Data & Insights Recap - May 22, 2023

BTC NFT

Source: CryptoSlam

• Bitcoin has emerged as the second most dominant chain for NFTs, behind Ethereum, putting up $30.86 million in volume last week.
  • We have talked about before the popularity of Ordinals, a protocol allowing NFT issuance on Bitcoin, which has pushed the 14-year-old network to new transaction highs.
  • One project, Bitcoin Frogs, even saw their 24-hour volume top the likes of Bored Ape Yacht Club, becoming the top traded collection for the day. 
  • Space Pepes is another Bitcoin-based NFT collection that climbed the ranks this week. 
  • These two collections have been dominating in the non-Ethereum art and collectibles category, making last week the highest week of volume since April 2022. 
• It is impressive that Bitcoin NFTs have emerged on the scene so strongly given they are quite new. While we were initially talking about Ordinals back in January of this year, they have really exploded since late last month. 
  • My colleague Steven Zheng says, “Being an extremely secure and highly liquid blockchain makes Bitcoin an attractive blockchain to launch NFTs for creators.” 
  • To outperform some of the top NFT chains, like Solana and Polygon, so soon is a testament to the excitement around these projects. 
  • Given that the concept of Ordinals has been in play since the start of 2023, it seems as though this isn’t just a fad, however, time will tell whether this level of sentiment can continue. While we are early in the current week, Bitcoin is on track to have its fourth week in a row as the second most dominant NFT chain.
  • While we have seen transaction numbers flourish under the excitement around Ordinals and BRC-20 tokens, fees have reached two-year highs and active addresses have reached two-year lows, indicating some might be priced out of transacting as a result of the activity. 

Optimistically high new addresses

Source: Block Explorers

• Both Arbitrum and Optimism saw a surge in new addresses last week. Arbitrum gained 175.84k new addresses on May 15th, a new all time high, and Optimism grew by 53.85k addresses on May 18th, the second-highest day of growth the optimistic rollup has seen. 
  • The highest day of new addresses for Optimism was April 27th, 2022, with an outlier of 456k new addresses, which happened the day after the Optimism Foundation announced eligibility for their first airdrop and also suggested more airdrops would be coming. 
• Arbitrum’s new addresses have been much higher since its airdrop, coming in above 35k every day since March 16th, after typically adding fewer than 25k addresses a day prior. However, the recent 6-digit spike is a noticeable increase for the layer 2. Aribtrum had a spike earlier in the month on May 5th, as well, adding 160k new addresses.
  • While Aribtrum has been hit with sharp peaks, Optimism saw more steady growth, seeing an increase in new addresses every day from May 10th to May 18th, but has since seen a bit of a drop-off. 
  • The rises are linked to times when fees on Ethereum have been high as a result of a surge in memecoin trading on decentralized exchanges. 
  • Other EVM blockchains and Solana have also seen an increase in new addresses as the fees on Ethereum have people looking for alternatives.
• On the converse, the 7-day moving average of transactions on Arbitrum are the lowest they’ve been since March and have been on the decline since a peak in late April. 
  • Optimism’s transactions have been rising since mid-May, but not by that much, still sitting below 300k. 
  • One possible reason for transactions not seeing the same rise in new addresses is that, while fees on the L2s were much lower than transacting on the mainnet, fees did rise for the optimistic rollups since gas prices were so high on the layer 1. Since layer 2s still need to publish data to Ethereum, the rise of fees did cause a bit of a bump for Arbitrum and Optimism. 
• Overall, the increase in cost to transact on Ethereum has reaped benefits throughout the crypto ecosystem, seeing users expand to other blockchains and onto layer 2s. 

Stable diffusion

Source: The Block

• The monthly on-chain volume of stablecoins on Ethereum is on pace to be the lowest since December 2020, with only $159 billion in volume so far in May. 
• Despite recently taking the second place slot in Ethereum stablecoin supply, USDC is still the stablecoin with the highest on-chain volume, although its dominance is waning. 
  • In February (prior to USDC’s infamous depeg), USDC did 2.8 times as much volume as USDT but has only done 1.06 times as much volume as USDT in May. 
  • There has been a sharp fall in USDC volumes post-March, falling 64% from March into April, and they’re on pace to decline again this month. 
  • Even though USDC was able to regain its peg quickly once it was revealed all funds on Silicon Valley Bank would be safe, the stablecoin has struggled to regain the dominance it once had. USDC’s supply is down 32% from March 9th. 
• However, against its dwindling supply, USDC volumes are still on top. USDC is still the top stablecoin on Uniswap, with 24 hour volume for USDC on Uniswap v3 on Ethereum more than double that of USDT. 
  • Its dominance on Uniswap could be helping its volume performance. 
  • The decline this month could be attributed to the memecoin frenzy we saw, which took trading emphasis away from stables. 
  • USDT is also gaining traction on the DEX. Even though USDT volumes are about half of USDC volumes, it is still the third most dominant asset on the exchange, with USDC being the second. 
• Individually, though, most stablecoins are on pace to underperform compared to April, meaning the cause is likely deeper than any specific token.
  • High fees, which seem to be the root cause of everything these days, could have contributed to the volume decline, making it too expensive to transfer stablecoins on the network. 

Layer 2 fee spree

Source: The Block

• We are just over two-thirds into May and the fees spent on the Ethereum mainnet to publish layer 2 data is already at a new all-time high for the month. 
  • Layer 2s, as we briefly mentioned before, are a scaling solution for Ethereum that offer lower fees and higher throughput while also utilizing the security of the mainnet. These solutions batch transactions off-chain but publish a summary of what went down to the mainnet. 
  • Over 7,700 ETH has been used to put those summaries on the blockchain this month. 
• Transactions across all layer 2s have been higher than those on the mainnet since February, but we did see a dip coming out at the end of April, declining from 3.5 million on April 27th to 1.7 million on May 7th. They rose again to 3 million on May 16th, but overall there seems to be less L2 activity in May than in April, despite the rise in mainnet fees. 
  • The likely culprit is the rise in fees we’ve seen on Ethereum this month in the wake of the memecoin trading. The median gas price reached 142 gwei earlier in the month, the highest it’s been since the collapse of Terra, making it more expensive to transact, which has contributed to the rise in the amount the L2s have been paying.
  • The rise was also not caused by one layer 2 in particular, with the major three players, Arbitrum, Optimism, and zkSync Era, all already outpacing their April numbers. 
  • And despite the rise in the fees paid in raw numbers, the percentage of total gas spent publishing this data is on pace to be lower than last month, on pace to be just over 4% compared to last month’s 5.4%.
  • That being said, we mentioned before the rise in new addresses on the optimistic rollup platforms. Despite the decline in transactions, the layer 2 ecosystem does seem to be looking like an attractive option to many users.
  • The unique depositors to ZK-rollup bridges have also risen for the past two weeks, marking the end of a seven-week decline after speculation of a zkSync airdrop caused deposits to surge. 

Have your (pan)cake and eat it too

Source: The Block, CoinGecko, The Graph

• PancakeSwap is on track to account for over 29% of DEX volume this month, the highest percentage since November 2021. 
  • PancakeSwap has already put up more volume than it had in April, unlike the most prominent DEX, Uniswap. It has already put up over $13.5 billion in volume in May, compared to $9 billion last month.
  • Uniswap has, for the most part, stayed steady on its market share. It is primarily Curve’s market share that PancakeSwap’s recent growth has eaten into.
  • The BNB Chain DEX champion began growing its market share last month after it launched a new version, v3. While Uniswap also deployed their v3 on BNB Chain in March, PancakeSwap continues to be the dominant force in the ecosystem. 
  • While v3 has added new volume for PancakeSwap, the majority of volumes still seem to be coming from version 2. 
• BNB Chain transactions have been on the upswing this past month, with the 7-day moving average reaching 4.8 million, the highest since May last year. 
  • PancakeSwap is also the largest protocol by total value locked on the blockchain, so a rise in transactions on the chain along with a rise in volume for PancakeSwap is not surprising. 
  • In addition to the v3 activity, we have mentioned before the users are looking to diversify where they’re transacting after high fees on Ethereum after fees rose. PancakeSwap also offered memecoin trading, including PEPE, which is still in the top 15 traded coins on PancakeSwap by 24-hour volume. The likes of Binance Pizza and LindaYacc CEO sit in the top 10. 
  • The combination of memecoin mania spilling over onto BNB Chain shortly after PancakeSwap’s v3 launch has caused the DEX to further develop its dominance in the space.