Thursday, 6 January 2022

Market Summary

Market Summary 6 January 2022

Bitcoin Price: U$45,832.01 (-1.32%)
Ethereum Price: U$3,785.11 (+0.51%)


Top 10 L1s & dApps by TVL, Bitcoin Battles Tighter Policy Outlook

  • The “multi-chain” narrative was strong in 2021 as various layer 1 blockchains and layer 2 scaling solutions emerged to address the scalability problems that have historically plagued Ethereum.
  • The amount of capital locked grew exponentially year-on-year on already existing chains like Terra (356x) and Polygon (17,100x) while new chains like Cronos and Arbitrum that launched in the later half of 2021 managed to eke their way into the top 10 list.
  • Influencing this exponential growth were push factors such as the high gas fees on Ethereum as well as pull factors including innovative projects being launched on other chains, not to mention farming opportunities from newly launched protocols. Various ecosystem funds were raised to incentivize users and developers to build on these native chains, facilitating further capital inflows.
  • Amongst the top 10 biggest dApps by TVL, applications native to Ethereum still dominate, but multi-chain protocols such as Lido and Multichain (rebrand from Anyswap) have made their way onto the list as well.
  • Curve sits atop the list largely due to the popularity of its stableswap invariant pools and CRV token emissions that keep liquidity sticky. Other complementary protocols have also been built on top of Curve, the most notable being Convex (see yesterday’s Daily here for more insight).
  • Anchor Protocol is the only protocol native to Terra on the list, attracting over $9bn of TVL since its inception in March 2021. This has spillover effects on Lido as well as it’s been a large beneficiary of Anchor’s growth.
  • BTC and ETH options faced a large drawdown in open interest due to end-of-year expiries. As reported by Deribit, $5.5B of BTC contracts and $3.3B of ETH contracts expired on December 31st.
  • The last few months of 2021 saw a material shift in the macro landscape away from the accommodative “do whatever it takes” rhetoric that characterized much of the last 18 months. Instead, policymakers now find themselves “behind the curve” as inflationary pressures continue to pressure major central bank leaders to hike rates sooner than initially anticipated.
  • Notably, the market is now pricing in at least one Fed rate hike as early as May 2022; Fed funds futures now imply a 100% chance of at least 3 rate hikes by the end of next year, compared to just one rate hike three months ago.


Grayscale rebalances DeFi Fund dropping Bancor (BNT) and UMA

  • Crypto asset manager Grayscale Investments has rebalanced its Grayscale DeFi Fund and adjusted weightings of its Digital Large Cap Fund.
  • A Jan. 3 announcement detailed the changes Grayscale made to its two funds. The DeFi Fund’s weightings have been rebalanced with AMP, the native collateral token of the Flexa payment network being added, while Bancor’s (BNT) and Universal Market Access (UMA) have been removed.
  • Flexa uses the AMP token to collateralize crypto payments and settles them in fiat to recipients enabling merchants to accept crypto easily.
  • Grayscale reshuffled weightings but did not change the token list of The Grayscale Digital Large Cap Fund (GDLC).


Bitcoin exchange balances trend back to historic lows as BTC withdrawals resume in January

  • Bitcoin (BTC) exchange reserves are back near record lows as 2022 sparks renewed appetite among buyers.
  • Data from on-chain analytics firm CryptoQuant shows reserves across 21 exchanges at 2.308 million BTC as of Jan. 4.


Third-largest whale celebrates Bitcoin’s birthday with 456 BTC buy

  • It’s now been 13 years since the genesis block of the Bitcoin blockchain was created. To commemorate the occasion, the third-largest Bitcoin (BTC) whale appears to be back after the new year holidays, and they have just completed the first sizable purchase of 2022.
  • On Tuesday, the third-largest Bitcoin address added 456 BTC at an average price of $46,363, equivalent to around $21 million, according to data from BitInfoCharts.
  • At the time of this writing, the whale holds 120,845.57 BTC worth over $5.6 billion. The holder’s identity remains a mystery, but it appears that the entity is making full use of the current price volatility. Bitcoin’s has dropped 1.7% in the last 24 hours and 8.9% over the last week, currently trading at around $46,603.


Crypto funds attracted $9.3B in inflows in 2021 as institutional adoption grew

  • Institutional cryptocurrency funds attracted record inflows in 2021, as demand for digital assets such as Bitcoin (BTC) and Ether (ETH) continued to grow during a volatile and often unpredictable bull market.
  • Crypto investment products registered $9.3 billion in inflows during the year, up from $6.8 billion in 2020, according to the latest CoinShares data, which was released on Tuesday. Bitcoin funds attracted $6.3 billion worth of capital last year, while Ether products saw inflows totaling nearly $1.4 billion. Multi-asset funds were also popular, attracting $775 million in investor capital.


SEC delays decision on NYDIG’s bitcoin ETF proposal

  • The Securities and Exchange Commission (SEC) has delayed on another spot bitcoin exchange-traded fund (ETF), as an extension notice for NYDOG’s Bitcoin ETF hit the register today.
  • “The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised in the comments that have been submitted in connection therewith,” said the order.
  • The Commission designated an additional 60 days. NYDIG can now expect an answer on its proposal by March 16. NYSE Arca first filed to list the product on June 30, 2021, putting the SEC on the decision clock. This is the latest in a series of extensions from the securities regulator.


Bitcoin is set to take further market share from gold, according to Goldman Sachs

  • Bitcoin’s ascent will cost gold market share, according to a research report by investment banking giant Goldman Sachs.
  • In a note to clients dated January 4, the bank said that the market capitalization of the largest cryptocurrency will likely grow as “a byproduct of broader adoption of digital assets, and possibly due to Bitcoin-specific scaling solutions.”
  • Looking at bitcoin’s float-adjusted market capitalization, the cryptocurrency accounts for about 20% of the total “store of value” market, which is currently dominated by gold. Proponents of bitcoin—ranging from Paul Tudor Jones to Anthony Scaramucci—have backed bitcoin as a store of value and inflation hedge asset akin to gold.
  • According to Goldman Sachs, the price of bitcoin could possibly increase to more than $100,000 if it were to command 50% of the so-called “store of value” market. The bank added that use-cases outside of store of value could serve as a tailwind for the crypto.


‘We are 50% of the way there,’ says Vitalik on Ethereum’s development

  • Vitalik Buterin has walked listeners through a five-part roadmap on the latest Bankless podcast where he outlined the necessary steps for Ethereum to survive and thrive.
  • In order to achieve ultimate scalability and decentralization, Butalik claimed that Ethereum needs to be more agile and more lightweight in terms of blockchain data so that more people can manage and use it.
  • The first step is called the merge, referring to the full transition away from proof-of-work to proof-of-stake, taking place in the first half of 2022. Part two, called the surge, plans to give Ethereum increased scalability, massive bandwidth and throughput, particularly on zk-rollups. The merge and the surge are the most important upgrades, according to Buterin, to building out the Ethereum network.
  • Once the merge and surge go through, and there is full sharding implementation, then it will supposedly be 80% complete. The roadmap, which is estimated to take another six years to complete, will lead to 100% optimization, according to Buterin.
  • The next phases include the verge, enabling more users to run nodes and essentially “democratizing access to the broadest number of participants possible to anyone and everyone who wants to verify the validity of the chain,” said Buterin. Following the verge, are the purge and splurge phases, referring to the elimination of historical data and the addition of miscellaneous upgrades, respectively.

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