Data & Insights Recap

Grayscale scores

Source: Yahoo Finance

• Perhaps the new normal for crypto is taking huge legal victories over the SEC. In the middle of July, we saw Ripple take home a partial victory in its case about whether or not the sale of XRP was a securities offering. Despite its technically “mixed” ruling, which deemed institutional sales unlawful but sales on exchanges as okay, it was largely perceived as a bigger win for crypto. 
  • This week marked another triumph as the U.S. Court of Appeals for the District of Columbia ruled in favor of Grayscale in their lawsuit against the SEC, centered around the regulatory body’s denial of converting its flagship Grayscale Bitcoin Trust (GBTC) into a spot bitcoin ETF. 
  • And the opinion was not light, calling the SEC’s decision to block the spot ETF as “arbitrary and capricious.” The arguments for the ruling centered around the fact that the Commission has previously approved bitcoin futures-based ETFs. The SEC had argued in its denial of the spot product that the bitcoin spot market was vulnerable to manipulation and fraud, but given that futures track the price changes in the spot market, the judges viewed the argument as insufficient. 
• The ruling seems to set the stage for spot bitcoin ETF approval, not just for Grayscale, but for the plethora of financial firms that also signaled they’d like to be a part of the ETF circle earlier this summer. Bloomberg analysts now estimate that there’s a 75% chance for a spot bitcoin ETF by the end of 2023 (and a 95% chance for one by the end of 2024). 
  • Of course, nothing is set in stone. The SEC has 45 days to request a rehearing, or they could try to latch on to a new argument for the disapproval. 
  • The SEC also further delayed decisions for most of the spot bitcoin ETF applications from June, with outcomes not expected until October. 
• But despite the fact that there’s some uncertainty, there’s no question that people are optimistic about Grayscale’s prospects. Its GBTC product has been trading at a steep discount to its net asset value (the value of the bitcoin that a share in the trust represents) largely due to the fact that there is no redemption mechanism (i.e. a way to exchange bitcoin for shares and vice versa), so there is no arbitrage opportunity for traders to try and keep the price near the NAV. 
  • A conversion to an ETF would allow for the redemption of shares, and the hope that the change can now come sent shares of GBTC soaring. The discount to the NAV was only 18% at the end of the day on Tuesday last week, which is the narrowest it has been since the end of 2021.
  • Trading of GBTC shares also skyrocketed, topping $400 million in volume, more than doubling the previous high for the last 12 months of $183 million.

Spot on

Source: The Block

• For the majority of the last year, the 30-day moving average of the ratio of spot volumes to futures volumes for ether has been trending downward. It came down from 0.21 in October of last year to 0.14 this past July, which was the lowest the ratio has ever been. This past year follows a broader trend, as the ratio has come down from 0.44 in early 2020 and continued to come down.
  • But since the middle of July, the ratio has been rising, currently sitting at 0.17, which is the highest it's been since April. This month-and-a-half-long upward trend is the longest we have seen this year, with other upward trends usually stopping within one month. 
  • Volumes on both the spot and futures side have been slipping in recent months for several assets as the crypto market has been in a bit of a cool market after being plagued with many catastrophic events in 2022, like the collapse of the Terra ecosystem and FTX’s bankruptcy, which wiped out a lot of the market’s value. 
  • But ETH futures in particular seem to be hitting a low point, with volumes for August only coming in at $275 billion, the lowest they’ve been since November 2020. On the other hand, bitcoin futures volumes have also been dropping, but have so far been managing to stay above volumes in December, which tends to be a slow month for trading in all markets due to the holidays. 
  • The slowdown in volumes has been felt across exchanges, and we have seen major trading firms like Jump and Jane Street pull back on crypto trading amidst a stringent regulatory environment which is likely contributing to the downfall. 
• As for why ETH in particular is having such a strong pullback, the end of 2022 saw a strong performance of ETH futures activity as investors piled on to speculate how the price of ether would react to The Merge, one of the most anticipated events in Ethereum’s history. It was unlikely that the ETH futures market would be able to sustain that hype. 
  • A lot of attention has also shifted off ether as the main assets of the summer have been bitcoin and its spot ETF attempts, and XRP after its legal victory. There has been very little broader coverage of ether this summer, which could also be limiting interest.
  • But in good news for ether futures and crypto ETFs, it seems like the SEC will soon be approving exchange traded funds based on the ETH derivatives, much like those that already exist for bitcoin.

Bye-nance USD

Source: The Block

• There are some things in this world you get to say goodbye to more than once. One of those things, it seems, is Binance’s stablecoin, BUSD.
  • One might remember, back in February, the first time we bid adieu to the dollar-pegged token. It was when Paxos was ordered to stop minting BUSD by the New York Department of Financial Services. This did seem like the end for the stablecoin, given its supply would continue to shrink until eventually it would just not exist anymore, but at the time of the announcement, BUSD’s supply was around 16 billion and it was the third largest stablecoin by market cap.
  • So while in a sense we were grasping with the fact that BUSD was over, the 16 billion assets didn’t just disappear overnight. Over the course of the last half year, BUSD’s supply has shrunk to below 3 billion, which still leaves it as the fifth largest stablecoin and 26th largest cryptocurrency by market cap. Also back in February, BUSD pairs were accounting for about a third of trading volume on Binance, so the stablecoin was not insignificant to the exchange either. 
• Binance began to lose its favorability of BUSD. Back in September of 2022, Binance ended support for USDC, TUSD, and USDP, and converted deposits of those stables into BUSD. It also used to run a no maker fee promotion on all BUSD pairs. So it was not surprising that BUSD had such a grip on the platform given Binance was encouraging its use. 
  • Binance has since pivoted, ending the BUSD fee promotion, and seemingly shifted to a more favorable view of TUSD, moving the no maker fee promotion to Archblock’s stablecoin. That being said, you could still trade BUSD pairs, but volumes for these pairs began to fall, accounting for just under 6% of spot volumes on Binance in August. 
  • TUSD has also been the subject of some controversy in recent months, with people questioning the ties between the stablecoin and Justin Sun, though Sun denies all allegations. 
  • So while Binance did stop its BUSD promotion and seemed to pivot to a new dollar-pegged asset, the fact that you could still trade BUSD and TUSD’s surrounding drama didn’t completely rule out Binance's stablecoin. 
• But now the time has come for us to say goodbye to BUSD once again, this time, as an asset on Binance. The exchange announced this week that it would end support for its once revered stablecoin by February 2024. Not only that, but it is also encouraging the conversion to FDUSD, a stablecoin that Binance listed at the end of July and has also gotten the fee-free bitcoin trading treatment that TUSD had gotten. 
  • The deadline feels significant, given that is also the date Paxos said it would continue supporting BUSD redemptions “through at least February 2024.”
  • The news of the BUSD trading suspension seems to have caused a surge in burns, with the supply dropping 10 million from August 30th to 31st, the steepest daily drop we’ve seen in over a month. The supply currently sits at 2.84 billion. 

Nobody's Financing Trades

Source: The Block

• Volumes across Ethereum NFT marketplaces for August came in at $411.94 million, which is the lowest they’ve been since June 2021, over two years ago. 
  • The slowdown in the NFT ecosystem is something we have talked about before. The prices of many collections have been sliding, with the Bitwise NFT Blue-Chip Index down about 80% since its inception back at the end of 2021. 
  • The NFT platform Recur also announced its shutdown this month, after it raised $50 million in a Series A round less than 2 years ago. 
  • On the NFT regulatory front, we saw the first SEC enforcement action for non-fungible tokens, in which the SEC charged the podcast studio Impact Theory over engaging in an unregistered securities offering by selling NFTs to raise funds. 
  • Even with the surge in DeGods volume, we saw this month after the drama surrounding Season III (which in the grand scheme of things was not that much, given weekly volumes only peaked at $28.6 million for the collection), overall volumes still declined. 
  • There was also a bit of royalty drama this month after OpenSea moved to make royalties optional after previously strictly enforcing them. As a reminder, royalties are fees paid back to the creator of the NFT on future transactions. Mark Cuban, an investor in the NFT marketplace, publicly slammed the decision, calling it a “huge mistake.” 
• So overall, while there was a lot going on in the NFT space this month, it wasn’t all particularly positive. There is also not a lot that would draw in more casual NFT investors these days. It is not surprising that we’d see a continuing drop off in volumes as the hype we saw in 2022 around NFTs is simply not there anymore.

Solana summer? 

Source: HelloMoon

• The 7-day moving average of the daily number of active addresses on Solana fell to 203.83k on August 31st, the lowest amount since at least January 2021. It is a far cry from the over 3.6 million active addresses Solana saw at its peak back in 2021, and even the 852,000 it saw last September. 
  • Solana has faced numerous struggles over the past year. Most glaringly, is its ties to former FTX CEO Sam Bankman-Fried. While Solana is its own blockchain and is not actually affiliated with FTX, the FTX chief had always been a strong proponent of the network. FTX and Bankman-Fried were frequent investors in the Solana ecosystem, and Alameda Research held a lot of SOL tokens. The Solana Foundation also had about $1 million worth of assets on FTX at the time of its bankruptcy. 
  • Another problem facing its native token is the fact that it has been identified as an asset that the U.S. Securities and Exchange Commission views as a security. It was named in both the lawsuits against Binance and Coinbase as an unregistered security. This has caused platforms like Bitstamp, eToro, Robinhood, and Revoult to all move to stop supporting the token in the United States. 
  • The price of SOL peaked back in November 2021 at over $250 and had already dropped to just $30 ahead of the collapse of FTX a year later amidst a decline in hype. The token fell below $10 at the start of 2023 but now trades just under $20 in a slight recovery. However, it still marks a large fall from its peak performance. 
  • So with a sinking token price and a potential securities status, along with ties to FTX, it's not surprising we’ve seen a decline in users on Solana. Also with the expansive network of layer 2s that are scaling Ethereum and helping make it cheaper and faster to interact with the network, one of Solana’s main draws seems less attractive. Its lack of EVM compatibility has also hindered it from having many major DeFi players deploy on-chain. 
• That’s not to say that it’s all over for Solana. Just last month Solana Pay integrated with Shopify, allowing the e-commerce platform to accept digital currency payments.
  • The co-founder of MakerDAO, Rune Christensen, also said the Solana stack was “the most promising codebase” for its “Endgame” plan which involves moving the Maker Protocol to its “new, stand-alone blockchain.” (There is speculation that Ethereum’s founder, Vitalik Buetrin, sold his stake in MakerDao after these comments.)