Data & Insights Recap - May 8, 2023

Fee-d Up

Source: The Block

•  Two weeks ago, we discussed the median gas price on Ethereum hitting a new post-Merge high (which it then exceeded this week, reaching 142.15 gwei on May 5th) and the correspondingly high transaction fees that came along with the rise in gas prices. 
  • But it seems Ethereum isn’t the only blockchain facing network congestion in the face of memecoins. 
• Bitcoin is not taking a back seat as it saw Ethereum transaction fees reaching levels not seen since May 2022. 
  • The 7-day moving average transaction fee on Bitcoin reached $8.78 on May 7th, the highest it's been since July 2021, almost two years ago. 
  • And it does not come without precedent, as transactions on Bitcoin have come out swinging, with the 7-day moving average reaching 534.45k. Every day since April 28th, this value has continued to reach a new all-time high, with the previous peak being 407k back in December 2021.
• What has caused this network of over 14 years to just recently see this transaction breakout (and a corresponding fee rise) despite the price of BTC still less than half its peak. 
  • There have been over 100,000 Ordinals Inscriptions (when you attach metadata to a specific satoshi to create an NFT on Bitcoin) every day since April 26th. The continued popularity of Ordinals has hinted at a change of Bitcoin’s public perception after it has previously often been touted as a somewhat stagnant blockchain. 
  • Speaking to the shift, the principles of Ordinals have been used to generate a Bitcoin token standard, BRC-20. This has allowed people to issue tokens (including pepe) on the Bitcoin network. In general, these new Bitcoin memecoins have driven an uptick in activity, and BRC-20 transactions even surpassed regular Bitcoin transactions on April 30th, May 1st, May 6th, and May 7th. The market cap across all BRC-20 tokens has already reached $900 million. 
  • Recent banking uncertainty in the U.S. is also a reminder of Bitcoin’s core use case as a permissionless, trustless, and transparent form of money.

Nothing but net (positive change)

Source: The Block

• The one-month anniversary of the Shapella upgrade is coming up on Friday. The infamous upgrade was the most anticipated since The Merge and allowed for the withdrawals of staked ETH. 
  • Depositors could either do a “full withdrawal” and shut down their validator, taking their 32 ETH stake and accrued rewards, or do a “partial withdrawal” and only claim the rewards they’ve earned so far. 
• The net change of ETH in the Beacon Chain contract has been positive every day since April 29th; meaning deposits have exceeded withdrawals, except for a small net negative day on May 5th. 
  • When Shapella first launched, withdrawals were quite high, over 100k ETH the first four full days with the upgrade in place. These days were heavy on partial withdrawals as users moved to claim the rewards they had earned over the past few years. 
  • More recently, though, we’ve seen more full withdrawals, with a lot coming from Kraken, which is now required to wind down its staking program after a settlement with the SEC.
  • The amount deposited post-Shapella exceeded withdrawals as of May 7th, with over 2.44 million ETH deposited since April 12th compared to 2.43 million ETH withdrawn. 
• Deposits, on the whole, have been much larger post-Shapella. 196.74k ETH were deposited on May 3rd, the fourth-highest daily deposit amount ever.
  • 10 of the 26 days after Shapella have had over 100k of ETH deposited, compared to only 13 days from November 2020 to April 11, 2023. 
  • The recent deposit increase can be attributed to the fact that staking looks less risky now, given that your funds are no longer locked up indefinitely. People take solace in the fact they are able to regain control of staked ETH if necessary. 

Squared away

Source: Company Filings

• Some fun crypto-related Q1 2023 earnings dropped this week from both Coinbase and Block this week.
  • What was the most exciting metric seemed to be the $2.16 billion of bitcoin sales made through Cash App, the highest amount since Q2 2021.
    It is also roughly up 25% from the $1.73 billion in sales made a year ago in Q1 2022. 
  • Block attributes the year-over-year increase to more units of BTC sold to customers, with the yearly increase being slightly deprecated due to the price of bitcoin being lower than it was in Q1 2022. 
  • Gross profits from bitcoin came in at $35 million, which actually marks a decrease from the previous quarter. But the percentage of gross bitcoin profits from the total $1.71 billion in gross profits Block racked in this quarter came in at 2.9%, the highest level seen since a year ago. 
  • This does seem overall bullish, given that Cash App’s customer base is primarily U.S. based, where crypto has faced an overwhelming amount of scrutiny. However, it does not seem to be stopping Cash App’s retail users from buying into BTC. 
• Highlights from Coinbase’s earnings included a small bump in monthly transacting users, up to 8.4 million versus 8.3 million in Q4 2022, marking the end of a four quarter decline. Non-transaction based revenue also came in over 50% of Coinbase’s total revenue for the first time (although it has been high in the past), with interest income being the main driver.

NFT traders trend down

Source: The Block

• There were only 5.39k NFT traders on Ethereum on May 6th, marking a new low since June 2021. 
  • Data & Insights enthusiasts are no strangers to the cooling NFT market we’ve been seeing. 
  • We talked last week about the falling floor prices of some of the major NFT collections, and this week again confirmed the slowdown in the sector.
  • Art Blocks founder Erick Calderon is not convinced there will be another crypto bull run and is working to get his generative art NFT company through current conditions. He remains bullish on Art Blocks, saying, "the vibes are negative, but the vision is very resolute." 
  • Celebrities are also backing off the whole NFT thing due to a myriad of conditions, including class action lawsuits against FTX promoters and dwindling NFT marketing budgets. The latest fallout? Gwenyth Paltrow’s denial of investing in the NFT project Wild. Wild announced Paltrow as an investor two months ago and is continuing to say she invested despite her recent claim. 
  • The former head of product at OpenSea was also convicted of insider trading on Wednesday, which was kind of expected news after he was accused of this back  in September 2021 and was indicted for wire fraud and money laundering in 2022, but it’s also the kind of thing that contributes to the negative vibes Calderon is talking about. 
  • Also, recent gas prices have made Ethereum very expensive to transact on. Especially with all the profit opportunities seeming to be in memecoins these days, it's probably better to spend fees buying up some PEPE than it is to snatch an NFT in the current market conditions. 
  • Or maybe people aren’t trading because they have their NFTs locked as collateral for loans! Blend, the latest NFT lending protocol on the scene, emerged last week as the brainchild of Blur and Paradigm and has already generated over 2,000 loans worth almost 40k ETH since last Monday. 

DEX-terity

Source: The Block

• The number of Uniswap users on Ethereum skyrocketed this weekend as memecoin prices rose to unprecedented highs.
  • PEPE, in particular, proved to be a fruitful investment, with its market cap reaching $1 billion on Friday and, for the most part, stayed above that 10 digit threshold until earlier today. It still sits as the 56th largest coin by market cap at time of writing.  
  • Uniswap hit over 104,000 distinct users on May 5th, the largest amount since May 2021. 
• The desire to trade these tokens pushed the average transaction fee over $15 on Ethereum on Friday as people upped their gas prices to get their transactions executed sooner. 
  • Uniswap saw the vast majority of the trading activity, no other DEX on Ethereum saw the same uptick in users that Uniswap did.
  • For the most part, though, DEX volumes stayed stagnant. Uniswap’s Ethereum volume just breached $2 billion on May 5th, a far cry from the over $11 billion in volume the day of the Circle depeg. Part of the reason volume didn’t actually balloon that much is because PEPE, even with its large market cap, is quite an inexpensive token. 
  • Looking at the top pools on Uniswap v3 on Ethereum, we see PEPE/ETH has the third largest 24 hour volume at $86 million but is still less than a third of USDC/ETH’s volume. The more impressive feat for PEPE/ETH is its volume relative to its liquidity. The $86 million is almost 17 times the pool’s $5.13 million TVL, whereas the volume on USDC/ETH is just about equal to its liquidity. 
  • The high transaction fees have also led to an increase in burned ether, with over 14k ETH being burned on both Friday and Saturday, marking a new post-Merge high. 
• PEPE peaked at $0.00000420 on Friday but now trades at $0.00000209, which is still up 500% for the past 14 days. 
  • The PEPE rally bears a striking similarity to GameStop stock in early 2021, very community driven with no clear value purpose (Binance even noted the token’s lack of utility prior to listing it). As my colleague, Steven Zheng put it, "This is the purest representation of crypto’s speculative prowess.”