Data & Insights Recap - July 17, 2023

Let it Rip(ple)

Source: CoinGecko

• It was a great week for Ripple, and broadly speaking for the crypto community, after its case against the Securities and Exchange Commission got ordered to trial. 
  • The fact that a trial is now necessary to conclusively resolve the years-long battle is not the part worth celebrating; what was much more significant was the ruling from Southern District Court of New York Judge Analisa Torres, who sided both Ripple and the SEC on separate issues. 
  • At the crux of the issue is whether Ripple’s selling of its native XRP token constitutes the sale of an unregistered security. In 2020, Ripple raised about $1.3 billion through XRP, selling about $729 million to institutional investors and $757 to retail investors. 
  • In her ruling, Judge Torres agreed with the SEC that the sale of XRP to institutional investors did violate securities laws. But what was perceived to be the much bigger victory was handed to Ripple, as Judge Torres took the stance that the “blind bid” sales where Ripple didn’t know who the buyer was were lawfully compliant. 
  • The ruling still puts Ripple in the wrong for about half of the token sales in question, and a trial is still pending to determine the liability of Ripple’s CEO and Executive Chairman, and the SEC has left the door open for an appeal on the decision in Ripple’s favor. That is to say, there is a lot to still unfold in this lawsuit. 
  • But the fact that retail sales, also called “programmatic sales” in the ruling, were deemed okay was enough to send XRP and the broader crypto market soaring in what has been one of the first major victories crypto has taken against the U.S. securities regulator. 
• XRP was around $0.47 at the beginning of July 13th and then rose to $0.82 at the end of it, rallying roughly 75% in one day. XRP trading volumes also rose 18-fold following the ruling and subsequent exchange relistings. And so far, it has held a lot of its gains, trading around $0.74 at time of writing.
  • The ruling also pushed many other tokens to perform positively as the implications of the XRP decision boded well for other crypto assets.
  • Almost all top 20 tokens by market capitalization, excluding stablecoins, are up for the month, despite a tumultuous start to last month after the SEC sued both Binance and Coinbase. BCH actually leads the pack in performance, up 129% after a strong June due to the fact it is a proof-of-work token that was unlikely to get caught in the SEC crossfires. SOL and XLM are also still outperforming XRP for the past 30 days, as well. 
  • BNB is the only of the top 20 tokens performing negatively for the month, but it is only down 1.15%, which is very small compared to the gains other tokens have been posting.

Toss a COIN to your richer

Source: CoinGecko, MacroTrends

• Ripple wasn’t the only crypto company celebrating this week. Coinbase also took a slew of victories adding to the bullish sentiment as of late.
  • For starters, Coinbase took a win when CBOE filed new amendments to its spot bitcoin ETF filings which confirmed that Coinbase was their partner for the surveillance sharing agreement. Previously, both CBOE and Nasdaq had named Coinbase as their surveillance partner, which meant that they would have access to data about spot trading on Coinbase to help detect fraud and market manipulation. This alone was good news as Coinbase had essentially been unanimously agreed upon at the most trustworthy spot exchange in the U.S. But the confirmation served as another boost to sentiment. 
  • The XRP ruling was another perceived Coinbase triumph. The judge had essentially ruled that the token sales through exchanges were the lawful ones, strengthening Coinbase’s case against the SEC in proving it is not an unregistered securities exchange. Many exchanges, including Coinbase, felt compelled to reinstate XRP trading after the ruling since it now seemed safe to do so without regulatory fears. 
  • From a product perspective, Coinbase also released a decentralized messaging feature in their wallet offering and confirmed that Base’s mainnet for developers would launch in August. Base is Coinbase’s upcoming Layer 2 platform built on Optimism’s OP Stack. 
  • This all pushed Coinbase’s stock to over $100 for the first time since May 2022, restoring its decline since the collapse of Terra which arguably set off the recent bear market. At close on Friday, Coinbase’s stock was up 33% from open on Monday, June 10th. This also pushed the ratio between its stock market cap compared to Uniswap’s UNI token market cap to the highest it has been since June 2022, 6.22. Despite a recent strengthening sentiment around DEXs for their transparency, post-FTX, and their flexibility in being able to add new tokens (like memecoins) quickly, Uniswap’s market cap has stayed mostly stagnant as Coinbase surpassed $20 billion last week.
• Coinbase did face a bit of a setback at the end of last week when it announced that customers in California, New Jersey, South Carolina, and Wisconsin would not be able to stake new assets on the exchange (although anything staked prior to the announcement would remain intact). It comes as a result of 10 states that issued a show-cause order to Coinbase regarding its staking program on the same day it was sued by the SEC. But in another small success, the staking program remains the same in the six other states that filed the action after the exchange worked with policymakers to protect it. 

Addressing the elephant in the room

Source: The Block

• The 7-day moving average of new addresses on the Bitcoin network reached 501.44k on July 12th, the highest it has been since May 2021, over two years ago.
  • The number of new addresses has been generally trending upward after a drop-off in mid-May (reaching 363k) when fees on the network spiked along with transactions amidst the hype around Ordinals, allowing for NFTs on Bitcoin and the new BRC-20 token standard. 
  • Active addresses, which also slumped in the high fee environment, have also shown recovery but haven’t yet surged beyond where the number of active addresses before the excitement, hovering just below 1 million. 
  • Looking at the unaveraged data, it doesn’t seem like a one-off spike caused the 7-day moving average to rise, the raw number of new addresses on Bitcoin surpassed 500,000 on July 7th, 9th, and 12th, and the number has stayed above 400,000 every day since July 3rd.
• We did see over 385k Ordinals Inscriptions (essentially NFT mints on Bitcoin) on July 8th, the second largest day of Inscriptions ever, indicating the Ordinals trend is still going strong. 
  • We also saw the number of transactions on the Bitcoin network surpass 500,000 again last week for the first time since calming down in May, so broader activity seems to be on the upswing as well.
  • Attention has been shifting back to Bitcoin as a handful of firms vie to get a spot ETF on the market, which could also be contributing to the latest traction and spur of new interest.
  • It is also worth mentioning that we could be seeing new addresses because of the spike in transactions due to how change addresses work. Transactions can sometimes generate a new address (that is still in control of the transaction initiator) to take in change, similar to if you paid for something worth $30 with a $50 and got $20 back. 

Met in the metaverse

Source: The Block

• Somnium Space Lands are bucking the trend of the recent doldrums in the metaverse market…well, kind of. 
  • The 7-day moving average of the average price for a Somnium Space Land rose to $5,720 on July 12th, the highest it's been since September and also marking the first time the average has exceeded $5,500 for any of the Ethereum metaverse projects since then as well. 
  • But the cause isn’t really more interest or demand for Somnium Space Lands; rather it was one specific transaction in which a Somnium Space Cube sold for 6 ETH, over $11,000 at the time. 
  • This sale alone was enough to rock the average sale price, as there have only been 5 sales of Somnium Space Lands in July so far, stacking up to be comparable to the 7 sales in June. 
  • And not many of the sales are bringing in the massive price; a transaction from July 13th shows a Somnium Land going for under $500 at the time of the sale. 
• So while at first glance we were getting a little bit more action in the metaverse, a sector that has recently been losing a lot of its initial steam, if we dig a little deeper it seems, for the most part, prices are still flat. 
  • Beyond no notable price action, we’ve also seen a slump in metaverse venture funding, a 76% drop-off in attendance at Decentraland’s Metaverse Fashion Week this year compared to 2022, Disney trashing its metaverse team, and a strong AI focus from Meta, which many took as a pivot from the metaverse, although Mark Zuckerberg says that narrative is false. 

Compound interest

Source: The Block

• The amount of outstanding debt across Compound v2 and v3 on Ethereum surpassed $1 billion on July 12th, rising all the way to $1.07 billion on July 14th, the highest it's been in over a year. 
  • In particular, there seems to have been a recent uptick in USDC borrowing on Compound, with total outstanding debt for the stablecoin rising from $396 million at the start of the month to $656 million most recently, accounting for over half of the total debt on the protocol. This also means the recent drive up in loan value hasn’t been caused by positive price action on the loans, since the rise has been primarily driven by USDC.
  • The growing outstanding debt means that more people are taking out loans from Compound, a good sign for the platform. 
  • At the end of June, Compound Labs had a leadership change as Robert Leshner went on to start Superstate, a company with a plan to launch a tokenized government bond. Jayson Hobby, former Head of Design at the firm, stepped up as CEO. 
• Compound is facing some pressure from the other major lending protocol in the space, Aave. Aave v3 recently overtook Compound v2 in terms of total value locked on Ethereum, despite Aave v3 only launching on the chain in January of this year. Aave’s outstanding debt on Ethereum is also more than double that of Compound at $2.5 billion.
  • That being said, Aave’s outstanding debt has been relatively flat since March compared to Compound’s recent surge in growth. The stable borrow APY on Aave v2 for USDC is 11.57%, so if you are looking to take out a long-term loan of USDC that might be a reason to look elsewhere. Compound only lists one borrow APR for its markets, both of which are around 4% for v2 (4.01%) and v3 (3.99%). That being said, the variable borrow APYs on Aave are comparable (3.54% on v3 and 3.97% on v2), so short-term borrowers have similar options across the two protocols.