Data & Insights Recap - July 24, 2023

Xtra Ripple Power

Source: The Block

• Ripple’s XRP is still feeling the heat from its massive price surge last week, trading at around $0.70 as of writing, up 49% from its $0.47 at the start of the month. Ripple has managed to maintain most of its gains, although it has not managed to hold strong on its 4th largest crypto by market cap status that it temporarily gained after overtaking BNB on the heels of its rally. 
  • In case you need reminding, the reason XRP had such a stellar week was due to a court ruling in its lawsuit with the SEC. The judge decided that the programmatic sales of XRP to retail investors on exchanges did not violate securities laws, whereas the sale of the tokens directly to institutional investors did. 
  • This bodes well for the entire crypto industry, but particularly XRP, as its newfound partial non-security status allowed it to be relisted on exchanges that previously removed the asset over fear of SEC scrutiny.
• XRP, in turn, has seen a surge in spot trading volume. So far in July, it has put up $29.15 billion in volume, which already exceeds its volume for five out of the sixth completed months this year (May is the exception with $30.8 billion in volume, but July is so far on pace to outperform that number). 
  • XRP volumes are also on pace to be the closest they’ve been to ETH spot volumes since December 2019 from a raw numbers perspective (on pace to be about $6.97 billion lower than ETH) and it’s the largest percentage-wise that XRP has taken in comparison to ETH since December 2020 (on pace to be around 85% of ETH spot volume). 
  • Ripple was first sued by the SEC back in December of 2020, so these recent numbers mark a big comeback for the token, being the first time it has grazed this close to ETH since the lawsuit.
  • While XRP did remain a dominant crypto token despite the ongoing legal battle, it was fading behind the two major players, BTC and ETH. Also, with several exchanges moving to initially remove the asset after the case first broke out, it also lulled its trading volumes. Now that XRP has taken a step forward in reaching the safe haven non-security status that bitcoin has, it's likely we see XRP continue to strengthen its dominance. XRP and Ripple have the first mover advantage in being a key legal victory for crypto, a feat that has never really quite been accomplished yet, restoring confidence and appreciation for the token.  

Mr. Worldwide

Source: The Block

• Coinbase International, Coinbase’s entrance into the crypto perpetuals market, has been putting up pretty mild volumes so far. 
  • The Bermuda-licensed exchange launched at the start of May and aims to offer futures on bitcoin and ether to institutional users at 5x leverage. 
  • The limit to institutions is likely playing a part in its tepid volumes so far. You have to complete an interest form in order to be able to trade on the exchange, which could be perceived as a high barrier to entry. The exchange, like most crypto derivatives platforms, is not available to users in the United States. 
  • That being said, it does bear the weight of being run by Coinbase, which is typically perceived as one of the most trustworthy entities in the space, so the desire to trade perpetuals on their platform might be worth going through the application to gain that reputation.
• The off-shore perpetuals exchange only offers two contracts right now, and combined the two contracts have only posted $100 million in volume twice in July. Compared to the $11.2 billion in 24-hour volume that Binance’s BTCUSDT perpetual contract is doing alone, this does not seem like that much. 
  • But Binance has been in the futures game for a long time and is the most dominant player in the space. It also has the benefit of being open to anyone (including retail traders) that lives in an area where Binance can operate. 
  • Volumes on Coinbase International seem to have been on the decline for the past month, though. They declined through June, coming in around $190 million on June 19th and falling to $39 million on July 1st. Now volumes tend to hover around the $50 million mark, barring some spikes. 

Lightning in a bottle

Source: TX Stats

• For the most part, the capacity of the Bitcoin Lightning Network has been on the uptrend since its inception back in 2018. Its capacity grows when more users lock up funds to use in the payment channels that provide a second layer to the Bitcoin network, allowing people to send bitcoin back and forth without transacting directly on the blockchain and incurring fees. The capacity thus refers to the amount of bitcoin that can be transacted over lightning at a given time.
  • But earlier this month, the capacity saw its first significant drop off in over 5 years. According to TX Stats, a project evolved from a collaboration between Coin Metrics and BitMEX Research to provide Bitcoin tracking analytics, the amount of bitcoin locked on Lightning fell from 5,640 BTC on July 9th to 5,110 BTC on July 10th, a 9% drop in one day. Not to mention, the 5,640 BTC marked an all time high for the scaling solution’s capacity.
  • When the capacity goes down, it's indicative of users taking their bitcoin out of the payment channel and settling on the mainnet. According to Lightning analytics provider 1ML, over the past 30 days, we’ve seen River Financial remove over 200 BTC from two of its Lightning nodes, with each node dropping over 70% of its capacity. Two nodes associated with the tag “bfx,” likely to be tied to the exchange Bitfinex, also reported over 100 BTC capacity decreases over the last month. 
  • The overall capacity of the Lightning Network fell to 5,040 BTC on July 15th, the lowest it had been since October, but has since started trending upward again. Sitting at around 5,130 BTC as of today.
• Lightning got a potential big boost of adoption this week as Binance, the world’s largest crypto exchange, completed their integration of the network. It joins several exchanges like Bitfinex and Kraken that were already using Lightning to provide users with quicker and cheaper bitcoin transactions. 
  • The network has also not been short on innovation this month, with the Phoenix wallet adding support for “splicing,” which allows users to deposit into a single dynamic channel as opposed to spreading funds across multiple channels for multiple purposes. And the development firm of the Lightning network itself, Lightning Labs, released a suite of tools meant to help with AI development that would allow artificial intelligence agents to hold and trade bitcoin. 
  • So despite the recent fall in capacity, it's likely we will see the Lightning Network make back a lot of its losses as usage becomes easier and more widely available.

BUSD bounces back

Source: The Block

• There’s about a week left in July, and so far for this month, the share of BUSD trading on Binance is on pace to post a slight increase compared to June. It would be the first month-over-month gain for BUSD trading since December 2022 into January of this year. 
  • It would also be the first increase since the end of BUSD issuance in February. Paxos, Binance’s stablecoin provider, was ordered by the New York Department of Financial Services to stop minting the stablecoin earlier this year, and Paxos received a Wells notice from the SEC indicating that the agency thought BUSD was a security, which was confirmed when they sued Binance in June. 
  • The whole ordeal forced the exchange giant to re-evaluate its stablecoin priority, as it was previously incentivizing BUSD trading with a no maker fee promotion, allowing pairs with the token as its base or quote asset to amass over 39% of the exchange’s volume in December. 
  • But as the exchange pivoted away from its namesake stablecoin, it also stopped prioritizing its trading, leading BUSD’s trading dominance to begin waning. BUSD pairs accounted for 33.2% of Binance’s trading volume in February and dropped over 10% to 22.7% in March. The share continued to decline into June, hitting 10.34%. 
• But things seem to be on pace to get a little better, with 10.42% of Binance’s spot volumes coming from BUSD pairs this month. 
  • While this gain is very small, it is a change of pace following all the declines, and it's a bit unexpected given that BUSD cannot grow anymore as a stablecoin supply-wise. 
  • TUSD, Binance’s new favored stablecoin, has faced some troubles this summer surrounding one of its banking partners, Prime Trust. While Prime Trust has been placed in receivership in Nevada, back in June, Archblock (TUSD’s issuer) stopped minting the stablecoin through the troubled firm. TUSD uses a multitude of fiat ramps, though, so its operations have remained largely unaffected. 
  • But TUSD’s supply has been slipping after Binance minted over 1 billion of the stablecoin in June; the supply is down 9.9% from 3.12 billion directly after the mint to 2.81 billion as of late. Binance also holds a lot of the TUSD in existence, with only one hot wallet holding 1.15 billion TUSD on Tron, which is over half of the stablecoin’s supply on the chain. A tweet also went a bit viral this week showcasing an address linked to Justin Sun minting 63 million TUSD, just to turn around and quickly burn 50 million, which was speculated to be him generating enough for a balance snapshot, which many took to be a bit suspicious. 
  • TUSD trading on Binance is also on pace to decline for the first time since getting the preferential treatment on the exchange, dropping to 22.35% this month from 26.5% in June.

In the grand scheme of things

Source: Google Trends

• It might seem like Coinbase has been dominating the news cycle this summer, but it seems its popularity on Google has not really changed. The monthly relative search volume for the term “coinbase” is at 17 so far, the same as January, February, and March of this year. 
  • Google Trends ranks periods on a relative scale, so months with an 100 rating are the months where “coinbase” received the most search traffic. Those months are April 2021 (the month the exchange went public) and December 2017 (when one of the first crypto bull runs took place and bitcoin reached $10,000). 
  • The search volume is up from 15 in June, which was low compared to earlier this year despite the exchange being sued at the start of the month by the SEC. 
  • There’s still time for searches to pile in, and if the relative volume can reach 18, then it would be the most search volume the exchange has seen so far this year, but still, global Google users are not searching for Coinbase like they used to. 
• Despite its constant confrontations with the SEC, its recent stock rally brought COIN’s price to a yearly high, a major perceived win in its case to defend itself against the unregistered securities allegations (which would set a major precedent for U.S. crypto regulations), internet users have not been looking up the exchange. 
  • The relative search volume for the exchange stayed above 20 from December 2020 to August 2022, indicating that the more recent bearish sentiment around crypto after the collapse of Terra, Three Arrows Capital, and Celsius during last summer have prevented more casual interest, even though all eyes in crypto are on it. 
  • Coinbase searches have been relatively steady since last summer, tending to land between 13 and 20, unmoved by any major news in the crypto space. It just goes to show that what is taken as a big step in the crypto-sphere is not always reflected to the broader public. Bitcoin search volumes show a similar pattern, indicating people didn’t start searching up the asset on the heels of the spot bitcoin ETF filings (including from BlackRock), which to many who read this newsletter, was a big deal.