Data & Insights Recap - June 26, 2023

I Prime Trusted you

Source: The Block

• TrueUSD, a fiat-backed stablecoin that has recently emerged as a popular option after BUSD had to stop being minted, is a token we have spoken about before in this recap.
  • In particular, its recent rise to dominance in the spot market marked an unusual turnaround for the originally lesser-known stablecoin. But it seems Binance was setting up TUSD to replace BUSD as its preferred stablecoin after the exchange reinstated fees on BTC pairs but left BTC/TUSD free to trade. 
  • The fact that TUSD is Binance’s new darling stable was further confirmed this week after it announced all TUSD pairs would have no maker fees starting at the end of this month. Binance has been running this promotion for BUSD for a while but recently excluded BTC/BUSD, ETH/BUSD, and BNB/BUSD (some of the largest BUSD markets) from the lack of fees.
• But it is not all great news for TUSD as it faces troubles with one of its providers, Prime Trust. 
  • Archblock halted TUSD minting from Prime Trust earlier this month, shortly after BitGo had signed a non-binding agreement to buy the crypto custodian. Minting and redemption of the stablecoin were still possible through other financial providers. 
  • BitGo announced it would be pulling out of its deal to acquire Prime Trust last week. Later that same day, Prime Trust was ordered to halt deposits and withdrawals after receiving an order from the Nevada Financial Services Division. The regulator then said that Prime Trust would not be able to meet all of its client withdrawals. 
  • Archblock said it was not impacted, as unlike BUSD, which solely relied on Paxos, the stablecoin utilized multiple USD on and off ramps. 
• And TUSD has maintained its dollar peg since all the drama has gone down with one of its dollar partners, and its supply has been relatively stable, barring a roughly 1 billion TUSD mint from Binance on the Tron network mid-month. 
  • And even without the full no maker fee on TUSD pairs being in effect on Binance, the no fees at all on BTC/TUSD and no maker fees on ETH/TUSD and BNB/TUSD have put it in the trading position Binance wanted.
  • 27% of Binance’s spot volume so far this month has come from TUSD pairs, compared to only 10% from BUSD pairs. BTC/TUSD has also emerged as the highest-volume trading pair on the exchange giant, eclipsing the massive BTC/USDT market.

To $30,000 and beyond

Source: CryptoCompare

• The moral of the story from last week is that we’re so back. Despite an onslaught of regulatory woes being thrown at the crypto industry from the SEC at the start of the month, bitcoin still hit a new 2023 high on Friday. 
  • The attention from regulators seems to have been a call to action for many traditional players. Beyond BlackRock’s ETF filing, which we saw just over a week ago, we saw registrations from Invesco, WisdomTree, and Valkyrie all pile in last week as they compete to offer the first spot bitcoin ETF on the market.
  • EDX Markets, a new crypto exchange backed by big players like Citadel Securities and Charles Schwab, also went live last week as a means to try and replicate more traditional finance models in the world of crypto with a “non-custodial” approach. 
  • Even though some people are contesting the entrance of some of these traditional players into the crypto space, there’s no doubt that so many firms putting in the time and effort to try to register a spot bitcoin ETF is an overall bullish signal, helping the original crypto token rally. 
• Things were a bit rockier in the world of traditional finance this week as the pressures of inflation set in. The chair of the Federal Reserve indicated that future interest rate hikes are likely despite a pause in June, and the Bank of England and European Central Banks have been continuing to raise. 
  • The fears of further tightening had the S&P 500 and the Nasdaq Composite trending downward for much of the last week after performing well this year on AI hype. 
• The recent trends evolving from both macroeconomic and crypto-specific conditions have inverted a trend we talked about a month ago. 
  • At the time we talked about the huge difference between bitcoin’s correlation to traditional stock indices compared to its correlation to gold, a pattern that rarely happens since gold tends to follow closely to traditional assets, but debt ceiling dramatics and the excitement for artificial intelligence drove a divergence. 
  • But on June 22nd, the correlation between bitcoin and the three assets converged again, right around 0, as the past 30 days have proved to treat bitcoin somewhat independently from more traditional assets. The brief period of the correlations hanging around 0 was the start of another gap, but this time with bitcoin being more positively correlated with the S&P 500 and Nasdaq Composite (which are still performing positively over the past 30 days despite recent pressure) and negatively correlated with gold.

Innovation Nation

Source: The Block

• The Block Pro Research analyzed trends in crypto and blockchain investment and innovation by Fortune 100 companies and major consumer and fashion brands. The research was conducted in partnership with Coinbase for a report the crypto exchange published on the State of Crypto Corporate Adoption.
• The report found that 52% of Fortune 100 companies have pursued crypto or blockchain initiatives since 2020, a testament to the institutional adoption the sector has seen.
• Over the past three and a half years, most of the initiatives came from the technology and financial services spaces, with retail (including e-commerce) and healthcare initiatives also making up a meaningful chunk of what firms were looking into within the blockchain ecosystem.
• The top 10 companies by number of web3 initiatives consist of IBM (18), Alphabet (11), Microsoft (11), Goldman Sachs (10), JP Morgan Chase (9), Amazon (6), Citigroup (6), Coca Cola (5),  Nike (5), and Bank of America (5). 
• The use cases flagged by the broader Fortune 500 companies for blockchain technology centered around customer and internal data collection and management. Within the Fortune 100, data collection is a key use case, along with infrastructure and supply chain management. 
• All of this is to say that institutional adoption and interest beyond companies that are solely focused on crypto are much deeper than it may seem. Many of these firms acknowledge that blockchain and web3 technology has the power to reshape the financial landscape and see it as a worthy sector to participate in. 
• The report goes into more detail about blockchain-related investments, company attitudes toward crypto, and examples of some of the largest company blockchain innovations, so be sure to check it out!

zkSync or zkSwim

Source: The Block

• We are on the last Monday of June, meaning we can begin to reflect on how things have panned out so far this month.
• One interesting metric that stood out to me is that zkSync Era is on pace to be the layer-2 that has paid the most fees publishing data on Ethereum this month for the first time ever, accounting for 47% of fees paid so far. 
  • zkSync Era shook up the L2 scene in late March when it became the first zkEVM to launch publicly. 
  • ZK rollup solutions, which batch transactions off-chain and publish a validity proof of what occurred on the mainnet, have been around for a while, but zkSync provided a rollup solution that allowed for the deployment of Ethereum Virtual Machine (EVM) code. Previously, tweaking needed to be done to smart contracts on Ethereum that wanted to deploy to a ZK rollup, but now the transition is much more frictionless. 
• zkSync Era, which celebrated its 3-month anniversary this weekend, has already amassed a vibrant ecosystem of protocols, with liquid staking provider Rocket Pool being a notable launch on the L2 earlier this month.
  • Many of the top DeFi protocols are either already deployed on zkSync Era or have expressed intent to. 
  • That’s not to say the other two scaling solution giants, Aribtrum and Optimism, which are both optimistic rollup solutions, don’t also have a plethora of protocols using them, but zkSync Era has seen explosive growth. 
• While zkSync Era is looking like it's going to claim the highest amount of L1 fees paid in June award, having spent 1.7k ETH on mainnet so far compared to Arbitrum’s 1.3k, it’s important to note that because of the validity proof that gets published, it's typically more expensive to publish ZK rollup data on Ethereum than optimistic rollup data. 
  • Optimistic rollups publish a summary of the transactions as calldata on Ethereum, a much smaller load. However, the lack of proof that comes with it means that you have to wait for a dispute period to pass before you can withdraw your funds. 
  • Arbitrum still largely outperforms zkSync Era in terms of daily transactions but falls behind in data publishing due to the nature of ZK rollups. zkSync Era has edged ahead of Optimism on the transaction front, though.
• The amount of ETH paid across all L2s has fallen significantly from May, dropping from 10.7k to only 3.6k so far this month, but the drop is a testament to fees dropping on the Ethereum mainnet after May’s memecoin hype. The percentage of total gas fees spent on L2 data publishing is actually expected to rise compared to the month prior.

Never really over

Source: The Block

• The hype around Ordinals and BRC-20 tokens on the Bitcoin network has been talked about a lot in this recap. 
  • In particular, this new era of network usage beyond just sending bitcoin pushed the 7-day moving average of daily transactions to an all-time high of 587k on May 12th. The moving average hadn’t breached 400k since December 2017, so it was a drastic rise. 
  • But the problem with surges generated by hype is that they are often short-lived. Take, for example, Ethereum, which saw the 7-day moving average of the average transaction fee on the network reach a yearly high of over $22 in mid-May as demand for blockspace increased during the wave of memecoin mania, dropped all the way back down to $3.82 in just over a month, the lowest fees have been since January. 
  • But last week, we discussed how fees weren’t coming down as quickly on Bitcoin, an indication that some of the excitement might still be persisting even a month after its peak. 
• Ordinals did seem to have some sticking power, with daily Inscriptions (or attaching metadata to a specific satoshi to “mint” an NFT) still coming in over 100k for much of last week, but even that has more recently fallen off compared to the over 200k daily Inscriptions from June 16th to 18th. 
  • But transactions on the Bitcoin network are back on the rise after the 7-day moving average fell to 381.5k in the middle of this month, which was still significantly higher than where transactions were prior to April of this year. The average sprung back up to 440k on June 21st, the most significant rise we’ve seen since the number of transactions first started falling from their peak. 
• The latest hype might not actually be Ordinals or BRC-20 related at all, but more so tied to the recent positive price action we’ve seen on the heels of many institutions casting a bid to start a spot bitcoin ETF.
  • More attention and a higher price are likely to have more people experimenting with bitcoin and trading it, contributing to the rise in transactions. 
  • It is interesting that the recent rise had come before Bitcoin transactions fully calmed down from the highs of the last bout of excitement. Attention and enthusiasm seem to be in full swing toward the oldest blockchain network. 
  • That being said, the rise was brief, with the 7-day moving average of transactions falling back to 391k as of yesterday.