Data & Insights Recap - June 19, 2023

Tethered to reality

Source: The Block

• 2023 has now been marked by a depeg of both of the two largest stablecoins by supply - USDT and USDC. 
• The most recent drama is not quite as bad as what transpired when USDC depegged back in March, at least by how far the stable in question lost its peg, but the aftermath has turned into a bit of an information-finding frenzy.
  • On Thursday, USDT depegged ever so slightly, reaching $0.997 as Curve’s 3pool, a popular stablecoin trading staple offering swaps between USDT, USDC, and DAI, became imbalanced, with USDT accounting for 70% of liquidity when, in theory, it should only make up a third. 
  • The USDT accumulating in the pool was indicative of the fact that more people were trading USDT for DAI and USDC, leading to USDT’s slight drop in price. 
  • When USDC lost its dollar price, both USDC and DAI saw their pool balance amass to over 45% each as people converted to USDT for safety. 
  • Tether’s CTO said they were “ready to redeem any amount.”
• The $0.997 seems a lot better than the $0.87 USDC hit when it lost its dollar parity during the collapse of Silicon Valley Bank, on which Circle had $3.3 billion of funds.
  • But perhaps what was more interesting was Tether saying they found it “suspicious” that USDT depegged on Thursday, which was the same day CoinDesk got documents from New York’s Attorney General relating to a settlement back in 2021. 
  • The documents revealed that Tether used to back USDT with Chinese securities and shut down the accounts of some well-known crypto companies, like MoonPay, CMS Holdings, and BlockFi. 
  • Tether did argue that the documents are out of date, including old bank statements that no longer reflect the backing of the stablecoin and said that "The published information, if properly read and interpreted, only demonstrates publicly the legitimacy of Tether’s business and the existence of its reserves.”
• Amidst it all, there was $28.11 billion of stablecoin on-chain volume on Ethereum on June 15th, with USDT accounting for $10.82 billion of that.
  • It was the highest day of stablecoin volume since March 15th, around the time of USDC’s depeg. 
  • March 11th, when the USDC drama first began, was the highest day of on-chain stablecoin volume ever at over $100 billion, so the current spike doesn’t seem too bad. 
  • But the release of the documents Tether previously fought to keep secret is the bigger breakthrough of the week.

Outnumbered and outranked

Source: SensorTower

• Binance.US has been putting in the work to combat the fallout from the lawsuit against Binance (and their U.S. subsidiary) that was filed two weeks ago.
  • They added a former co-director of the SEC’s enforcement division, George Canellos, to their legal team.
  • The exchange also managed to escape a complete asset freeze after agreeing to work on a deal with the SEC, overcoming something that would’ve been detrimental to their business and the broader crypto asset market if things had gone 100% in the SEC’s favor. Binance.US’s proposed deal consists of restricting access of the exchange's assets from employees of the larger, global Binace. 
• But, perhaps unsurprisingly, Binance.US is struggling with depleting market share amidst reputational damage and a struggle with banking partners that forced them to halt USD deposits. 
  • Less on the forefront of people’s minds are the App Store rankings of crypto exchanges, but it still shows an interesting trend. 
  • Binance.US’s position in the finance category in the U.S. App Store has fallen from 87 the day before the lawsuit all the way to 192 at its lowest point on June 16th, being surpassed by more than 100 apps. 
  • What could be hurting the most is that in the drop, Binance.US was almost surpassed by Kraken, which sits at rank 177 as of this morning, compared to Binance.US’s 173 after it recovered a bit coming out of the weekend. 
  • Kraken actually got a boost from the lawsuits of two of its major competitors, rising up from 256 at the start of June after it had been on the decline since April. Kraken Pro also rose to 357 today after not breaking the top 500 for much of April and March, boosting attention on the exchange’s premium product, as well.
  • Coinbase, despite also getting sued, never fell out of the top 60, likely because the lawsuit was known to be coming after Coinbase announced its Wells notice back in March, and the lawsuit did not contain anything unexpected, unlike the allegations of customer fund misuse in Binance’s. 

Set me f(r)ee

Source: The Block

• On June 12th, the gap between the 7-day moving average of the average transaction fee on Bitcoin and Ethereum was only $0.71.
  • The gap was $11.76 just over a month ago, on May 6th. 
  • The difference between the two has not been this narrow since December 2022, which was a period of intense bearish sentiment after the collapse of FTX, which allowed fees to decrease significantly on both networks. 
  • It hasn’t actually been more expensive to transact on Bitcoin than Ethereum since July 2021.
• The recent narrowing is related to the rate at which fees on Ethereum and Bitcoin have been cooling down after both had a surge in May.
  • On Ethereum, a memecoin rally drove up network activity as everyone wanted to trade PEPE and the likes on decentralized exchanges. On Bitcoin, hype around Ordinals (allowing for NFTs on the network) and the development of the BRC-20 token standard drove up demand for blockspace. 
  • The memecoin hype was short-lived, largely fizzling out towards the end of last month, sending the 7-day moving average of the average transaction fee on the network down to $3.76 as of yesterday, the lowest since January of this year. 
  • Bitcoin fees have been slower to subside and stayed between $4 and $5 from May 23rd to June 12th, which was much higher than the typically below $2 and rarely over $3 we were seeing prior to the spike. The fees have started dropping again, though, reaching $2.46 yesterday, which is still only the lowest since April 30th. 
  • While Ordinals inscriptions, which attach data to a specific satoshi, have declined, there were over 200,000 on Friday, Saturday, and Sunday, so the number is still not insignificant. BRC-20 tokens seem to have taken a deeper hit, with a market cap that hit $1 billion during the peak of the excitement in early May, now less than $140 million.
  • On the other hand, volume for PEPE on Uniswap v3 on Ethereum fell from a peak of $319 million in one day in May to staying below $21 million every day so far in June. 
  • Overall, Ordinals seem to be sticking stronger than May’s memecoin mania, pushing Bitcoin and Ethereum to have comparable fees for the first time this year. 

Hot commodity

Source: CoinGecko

• Bitcoin seems to be what every crypto company wants to be - an entity that is confirmed to be free from being regulated by the SEC. 
• Bitcoin is the only crypto asset with that coveted status, especially after Gary Gensler, the SEC’s current chair, told New York Magazine that “everything other than Bitcoin” is a security earlier this year. 
  • And 19 assets got hit with the “security” label between the lawsuits against Coinbase and Binance last week, which sent their prices spiraling. 
  • But even beyond the assets named, the suits opened up a broader uncertainty about the future of crypto in the United States, putting pressure on digital assets across the board. 
• Bitcoin did take a bit of a hit over the past two weeks, dropping from over $27,000 before the two lawsuits were filed to below $25,000 last Thursday (although it has since recovered to about $26,300), it fared better than many other tokens that were left in the lurch about their status.
  • Bitcoin’s dominance, or the share of its market cap as a percentage of crypto’s total market cap, reached 46.42% on June 17th, the highest it's been since May 2021, over two years ago. Bitcoin’s dominance was 46.39% this morning, a slight decline but overall still in a very strong position. 
  • And while all of crypto has been suffering through the drama, Bitcoin has emerged as a star player that cannot be labeled an unregistered security.
  • Another boost was provided on Thursday when BlackRock filed to register a bitcoin spot ETF, which we will talk about below.

BlackRock your world

Source: Yahoo Finance

• The investment management giant BlackRock showed a sign of crypto support last Thursday by filing a registration statement with the SEC for a spot bitcoin ETF. 
  • The notion of a bitcoin ETF is not foreign, as bitcoin futures ETFs have been approved in the past, with ProShares, VanEck, and Hashdex included in the ranks of companies offering these types of exchange-traded funds.
  • What has historically been more contentious is a bitcoin spot ETF. 21Shares and Cathie Wood’s Ark Investment have been working on a bitcoin spot ETF since 2021, with Fidelity and Grayscale also amongst the long list of people who have tried to spur crypto adoption with a proposal for a spot bitcoin ETF, only to get shut down by the SEC. 
  • Bloomberg Intelligence says there have been about 30 attempts at a bitcoin spot ETF prior to BlackRock’s latest foray. Many view these exchange-traded funds as a key instrument to get more investors exposure to crypto in a way that doesn’t require individuals to take on the responsibility of actually holding the assets themselves. 
• Many people are more excited about BlackRock’s proposal than ones of the past. 
  • BlackRock’s status as the world’s largest asset manager makes it a force to be reckoned with. And it partnered with Coinbase as a custodian, which despite its current legal debacle with the SEC, is still the most prominent crypto exchange in the U.S. It’s a powerhouse team that the SEC would have to deny and then likely fight in court if it tries to deny the product. 
  • Grayscale filed a lawsuit after the SEC denied its proposal to turn its bitcoin trust into a spot ETF, which would finally allow for shares of GBTC to be redeemed and would help the product regain more parity to its net asset value, which it currently trades at an over 30% discount to. The first hearing in the Grayscale case was earlier this year and many perceived it to be a good sign for the asset manager. The main argument the SEC lodges against spot bitcoin ETF is fears of market manipulation. But Judge Neomi Rao questioned how the regulator views the difference between the price of bitcoin itself and bitcoin futures, given they often trade at the same price. 
  • The combination of BlackRock’s influence and the recent strength pushing back against the Grayscale decision could have things leaning more in favor of approval than those prior. 
• As a result, GBTC began trading up on the optimism that an approved spot bitcoin ETF would provide a path forward for Grayscale’s product to be converted.
  • While GBTC does still trade at a large discount to its net asset value, the gap did narrow from 44% on Tuesday last week to 36.6% on Friday.
  • There was also $79.61 million in GBTC volume on Friday, a two-month high.