoin, market participants are now asking themselves wen all-time highs?

It’s $69k high set in 2021 is now just 32% away, and bullish catalysts continue line up. There are five major catalysts in sight that could lead BTC to all-time highs before the summer. Namely, these are: the Halving, ETFs, Easing, Elections, Treasuries (HEEET).

Let’s look at these one by one to understand their implications regarding price action over the next few months. First off, how is the halving likely to impact Bitcoin?

Source: ITB Bitcoin Hash Rate

The Halving’s Effect on Network Security — the implications of a reduction in Bitcoin’s security budget

  • The Bitcoin halving is set to happen in mid-April 2024. In it, the amount of rewards issued to miners per block will be reduced from 6.25 BTC to 3.125 BTC
  • Since miner revenues decrease by 50%, it is likely that Bitcoin’s hash rate (the aggregate amount of computation miners provide the blockchain) drops shortly after the halving
  • In 2020 after the last halving, Bitcoin’s hash rate dropped by 30% within the two weeks. However, Bitcoin’s miner difficulty was also automatically reduced shortly thereafter, leading to new all-time highs in the hash rate just seven weeks after the halving even while BTC’s price had remained nearly unchanged
  • With Bitcoin set to undergo its fourth halving, it is likely that miners are more prepared than ever for the reduction in issuance. For this reason, as well as the continued specialization in miner equipment, we predict Bitcoin’s all-time high to reach another all-time high just a month after the halving

With regards to Bitcoin’s price, a quick rebound in hash rate would help assure the security of the Bitcoin blockchain. Moreover, the reduction in issuance also translates to potentially less Bitcoin being sold by miners.

Reduced Selling Pressure?

  • Bitcoin’s issuance inflation rate will be decreasing from 1.7% to just 0.85% per year after the halving
  • Approximately 900 BTC are currently issued per day, representing just 0.1% of Bitcoin’s on-chain volume. While there will be marginally lower sell pressure as these newly-minted flows decrease, the larger impact may come from miners’ holdings
  • Miner addresses are attributed 15% of Bitcoin’s on-chain volume last week, and hold 1.93M BTC in aggregate. Historically, as volume trends higher after the halving while miner rewards decrease, this results in less market impact

Then psychologically, many large players in the crypto market operate under the premise of four year cycles. Historically, the year following Bitcoin’s halving tends to have the strong performance. Given that this theory has become relatively widespread within crypto, it is likely many participants front-run this by buying earlier, making it increasingly likely that all-time highs will be hit faster than in previous bull cycles.

ETF Flows — The second catalyst for Bitcoin is likely to be the continuation of inflows coming from the spot ETFs

  • Over $4B in new inflows have come into the Bitcoin ETF products just a month after their launch
  • While GBTC outflows were temporarily larger than inflows into the new ETFs, this situation has reversed, with Blackrock’s IBIT recording one of the most successful ETF launches in history in terms of assets under management
  • Demand for Bitcoin ETFs has particularly accelerated this week, recording an average of $350M in inflows per day

While it’s unclear how long the strong inflows will last, some are arguing that these may accelerate in Q2 as Bitcoin spot ETFs finish their first quarter trial and registered investment advisors can begin offering it more broadly. This could result in growing demand for Bitcoin, while supply issuance decreases post-halving, resulting in a potentially explosive dynamic for Bitcoin’s price.

Easing — The Federal Reserve’s restrictive stance on interest rates in 2022 set the grounds for a bear market, not only crypto but in all risk assets. As inflation has come down to 3% from nearly 10%, market participants are now anticipating the Fed to facilitate financial conditions, lowering interest rates and potentially reactivating quantitative easing. This anticipation is likely a main driver behind the recent rally in both Bitcoin and stocks.

Source: ITB Capital Markets Insights

Front-Running the Fed — Previous bear markets in equities used to bottom shortly after the Fed began cutting rates; now that this play has become obvious, market participants continue to buy in anticipation of eventual rate cuts

  • Despite last month’s CPI print being slightly higher than expected, the stock market continues setting new all-time highs
  • This time, Bitcoin’s price action has moved more closely with stocks, leading to its correlation with the Nasdaq and the S&P 500 to a two-month high
  • Whether it happens in March or as late as the summer, the forecasted rate cuts are being priced in and leading markets higher
  • As interest rates begin to decrease, it will become cheaper to borrow, supporting more liquidity into financial markets which ultimately tends to benefit prices of Bitcoin and stocks alike

Elections — To make matters more interesting, the Fed’s bias towards the democratic party might sway them into further support of the economy

  • Though the Fed is supposed to be an independent apolitical institution, the political donations from its employees has consistently favored the democratic party over the last few years
  • With presidential elections coming in November 2024, there is an implicit incentive for the Fed to prop up the economy to increase Biden’s odds of reelection
  • While the Biden cabinet has been relatively anti-crypto, the months leading up to the election would likely be favorable to crypto as stronger economic conditions facilitate an environment for markets to rise
  • Moreover, prediction markets in Polymarket are currently giving Biden just 33% odds to win reelection, making Trump who has been significantly more crypto-friendly the most probable outcome

Then, finally, we have the potential for institutional treasuries to increase their Bitcoin holdings.

Source: ITB Bitcoin Whales Perspectives

Treasuries — Institutional treasuries could be a non-obvious driver for Bitcoin in the next few months

  • In 2020 as Bitcoin rebounded post-Covid crash, traditional finance giants like Paul Tudor Jones first began being vocal about BTC’s potential
  • With the spot ETFs now making it easier than ever for Wall Street to access Bitcoin, it is likely that more hedge funds will accumulate Bitcoin in the upcoming quarters
  • Registered investment advisors may also see increased demand from their clients, given the strong performance of the spot ETFs
  • This could result in a small percentage of corporate treasuries beginning to allocate to Bitcoin and the broader crypto space
  • While this narrative may be less concrete within the US thus far, an increasing amount of companies in Asia and South America have adopted Bitcoin for part of their treasuries. Now that the ETF legitimizes Bitcoin in the US, this pattern may expand nationally

Conclusion: Given these five catalysts (Halving, ETFs, Easing, Elections and Treasuries), we give Bitcoin 85% odds of hitting all-time highs within the next six months.

Bonus: What could go wrong? With the current tailwinds, it is easy to be bullish on Bitcoin, but what could prevent it from not hitting new highs in 2024?

  • Many of the catalysts mentioned are at least partially priced in, particularly the first three mentioned. If one of these failed to materialize (e.g. the Fed does not end up easing conditions as expected), then it is likely that Bitcoin could face a 10%+ correction
  • Geopolitical conflict — while wars in Gaza and Ukraine haven’t spread out globally, there is a possibility that these begin to expand. If Western economies or China become more directly involved, the uncertainty would likely result in a major sell-off at least in the short-term
  • Unexpected selling pressure — if major crypto institutions were to fail, Satoshi-era addresses become active again or there is a major hack/vulnerability in Bitcoin, it is possible for selling pressure to surmount the current tailwinds at least temporarily. This currently seems unlikely, but could be a potential unknown weighing down on the market


Analyzing Bitcoin’s Odds of Hitting All-Time Highs was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Ethereum’s Dencun Upgrade & The L2 Wars

https://medium.com/intotheblock/ethereums-dencun-upgrade-the-l2-wars-8d80332de001

Increased competition in L2s as fees reduce 10x

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week, we evaluate the increased competition among Layer 2 (L2) networks on top of Ethereum. As the Dencun upgrade is expected to dramatically reduce costs to use L2s, the fight among these networks is likely to accelerate as the top players seek to specialize in their niche.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees climbed by over 50%, recording a spike in Ordinals fees on February 3
  • Ethereum fees increased by more than 30%, with EigenLayer deposits and speculation surrounding the new ERC-404 standard contributing to increased demand

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin broke its eight-week trend of inflows into exchanges, with nearly $300M BTC being withdrawn on net as Bitcoin ETFs continue growing in AUM
  • Over $1B in ETH left CEXs this week, with many of those funds ending up in EigenLayer, which recorded $3B in deposits this week as they removed their deposit caps temporarily

Ethereum’s Dencun Upgrade & The L2 Wars

Ethereum’s long-awaited Dencun upgrade has officially been scheduled for March 13. After a successful implementation on the Holesky testnet, the upgrade is set to happen in just over a month.

The Dencun upgrade will implement nine Ethereum Improvement Proposals (EIPs), out of which EIP-4844 is the most anticipated. EIP-4844, also known as proto-danksharding, introduces a new type of transaction called blob-carrying transactions. Blob-carrying transactions only include a reference hash to the blob’s data stored off-chain. This allows verification based on the hash without bloating the consensus layer with sharded blob data.

Blobs enable more data to be posted to Ethereum while simplifying off-chain transaction verification. Unlike calldata, blobs aren’t permanently stored, reducing overhead. Their data becomes inaccessible after approximately 3 weeks.

This long-awaited upgrade is forecast to cut costs for Ethereum’s L2s by at least 10x, making Ethereum more scalable and efficient. By leveraging rollups and temporary blob storage, the developers aim to increase throughput and reduce fees for users.

Source: ITB Ethereum L2 fees

2 Cent Transactions Coming Soon — L2s transactions are expected to drop by 10x from a current average of $0.23

  • Average fees on the major L2s have ranged from $0.15 to $0.60 in 2024
  • Complex smart contracts powering many dapps can still cost over $1
  • This is expected to accelerate the transition towards Ethereum’s roll-up centric roadmap as L2s become more competitive with a lower cost to use

The increased attractiveness of L2s is also likely to accelerate competition between them as they fight to bring users on-chain.

Source: ITB ETH L2s Perspectives

Arbitrum Leads in DeFi — Arbitrum consistently has over 50% of the ETH transaction volume between the top optimistic rollups

  • Arbitrum has consolidated as the DeFi leader amongst L2s, with $2.7B in total value locked across 500+ applications
  • DEXs on Arbitrum have processed over $1.7B in volume in the last week alone per DeFiLlama
  • Arbitrum’s first mover advantage and diverse range of DeFi applications have helped it secure the number one spot among L2s on Arbitrum

Looking beyond financial applications, however, Optimism stands out.

Source: ITB ETH L2s Perspectives

Optimism Leads in Distribution — The Optimism Stack has gained traction as the most used L2 infrastructure

  • Optimism Mainnet has frequently had over 60% of the number of daily active addresses out of the top optimistic rollups
  • User activity has increased as popular apps like WorldCoin and Farcaster have deployed on Optimism
  • Coinbase’s Base is also part of the “superchain” a consortium of L2s using the OP stack, which share a fee with the Optimism DAO

Horizontal vs Vertical Expansion — Optimism and Arbitrum have taken opposite approaches seeking growth

  • Arbitrum Orbit enables the creation of L3s on top of the Arbitrum One L2, while the OP Stack deploys multiple L2s in parallel to Optimism Mainnet
  • L3s on Orbit can take advantage of the liquidity and applications that are already available on Arbitrum L2, an approach that favors faster transactions and lower costs
  • Meanwhile, the OP Stack facilitates developer creativity by being able to quickly spin off L2s, which can be app-specific like Aevo or general-purpose like Mantle

There are currently 39 L2s deployed on top of Ethereum per L2Beat. As the Dencun upgrade decreases the costs to use all of these networks by an order of magnitude, it is likely that the L2 wars are just getting started.


Ethereum’s Dencun Upgrade & The L2 Wars was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

GBTC Outflows FUD & Carry Trade Profits Drag Bitcoin

https://medium.com/intotheblock/gbtc-outflows-fud-carry-trade-profits-drag-bitcoin-a326fdc1ec44?source=rss----b85bd2b83bfe---4

Analyzing BTC’s correction and what’s next

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we evaluate the claims behind the fear, uncertainty and doubt (FUD) surrounding the Grayscale Bitcoin ETF. We analyze ETF flows in aggregate, look at Bitcoin whales’ increased holdings and underreported factors potentially dragging the market.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin and Ethereum fees declined over 30% as market volatility decreased, leading to relatively less urgency amongst users transacting

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded a seventh consecutive week of net inflows into CEXs, led by GBTC’s deposits, but these inflows did decrease by $100M relative to last week
  • $200M worth of ETH left CEXs this week, compared to $460M in net outflows last week

GBTC Outflows FUD & Carry Trade Profits Drag Bitcoin

As Bitcoin remains in a downtrend following the launch of the spot ETFs, many are pointing to Grayscale as the potential culprit. Grayscale’s GBTC, which had been at a discount relative to its Bitcoin holdings for two years, was converted into an ETF and has seen major outflows since then.

Source: Bloomberg ETF Analysts

Analyzing the FUD — Grayscale outflows have been casting doubts over whether the launch of the Bitcoin ETFs was successful or not

  • Since it’s launch, GBTC has recorded an outflow of over $4.3B
  • Approximately $1B of those outflows were from FTX, which should be done selling its GBTC holdings per CoinDesk
  • FTX’s bankruptcy estate had been holding GBTC at a discount and opted not to realize a loss by selling prior to the likely ETF conversion
  • Many other entities, including DCG (the parent company of Genesis) that had been holding at a loss likely decided to exit GBTC once it converted to an ETF and its discount went to near-zero
  • However, even despite the $4.4B in outflows from GBTC, it is worth highlighting that all the Bitcoin ETFs received in aggregate $820M+ in inflows

Therefore, it appears that there has actually been net buying activity from the Bitcoin ETFs despite its price trading lower than when these launched. Moreover, it seems that there has been additional buying from Bitcoin whales.

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Effective risk management is essential in the next stage of DeFi’s growth. We’ve recently launched the DeFi Risk Radar, a significant step forward in understanding DeFi risks. This tool offers a comprehensive look at numerous protocols and over a hundred advanced risk metrics, enhancing your approach to DeFi risk management. Want to see it in action? You can try the DeFi Risk Radar for free.

Read More

Source: ITB Bitcoin Whales Perspectives

Whales Balance Reach Yearly High — The amount of Bitcoin held in addresses with over 1,000 BTC has accelerated in 2024

  • “Whales” include any entity, individual or fund (including the ETFs) holding over 1,000 BTC
  • While Bitcoin ETFs have seen net inflows of $820M, Bitcoin whales have seen an increase of ~$3B (76,000 BTC) so far in 2024
  • Including GBTC, Bitcoin ETFs now hold 3.23% of Bitcoin’s circulating supply
  • This is a higher share of supply than in gold’s case, were $110B out of a market cap of ~$10T is held in US-traded ETFs (approximately 1% of supply)
  • Despite Bitcoin’s correction, the high ownership of Bitcoin ETFs suggest these have actually been getting decent traction among traditional finance investors

So if the ETFs aren’t selling, then who?

Source: ITB Bitcoin Futures Data

Carry Trade Profits — Hedge funds’ carry trade positions likely pushed the market higher in Q4 and may be leading to its decline in Q1 2024 as these are closed

  • Bitcoin futures were trading at a premium (contango) of over 2% relative to spot prices just a month prior to the ETF approvals
  • By going long spot and short futures, funds would execute a carry trade profiting from this difference in price netting 25% to 30% in annualized profits
  • As the ETF approval window began we see that premium in futures quickly turning into a discount (led by BitMEX [green] on January 6), suggesting firms began taking profits

Other than carry trade profits, Arthur Hayes’s recent article pointed to the recent decline as a signal that the market expected the bank term funding program (BTFP) to not be renewed, which ended up becoming official on Thursday. While the BTFP allowed banks to flow liquidity into the market, by being able to borrow at par against bonds that were at steep discounts, the termination of this program may reduce some of that capital injected after the Silicon Valley Bank collapse. With Bitcoin increasingly acting as a barometer for global liquidity, this seems like a plausible argument as well.

The BTFP will now expire on March 11, but banks will have an extra year to repay their debt, suggesting the outflow on liquidity may not be as imminent. At the same time, it seems GBTC outflows are also slowing down in the last two days, and China’s central bank announced it will inject $140B into its financial system. Are these signs that Bitcoin’s correction may be close to being done, or are there other factors that could continue pushing it lower?


GBTC Outflows FUD & Carry Trade Profits Drag Bitcoin was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Bitcoin ETF Competition & DeFi’s Credit Boom

https://medium.com/intotheblock/bitcoin-etf-competition-defis-credit-boom-92cf40232bff

Crypto faces shift in traditional finance products, while decentralized leverage expands

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we analyze crypto adoption in both traditional finance and decentralized finance (DeFi). We begin by evaluating the competition for Bitcoin ETFs and the ongoing rotation of long-term capital there. Then we highlight the increased demand for lending protocols on-chain, which have been quietly expanding.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin and Ethereum fees rebounded as market volatility increased

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded a sixth consecutive week of inflows into CEXs, with nearly $2B in net deposits since December
  • ETH, on the other hand, saw $460M in net outflows from CEXs as it sustains its recent relative strength

Bitcoin ETF Competition

A week after the launch of the Bitcoin ETFs, the market appears to have mixed feelings about their short-term impact. Bitcoin’s price is down 16% from the high realized shortly after the approval announcement, and has been hovering around the $41,000 level. Through this correction, the ETF competition appears to be heating up.

Source: IntoTheBlock’s Bitcoin Network Indicators

Long-Term Rotation — Bitcoin’s average holding time of transacted coins hit an all-time high on Monday as people exited GBTC

  • Grayscale successfully converted its GBTC product into an ETF, but left its fees at a hefty 1.5%, 5x greater than Blackrock’s fee
  • As a result, GBTC has recorded $2.2B in outflows, losing almost 10% of its assets under management
  • It is unclear how much of these assets have added sell pressure to the market vs ended up in competing ETF products
  • That being said, the aggregate amount held by Bitcoin ETFs has increased by approximately $1B net after GBTC’s outflows, pointing to more capital flowing in than exiting Bitcoin in TradFi markets
  • Following their debut, Bitcoin ETFs surpassed silver ETFs as the second largest commodity by AUM, only after gold

DeFi’s Credit Boom

Demand for leverage in crypto is growing as reflected in DeFi lending protocols. The amount of active loans in lending protocol has nearly doubled over the course of the last year.

Source: IntoTheBlock Lending Protocol Perspectives

1.5 Year High — Loans outstanding in lending protocols surpassed $7B for the first time since June 2022

  • Demand for borrowing in lending protocols has recovered along with market sentiment, accelerating in Q4 2023
  • Compared to 2021, the demand has been largely “organic” as most established lending protocols do not have sizable incentive programs active
  • Aave continues to dominate in this category with over 50% of loans issued through their platform

Source: IntoTheBlock Risk Radar

ETH Deposits in Aave v3 Set ATH — Over 600k ETH has been deployed in Aave v3 on Ethereum for the first time

  • The increase in supply in ETH amounts shows that the increase in the value of loans outstanding is not just due to prices increasing
  • The amount of USDT and USDC in Aave v3 has also been setting all-time highs

While DeFi might not be getting as much attention on social media, it is clear that usage for lending protocols is quietly booming. DeFi bluechips successfully came out of the bear market and are seeing renewed interest as demand for financial services builds up on-chain. Ultimately, this credit boom is likely to further accelerate if the bull market continues.


Bitcoin ETF Competition & DeFi’s Credit Boom was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Bitcoin’s Institutional Era Begins

https://medium.com/intotheblock/bitcoins-institutional-era-begins-f66aaae7d88a

While ETH builds momentum as the market looks for the next catalysts

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we discuss the launch of the Bitcoin spot ETFs, taking a look at its impact on BTC trends. We analyze the ETFs’ effect on institutional adoption and how miners have been positioning in anticipation of this milestone. Finally, we evaluate ETH as the next focal point for the industry moving forward.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees dropped by half week over week as Ordinals transactions declined significantly
  • Fees for using Ethereum increased by 10% driven by Uniswap volumes reaching a 10-month high

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • $210M in Bitcoin was net deposited into CEXs this week, and over $500M over the last two weeks
  • Ether saw $120M in net outflows as the markets focus shifted post-ETF

Bitcoin’s Institutional Era Begins

After years of failed applications, the Bitcoin spot ETF was announced and launched this week. The approval process was not exactly smooth, with an initial fake approval tweet coming from the SEC’s X account a day prior to the official announcement.

Eleven Bitcoin ETFs were approved and launched on Thursday, generating a record $4.6B billion in volume on their first day. On-chain, volume has also been rising, reaching a 14 month high on the day of the ETF approvals.

Source: IntoTheBlock’s Bitcoin Financial Indicators

Volume Reaches 14 Month High — Bitcoin’s on-chain volume reached its highest since the FTX collapse

  • Bitcoin recorded $60B in total volume on Wednesday, of which $58.76B was in transactions of over $100k (97% of volume)
  • The high share that transactions over $100k makes out of total volume has been consistently rising and is bound to get bigger following the ETFs’ launch
  • Based on Bitwise’s survey of financial advisors, 88% of advisors are waiting to invest until after the ETF was approved
  • While the inflows from traditional entities into Bitcoin is not likely to materialize over night, the approval and strong launch of the spot ETFs set the path towards a more institutionally adopted BTC
Source: IntoTheBlock Bitcoin Mining Indicators

Old Players vs New Ones — Bitcoin miners’ share of on-chain volume reached its highest since October of 2019 a few days prior to the ETF approvals

  • Bitcoin miners’ aggregate holdings has dropped by 30,000 BTC (~$1.4B) in the last two weeks
  • The total amount held by miners still sits at 1.93M BTC, or around 10% of the circulating supply
  • With the halving less than 90 days away, miners may face some pressure in their earnings if BTC’s price does not continue to rise
  • Thus far, however, it does not seem miners are too concerned about the halving decreasing their revenues, as Bitcoin’s hash rate hit an all-time high yesterday

Even though the Bitcoin halving has historically been a catalyst in Bitcoin cycles, the market seems to be placing its attention elsewhere at the moment.

Source: IntoTheBlock Capital Markets Insights

ETH ETF Next? Ether has outperformed Bitcoin by over 10% since the initial fake approval of the spot ETF came out on Tuesday

  • With Blackrock and several other entities having pending applications for Ethereum spot ETF applications, the market appears to be giving it high odds they will pass
  • The SEC’s approval order further increases the odds of the ETH ETF by stating that “fraud or manipulation that impacts prices in spot bitcoin markets would likely similarly impact CME bitcoin futures prices”
  • Since Ethereum already has a futures ETF, it appears that the SEC may follow the same logic as they did with ETF in approving it since both are subject to the same type of potential manipulation
  • Additionally, the market has also favored higher beta ETH-related investments, with layer 2 tokens and liquid staking protocols recording gains of over 10% this week, and with extra catalysts fueling these higher

Overall, Bitcoin is closing off a historical week. Traditional institutions can now access BTC easier than ever through spot ETFs, though that demand might not flow over night. In the mean time, market speculators have already shifted their attention to ETH in anticipation of spot ETFs generating a similar effect on the second largest crypto-asset.


Bitcoin’s Institutional Era Begins was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

3 Catalysts Driving Crypto in 2024

https://medium.com/intotheblock/3-catalysts-driving-crypto-in-2024-cfb7b81a3c67

The key areas to watch for Q1 and beyond

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

Welcome back, hope you enjoyed the holidays. At IntoTheBlock we are back with a quick summary of the trends that have already been pushing crypto forward in 2024. This week we dive into the Bitcoin ETF launch, the upcoming Ethereum upgrade, the launch of restaking and what all of these three entail with regards to potential market activity.

3 Catalysts Driving Crypto in 2024

2024 is starting where 2023 left off. Momentum keeps driving crypto forward, with certain pockets benefitting in particular. Let’s dive into these key narratives and what 2024 may have in store for them.

1. Bitcoin ETF Launch — More than 10 years after the first Bitcoin ETF spot application, it appears we are primed for it to launch this month. Multiple applications from some of the largest asset managers are expected to receive a response regarding their approval as soon as today, January 5.

Source: IntoTheBlock’s Bitcoin ETF Perspectives

Will the Bitcoin ETF Finally be Approved? The answer to this question can vary significantly based on the person answering

  • In a Bitwise report surveying financial advisors in Q4 showed that only 39% of advisors expected a spot Bitcoin ETF to launch in 2024
  • On the other hand, Bloomberg ETF analysts have consistently been point at 90% odds of approval for the ETF, while a senior crypto reporter at TechCrunch pointed to the approval for multiple firms, “expecting something tomorrow” (January 5)
  • While traditional finance companies were still skeptical of the Bitcoin ETF approval, people familiar with the matter suggest the approval to be imminent

Is an Approval Priced In? Given the seemingly high odds of approval, is the market move from the ETF already factored in by market participants?

  • Following a hypothetical approval announcement, a poll from crypto anon Hsaka suggests that 50% of respondents believe prices will be at least 5% higher within 48 hours, with just 22% voting it would drop by 5% and the remainder voting for it to remain rangebound. Though not extremely bullish, it does show a positive consensus, opening things up for a potential downside surprise
  • In a recent interview, Jim Bianco also noted that traders have been front-running the potential inflows from an ETF by investing into Bitcoin proxies such as Coinbase’s stock, MicroStrategy and GBTC, all which outperformed Bitcoin in the last quarter

What’s Next? The next week should be interesting as the final decisions are announced

  • If the ETF is approved, then the market’s attention is likely to shift to whether it’s an initial “sell the news” event first
  • The next parameter to watch will be just how much volume these ETFs are able to attract within the first days of trading. If these disappoint, there is potential risk for the market, which has been overly optimistic
  • Regardless of the outcome, the Bitcoin ETFs are likely to continue being a major catalyst affecting crypto in Q1 of 2024

2. Ethereum’s Dencun Upgrade Impact on L2s — After being delayed a few months, Ethereum is on track to deploy its next major upgrade in late Q1 or early Q2. EIP-4844, also known as protodank sharding, is one of the most anticipated changes coming, bringing down transaction costs on layer 2s by 10x or more

Source: IntoTheBlock’s Arbitrum Incentives Program dashboard

Accelerating L2 Growth — The main layer 2s have been seeing sharp growth in prices and key metrics

  • Optimism’s OP token is up 180% over the last 90 days, while Arbitrum’s ARB has increased by 130% within the same period
  • As we discussed in 2023 On-Chain, the number of transactions on these Ethereum L2s has climbed by more than 90x in the last two years
  • The reduction in transaction costs is expected to attract further economic activity into L2s due to reduced friction

Arbitrum’s Moment — Although OP has outperformed over the last three months, Arbitrum metrics are showing signs of progress in 2024

  • The total amount of trading volume on Arbitrum surpassed that of Ethereum Mainnet on January 4 for the first time, per DeFi Llama data
  • Arbitrum’s incentive program has increased TVL on the L2 by nearly 50%, as shown in ITB’s dashboard

Overall, Ethereum’s transition to L2s has been in motion already, and is set to accelerate following the implementation of the Dencun upgrade. As such, the L2 ecosystem and their tokens are a main area of focus going into 2024.

3. Restaking & Liquid Staking — In terms of new products, EigenLayer’s launch is set to be one of the most anticipated releases of 2024. EigenLayer is an infrastructure layer that will enable “restaking”, or using Ethereum’s existing staked funds in order to validate additional features for applications building on top of it. Its launch is set to bring forth new applications, while benefitting the existing liquid staking protocols.

Source: IntoTheBlock’s Ethereum Liquid Staking Perspectives

Impact of Restaking on LSTs— Restaking on EigenlLayer will provide higher yields on top of the existing staking rate

  • Users of EigenLayer can deposit liquid staking tokens, such as Lido’s stETH, and earn extra yield from the actively validated services (AVSs) they choose to validate
  • Prior to their main launch, EigenLayer has already attracted over $1B in deposits, through their points program
  • Over 70% of deposits into EigenLayer have come through liquid staking, pointing to large role these are likely to play as the launch approaches
  • Building both restaking and data availability services, EigenLayer is also likely to offer one of the largest airdrops in crypto history, as evidenced by the funds they have managed to attract just off of their points system

Just a week into the year, chatter around restaking has grown as EigenLayer reached its cap of the amount of ETH staked into the product. Liquid staking projects governance tokens such as LDO have also been favored by the market, appreciating by over 10% year to date. Ultimately, the launch of this new primitive is expected to be one of the key narratives shaping crypto throughout the year.


3 Catalysts Driving Crypto in 2024 was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

2023 ON-CHAIN

https://medium.com/intotheblock/2023-on-chain-2b2b0f67df9f

The key trends and indicators pushing crypto forward

Hope you are having a great end of the year, and are eager to dive into our 2023 crypto review. As usual, we cover the most relevant events and trends that shaped 2023, providing key insights and analytics explaining what has happened and what may come next for the crypto space.

This is a brief recap, but there’s still a lot to cover. Hope you enjoy!

2023 On-Chain

Crypto’s 2023 can be summarized in one word: resurgence. Following the collapse of multiple crypto giants and the adverse macro conditions faced in 2022, the crypto space has shown strong signs of recovery this year.

Multiple crypto-assets have rallied 100%+ in 2023 as positive catalysts helped push the space forward. But it’s not only prices that have been improving in 2023, several fundamental metrics for crypto-assets have been growing.

Let’s begin by diving into the performance of some of the largest crypto-assets and the factors leading them forward, before discussing the growth in on-chain metrics. It’s worth noting that the values of the table below are as of December 18, so they may have changed slightly by the time you read this.

See more at IntoTheBlock’s 2023 Review Perspectives

Top Performers — Evaluating the top crypto-assets in a bullish year

  • Bitcoin appreciated by over 160% in 2023. BTC’s price was propelled by an improving outlook of global liquidity (tied to the Fed slowing rate hikes), the regional banks collapse, the Blackrock ETF application and the increasing likelihood of its approval
  • Ethereum’s market cap grew by 85%, slightly underperforming despite undergoing a major upgrade, also seeing spot ETF applications and recording growth in adoption metrics
  • The biggest winner out of the top crypto-assets in 2023 is undoubtedly Solana, growing by over 740% in price. SOL’s price decreased by 96% in 2022, with the crash accelerating following the FTX/Alameda bankruptcy. The main factors leading to Solana’s resurgence in 2023 were its strong developer ecosystem, the improved consistency of the network (which has had 100% up-time in 2023) and more recently a slew of airdrops attracting users
  • Other top performers were AVAX and LINK, appreciating by 341% and 199% in 2023, respectively. Though they are very different projects, both Avalanche and Chainlink have benefitted from important partnerships with traditional finance institutions and the release of new products (Subnets in the case of Avalanche, and the cross-chain interoperability protocol (CCIP) for Chainlink)

Early Stages of a Bull Market

Having bottomed in Q4 of last year, it is becoming increasingly clear that crypto is at the beginning of another bull cycle. Not only have prices and sentiment improved, but on-chain metrics are also repeating patterns indicating a promising outlook.

See more at IntoTheBlock’s 2023 Review Perspectives

Early Bull Market Accumulation — Long-term investors (“hodlers”) continue to buy more crypto

  • Historically, hodlers buy Bitcoin aggressively during bear markets, like we saw in 2014, 2018 and 2022
  • As prices rebound from the bottom, hodlers continue to accumulate though at a slower pace into the early stages of the bull market
  • Then finally, after Bitcoin surpasses its previous all-time high, hodlers begin to take profits as new entrants come in
  • This pattern has played out in the previous two crypto cycles, and the current trend suggests that we are still in the early to middle stages of the cycle
  • Other key indicators such as the profitability of Bitcoin holders and BTC’s inflation rate align with the cyclical recovery the crypto space saw in 2023

Interestingly, the hodler accumulation is not only happening in Bitcoin.

See more at IntoTheBlock’s 2023 Review Perspectives

ETH Hodlers Surpass BTC Hodlers — A larger percentage of ETH is now held by addresses holding over 1 year than in BTC’s case

  • The amount of ETH owned by hodlers reached a record of over 70% in December
  • It is worth noting that “hodlers” include not just individuals but also smart contracts that have held assets for over one year
  • In ETH’s case, the largest hodler by that definition is the staking contract of the Beacon chain, where 23% of ETH is held
  • Following the Shapella fork in April, which enabled withdrawals from the staking contract, the opposite of what many expected happened: instead of funds flowing out, much more inflows came in, which is why the amount of ETH held by hodlers accelerated around that time

Improving Fundamentals Fuel Sustained Rally

In addition to increased investment activity, the demand for the underlying crypto networks has been rising. Layer 1 fees reflect this trend.

See more at IntoTheBlock’s 2023 Review Perspectives

Ordinals Boost — Bitcoin fees reached new highs in 2023 driven by inscriptions

  • Bitcoin average daily fees have climbed by 35x relative to December 2022; Ethereum fees have increased by 4x in the same period
  • Bitcoin ordinals launched in January 2023, enabling the creation of inscriptions tied to individual satoshis (the smallest unit of a Bitcoin)
  • These inscriptions materialized initially as NFT-like collections within Bitcoin, and then as tokens through the introduction of the BRC-20 standard (similar to Ethereum’s ERC-20)
  • In May 2023, with a meme token frenzy, Ordinals pushed Bitcoin fees higher, leading to the first day where Bitcoin fees surpassed Ethereum fees since 2021
  • Now in December, we are seeing Bitcoin fees surpass Ethereum’s in a full week

Ethereum fees have also been in an up-trend in 2023, but have not yet reached 2021 levels. Even though ETH has recorded more in fees throughout the year ($2.3B+) than BTC ($640M+), the slower growth is symptomatic of something else going on.

See more at IntoTheBlock’s 2023 Review Perspectives

Ethereum Layer 2 Adoption Boom — Activity on Ethereum has increasingly moved to L2s

  • With a week left to go, Ethereum optimistic rollups (shown above) have already done more than triple the number of transactions than they did last year
  • Compared to 2021, the number of transactions on these Ethereum L2s is up by 90x
  • The transition to L2s, first highlighted by Vitalik’s rollup-centric roadmap, is effectively materializing with optimistic rollups doing more than double the number of transactions than Ethereum mainnet over the last quarter
  • While the increased L2 adoption does allow for a broader user base to use Ethereum at significantly lower cost, it also means that the total fees (and corresponding amount of ETH burnt) on Ethereum as a whole has been relatively lower than it would have previously been
  • Heading into 2024, Ethereum is set to go through the Dencun upgrade in late Q1/early Q2, which will reduce L2 fees by an order of magnitude, improving the prospects of broader on-chain economy

Overall, crypto has seen a strong recovery in 2023, both from the investment and the fundamental perspective: prices of several crypto-assets have increased by 100%+ while on-chain metrics like fees and transactions have grown by an even larger magnitude.

Crypto’s cyclical nature seems to suggest that 2024 should be another positive year, with hodlers’ accumulation and upcoming catalysts such as the spot ETFs backing this up. Ultimately, 2023’s resurgence is likely to turn into a year of acceleration as these catalysts play out and help crypto reach a broader audience.


2023 ON-CHAIN was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Crypto Liquidations & Quick Recovery

https://medium.com/intotheblock/crypto-liquidations-quick-recovery-af2adcbcccc2

Key factors driving crypto in the short- and long-term

This week we cover this week’s volatile price action. We explore key factors behind the ups and downs, top performers, as well as the growing liquidity reflected in the stablecoin market and the increasing maturity of the DeFi space.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees sustained at high levels along with Ordinals transactions
  • Ethereum fees also remained high, with the amount fees being burnt leading ETH’s supply to its lowest since August 2022 per Ultrasound.money

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded $860M net inflows into exchanges, the highest value since March of this year
  • $80M worth of ETH was transferred into CEXs this week

Crypto Liquidations & Quick Recovery

Crypto markets experienced a sudden correction on Monday, but have since recovered most of the drop. $440M in long positions were liquidated, per The Block data, suggesting market participants were highly levered going into the end of the year.

Source: IntoTheBlock’s Capital Markets Insights

Market Analysis — Macro conditions are helping boost risk seeking behavior in crypto

  • This week the Federal reserve left rates unchanged as expected, but delivered an outlook with more rate cuts in 2024 than previously disclosed
  • Stocks rebounded strongly following the news, with the Nasdaq being just 1.5% away from breaking it’s previous all-time highs
  • Bitcoin and Ether recovered most of Monday’s losses, while smaller cap assets such as the Layer 1 Injective and the dog token Bonk reached new all-time highs

The strong price performance and speculative activity show signs of the market seeing large inflows.

Source: IntoTheBlock’s Stablecoins Perspectives

Stablecoin Market Cap Growth — The total value of stablecoins is on track to climb for the second month in a row for the first time since Q1 2022

  • The increasing market cap of stablecoins is a positive sign for crypto liquidity
  • Following a year and a half decline, liquidity appears to be flowing back into crypto in the form of stablecoins
  • Despite growing by nearly $10B this quarter, the market share of stablecoins has decreased, suggesting that the increased supply in stablecoins is helping support markets

In other news in crypto, the amount of yearly losses to exploits in DeFi are poised to reach their lowest since 2020.

Source: IntoTheBlock’s DeFi Exploits Perspectives

Relatively Better, But Still Needs to Improve — Losses in DeFi are on track to their lowest since 2020, but recent incidents remind us there are still issues

  • Early on Thursday, a code library for Ledger Connect was exploited leading to approximately half a million in losses
  • Multiple applications and wallets that interact with Ledger Connect were potentially vulnerable to the attack, though it was quickly identified and fixed by most services
  • The total amount lost to exploits in 2023 may be its lowest in three years, but incidents such as this one show that using crypto apps is still risky

Looking into 2024, liquidity appears to be flowing back into crypto and DeFi applications have been benefitting from it. Though it is uncertain how long the current momentum will persist, in the long-term picture crypto is showing signs of maturity slowly but surely.


Crypto Liquidations & Quick Recovery was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Are We 1 Month Away From the Bitcoin Spot ETF?

https://medium.com/intotheblock/are-we-1-month-away-from-the-bitcoin-spot-etf-fd60e6153548

Potential benefits and growth metrics related to the BTC ETF

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we provide a brief overview of the current status of the Bitcoin ETF applications: when the first spot ETF is likely to be approved, the benefits vs the existing options to buy Bitcoin in a regulated way, and the signs of adoption growing in anticipation of this milestone.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees increased by 60%, led by the ORDI BRC-20 token increasing in price by 150% this week
  • Ethereum fees climbed by 48%, with Uniswap being the protocol consuming the most gas

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Both Bitcoin and Ethereum recorded $110M in net inflows to CEXs, a relatively modest amount relative to their market caps

Are We 1 Month Away From the Bitcoin Spot ETF?

After 10 years of rejections, it appears that the first Bitcoin spot ETF might be just one month away. The Ark Invest Bitcoin ETF application reaches its final deadline for the SEC to decide whether to accept or reject an ETF on January 10.

Based on multiple companies being approved simultaneously for the first Ethereum futures ETF, most market experts suggest there is a likelihood several Bitcoin spot ETFs would also be approved at the same time. Recent updates in Blackrock’s and Bitwise’s applications also suggest these entities may be preparing for an approval in early January even though their deadlines are later.

Source: IntoTheBlock’s Bitcoin ETF Perspectives

$13T in Aggregate AUM — Assets under management by the companies applying for a Bitcoin ETF surpass $13 trillion

  • Notably, Blackrock is the world’s largest asset manager and is filing for the iBTC ticker, expanding its iShares ETF brand into crypto
  • The prospect of having many of these ETFs launch at the same time drives competition between them
  • This means that Blackrock employees are likely to be competing with Fidelity’s, Franklin Templeton and other companies to sell their Bitcoin ETF products to their clients in order to acquire market share
  • This is expected to lead to the onboarding of institutions into Bitcoin, giving it a large credibility boost while facilitating inflows from traditional finance

The Importance of Spot vs Futures ETF

Today if institutions trading on American stock exchanges want access to Bitcoin, they can do so through Grayscale’s GBTC or futures-backed ETF products. These products have shown to be inferior to simply holding regular spot Bitcoin.

Source: IntoTheBlock’s Bitcoin Cycles Perspectives

Subpar Existing Products — Current publicly traded Bitcoin products have failed in many ways

  • Since there are no redemptions from GBTC, Grayscale’s product has seen discounts of over 50% at its worst, even being negatively correlated to Bitcoin’s price in December 2023 as Digital Currency Group faced issues
  • Like GBTC, Bitcoin futures ETFs have been more volatile than Bitcoin itself
  • This is the case as the futures ETFs “rollover” from one month expiration onto the following month’s contract, which typically is at a premium to spot prices; in other words futures ETFs are constantly buying Bitcoin at higher prices than if they were trading spot, leading to higher volatility and worse returns
  • Last but not least, the spot products actually purchase Bitcoin in the market rather than derivatives contracts, which can be more supportive of prices

The high likelihood of spot Bitcoin ETFs being approved has already led to a significant rally in prices and broader adoption.

Source: IntoTheBlock’s Bitcoin Addresses Metrics

Record Number of Bitcoin Addresses — The number of addresses holding BTC surpassed 50,000,000 for the first time ever this week

  • Though one address does not necessarily mean one user, the growth in addresses with a balance of Bitcoin suggests growing adoption
  • Bitcoin’s dominance of the total market has also been increasing recently, reaching 52% this week, its highest since April 2021
  • The total amount of stablecoins in circulation has been growing for two consecutive months for the first time since early 2022, pointing to greater liquidity being attracted into the crypto market

Overall, the spot Bitcoin ETF appears to be closer than ever. While it is true that it should bring several benefits for Bitcoin and the crypto market, it is also evident that the market has been anticipating this, particularly accelerating in the last few months.


Are We 1 Month Away From the Bitcoin Spot ETF? was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

BTC Profits Reach Highest Since Dec 2021

https://medium.com/intotheblock/btc-profits-reach-highest-since-dec-2021-3cfc6700fda6

COIN sets yearly high and whales accumulate

This week we dive into three key metrics covering the current dynamics in crypto. We evaluate Coinbase’s stock and reasons for its strong performance. Then we explore Bitcoin holders profitability and analyze the accumulation that keeps pushing prices higher.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees dropped in half as Ordinals-related transactions decelerated
  • Ethereum fees increased slightly, holding at relatively high levels leading to ETH being deflationary for a fourth consecutive week

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • $450M worth of Bitcoin left CEXs compared to just $100M the previous week
  • $140M of ETH was withdrawn from CEXs compared to nearly $800M last week

COIN Reaches Yearly Highs Fueled by Higher Volumes

Crypto’s momentum in Q4 appears to be continuing into December. As yields drop and appetite for risk rises, many crypto-assets and stocks are trending up. Trading volumes have been rising as well, benefitting Coinbase’s stock in particular.

Source: IntoTheBlock’s Capital Markets Insights

Coinbase Stock Outperforming — Coinbase’s stock is up by 60% over the last three months

  • Year-to-date, COIN has increased approximately 250%, outpacing Bitcoin and Ether’s growth of 130% and 75% respectively
  • COIN has also outperformed Nvdia’s 220% yearly gains, an impressive statistic given the AI frenzy that has been fueling the semiconductor company
  • One key factor driving Coinbase’s valuation is likely to be its trading volumes, with Q4 volumes already surpassing their figures for the last quarter with one month to go

Besides trading volumes, Coinbase is likely also benefitting by USDC’s market cap recovering slightly after a long period of decline, and the continued adoption of its Base layer 2.

BTC Profitability Reaches Highest Since December 2021

In other news, Bitcoin holders are now realizing their highest profits in two years.

Source: IntoTheBlock’s Bitcoin Cycles Perspectives

Highest Profitability Since December 2023 — Over 80% of Bitcoin addresses are earning money on their holdings

  • This figure has reached its highest value since December 2021, when prices were above $50k per Bitcoin
  • The reason why Bitcoin holders are now seeing higher profits in aggregate than in December 2021 is because the average price at which a Bitcoin holder purchased their holdings is now significantly lower after the bear market
  • With just over 80% of addresses profiting, Bitcoin’s aggregate profitability is sitting at levels similar to those seen in late 2020 and mid-2021 prior to the bull market
Source: IntoTheBlock’s Bitcoin Whales Perspectives

Institutional Accumulation — Whale holdings reached a year to date high this week

  • The amount of Bitcoin held by addresses with 1k BTC or more reached its highest since December 2022
  • Following the aftermath of FTX and Genesis, the aggregate balance held by whales dropped significantly
  • One year later, Bitcoin whales’ balance has recovered, currently sitting at 7.66M BTC (~$290B)
  • This institutional accumulation appears to be driven largely by North American entities as discussed in the newsletter a few weeks ago

Overall, the crypto market continues to accelerate. Inflows are entering both crypto-assets and stocks, and holders are enjoying sizable profits. With December now beginning, we will see if crypto is able to sustain its momentum into the year end.


BTC Profits Reach Highest Since Dec 2021 was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Arbitrum Key Metrics Grow by 25%+ Following Incentive Program

https://medium.com/intotheblock/arbitrum-key-metrics-grow-by-25-following-incentive-program-9aa0954bfeac

Arbitrum DeFi Gets a Boost from $50M Incentive Program

Arbitrum is closing 2023 with strong momentum fueled by its incentive program. Just a few weeks after incentives began to be distributed to protocols on Arbitrum, there are already positive signs of more users and capital flowing into the layer 2 network.

The Arbitrum Short-term Incentive Program (STIP) was coordinated by the Arbitrum DAO and ARB token holders. Token holders first voted to decide on the amount of ARB tokens distributed in the program, settling for 50M distributed throughout three months. Afterwards, protocols interested in participating applied for the STIP, and engaged in feedback from the community, prior to moving to a vote deciding whether or not they would receive the ARB amount they applied for.

Following the governance votes, the ARB tokens ended up being distributed to a total of 28 protocols across a series of different use-cases. Here are the top 10 largest ARB incentives and how they will be used:

ITB Perspectives

IntoTheBlock (ITB) recently launched Perspectives, a new section offering in-depth dashboards covering the most relevant topics in the crypto space, such as the Arbitrum incentive program, broader layer 2 adoption, crypto cycles and much more.

New dashboards and indicators are added on a weekly basis, providing actionable insights into the most timely subjects in crypto. If you haven’t already, make sure to give ITB Perspectives a try here, and read our announcement here.

Analyzing the Impact of Arbitrum’s Incentive Program

Votes on the STIP concluded on September 17 and after undergoing a KYC process with the Arbitrum Foundation, incentives began being claimed by the protocols in early November.

The total value locked (TVL) in Arbitrum began increasing shortly after the approval of the incentive program, likely in anticipation of higher yields. As the distribution began the growth has continued to accelerate, leading to Arbitrum’s TVL growing by 25%.

Source: IntoTheBlock Arbitrum Incentives Perspectives

DeFi protocols on Arbitrum have seen net inflows of capital most days since the STIP began. The largest day of TVL growth was on November 10, where nearly $80M was deposited into Arbitrum protocols, driven largely by the beginning of incentives in GMX, Arbitrum’s largest derivatives trading exchange, and Radiant, Arbitrum’s main lending protocol.

Even though larger protocols received larger amount of ARB incentives, the program appears to be benefitting all. All of the protocols that have begun distributing incentives have seen a growth in their total value locked.

Moreover, it appears that many protocols have been able to attract more capital with less.

Source: IntoTheBlock Arbitrum Incentives Perspectives

Above we can see the amount of dollar inflows that protocols have been able to attract per dollar amount allocated to incentives. Here Silo Finance and Gamma stand out, with both being able to gain a 50x multiple per dollar.

To further clarify, let’s look closer at Silo’s liquidity mining program: Silo is a lending protocol with isolated pools, where users can borrow ETH and USDC against a wide range of tokens, like wstETH for example. Isolating risk to each pool means that every pool needs their own liquidity necessary to carry out loans. Silo was granted 800k ARB tokens (worth $800k at the time the grant passed) and decided to allocate 100% of these to bootstrap the supply-side of their pools.

Just two weeks after they began their ARB liquidity mining incentives, Silo has been able to attract $41.9M in TVL. Dividing that over the $800k allocation, we see that Silo has seen a 52x multiple in growth per dollar allocated, making it the protocol that has seen the largest relative impact in TVL.

Similarly, we track the impact that protocols have seen in their revenue relative to their grant amount. Here Gamma and Balancer lead the way, growing 3x and 1.72x respectively. These metrics can be very helpful to identify how efficient protocols are being at taking advantage of the subsidy-like program Arbitrum is providing.

Another way to look at how effective the program is performing is by tracking the amount of new users it is attracting.

Source: IntoTheBlock Arbitrum Incentives Perspectives

The number of new addresses on Arbitrum has been growing consistently, often spiking upon the initiation of incentives from large protocols. Since the STIP program was approved the number of daily new addresses making their first ETH transaction has grown by 27%.

Overall, it is still early since the STIP began, but there are clear signs of growth in the Arbitrum ecosystem. TVL and new daily users have grown over 25% within two weeks of launching. Many protocols are seeing even larger increases in their TVL and revenue figures as a result of the incentive program. We are also seeing protocols like Silo and Gamma seeing an order of magnitude greater returns per dollar spent on incentives.

Ultimately, protocols on top of Arbitrum are reaping benefits from the STIP program thus far. Using the Arbitrum Incentives Program perspectives, we will continue tracking how the Arbitrum ecosystem grows as more rewards get allocated. As well, we will be measuring the impact after these incentives finish, looking at how protocols are able to retain capital and users amongst other things. Because of these changing dynamics, more metrics are likely to be added to the dashboard as the program approaches an end. Make sure to keep an eye out in the dashboard directly or through our social media to stay up to date with how the program impacts Arbitrum, the ARB token and the protocols built on top.


Arbitrum Key Metrics Grow by 25%+ Following Incentive Program was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Who is Driving the Crypto Rally?

https://medium.com/intotheblock/who-is-driving-the-crypto-rally-143182588f90

A dive into the type of players pushing BTC higher

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we evaluate the players driving the recent surge in crypto markets. Particularly, we dive into on-chain metrics for Bitcoin, helping segment the size, geography and recency of the participants accumulating throughout 2023.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees doubled compared to last week with Ordinals transactions reaching their highest since May
  • Fees on Ethereum also climbed along with market volatility and DeFi volumes

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • $260M worth of Bitcoin was transferred into exchanges in net
  • ETH recorded $320M in outflows this week, and over $1B through the last three weeks

Who is Driving the Crypto Rally?

Bitcoin’s price has increased 30% over the last month, approaching yearly highs on Wednesday prior to retracing on Thursday. Many point to the upcoming spot ETF deadlines as the main catalyst driving the recent surge in prices. Diving into on-chain data we can get further clarity into the entities that have been buying Bitcoin and leading the rally.

Via ITB’s Network Indicators

New Money Coming In — There are signs growing of new entrants buying Bitcoin

  • The percentage of active addresses that are newly created, as tracked through the New Adoption Rate indicator, reached a yearly high of 67.62% this week
  • Bitcoin’s price has also held up strongly while smaller cap crypto-assets rise higher, suggesting inflows into both

In addition to new money, it also seems that long-term investors continue to double down.

Via ITB’s Bitcoin Cycles Perspectives

Hodlers Balance ATH — The amount of Bitcoin held by long-term investors set new all-time highs this week

  • Addresses holding Bitcoin for over one year have historically been a bellwether for the progress in Bitcoin cycles
  • Hodlers tend to increase their Bitcoin holdings through bear markets and beginning of bull markets, and decrease them near previous all-time highs
  • With hodlers’ balance continuing to rise, it appears that investors in aggregate expect Bitcoin to push higher

In terms of size, it appears that recent buyers skew towards larger allocations.

Via ITB’s Bitcoin Whales Perspectives

Whales Reach Yearly Highs — The amount of Bitcoin held by addresses with over 1,000 BTC is at its highest in 2023

  • Following the collapse of Alameda and Genesis, the amount of Bitcoin held by addresses with over 1k BTC plummeted
  • Entities of this size have since been growing throughout 2023, reaching total holdings of 7.67M BTC (~$275B) this week
  • The magnitude of these holdings suggests that large Bitcoin institutions are seeing higher demand and are in a strong position
Via ITB Bitcoin Futures Indicators

American Institutional Demand — Futures markets suggest US entities have been some of the main players driving Bitcoin’s rally

  • The difference between a futures’ contract price and the asset’s spot price is known as the basis. An futures contract with positive basis (a premium) is considered to be in contango, while one with negative basis (a discount) is in backwardation
  • Tracking Bitcoin futures, we see that CME contracts have been trading at a higher premium compared to international exchanges, particularly in late October
  • The high level of contango not only is indicative of the bullish sentiment from American institutions (which predominate in CME volumes), but also helps drive demand for spot Bitcoin as people execute the basis trade, profiting from the converging prices between futures and spot
  • Last week, CME futures surpassed Binance in terms of open interest, further signaling the growing demand from American institutions to trade Bitcoin

Overall, on-chain data helps clarify the players driving crypto’s rally. There are signs of new money coming in, but also long-term investors continuing to accumulate. Bitcoin demand from institutions, particularly those from the US, also appears to be growing over the last month. Ultimately, although crypto was showing some early signs of getting overheated, the underlying demand is showing healthy signals.


Who is Driving the Crypto Rally? was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Blackrock’s ETH ETF Adds Fuel to an Overheated Market

https://medium.com/intotheblock/blackrocks-eth-etf-adds-fuel-to-an-overheated-market-af3665b2a401

On-chain demand spikes, but derivatives signal caution

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we analyze the continuation of crypto’s strong performance, as positive news surface, prices rise and demand shows signs of strength on-chain. We also evaluate demand expanding into riskier bets, particularly NFTs, and explore signs that the market may be getting too optimistic short-term.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees climbed a whopping 243% week over week, as Ordinals volumes reached a six month high driven by the listing of the ORDI token on Binance
  • Ethereum fees increased to $41M over the last seven days as token prices and DEX volumes surged. Yesterday we also saw gas prices remain above 100 gwei for over an hour for the first time in three months

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • $230M of BTC was transferred into exchanges over the past week
  • ETH recorded $430M in CEX outflows this week, and over $600M in the past fourteen days

Blackrock’s ETH ETF Adds Fuel to an Overheated Market

Crypto’s rally continues as optimism around a bull market grows. A few weeks ago we evaluated the arguments suggesting we’re at the beginning of a new Bitcoin cycle, and the signs have continued to spread expanding into many other crypto-assets.

Several crypto-assets are now recording their largest 30-day increases in price, while demand is showing strong signs on-chain. However, there are also signs that the market may be beginning to get overheated near-term.

Via ITB’s Custom Home Matrix

Strongest 30-Day Period in 10 Months — Multiple large cap crypto-assets are on track for 35%+ gains for the first time since the beginning of the year

  • Institutional and whales’ demand has also picked up strongly, with Bitcoin seeing an 80% increase in the volume of transactions of over $100k, Ethereum of 170%, and Polygon over 3,800% (!)
  • In terms of active addresses, LINK and TON have recorded the largest surge, climbing by 170%
  • Long-term investors (hodlers) of large cap crypto-assets continue to accumulate for the most part, with only MATIC hodlers showing a slight decrease in the aggregate balance over the last 30 days

Driving the Rally — Market structure has become more bullish following several catalysts in the last few weeks

  • The fake CoinTelegraph headlines of the Blackrock ETF being approved showed the market how quickly Bitcoin could rally once it actually goes through, increasing demand given the high likelihood it will pass
  • Sell pressure from FTX/Alameda’s bankruptcy liquidation appears to have been less than anticipated, leading buyers to come back into the market
  • Blackrock took the first step towards an Ethereum spot ETF yesterday, leading ETH 10% higher approaching its yearly highs

Crypto-native investors seem to be increasingly positioning themselves for a bull market, taking risks into smaller cap tokens and now NFTs too.

Via ITB’s NFTs Insights

5-Month High — NFT volumes reached their highest since July (both in ETH and dollar terms)

  • The daily volume of NFTs traded surpassed $30M yesterday for the first time since the 2nd of July
  • NFT volumes have begun trending higher again over the month and a half following a prolonged downturn
  • Prices of many bluechip collections have recovered quickly, with CryptoPunks appreciating by 22% in ETH terms within 30 days

Bullish expectations appear to be spreading through every corner of the crypto market, and many may be asking themselves: is crypto overheated at the moment?

Via ITB Ethereum Derivatives Metrics

Funding Rates Raise the Alarms — Perpetual swaps funding rates for both BTC and ETH have reached their highest in over a year

  • Funding rates are the fee that long (or short) holders have to pay when the price of perpetuals contracts are above (or below) spot prices
  • Historically, large funding rates on either direction have marked points where the market has become over-extended, as was observed during the FTX collapse last November
  • A year later funding rates in both Bitcoin and Ethereum are at their highs, suggesting the market is perhaps too eager to go long
  • This is not necessary a signal that prices will crash imminently, as funding rates sustained at high levels for several weeks at points in 2021, but may point to the need for some caution

Crypto winter appears to be finally over. Strong demand is being reflected both on prices and in on-chain metrics. Several catalysts are pushing the market higher, and bullish sentiment is spreading across the market. While there are clearly many positive developments coming medium- to long-term, there are also some early signs of crypto getting overheated near-term.


Blackrock’s ETH ETF Adds Fuel to an Overheated Market was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Crypto’s Early Bull Market Rotation

https://medium.com/intotheblock/cryptos-early-bull-market-rotation-933604fe5923

Investors seek riskier investments while fundamentals remain positive

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we dive into the capital rotation taking place within crypto cycles. We analyze trends between the current top performers in terms of price, and the organic demand flowing into the space in the form of spot volumes and on-chain activity.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees decreased by 4.6% as volatility and transactions cooled off relative to last week
  • Ethereum fees climbed by 30% with many smaller cap tokens seeing a surge in on-chain trading volumes

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded slight inflows of $55M into CEXs after back to back weeks of $150M+ in outflows
  • $210M worth of ETH left CEXs this week, the largest 7-day net outflows since August

Crypto’s Early Bull Market Rotation

Crypto markets experienced a volatile week, as the current rally expanded beyond Bitcoin into smaller cap assets. Multiple tokens saw a glimpse of the bull market, appreciating over 10% within a week. Even though the price momentum may be getting overheated short-term, there are signs of sustainable demand driving the crypto uptrend.

Via ITB’s Custom Home Matrix

DeFi & Alt L1s Leading the Rotation — The tokens above recorded the highest price increases out of assets supported on IntoTheBlock with over $100M in market cap and at least 1k daily active addresses

  • Most of the top performers this week were either bluechip DeFi protocols or smaller layer 1 tokens
  • Historically crypto cycles have followed the trend where Bitcoin leads the first surge, then Ethereum, with capital progressively being allocated to lower cap and riskier bets
  • This week’s trend suggest this rotation is beginning to take place as Bitcoin and Ether trend sideways while DeFi and alternative L1 tokens record a strong rebound

Despite the rotation into riskier assets, the demand flowing into crypto appears to be relatively organic, led by spot buying.

Via ITB’s Bitcoin Derivatives Indicators

Leverage Remains Low — The ratio of Bitcoin’s open interest in perpetual swaps relative to its market cap (OI/MC) remains near its yearly lows

  • Perpetual swaps are the most common instrument to get leverage on crypto
  • The ratio of open positions in perpetual swaps relative to Bitcoin’s market cap climbed throughout 2021 and 2022 as traders got more leverage, and has been declining since the FTX saga
  • The relatively low levels of OI/MC suggest that the recent run-up in prices has been led by spot volumes, suggesting a more organic demand than derivatives-fueled leverage

On-chain we also see signs of fundamental activity picking up.

Base Perspectives

With our latest Perspectives release, we are adding one new Perspective every week. This week, we introduced a new Perspective for the Base ecosystem. See our analysis on X or explore Perspectives yourself.

Explore Perspectives

Volume Settled on Ethereum Reaches 6 Month High

Via ITB Volume Settled Perspectives
  • The weekly value of assets settled on Ethereum (including ETH, stablecoins and top 50 tokens) reached its highest since March during the SVB collapse
  • Volume settled last week on Ethereum surpassed $213B on mainnet alone, with an additional $16B being transacted between Arbitrum, Optimism and Base

Overall, crypto appears to be exhibiting an early bull market rotation. DeFi and alt L1 tokens like SOL and LINK have recorded gains of 40%+ over the last month. Crypto-native investors appear to be seeking higher risk investments, but organic demand seems to be flowing into the space as evidenced by the low OI/MC.

The increasing amount of volume settled on-chain aligns with this trend, showing fundamentals are improving. Though market prices may correct from the recent quick surge in smaller cap assets, improving on-chain activity and growing spot-driven inflows point to strong demand driving crypto’s rally.


Crypto’s Early Bull Market Rotation was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

What Comes Next For Bitcoin After Reaching $35k?

https://medium.com/intotheblock/what-comes-next-for-bitcoin-after-reaching-35k-3ec0523ee892

Institutional activity picks up amid signs of an early bull market

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we dive into on-chain metrics regarding Bitcoin’s outlook. Bitcoin is showing strength both from a tactical and longer-term perspective, with institutional demand reinforcing cyclical tailwinds.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees increased by 44.8% as transaction activity accelerated during the price rally
  • Ethereum fees grew even further, nearly doubling within 7 days, driven by Uniswap volumes reaching their highest weekly levels since June

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded $190M in outflows, while ETH saw $100M in inflows from centralized exchanges this week

What Comes Next For Bitcoin After Reaching $35k?

Bitcoin’s price touched $35,000 for the first time since May 2022. BTC is now up over 100% in 2023. This price action has awoken animal spirits in crypto as signs emerge of Bitcoin being in the early stages of a bull market.

Not only are cyclical patterns aligning for Bitcoin, but short-term activity is also showing signs of heating up.

Via ITB’s Bitcoin Large Transactions Indicators

Institutional Activity Picks Up — The number of transactions of over $100k on the Bitcoin blockchain reached its highest level in 2023

  • The Bitcoin spot ETF applications appear to have increased whales’ and institutions appetite for Bitcoin
  • Transactions of over $100k had previously spiked in late June after Blackrock’s ETF filing, and have now surpassed that level as Bitcoin sets new yearly highs

The recent rise in institutional activity might be a harbinger for what comes in 2024.

Via ITB Bitcoin Cycles Perspectives

Cyclical Uptrend — On-chain analytics point to a bullish Bitcoin outlook

  • Bitcoin is set to undergo the halving in 2024, a few months after the first spot ETF is expected to go live
  • This decreases miners’ marginal selling pressure while demand picks up from institutions gaining easier access to Bitcoin
  • The Bitcoin market value to realized value (MVRV) ratio shows that despite reaching yearly highs, Bitcoin is not as overheated yet as during previous bull markets
  • Historically, bitcoin bull markets have peaked around 300%+ MVRV, which in comparison to the current 150% value, suggests the bull market has room to run further

However, macro forces and potential black swans could bring a correction following the recent appreciation.

Via ITB’s Bitcoin Network Analytics

Levels to Watch — Based on buying activity recorded on-chain, we can identify price levels where BTC may be heading next

  • The recent high of $35,000 is the next resistance point for Bitcoin, where previously 664,000 holders bought 340k BTC
  • If this level is surpassed, the next point where trading activity has been concentrated is around $38k-$39k, where 333k BTC was acquired
  • On the other hand, in case of a correction, buying activity seems to be concentrated just above of $30k, where 553k BTC traded hands

Overall, there are cyclical and tactical factors pushing Bitcoin further. The recent rise in institutional activity appears to be adding fuel to the beginning of a bull market fire.


What Comes Next For Bitcoin After Reaching $35k? was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Are We at The Beginning of Another Bitcoin Cycle?

https://medium.com/intotheblock/are-we-at-the-beginning-of-another-bitcoin-cycle-4220fe8781aa

Analyzing Bitcoin’s Bull Cycle Patterns and What Comes Next, featuring IntoTheBlock Perspectives

Bitcoin has reached new yearly highs this week, and is now up over 100% in 2023. Given this strong performance, many are wondering if Bitcoin is beginning another “cycle”, perpetuating its four-year pattern through yet another bull market.

In this piece, we evaluate the imminence of a Bitcoin bull market, diving into supply and demand dynamics based on historical patterns emerging in on-chain data.

ITB Perspectives

IntoTheBlock (ITB) recently launched Perspectives, a new section offering in-depth dashboards covering the most relevant topics in the crypto space, such as Bitcoin cycles, stablecoin adoption and more.

New dashboards and indicators are added on a weekly basis, providing actionable insights into the most timely subjects in crypto. If you haven’t already, make sure to give ITB Perspectives a try here, and read our announcement here.

Exploring Bitcoin Cycles

The concept of Bitcoin cycles consists of the process of expansion and contraction of prices, historically following a four year cadence with bull market tops in 2013, 2017 and 2021.

Proponents of Bitcoin cycles theory point to the halving (or “halvening”) as the main force driving these evolutions in Bitcoin’s price. Every four years Bitcoin’s issuance rewarded to miners drops by 50%. There have been three previous halvenings, all which have preceded meteoric rises in Bitcoin’s price.

While the cause-effect dynamic is not as simple as that, there are patterns in Bitcoin’s supply and demand that have set the base for Bitcoin cycles to emerge and bring forth new all-time highs. As we discuss below, many of these patterns are beginning to show, fueling optimism of another bull market building up.

Supply-Side Catalysts

Bitcoin’s issuance schedule has been predetermined since its inception. Initially, Bitcoin miners received 50 BTC in compensation for every block of transactions that they validated. This decreased to 25 BTC in 2012, and is on track to going to 3.125 BTC in 2024.

These rewards are effectively Bitcoin’s inflation. Therefore, Bitcoin’s inflation rate decreases after every halving.

IntoTheBlock Perspectives: Bitcoin Cycles

Following the last halving in May 2020, Bitcoin’s inflation rate has dropped to just 1.8% as seen on the left indicator.

With miner rewards decreasing, marginal selling pressure from miners also drops. The percentage that miners’ transactions makes out of total Bitcoin volume has followed Bitcoin’s issuance rate, becoming less relevant as rewards drop.

Miners’ Volume Share currently sits at around 10%, having increased during the bear market as total volume figures plummeted. With the amount of Bitcoin rewarded to miners set to decrease by 50%, it is likely that their share of volume and selling pressure follows.

That being said, the supply-side clearly does not show the full picture: an asset also needs demand to go up in price. While popular stock-to-flow models fail to consider the second half of the equation, on-chain data can help bring light into buying patterns propelling Bitcoin cycles.

Demand-Side Catalysts

Asides from the halvening, Bitcoin cycles have been facilitated by buying activity from long-term investors. Hodlers, classified as investors that have been holding Bitcoin for over a year have historically accumulated Bitcoin in bear markets, supporting its price. As Bitcoin’s price reaches new highs, the amount of Bitcoin held by hodlers drops as they take profit into the tops of the cycle.

IntoTheBlock Perspectives: Bitcoin Cycles

Consistent accumulation from long-term investors has been an early signal of a bear market coming to an end. Hodlers in aggregate do not buy at the exact bottom, but continue to accumulate during it. They have also shown to “diamond hand” their Bitcoin holdings, with hodlers’ balance not dropping during black swan events like the ones seen in March 2020 and more recently through the FTX collapse.

This strong conviction from long-term investors reinforces Bitcoin’s store of value proposition. For assets that do not yield cash-flows such as gold, their perceived value can be seen as a social construct feeding off of itself. Bitcoin hodlers’ shared belief of its future appreciation creates the buying pattern seen on-chain where they buy low and are hesitant to sell until much higher prices are realized.

Moreover, Bitcoin’s demand-side has grown from being able to attract larger and larger players to participate each cycle. In 2013 and 2017, Bitcoin was largely driven by retail investors. In 2021, crypto-native institutions and a handful of traditional finance (TradFi) entities helped bid Bitcoin into new highs.

Looking into 2024 and beyond, it is likely that the percentage that traditional finance institutions make out of Bitcoin volumes grows significantly larger, especially with the high likelihood of a spot ETF being introduced soon. TradFi giants such as Larry Fink from Blackrock are now hailing Bitcoin as a “flight to quality”, creating demand for his peers to buy into the asset.

Similarly, in 2020 Paul Tudor Jones was one of the first hedge fund managers to point to crypto’s proposition, in his case referring to it as “the fastest horse in the race”. While PTJ initiated Bitcoin’s penetration of wall street, Blackrock seems poised to elevate it into a broader set of institutions.

This trend enables capital flows into Bitcoin, allowing it to go beyond an asset held by just a few zealots to one that is widely recognized as a store of value, gaining increasing validation after every cycle.

Profitability as a Signal

One of the most indicative metrics of the status of Bitcoin cycles has to do with the profitability of its holders. This makes sense as the supply and demand forces previously explained interact to determine the price, and profits are just a function of the change in price.

Through on-chain data we can observe the prices at which each address receives Bitcoin. This can be extended to all addresses to estimate the average price at which Bitcoin was purchased. By multiplying this average price times the Bitcoin supply, we get its realized value.

The ratio of Bitcoin’s market cap to its realized value (MVRV), therefore shows the aggregate profitability of Bitcoin holders. Historically, this ratio has helped signal Bitcoin cycles.

IntoTheBlock Perspectives: Bitcoin Cycles

When the MVRV ratio drops below 100%, it shows that Bitcoin is at prices below than the average purchasing price of its holders. Bear markets have tended to bottom when the MVRV drops to 70% to 80%, representing a buying opportunity.

Additionally, every time that the MVRV has gone back above 100% after falling below it has pointed to the beginning of a bull market. By this metric, Bitcoin’s bull market began in January of this year, and could have further room to appreciate if it reaches the levels of 300%+ in MVRV seen towards the end of previous bull markets.

Overall, on-chain indicators appear to suggest Bitcoin is in the early stages of a bull market. Ultimately, though previous patterns do not necessarily guarantee Bitcoin’s returns, the alignment of positive supply and demand catalysts increase the likelihood of another Bitcoin cycle taking place.

As always, none of this is to be taken as financial advice. For more insights on Bitcoin cycles check out our perspectives dashboard here.


Are We at The Beginning of Another Bitcoin Cycle? was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Bitcoin’s “Flight to Quality” Proposition

https://medium.com/intotheblock/bitcoins-flight-to-quality-proposition-a1c9e489ee52

BTC outperforms amidst historical bonds crash

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we continue to explore Bitcoin’s increasingly relevant role in the uncertain macroeconomic environment. Specifically, we evaluate its proposition as a “flight to quality”, given the liquidity implications of the recent bond crash and Bitcoin’s scarce dynamics.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees dropped by 29% as the number of daily transactions decreased
  • Ethereum fees increased by 7% bouncing slightly from the 3-year lows recorded last week

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Exchange flows for both Bitcoin and Ether picked up this week, with both assets seeing $170M-180M in outflows, potentially suggesting buying activity

Bitcoin’s “Flight to Quality” Proposition

US bonds are experiencing one of its largest sell-offs in their history. Long-term bonds have been hit the worst, as 10-year yields reached as high as 5% yesterday, the highest levels since 2007. Recall that as bond yields rise, the price of existing bonds fall as there is less demand for the lower yielding bonds in circulation.

Via ITB’s Capital Markets Insights

Sell-off Accelerates — Long-term bonds (TLT) are down nearly 20% in the last six months

  • Despite being recognized as risk free, long-term treasuries are now down by 53% since March 2020
  • The sell-off has led to hundreds of billions in unrealized losses, with Bank of America alone recording $131.6B on paper losses due to the depreciation of bonds
  • Simultaneously, US debt continues setting record highs, climbing by $604B in the last month
  • This creates structural problems for the economy since the rates the government pays on their debt continue rising along with the size of their debt

“Flight to Quality” — Bitcoin’s recent rally was described in such way this week by Larry Fink, Blackrock’s CEO

  • Both Bitcoin and gold are up about 7% in October
  • Bitcoin has been increasingly cited as an attractive alternative asset among Wall Street veterans, and its recent price performance appears to be reinforcing its value proposition
  • Just how Bitcoin increased as Silicon Valley Bank and other banks collapsed, it has performed strongly in the midst of the bond crash

Perhaps more surprisingly, not only Bitcoin is outperforming, it is has also been less volatile than treasuries.

Via ITB’s Capital Markets Insights

Less Volatile than Treasuries — Bitcoin’s volatility has fallen below that of long-term US bonds (TLT)

  • Volatility is typically a measure of risk in traditional markets
  • Despite Bitcoin being famously volatile, it has been less risky in this sense than US treasuries over the past month
  • These conditions, along with the likely approval of a Bitcoin spot ETF, have helped support BTC’s price

Long-term holders also help reinforce Bitcoin’s scarce dynamics.

Via ITB’s Bitcoin Network Analytics

80% of Bitcoin is Owned by Addresses Holding for Over Six Months

  • The share of Bitcoin held by long-term investors has continued to rise, reaching new highs in October
  • With long-term holders historically accumulating until prices reach new highs, the supply of Bitcoin available to be readily sold is likely decreasing
  • The upcoming Bitcoin halving will decrease annual inflation from 1.72% to 0.86%, further amplifying its perceived scarcity

Overall, the bond sell-off appears to be showing cracks in the traditional finance system. As bond prices continue to fall, many macro experts believe the Fed will have to eventually intervene and directly or indirectly buy them. Though this will likely be a different version of quantitative easing due to the still-high rates of inflation, it is increasingly likely that global liquidity will increase.

This is likely one of the main drivers for Bitcoin’s recent outperformance. As the probability of the proverbial money printer being resuming increases, Bitcoin’s scarcity is being sought by more investors in a flight to quality.


Bitcoin’s “Flight to Quality” Proposition was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Ethereum Fees Reach Multi-Year Lows

https://medium.com/intotheblock/ethereum-fees-reach-multi-year-lows-d0677dd87f1f

Upon a major transition, ETH is inflationary again

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we dive into an overlooked trend within Ethereum. We analyze the reasons behind the remarkably low fees being generated by Ethereum, their effects on ETH’s supply and their relevance towards the network’s long-term future.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees increased slightly relative to last week
  • Ethereum fees dropped by nearly a third in just a week, we’ll be discussing this in more depth below

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Exchange flows for both Bitcoin and Ether remain relatively negligible

Ethereum Fees Reach Multi-Year Lows

Demand for Ethereum Mainnet has been slowing down over the past few months. Driven by the migration to layer 2s and the decreasing usage of applications in Mainnet, fees on Ethereum reached their lowest since April 2020.

Via ITB’s Ethereum network indicators

3-Year Low — Fees on Ethereum Mainnet reached their lowest since before DeFi Summer in 2020

  • Last week Ethereum averaged 1.38k ETH worth of fees/day, and is currently on track for just 1.19k this week ahead of the weekend when fees usually reach their lowest
  • Fees are down 90% from their highs this May and approximately 50% lower than they were last October

The decrease in fees is putting ETH’s “ultra sound money” thesis to a test.

Via ITB’s Ethereum supply indicators

Inflationary Again — Ether’s supply is slowly trending upwards

  • September was the first month since December 2022 where ETH’s supply grew
  • There are two reasons behind Ether’s inflationary trend: low fees and higher supply issuance
  • The multi-year low levels of fees on Ethereum have led to less ETH being burnt, thus decreasing the deflationary pressure
  • Additionally, the amount of ETH minted per day has been climbing as the amount of ETH staked continues to set new highs, leading to more inflationary rewards
  • Despite being technically inflationary again, Ether’s net issuance for this week holds at around 0.44% annualized inflation, still 75% lower than Bitcoin’s current inflation rate

As we discussed in the Q3 on-chain review, the transition of activity to layer 2s on Ethereum has been one of the main reasons behind its decreasing fees. Another reason is the dwindling volumes from NFT collections.

Via ITB’s NFT insights

NFT Bear Market Impacts Fees — As NFT volumes remain lower, Ethereum loses one if its main fee contributors

  • In 2021 and early 2022, NFTs used to be the largest category of application burning fees on Ethereum
  • This week NFTs contributed to just 8% of the ETH being burnt, per ultrasound.money
  • With average gas fees at their lowest since September 2020, the cost of minting or trading NFTs on Ethereum Mainnet are a fraction of what they used to be; yet users don’t seem to care as shown by the stagnant volume figures

As speculative activity on L1 disappears and L2s continue to grow, Ethereum fees are likely to remain low. The upcoming introduction of EIP-4844 may further accelerate this trend as it is expected to decrease L2 fees by an order of magnitude.

Ultimately, the low fee regime represents a major transition for Ethereum, trading off high revenues and deflationary supply for the promise to be able to attract mainstream users through layer 2s.


Ethereum Fees Reach Multi-Year Lows was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Is the Bond Crash Strengthening Bitcoin?

https://medium.com/intotheblock/is-the-bond-crash-strengthening-bitcoin-a74e9e9ae2df

Bitcoin outperforms despite (or because of?) macro woes

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we shift gears into the macro-side of things as bonds continue a historical sell-off, while Bitcoin holds steady. We discuss the implications of this trend, diving into how the market’s valuation of Bitcoin has evolved and how it may be benefitting from the increasing financial instability experienced in 2023.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin’s fees dropped by 30% this week as ordinals inscriptions and overall transactions decreased significantly
  • Fees on Ethereum reached a yearly low with low volatility and general lack of activity on mainnet

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Both Bitcoin and Ether recorded approximately $100M in net inflows into centralized exchanges this week. Part of these inflows could be tied to FTX selling, with many of their addresses becoming active recently, including unstaking ~$150M worth of SOL

Is the Bond Crash Strengthening Bitcoin?

We are seeing a continuation of the trend we discussed a few weeks ago, where Bitcoin has begun outperforming global markets. Interestingly, many of the catalysts that brought Bitcoin down in 2022 are no longer doing so, hinting at the market reevaluating how to value Bitcoin.

Via ITB’s Capital Markets Insights

Regime Change? The prices of long-term bonds and Bitcoin are no longer moving in tandem despite doing so over the past year and a half. Let’s explore the dynamics at play:

  • As the Fed raised rates sharply in 2022, the value of long-term bonds decreased as these yielded much lower rates
  • High interest rates also put pressure on Bitcoin and risky assets in general as a) short-term bonds became an increasingly attractive alternative and b) the discount rate for assets’ revenues grew proportionally
  • Then as the pace of rate hikes slowed down and discussions regarding a fed pivot began in 2023, both Bitcoin and long-term bonds rallied
  • Over the past month this trend has changed: Bitcoin has been rallying while long-term treasuries crash, leading a correlation of -0.74 between the two, the lowest value in over a year

So why is Bitcoin outperforming bonds and why is this important to the average person in crypto? The answer is because the market appears to be reevaluating Bitcoin’s value proposition amid global uncertainty.

Via ITB’s Bitcoin Financial Indicators

From Medium of Exchange to Store of Value — The way the market approaches Bitcoin has evolved significantly over the years

  • Initially, when many saw Bitcoin as peer-to-peer cash, the transaction volume processed was a key metric to track Bitcoin’s progress to become a medium of exchange
  • The ratio of Bitcoin’s market cap to the value it transacted (the NVT ratio shown above) then became a popular metric to track, showing Bitcoin to be relatively undervalued in the 2015–2016 bear market, where the value of Bitcoin was low compared to the volume it transferred on-chain
  • Bitcoin just hit an all-time high in its NVT ratio in September — so is the market indicating that Bitcoin is significantly overvalued?
  • Most likely this is not the case; instead this trend suggests that Bitcoin is not valued by investors in relation to its transactional utility, but by something else

In 2023 we have seen demand for Bitcoin pick up as the traditional finance system’s cracks become exposed. In March as Silicon Valley Bank collapsed and the Fed intervened with the BTFP program, Bitcoin’s price rallied by over 20%. Now, as the value of long-term treasuries crash to their lowest since 2007, Bitcoin is holding steady, reversing its previously strong correlation to bond prices.

It may be too soon to begin calling for the bull market, but it is clear that the broader market has changed its tone in regards to Bitcoin.

Via ITB’s upcoming Bitcoin cycles perspectives

Scarce and predictable supply — Bitcoin’s decreasing programmatic issuance is one of the key arguments propelling it as a store of value

  • Bitcoin’s annual inflation rate is currently 1.7% and is set to drop to 0.85% in May of 2024
  • With the US debt reaching record levels of $33 trillion and rates continuing higher, the risk of financial instability has been growing
  • Many macro experts, including ex-Fed trader Joseph Wang and Luke Gromen are now discussing higher chances of a “liquidity event” where markets crash before the Federal Reserve steps in again with the latest iteration to quantitative easing

As with any potential crisis, it is difficult to predict when/if they will hit. The recent bond crash is showing signs of weakness in the traditional banking system, but the extent of it is still unclear. At the same time, it appears the market has reassessed the correlation between bond prices and Bitcoin, seeing greater value in the crypto-asset despite yields heading higher. Ultimately, this appears to be strengthening Bitcoin’s value proposition in an unstable economic environment.


Is the Bond Crash Strengthening Bitcoin? was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Q3 2023 On-chain

https://medium.com/intotheblock/q3-2023-on-chain-4cb3111dca20

The ETF Races & Layer 2 Adoption

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

Happy last Friday of September to everyone reading. This week, per usual, we will recap the major stories of the quarter through an on-chain lens. We dive into the Bitcoin and Ether ETF news, their impact and how investors have been positioning. Then we discuss the brewing adoption for Ethereum on layer 2s and its potential short-term side effects.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees declined by 71.9% compared to the past quarter when BRC-20 tokens first emerged as a way to trade meme tokens on Bitcoin. Compared to Q3 2022, though, fees on Bitcoin have more than doubled, showing the sustained demand Ordinals have brought
  • Ethereum fees dropped by 10.8% relative to the last quarter as a large portion of transactions shifted to layer 2s (more on this later). Compared to one year ago, fees on Ethereum are up by 72%, suggesting on-chain activity may have bottomed last year

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded relatively negligible net outflows of $90M throughout the quarter, $1.3B less outflows than last quarter, but $140M more than last year
  • Ether’s supply on exchanges decreased by $2.5B this quarter, compared to $5.5B in outflows last quarter, but $1.3B more outflows than a year ago

Q3 2023 On-Chain — The Crypto ETF Races

The third quarter of 2023 in crypto ended how it began: dominated by ETF news. This time, though, the conversation has shifted from Blackrock’s application for the first spot Bitcoin ETF to VanEck’s approval for the first ETH futures ETF.

Via ITB’s Capital Markets Insights

Spot ETF Barometer — Grayscale products have been a proxy to the odds the market is assigning to ETFs being approved

  • While BTC and ETH prices dropped just over 10%, GBTC remained flat and ETHE climbed by 9% this quarter
  • On August 29, Grayscale won their lawsuit against the SEC, where the courts deemed “arbitrary and capricious” that its GBTC product was not allowed to be transformed into an ETF, which led to a strong rally in GBTC
  • Now with the launch of ETH futures ETFs, it appears the SEC is giving up on its case against Ethereum, making a spot ETF likely in the case that one is approved for Bitcoin
  • Cathie Wood’s Ark appears to believe this is the case, filing for the first spot Ether ETF in early September
  • In both cases, Bitcoin and Ether spot ETFs are expected to drive inflows as they provided a trusted way for institutions and retail alike to access the largest crypto-assets

Unsurprisingly, market participants appear to be bullish with this on the horizon.

Via Bitcoin’s Ownership Indicators

Large Holder Accumulation — Addresses holding at least 0.1% of BTC’s supply have recorded strong net inflows throughout Q3

  • As Bitcoin dropped to $25k, large holders saw inflows of $600M within a day
  • Since then Bitcoin has seen three other spikes of $400M+ in net inflows to large holders, showing strong interest quietly building up
  • These have happened while centralized exchanges have seen outflows, suggesting it is organic buyers receiving these funds and not just CEX addresses
  • With the Bitcoin spot ETF application decisions delayed again by the SEC, the patience of these holders may get tested

Q3 2023 On-Chain — Ethereum’s L2 Boom

While the ETF news have been the major crypto story from the investor perspective, layer 2 (L2) adoption has been the dominant narrative from the technology point of view, and for the right reasons.

Coinbase’s recently-launched Base L2 has been leading an expansion in on-chain activity, surpassing Optimism and Arbitrum in terms of active addresses and transactions within months. The result has been a larger percentage of transactions moving to L2s, accounting for 67% of daily transactions in September, compared to just 16% a year ago. While this trend is enabling broader adoption of Ethereum, it is also leading to lower revenues.

Via ITB’s Ethereum Activity Perspectives

Are L2s Bullish or Bearish for Ethereum? The answer probably depends on the timeline under consideration

  • It is industry consensus that L2’s scalability and low costs are necessary to bring mainstream adoption of crypto applications
  • However, transactions moving to L2s also results in lower revenues for Ethereum as the fees they consume are substantially smaller
  • The image above shows the inverse correlation between the two, where L1 fees have steadily declined throughout the summer, while L2 transactions have picked up
  • With Arbitrum set to begin an incentive program of 50M ARB ($45M) in mid October, L2 activity appears primed to continue growing through Q4

Overall, Ethereum should benefit over the long-term as Arbitrum, Base and zk rollups attract more users on-chain. However, it is likely that ETH revenues will continue to decline if there is not an uptick on activity on mainnet. The lower revenues are also resulting in Ether being inflationary again as less ETH is being burnt. Ultimately, this should be a short-term pain point necessary for the long-term growth of the network.


Q3 2023 On-chain was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Bitcoin Holds Steady Despite Macro Deterioration

https://medium.com/intotheblock/bitcoin-holds-steady-despite-macro-deterioration-ff5f86a8ab8b

BTC outperforms stocks and crypto markets

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we dive into Bitcoin’s steady price action, which can be considered remarkable as stocks take a hit. We discuss the potential drivers to this trend, analyzing key on-chain data points.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees continue to climb, reach a three month high of $7M this week
  • On the contrary, Ethereum fees dropped to a nine month low of $22M

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Net outflows from exchanges relatively picked up this week, with $240M of Bitcoin and Ether leaving CEXs

Bitcoin Holds Steady Despite Macro Deterioration

As expected, the Federal reserve did not raise interest rates this week. However, through their dot plot they did project one more hike this year and only two cuts into late 2024, showing their commitment to the higher for longer mantra.

This sent 10-year yields to their highest since 2007, putting pressure on markets. The Nasdaq and the S&P 500 are down 3.3% and 2.7%, respectively, so far this week. Yet Bitcoin has showed relative strength, managing to hold at the same price of $26,600 as last week and outperforming throughout the past 30 days.

Via ITB’s Capital Markets Insights

Analyzing the Outperformance — Some key points that may explain Bitcoin’s steady price

  • Bitcoin’s correlation to the dollar has hit a value of zero, putting it in a strong position despite the DXY’s rally
  • The Bitcoin ETF passing continues to be a positive catalyst on the horizon, making holders hesitant to sell in advance
  • Mt Gox’s repayment, where they plan to send 850,000 BTC ($23B) to users affected by their hack, was delayed by a year, easing the sell pressure that was anticipated if they had began redistributions next month as previously planned
Via Bitcoin’s Price Indicators

Relative Strength in Crypto — Bitcoin’s dominance within the sector has been growing

  • The ratio of Bitcoin’s market cap to Ether’s market cap reached a yearly high of 2.68x this week
  • Bitcoin’s market share has rebounded in the past few weeks, approaching 50% for the second time this year
  • Ethereum’s declining fees, driven partly by L2 adoption, may be putting some pressure on the second largest crypto-asset, as its supply has been growing over the past month, reverting its deflationary trend
Via ITB’s Upcoming Bitcoin Cycles Dashboard

Zooming Out — Bitcoin’s steady price action also has to do with its zealots remaining calm

  • “Hodlers”, addresses holding BTC for over a year, have been accumulating during the recent bear market just as they have in previous ones
  • Despite the recent correction, the total balance held by hodlers remains near record highs at 13.44 million, or 69% of the circulating supply
  • Historically, these long-term investors have helped sustain price during bear markets and take profits as new all-time highs are set in bull markets

Overall, this trend appears to signal a bullish cycle for Bitcoin may be approaching. Though it’s unclear how long Bitcoin’s outperformance will last in a worsening macro environment, on-chain data shows that its long-term investors continue to accumulate regardless. This, plus the easing of sell pressure expected from Mt Gox, has been buoying BTC while the rest of the sector underperforms on a relative basis.


Bitcoin Holds Steady Despite Macro Deterioration was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Base Hits All-Time High Amid FriendTech Hype

https://medium.com/intotheblock/base-hits-all-time-high-amid-friendtech-hype-c73ea7fc3042

Coinbase’s L2 usage surpasses competition

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we dive into the renewed growth in Base, Coinbase’s layer 2 on top of Ethereum. We analyze some of the impressive statistics on its traction, the breakout application leading the way and how its leading to a more specialized layer 2 ecosystem.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin network fees climbed by 40%, stabilizing at around 30 Bitcoin per day, 2x greater than they were a year ago prior to Ordinals
  • Ethereum fees declined by 4% as lack of volatility leads to slower demand on Mainnet, despite adoption on layer 2s

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded $10M in net inflows, while $110M of ETH left CEXs

Base Hits All-Time High Amid FriendTech Hype

Coinbase’s Base layer 2 has been gaining remarkable traction since its launch two months ago. With a combination of bluechip protocols and Base-native ones, the Coinbase L2 has been quickly attracting users and surpassing expectations.

Via ITB’s New Base Analytics

Base Momentum — Here are some statistics on the growth of Coinbase’s L2

  • September 14 marked a new all-time high for Base transactions, recording more transactions than Arbitrum and Optimism Mainnet combined
  • Base has averaged 888k daily active addresses over the last month, with nearly 60% of the market share of addresses using Optimism roll-ups
  • The Coinbase L2 has already attracted $380M in total value locked, making it a top 10 chain in this regard per DeFiLlama

Interestingly, it is not DeFi applications nor NFT marketplaces driving the surge in Base’s activity. Instead, a significant portion of usage can be attributed to a new social application, FriendTech.

Via DeFiLlama

FriendTech Hype Explained — Here’s a brief introduction to FriendTech (FT) and its remarkable numbers

  • FT creates user accounts connected to their Twitter profiles, creating keys for each user which can be used to access a chat with them
  • Users can buy and sell these keys, giving them upside on social profiles
  • Influencers are incentivized to join as they can benefit not only from their keys going up in value, but also from getting 50% of their keys’ trading fees
  • The remaining 50% of fees goes to FriendTech as revenue, which is currently on track to reach $93M annually, making it one of the most profitable crypto applications
  • FriendTech usage has increased in the last week, partly driven by users aiming to get points that will later be used for an airdrop

The rise in FriendTech has attracted over 100k users (or rather unique Twitter profiles) within weeks of launching. This has led Base to grow a broad reach of retail users, feeding into Coinbase’s strengths.

Via ITB’s Upcoming L2 Perspectives Dashboard

Layer 2 Comparison — Ethereum’s L2 ecosystem is evolving with players becoming more specialized in their own niche

  • Base has quickly become the L2 with the most unique addresses and transactions, fueled by Coinbase’s wide reach, making it a strong candidate for social applications like FriendTech to thrive
  • Arbitrum continues to dominate in terms of transaction volume, having the most liquid DEXs and highest TVL in DeFi applications in general
  • Optimism has been embracing its superchain vision, with the OP Stack becoming adopted as the underlying infrastructure of other L2s such as Mantle (formerly BitDAO) and Base itself

Overall, the Ethereum L2 space has become one of the more exciting areas in the crypto market. As L2s try new approaches and scale further, we are likely to continue seeing more innovative applications such as FriendTech drive broader adoption into crypto.


Base Hits All-Time High Amid FriendTech Hype was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Analyzing the ETH Spot ETF & The Market’s Lack of Action

https://medium.com/intotheblock/analyzing-the-eth-spot-etf-the-markets-lack-of-action-235a43516ab9

Ark files for an ETH ETF, but why does price remain unchanged?

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

Traditional finance institutions continue pushing to launch crypto products. Following last week’s Grayscale win, on Wednesday we saw Cathie Wood’s Ark file to launch the first spot ETH ETF, a product which would facilitate broader investment into the second largest crypto-asset. Despite the news, Ether’s price remained relatively unmoved throughout the week.

This week we discuss the market’s lack of reaction to news such as this, diving into on-chain concentration and the drivers behind the ongoing market dynamics keeping price within a tight range.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin network fees climbed by 38% as Ordinals inscriptions reached their second highest daily amount
  • Ethereum fees declined 24%, with the lack of market volatility leading to lower gas usage from DeFi applications

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Both Bitcoin and Ether recorded modest netflows into CEXs as market activity cools off

Analyzing the ETH Spot ETF & The Market’s Lack of Action

Following Ark’s spot ETH ETF filing, Grayscale’s ETH fund is close to its yearly highs, even while Ether itself is down over 20%. The diverging paths between these assets is worth exploring further as complex market forces are at play.

Via ITB’s Free Capital Markets Analytics

ETHE Outperformance — Grayscale’s ETH fund has produced significantly higher returns than spot Ether this year

  • ETHE has increased by over 140% in 2023, significantly narrowing its discount to the underlying Ether it holds
  • The ETHE discount decreased from -56% to -36% in the month following the Blackrock spot Bitcoin ETF application, leading ETHE to yearly highs despite Ether trending lower
  • Following Ark’s spot Ether ETF filing this week, the gap has narrowed to -26%, its lowest discount since October 2022 per Ycharts
  • This trend suggests that the market is weighing higher odds that Grayscale will be able to convert its ETHE product into an ETF following the push from traditional finance giants into the space

While a spot ETH ETF would certainly facilitate inflows into Ether, it begs the question: why did such news not affect Ether’s price?

Via ITB’s Ethereum financial indicators

Supply/Demand Congestion — Large holdings are concentrated close to ETH’s current price, consolidating prices in a tight range

  • 5.1 million ETH was previously acquired in the low $1,600s, showing that this has historically been a place where buyers have stepped in as support
  • Similarly, 6.5 million ETH has been purchased with a price in the high $1,600s, much of which creates resistance from holders looking to exit the market minimizing losses
  • In short, buyers and sellers are agreeing to transact in a narrow range where there is a large concentration of ETH positions

This explains why the market is consolidating, but does not answer our main question: why isn’t the market reacting positively (or at all) to bullish news?

The spot Ether ETF is not the only instance where price was barely affected by optimistic news. This week Visa announced it will be using Solana for faster and cheaper settlements. While SOL’s price increased in the hours following the release, the move was fully retraced the next day, similar to what happened with ETH.

Automated Buying, Discretionary Selling — trading bots appear to be buying these announcements, but discretionary sellers then overtake the trend

  • A key factor behind the discretionary selling is likely to be FTX’s upcoming liquidation of reportedly $3B in crypto holdings
  • Though FTX has not reported when they will conduct these liquidations, it is likely that the market got spooked following their recent bridging activity
  • With ETH and SOL both being part of FTX’s holdings, it is plausible to believe that the lack of sustained price action in these assets is linked to sellers front-running FTX and less buyers looking to buy ahead in anticipation of their liquidation

Ultimately, demand and supply appear to be matching within a narrow trading range as market forces clash. The heterogeneity of market participants make it difficult to ascertain the sole drivers behind price action, but it appears that buying activity driven by catalysts such as a potential ETH spot ETF is being offset by the anticipation of FTX selling. These complex dynamics may persist as there are other waves of large sellers (such as the US government and MT Gox claims) expected later this year at the same time that institutional catalysts and organic adoption continue to improve.


Analyzing the ETH Spot ETF & The Market’s Lack of Action was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Grayscale Wins & Whales Accumulate

https://medium.com/intotheblock/grayscale-wins-whales-accumulate-599cb7bd31c0

GBTC’s discount reaches lowest since 2021 as institutional demand grows

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we dive into the court’s ruling in favor of Grayscale. We evaluate the outperformance of GBTC, on-chain data revealing how Bitcoin institutional investors are positioning and the growth in retail holders.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Network fees for both Bitcoin and Ethereum dropped to their lowest in two months as on-chain activity faded in spite of the GBTC news

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded modest inflows into CEXs of just $5M this week, and $170M in net outflows throughout August
  • Ether continues to record larger outflows, with $380M leaving CEXs this week and a approximately $1.5M this month

Grayscale Wins & Whales Accumulate

In June 2022, Grayscale sued the SEC after being rejected to turn its GBTC fund into an ETF. Over a year later, this week the US courts ruled 3–0 against the SEC’s decision, deeming it “arbitrary and capricious”. The ruling in favor of Grayscale, led GBTC to rally — and briefly the rest of the market too.

Via ITB’s Free Capital Markets Analytics

Narrowing Discount — The price of GBTC relative to its Bitcoin holdings has been increasing in 2023

  • The value of GBTC has increased 125% this year, more than double than Bitcoin’s 62% rise
  • After winning the court case, GBTC’s discount has narrowed to 18% its lowest since December 2021
  • The narrowing discount suggests the market is placing higher odds on Grayscale’s transition to an ETF going through, which would enable users to withdraw their BTC at par and thus arbitrage the discount down to 0

GBTC’s conversion into an ETF has not been approved yet, but there are signs that institutional investors are getting optimistic in Bitcoin as ETF decisions approach.

Via ITB’s Bitcoin Concentration Indicators

$1.5B Accumulation — Addresses holding 0.1% of the Bitcoin supply or more have added over a billion and a half in BTC holdings in the last two weeks

  • An initial spike in accumulation of 24k BTC took place after the drop to $25k, was followed by another increase in August 23 and then one of 20k BTC the day of the Grayscale ruling
  • Comparing this to Bitcoin CEX netflows, which have been close to $0 as previously discussed, suggests that there is organic buying demand rather than just funds moving to exchange addresses

It’s not just large investors that appear to be buying Bitcoin, the broader market also appears to be growing on-chain.

Via ITB’s Bitcoin Ownership Indicators

Record High Holders — The number of addresses holding Bitcoin has reached over 48 million for the first time

  • After dropping slightly in July, the number of addresses holding Bitcoin broke a new high this week
  • Many of these new addresses seem to be from retail investors, since the number of addresses with less than 1 BTC but more than 0.001 BTC (~$26) reached a new high of nearly 23 million

Although the court’s decision in favor of Grayscale appears to be bullish for the GBTC premium, Bitcoin prices are back to where they were roughly prior to the ruling. This casts some doubts about where Bitcoin’s price may be going next, but institutional holders’ accumulation suggest they are optimistic.


Grayscale Wins & Whales Accumulate was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

DeFi TVL Hits a 2.5 Year Low

https://medium.com/intotheblock/defi-tvl-hits-a-2-5-year-low-11e0374bcc8c

And how it’s evolving to bring back users

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we dive into the state of decentralized finance. We highlight some of the struggles the space has been going through, and how it is evolving to attract users back.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin network fees dropped by 15.9%
  • Ethereum fees increased slightly as the market volatility led to higher on-chain activity on Mainnet

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Approximately $750M of Bitcoin and Ether left CEXs this week, their highest since June
  • Meanwhile, USDT recorded $200M in net inflows, potentially suggesting users were depositing stablecoins to buy and withdraw BTC and ETH

DeFi TVL Hits 2.5 Year Low

The DeFi space has been one of the worst hit during the bear market. As yields compressed and exploits ramped up, approximately $170B in deposits have left the DeFi ecosystem.

In the last few months, even though the market has trended upwards, the value locked in DeFi continues heading lower. However, as we will discuss, the DeFi ecosystem is evolving in ways that are likely to drive some demand back to the space.

Source: DeFi Llama

2.5 Year Low — The total value locked in DeFi protocols reached its lowest since February 2021

  • DeFi’s TVL dropped by 80% in 2022 as incentive programs from L1s largely came to an end, Terra collapsed and $3B+ was lost to exploits
  • Decreasing token prices led many DeFi protocols into a negative feedback loop where the yield offered to depositors (subsidized by tokens) decayed, leading to decreasing TVL, resulting in less perceived value for the protocol and so forth
  • Between these factors and decreased appetite for speculation, it might not come as a surprise that value locked in DeFi is at its lowest since 2021

2021’s speculative frenzy drove people into DeFi, lured by unsustainably high yields. As the dust has settled in the bear market, we see the DeFi space transforming, taking different approaches and abstracting some of its complexities.

DeFi’s Ongoing Transition

Via ITB’s free Aave GHO Risk Radar

Low Borrowing Costs — DeFi is transitioning from high yields to depositors, to low costs to borrowers, as exemplified by Aave GHO

  • When treasury yields were at near 0%, offering significantly higher yields to depositors in DeFi
  • At 5%+ treasury yields, DeFi has strategically shifted to a place where users can look to borrow at discounted rates
  • An example of this is Aave’s GHO stablecoin, which users can borrow at rates between 1%-1.5%, leading it to grow to $20M+ in supply and $60M+ in collateral within a month of launching

Sustainable Yields — The introduction of real world assets (RWAs) into DeFi has brought sustainable stablecoin returns into DeFi

  • MakerDAO has begun redirecting part of its revenues accrued from treasuries to DAI users through the DAI savings rate (DSR)
  • As discussed in the ITB newsletter from a few weeks ago, the increase in the DSR brought attracted over $1B in deposits within a week
  • With sDAI (DAI earning the DSR) soon becoming collateral on Aave, demand for DeFi is likely to grow as users will be able to borrow at low costs against collateral earning sustainably higher yields

Outside from the “DeFi bluechips”, new protocols are also entering the space. One that has grabbed many’s attention quickly is Unibot, a protocol that turns the relatively complex DeFi trading experience into a simple Telegram bot.

Via ITB’s Unibot network indicators

Is Convenience the Answer? Thousands of users are foregoing the option to hold their own keys in favor of a simpler trading experience in Unibot

  • Unibot is sacrificing DeFi’s original ethos for a quick, easy to use trading experience
  • Regardless of its custodial set up, Unibot is on track to accruing ~$30M in fees annually per DeFi Llama
  • Unibot’s set up is not too disimilar from the viral Friend.Tech, the social media app which hosts keys for users looking to trade “keys” to access influencers

Overall, there is plenty of experimentation going on in DeFi despite its decreasing TVL numbers. While established protocols are opting through low borrow costs and sustainable yields, newer protocols are attempting to simplify the DeFi experience. Though there is no clear answer as to which approach will end up being more successful, there are promising signs for both to reignite the DeFi space.


DeFi TVL Hits a 2.5 Year Low was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Introducing Curve Risk Radar

https://medium.com/intotheblock/introducing-curve-risk-radar-d1872cb0f8c1

IntoTheBlock launches economic risk tools for Curve

After months of engineering effort, we are glad to release the Curve Risk Radar dashboard. Through these indicators, Curve users and liquidity providers will be able to monitor and manage their exposure to the most important economic risk factors that the protocol is exposed to.

IntoTheBlock DeFi Risk Radar

Risk management has emerged as a crucial component for the mainstream acceptance of decentralized finance (DeFi). Despite DeFi’s recent momentum, the ecosystem is vulnerable, especially to often-neglected economic risks like liquidations, de-pegging events, and large whale transactions. Economic risks, though less-publicized than DeFi hacks, can cause major losses to participants.

With the Curve release, IntoTheBlock (ITB) enhances the Risk Radar platform monitoring DeFi’s economic risks. The metrics in the Risk Radar are based on our quant strategies, which have safeguarded capital in DeFi for some of the largest institutions in the crypto space. For more info on the Risk Radar vision feel free to read our CEO’s announcement of the initial alpha release.

Curve Risk Overview

Curve is a decentralized exchange (DEX) optimized for stablecoin swaps with low slippage and fees. It employs automated market makers (AMMs) to facilitate trading, focusing primarily on stablecoins and other pegged assets. With over $3B in value deposited into Curve, it is one of the largest and most important protocols in the DeFi space.

Through 2022 and 2023, the crypto space learned the hard way that stablecoins are not risk-free. The Curve protocol exposes users to the risks of de-pegging events, slippage, and complex withdrawal fees varying depending on whale concentration and more.

With the nine metrics released in the Curve Risk Radar, we offer a transparent way for users to navigate these risks. Let’s take a look at some of the most relevant metrics and how to use them.

Before we get started, it’s worth noting that are only four metrics shown under “all pools”, but there is a lot more to cover when selecting a specific pool so make sure to check the indicators for your favorite pool in the top right corner.

Net Liquidity Flows

Inflows and outflows are crucial to understand the health of any DeFi protocol. In Curve’s case, inflows into the protocol increase liquidity, which allows for better trading execution to take place.

On the other hand, if there are negative netflows (more outflows than inflows) that indicates liquidity is decreasing.

https://defirisk.intotheblock.com/metrics/ethereum/curve

In the graph above we can see negative netflows of over $700M in Curve in early March. This coincides with the USDC de-pegging event, where its price dove to as low as $0.9 following the collapse of Silicon Valley Bank. Tracking such large deviations users will be able to identify potential risks, which are then covered in more depth in the remaining indicators.

Peg Monitor

Through the USDC example, it is evident that tracking the price of an asset relative to its intended peg is essential. Through the Peg Monitor we display the premium/discount of an asset versus the other asset(s) available in the pool.

https://defirisk.intotheblock.com/metrics/ethereum/curve

Above we can see that USDC’s de-pegging event in March was much more severe against USDT than against DAI. A likely reason for this is that DAI is partly backed by USDC, which meant that it also was indirectly exposed to the SVB collapse.

Through the ITB Risk Radar users will be able to monitor potential de-pegging events in near real-time, download the data to analyze previous instances and soon be able to receive alerts to be notified as they happen.

Market Depth

From a trader standpoint, it is important to understand the slippage that one may incur by trading a given size. Borrowing from centralized exchanges, we show this impact through the Market Depth indicator.

https://defirisk.intotheblock.com/metrics/ethereum/curve

The data above shows in the x-axis the price impact on either direction, and in the y-axis the size that would be traded to produce such movement in price.

Therefore, we can observe that a 93k stETH sell order on Curve would produce a slippage loss of only 2%. This is important to monitor to understand how resilient the pegs of Curve assets can be to large buy/sell orders.

Exit Fee Evolution

One thing that is clear in DeFi protocols is that they consist of multiple players that can affect each other. In AMM pools, if a whale withdraws their liquidity, it can lead to significant losses for a liquidity provider looking to remove their assets afterwards.

Through the Exit Fee Evolution indicator we provide an environment for users to simulate this impact by showing the slippage they would incur exiting in one coin if a large percentage of the pool is withdrawn.

https://defirisk.intotheblock.com/metrics/ethereum/curve

In the indicator above, we simulate the exit fee (y-axis) a position with 10% of the stETH/ETH pool would have if a large percentage of the pool (x-axis) is withdrawn. As can be seen, exit fees are relatively negligible up to the point when 30%+ of the liquidity is withdrawn, when they begin increasing exponentially.

Given the adverse and unpredictable conditions that can arise in crypto, it is essential for any large depositor to be following these dynamics. From our experience in DeFi strategies, modeling the evolution of exit fees has allowed us to protect and automatically withdraw positions that would have otherwise been exposed to major losses.

Overall, the indicators above provide a glimpse of the complex risks that can emerge in Curve and other decentralized exchanges. By creating these open risk dashboards we hope to support users and liquidity providers to better manage risks and make DeFi safer over the long-term.


Introducing Curve Risk Radar was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Ethereum L2 Activity Spikes

https://medium.com/intotheblock/ethereum-l2-activity-spikes-48a4a29a3f08

Optimism and Base gain momentum

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we step back from the recent volatility to discuss a growing area within crypto: Ethereum layer 2s. We analyze the competitive landscape within optimistic rollups, dive into key metrics and explore the impacts on the broader Ethereum ecosystem.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin network fees dropped by 16.6% despite the number of transactions remaining relatively high
  • Ethereum fees increased by 2.6%, accelerating in the last few days as market volatility picked up

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin and Ether recorded a total of $400M in net CEX outflows, potentially suggesting buying activity from holders looking to keep custody of their assets

Ethereum L2 Activity Spikes

Ethereum scaling solutions have been getting an increasing amount of traction in the past few months. New layer 2s (L2s) are launching almost every week now as competition in the space heats up. The most recent launch to quickly attract users was Coinbase’s Base L2.

Built on top of the OP Stack, Base is a separate L2 built with the same infrastructure as Optimism, but with its own set of sequencers batching transactions onto Mainnet. Within just a few weeks of launching Base surpassed Optimism in terms of daily transactions but has since fallen back lower.

Via ITB’s Ethereum Mainnet, Arbitrum, Optimism and upcoming Base data

Optimism Momentum — The Optimism network and OP token have been gaining steam recently

  • Optimism transactions hit a new all-time high on Wednesday, surpassing Arbitrum transactions for the first time in 2023
  • Sam Altman’s Worldcoin launch on Optimism a few weeks ago contributed to the rise in transactions as users claim WLD tokens
  • Though Base transactions are not settled on Optimism’s network, part of the fees Coinbase earns are shared with the Optimism DAO, helping boost its revenues
  • These factors have helped support the OP token, which has decreased by just 1% over the past 30 days, compared to ARB’s -18% and MATIC’s -20% performance

As competition between L2s grows, it becomes clear that Ethereum benefits.

Via ITB’s Ethereum Mainnet, Arbitrum, Optimism and upcoming Base data

2nd Highest — The number of transactions processed between Ethereum Mainnet and the major optimistic rollups hit their second largest value in history

  • The prior high set in March 2023 took place on the day of the ARB airdrop, which distributed $1.7B in tokens to users
  • The total number of transactions including L2s are now roughly 3x higher than during the bull market peak, when activity only took place on mainnet
  • Despite L2’s growth, Ethereum mainnet does not seem to be meaningfully cannibalized as transactions there remain at ~1M/day, just as they were a year ago

Additionally, Ethereum appears to be benefitting from each rollup attracting slightly different audiences.

Source: DeFiLlama

Arbitrum Dominating DeFi — The Arbitrum ecosystem remains the most liquid and active for financial applications

  • Arbitrum’s TVL and daily volume numbers outpace all L2s and most L1s per DeFi Llama data
  • Within just a few weeks Base already has accumulated $170M in TVL, surpassing Cardano and Bitcoin

EIP-4844 Catalyst — The upcoming Ethereum Dencun upgrade implements an improvement proposal expected to decrease L2 transaction costs by 10x-100x

  • While the timeline for the Dencun launch has not yet been made official, it is likely to take place in the fourth quarter of the year
  • More clarity on the launch date is likely to come after the Devnet 8 testnet goes live next week, where Ethereum developers will be implementing all improvement proposals set to be included in Dencun
  • Both optimistic and zero-knowledge (ZK) rollups will benefit from this scalability improvement, and are expected to attract more users as costs decrease by an order of magnitude

Overall, despite market volatility, it seems that L2s for Ethereum have been a bright spot. Optimism has gained momentum with the OP Stack becoming quickly adopted. Base has become one of the fastest growing chains. And Arbitrum continues to dominate DeFi even if it’s getting less attention than it did shortly after the airdrop. All of these L2s are poised to benefit greatly from the implementation of the Dencun upgrade and ultimately help push Ethereum towards broader adoption.


Ethereum L2 Activity Spikes was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

Maker’s 8% Stablecoin Yields Re-spark DeFi

https://medium.com/intotheblock/makers-8-stablecoin-yields-re-spark-defi-9f2600136ddb

DAI savings rate attracts $1B in deposits

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we dive into one of DeFi’s original protocols: MakerDAO. We analyze its recent improvement, attracting nearly $1B in less than a week. We cover growth in its DAI stablecoin, patterns of accumulation on MKR and potential secondary effects likely to act as tailwinds for crypto.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin network fees climbed by 24.5% without a clear indication of the drivers
  • Ethereum fees dropped by 21.2%, reaching a two month low as volatility stagnates

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Both Bitcoin and Ether recorded around $50M in net outflows from CEXs, suggesting modest activity

Maker’s 8% Stablecoin Yields Re-spark DeFi

The first lending protocol, MakerDAO, has caught the attention of the crypto space with its recent move. Its stablecoin, DAI, is able to earn the DAI savings rate (DSR), which as of this past Sunday was increased to 8%. This yield is funded by Maker’s revenues, most which stem from supplying part of its collateral into US treasuries. This shift is already causing an impact on Maker and is likely to extend beyond the protocol.

Source: MakerBurn DSR

RWA Yields On-Chain — Real world assets such as treasuries are bringing renewed interest into DeFi

  • The amount of DAI earning the DAI Savings rate climbed by nearly $1B this week
  • DAI supply has increased almost as much ($800M), and is currently at a three month high
  • The DSR’s increment solidifies the trend of real-world assets in DeFi, where other protocols like Ondo Finance have already made strides with $164M in deposits in their tokenized treasuries
Source: ITB DAI Transaction Indicators

DAI Resurgence — The original decentralized stablecoin is seeing increased activity

  • DAI volume hit its highest since the Silicon Valley Bank collapse, which had brought panic as part of USDC’s collateral was held there
  • The option to earn yield on top one of the bluechip stablecoin is beginning to have positive ripple effects across DeFi
  • Aave has a proposal to list sDAI (DAI earning the DAI savings rate) as collateral, which would indirectly allow users to take leverage against treasuries on-chain
Source: ITB MKR Ownership Indicators

MKR Accumulation — Maker’s governance token has more than doubled in price in the past three months

  • Large MKR holders have seen significant inflows, suggesting strong buying activity
  • The spike in in Large Holders Netflows in July 16 appears to have been linked with Maker’s founder Rune, who has acquired $24M in MKR tokens over the past year
  • MKR has been one of the best performing tokens over the past month, increasing by 35%

While the recent price move in MKR may be overheated, the implications of having the DSR at competitive rates are likely just beginning. Even if the DSR drops to 5% to match treasuries, it opens the opportunity for other lending protocols and DEXs to use a sustainable yield-generating stablecoin as a building block. It also makes it easier for people who would have not otherwise bought treasuries to simply access their yields. Overall, the DAI savings rate is likely to play an increasingly important role in DeFi and crypto altogether as it helps attract back capital and bring in new users.


Maker’s 8% Stablecoin Yields Re-spark DeFi was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.

The Stablecoin Race Heats Up

https://medium.com/intotheblock/the-stablecoin-race-heats-up-dd653be22ad1

USDT reaches new highs while USDC and DeFi catch up

Based on IntoTheBlock’s weekly newsletter. If you enjoy it, and would like to receive it every Friday make sure to sign up here!

This week we cover the latest on the stablecoin space and its effects on the broader crypto space. We analyze Tether’s remarkable position, USDC struggles post-SVB and recovery attempts, and the upgrades decentralized stablecoins are making to gain market share.

Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether

  • Bitcoin fees rebounded by 37% as weekly transaction numbers are on track to reach their highest since May
  • Ethereum fees climbed by 9% with Uniswap volumes increasing for new assets like UNIBOT and “X-related” tokens following the Twitter rebrand

Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges

  • Bitcoin recorded $230M of outflows from CEXs, while Ethereum saw only $15M in inflows

The Stablecoin Race Heats Up

Stablecoins have benefitted significantly from the bear market. As interest rates have increased from 0% to 5.5%, revenues for centralized stablecoins have been growing quickly.

In particular, Tether stands out, accumulating almost $1.5B in net profit in the first quarter of 2023. These profits are on track to be even larger in Q2 and Q3 as the amount of Tether issued continues to grow.

Source: IntoTheBlock’s USDT Indicators

All-Time High for USDT — Tether supply (and market cap) reached a record high this month, as it approaches $84B

  • USDT is one of the few crypto-assets currently at all-time highs
  • Being highly profitable, Tether announced it would be using 15% of its profits to buy Bitcoin which should help support the market
  • Circulating supply of USDT is up nearly 30% year-to-date, accelerating after the Silicon Valley Bank collapse, which led to uncertainty for USDC
Source: IntoTheBlock’s USDC transaction stats

USDC Troubles — USDC volumes and supply have plummeted since March

  • USDC on-chain volumes hit a two year low a month after the SVB collapse, and are down 50% from the week prior to it
  • Circulating supply is down 37% since March and continues to trend lower
  • Despite this, Coinbase is doubling down on USDC, with Brian Armstrong pointing to instant and free payments as the next step for crypto adoption

Meanwhile, DeFi stablecoins are making moves to catch up with centralized counterparts.

Source: ITB Research

Increasing Competition — decentralized stablecoins are looking to differentiate to attract more capital

  • MakerDAO founder Rune Christensen is proposing to introduce an enhanced DAI Savings Rate (DSR) that would yield as high as 8% APY
  • Instead of offering high yields to depositors, Aave has opted to provide low borrowing costs
  • There is also a proposal to add support to the DSR on Aave, which would significantly boost demand to borrow GHO
  • New entrants such as Lybra and Raft also offer low cost (or even free) stablecoin borrowing options by instead taking a cut of staking yields from collateral assets

Overall, while USDT continues to reap massive returns from its liquidity moat and first mover advantage, USDC aims to reduce friction for global usage and DeFi stablecoins make strides to become more competitive. With stablecoins being one of the largest opportunities within crypto, it is evident that the race for adoption is heating up.


The Stablecoin Race Heats Up was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.