Data & Insights Recap - June 5, 2023

Kraken cracking into market share

Source: The Block

• May marked a particularly brutal month for centralized exchange volumes, dropping to just below $440 billion, the lowest since October 2020.
  • It’s a testament to just how chilling this crypto winter has gotten, despite the price of bitcoin and other assets rebounding a bit from the lows of last year. 
  • Two other major factors beyond the generally slow market that pushed spot volumes down are both Jane Street and Jump pulling out of the crypto space amid regulatory concerns, and Binance’s reinstatement of bitcoin fees, which saw volume on their bitcoin pairs (and their market share) fall sharply.
  • CEXs also missed out on a lot of the memecoin trading that got underway on decentralized exchanges last month, as they could not add the assets as quickly.
• While there are no real winners in a cool market like this, Kraken is emerging as a more prominent leader amongst exchanges offering trading of USD pairs. The exchange accounted for 20% of the spot volume in the USD crowd, the highest share it has had since January 2018.
  • While Kraken’s volume did decline a bit from April to May, falling from $16 billion to $13.8 billion, it fared much better than its competitors.
  • Coinbase faced a steeper cut percentage-wise than Kraken did last month, dropping 23% compared to Kraken’s 14%, but its share still increased month over month to 38.75% for May. This marks a slight rebound for Coinbase after it saw its share amongst USD exchanges drop over 10% from January to March.
• The real victim was Binance.US, which saw its share fall from 16.05% to 8.47% from April to May. 
  • April was a peak for Binance.US’s share, but it came crashing down quite quickly.
  • Looking pair by pair at volumes on the exchange, the overall volume drop off seems charged by a fall in both BTC/USD and ETH/USD volumes, which are the two largest pairs on the exchange. 
  • There is a sharper decline around mid-May, corresponding to reports of Binance.US looking for ways to cut the majority stake of Binance’s CEO Changpeng Zhao, and also when people began taking note of a large premium on asset prices on the US-focused exchange.
  • Overall volumes have been on the decline though, as SEC staff have said they believe Binance.US is an unregistered securities exchange, leading many to wonder when official enforcement might be coming.
  • Binance.US still has an edge despite its regulatory woes, as, unlike its older international big sister, it still touts free trading on major BTC and ETH pairs. (Although free trading only gets you so far when bitcoin is trading at a triple digit premium compared to your rivals.)

An avalanche of activity

Source: Block Explorers

• May was a great month for the Avalanche ecosystem.
  • The EVM-compatible blockchain hit 1 million monthly active users for the first time.
  • The 7-day moving average of transactions on the Avalanche C-Chain (its default smart contract chain) reached almost 560,000 on May 30th, a new high since mid-May 2022, when Avalanche saw their transaction count fall from 860,000 on May 12th to 248,000 by May 31st amidst the fallout from Terra’s demise. 
  • The transaction rise also saw it pass Fantom earlier in the month, to take a fourth place spot behind BNB Chain, Polygon, and Ethereum for EMV-compatible activity. 
• Ava Labs, the team behind Avalanche, attributes their recent growth to the AvaCloud launch, which allows for the no-code deployment of subnets, or “custom blockchains,” built on top of the network.
  • Circle, the issue of the stablecoin USDC, has also taken quite a liking to Avalanche in recent months. In April, they released the Cross-Chain Transfer Protocol for facilitating the movement of USDC between Ethereum and Avalanche through native minting and burning of the asset, as opposed to locking and minting through a bridge. Circle also announced last week that its Euro-pegged stablecoin, EUROC, would be making its first multichain foray by being supported on Avalanche.
  • Avalanche likely also benefited from the high Ethereum fees that plagued the network last month, offering an attractive alternative after the average transaction fee on Ethereum hit $20.

Reaching higher dimensions

Source: The Block

• From April into mid-May, the 7-day moving average of transactions on the bitcoin network literally soared to new heights as Ordinals and BRC-20 tokens drummed up network activity, and consequently the average transaction fee.
  • The high fees caused the 7-day moving average of the number of active addresses on the network to decline from 1.05 million on April 15th to 754k on May 13th as it became too expensive to transact.
  • May 13th marked the day active addresses began turning around, coincidentally two days after the average transaction fee peaked as they moved in opposition.
• After the peak in fees, they quickly dropped a bit, with the 7-day moving average falling more than $10 between May 12th and May 17th. 
  • But from May 22nd to yesterday, a two week period, the 7-day moving average has stayed between $5.01 and $3.99, a just over one dollar range. 
  • This is to say that we have seen a bit of stabilization in Bitcoin’s fees after the volatility of the last two months.
  • But the new flat point is much higher than where bitcoin transactions were before, with the 7-day moving average of the average transaction fee staying below $4 from July 2021 to this past May, with it coming in below $2 for much of that time. In the past 12 months, the average only exceeded $3 for 6 days prior to May 5th, peaking at $3.18. 
  • It’s a similar story for active addresses, which we saw come back up from their 754k in mid-May to roughly 922k at the end of last month as fees began to decline, and the 7-day moving average has stayed within a 4,000 range for the past 5 days, but again lower than the number of users prior to the hype. 
  • The number of transactions is decreasing, as well, but has not flattened by as much as fees and active addresses have, but they are dropping at a much slower rate compared to the second half of May. 
• The fees at their peak were likely too high to be sustainable, with the unaveraged data showing the average transaction fee hitting $30. The decline in active addresses was a tribute to the fact that fees were pricing people out of the network. 
  • The recent flat activity, though, is indicative that we’ve reached a new sort of balance, with fewer active addresses but higher fees and transactions than we had prior to the emergence of the BRC-20 token standard and Ordinals hype.
  • Ethereum’s fees are also recovering post memecoin surge, and are showing a stronger downward trend than that on Bitcoin.

Deposit depot

Source: The Block

• June 1st marked the largest day of deposits ever to the Beacon Chain contract, with 408.9k ETH being staked to help secure the Ethereum network by adding validators.
  • Conversely, the largest day of withdrawals remains April 15th, three days after the Shapella upgrade went live and began allowing withdrawals to be processed, at 392.8k ETH.
  • Even Lido, the largest liquid staking provider, enabling withdrawals in the middle of May did not cause much of a stir, with daily withdrawals staying below 50,000 ETH since May 14th. Lido does use a buffer that includes ether that hasn’t yet been staked to help expedite withdrawals and is likely contributing to their lack of needing to actually withdraw from the contract. 
• The main outlier on June 1st was 192k ETH deposited to the Celsius staking pool, belonging to the bankrupt crypto lender.
  • It’s a bit of an unusual move after Celsius moved to unstake about 240,000 stETH soon after Lido began processing withdrawals, and then eventually requested all 460,000 stETH be withdrawn, receiving 428,000 ETH so far. 
  • With the ETH they unlocked, they deposited about 198k ETH to their native staking pool (depositing a few thousand more ETH on June 2nd), and another 198k ETH to the Figment staking pool over the two days.
  • Their surge in deposits has caused the validator queue to shoot up, with almost 94,000 validators pending and a wait time of over 45 days to become a validator on the network after depositing. 
  • The Ethereum network breached 600k active validators this weekend, with almost 700k validators including those that are actively pending. 
• The enablement of withdrawals on Ethereum had many fearing a massive pullout from validators and a drop in network security and decentralization. 
  • However, the trend has largely been limited withdrawals and large deposits since the Shanghai upgrade, even without Celsius’ recent re-staking rendezvous. 
  • Staking does look less risky now that it is clear funds can be recovered, helping contribute to the surge.

Rhino-fine

Source: The Block

• The total value locked in the validium project Rhino.fi more than tripled last week, rising from $14.8 million on May 30th to $52.66 million on May 31st. 
  • A validium scaling solution on Ethereum is one that utilizes zk-proofs to publish on the mainnet and validate transactions, but store transaction data off-chain.
  • Rhino.fi is built on StarkEx and offers an exchange, an earn product, and cross-chain swaps.
• The layer 2 had a spike in value locked earlier in May, reaching $33.93 million, but quickly came back down.
  • It seems to be driven by one large depositor, who deposited about 10,000 ETH to Rhino.fi on the third, but then 10,000 ETH were removed from the bridge two days later. Rhino.fi does offer withdrawing to a different address so it is possible this was the same user, but at the very least it does seem to be the same funds.
  • The most recent spike was also caused by a handful of deposits, specifically two. Both were around 10,000 ETH like the one earlier (1, 2). It is now June 4th and the TVL has held steady, for a longer sustained rise than the one in early May.
  • While volume did spike on both days, volume includes deposit volume so it's not super surprising, however, volume spiked higher on May 4th than it did on May 31st, indicating some of the funds from the first batch were likely transferred on Rhino.fi, likely as a means to escape the high fees on the Ethereum mainnet. 
  • The number of users on the layer 2 has actually fallen off after the end of May, dropping from 3.23k on May 28th to just 794 on May 30th, coinciding with the end of a Gaxle campaign in which users could earn an NFT by depositing to Rhino.fi from zkSync. 
• So despite a 256% rise in TVL that has been sustained for much of the last week, it seems as though the value is locked with only a few addresses, and there are still a limited number of active users on the protocol.
  • That being said, the recent TVL jump brought it ahead of Sorare in terms of validium TVL, now sitting only behind Immutable X. It is now also tenth across all layer 2s in terms of TVL.