Data & Insights Recap - September 18, 2023

Active pursuit

Source: The Block

• Both Ethereum and Bitcoin have seen an uptick in active addresses over the past week. 
  • The 7-day moving average of active addresses on Ethereum spiked from 372.36k on September 10th to 507.59k on September 17th, reaching the highest the average has been in 2023 so far. 
  • Bitcoin’s 7-day moving average of active addresses has had a more gradual rise from just under 906,000 on August 28th to 1.11 million on September 15th, but still hitting levels not seen since May 2021. 
• On the Ethereum front, the main driver seems to be Binance, with one of their hot wallets partaking in over 710,000 transactions on September 13th and engaging with over 700,000 unique addresses. As a reminder, for both Bitcoin and Ethereum, an active address is typically considered active on a given day if it either sends or receives a transaction that day. 
  • Looking at the un-averaged data, the surge pushed the daily number of active addresses on Ethereum to the second highest it's ever been at just under 1.09 million. 
  • The spike did seem to be unnatural but was not even the highest day of activity for the address, with the hot wallet being involved in almost 960,000 on December 9th last year. 
  • It is not exactly clear why the surge occurred, but given that spikes like this have happened before, it could be some sort of maintenance-related incident. Many of the transactions were incoming to the hot wallet, but inflows to Binance overall on Ethereum were pretty normal, around $582 million on the day of the spike, since a lot of the transfers into the address were of low value. Net flow to Binance-labeled addresses on Ethereum was only -$45.8 million, which is very mild for the exchange powerhouse. 
• Bitcoin’s growth seems to be more organic, with the unaveraged data showing an upward trend in active addresses since a drop off in May, corresponding with an increase in fees causing fewer people to transact, but the growth has been sharper in September. The 7-day moving average of the daily average transaction fee has stayed below $2 since July 7th, which could be motivating more people to interact. 
  • New addresses on the network have also seen a large rise, but it's typical to see new addresses grow with active addresses due to transactions generating change addresses, which send any remaining funds not sent in a transaction to a different address that is still controlled by the sender (like getting change back for a $15 purchase that you paid for with a $20 bill). 
  • Coinbase CEO Brian Armstrong called bitcoin the “most important asset in crypto” and confirmed that the exchange would be integrating with Bitcoin’s Lightning Network soon.

Taking stock

Source: CoinGecko, Macro Trends

• The ratio between Coinbase’s stock market cap and Uniswap’s token market cap reached 6.24 on September 12th, the highest it's been since June 2022, surpassing a surge from earlier this year when Coinbase stock was rallying on the heels of being named the surveillance sharing partner for many of the spot bitcoin ETF filings from early in the summer and the Ripple ruling which deemed the sale of XRP on exchanges to not be unregistered securities offerings, helping the exchange’s case against the SEC. 
  • But then the broader market slumped a little bit, pushing the market cap of COIN from over $25 billion on July 19th to just $17.5 billion on August 28th, dropping over 30% in less than a month. 
  • The tides have now turned ever so slightly, partially due to the Grayscale ruling, which, as we’ve talked about before, makes a spot bitcoin ETF all the more likely. This pushed the price of a COIN share from $73.71 on August 28th to $84.70 on August 29th, helping the stock to recover some ground lost in the slowdown. The price has managed to hold roughly steady around there, trading over $82 on Friday.
  • But ahead of the decision, the crypto market was also hit with a similar sell-off to the stock market, as macro sentiment caused people to drop risky assets of all kinds. Uniswap’s market cap fell from $4.72 billion on August 15th to just $3.09 billion on September 12th. 
  • The crypto market did react last week to news that FTX was granted permission to begin liquidating their crypto holdings in court this week. While UNI isn’t the top token of mind that will be impacted, the implications still rocked the world of many altcoins. The selling pressure from the failed exchange’s roughly $3.4 billion of assets had people nervous, although the firm is only supposed to liquidate $100 million a week to slow the effects. 
  • Coinbase and other crypto stocks did not feel the same pressures, allowing them to hold more stable as prices of coins dipped and helping exacerbate the difference between Uniswap and Coinbase.

In it for the friend.tech

Source: Dune Analytics

• Just when you thought it was over, they pull you right back in. That seems to be the vibe for the social platform friend.tech, which had explosive growth at the end of August that quickly petered out, only for it to have a resurgence last week that was stronger than its initial showing.
  • As a reminder, friend.tech is a protocol built on Coinbase’s new optimistic rollup protocol Base (which is also experiencing its own bout of hype, helping boost friend.tech). The 7-day moving average of transactions on Base hit a new all time high yesterday, at 1.33 million, largely outperforming its two main competitors, Aribtrum and Optimism. The brand reputation of Coinbase, as well as the fact that it was built on the familiar OP Stack, have helped Base achieve massive success out of the gate.
• Friend.tech allows users to buy “keys” (formerly known as shares) of other people, which grants you access to messages with them. The accounts on friend.tech are linked to accounts on X, so many of Crypto Twitter’s biggest stars were making an appearance on the platform, attracting more people. 
  • The idea is a kind of novel premise, but like many new protocols, it was also gaining a lot of popularity due to airdrop potential. The platform has been airdropping “points” on Fridays, with speculation that these points will eventually be used in some sort of token conversion. 
  • There are no clear rules about the points airdrops are being distributed, but as more Fridays went on, people began to figure out patterns, with many thinking that being a key holder was the most important factor for the airdrop. 
  • The new-found “mission” helped revitalize a lot of the metrics. Last week, the 24-hour earnings for friend.tech exceeded those of Ethereum. The price of the protocol’s most expensive key (for one of its pseudonymous co-founders, Racer) was 40% of the floor price for a Bored Ape Yacht Club, one of the most important NFT collections.
• One number that has swung back up again is both the daily unique buyers and sellers of friend.tech keys. The number of buyers jumped up to around 13,700 on Saturday, which was lower than the high of over 20,000 back in August. What did reach a new peak was the number of sellers, climbing to 12,140. 
  • The number of buyers still exceeds sellers, but the largest day of key selling was September 15th, with almost $2.4 million worth of keys sold in one hour. It seemed to be the result of the points airdrop coming in for the day, inspiring some people to offload their keys, deeming their airdrop sufficient and wanting to get rid of their keys before the hype died down or thinking they weren’t earning enough.

Binance.US says bye to execs

Source: The Block

• It is not a secret that 2023 has marked a difficult year for Binance, but more specifically, for its U.S. affiliate. 
  • Both exchanges were sued by the Securities and Exchange Commission earlier this year, but given that Binance isn’t even supposed to be operating in the United States, it felt more pressing to the potential user base of Binance.US. 
  • The lawsuit was just the tipping point for further issues that Binance.US would face. The legal and regulatory scrutiny would put pressure on its traders, partners, and employees. 
  • Most notably, the exchange had to halt USD deposits and withdrawals and suspended trading of its USD pairs after losing its banking partners, which was significant given it is a U.S.-based exchange. The removal of the USD support dropped the number of pairs the exchange offered from 337 to 185, putting it way below its competitors (Coinbase offers over 500 pairs).
  • Even before the exchange was unable to offer trading of the fiat asset, people had already started pulling back from the exchange on fears of what was to come. Liquidity was low and assets on Binance.US started trading at premiums compared to other exchanges.
  • And, of course, there was an impact on volumes. Binance.US was never a particularly large exchange, given it was only meant to serve one country and was competing with Coinbase, but it went from small to even smaller. In July and August (the only full months after the lawsuit, which happened in June), volumes have come in below $500 million. But from January 2021 to May 2023, monthly volumes always totaled over $5.8 billion, often by a significant amount. 
  • The lack of USD pairs is definitely a big contributor here, as USD is what allows users to cash out from the exchange into their bank accounts. 
  • Things took a bit of a turn for the worse from an internal perspective this week, as the exchange laid off about a third of its staff. In addition to that, several executives were reported to be leaving, with their head of legal, chief risk officer, and CEO all on the list. Many cited the mounting regulatory pressure on Binance.US as the reason for the departures. The CEO of Binance, Changpeng Zhao, said the former CEO of the U.S. exchange was taking “a deserved break” as justification for his leaving. 
• Binance.US is working to restore itself, though. Shortly after the lawsuit, they added a former SEC enforcement co-director to their legal team. And the exchange has secured a partnership with MoonPay to help users convert from fiat to crypto. 
  • Volumes for Binance.US are on pace to slow again compared to August, though, indicating the opportunity to convert from fiat again isn’t attracting many users back.

Absolutely bananas

Source: Ultra Sound Money

• Telegram trading bots have been all the rage lately. They allow users to execute a range of automated trading activities on decentralized exchanges through Telegram’s messaging interface. 
  • It is a trade-off of convenience for security, as using the bots requires placing funds in a third-party wallet, which could lead to a number of issues like the bot owners misusing funds or a private key database leak. While many security professionals have issued caution about using these bots, they have continued to be popular. 
• But as a testament to the popularity of these new trading mechanisms, we can look at the top 20 gas-consuming smart contracts over the last 30 days. 
  • There are two Banana Gun trading bot versions (both 0xdb5 and 0x58d) and Unibot, with each burning over 700 ETH in the past month. 
  • They are two of the largest Telegram trading bots, with each putting up millions of volumes a day. 
  • Others on the top 20 list include Uniswap, OpenSea, and several popular layer 2’s. The fact that these telegram bots have so quickly become ETH-burning powerhouses is a testament to their success.
  • Xi Jiang, founding partner of Old Fashion Research and former Investment Director and Head of Launchpad at Binance Labs, views these trading bots as web3 protocols successfully leveraging messaging platforms and also helping capitalize on the explosive growth of memecoins by offering advanced trading capabilities. 
• And, as we’ve mentioned before, with all new things comes airdrops. But this one’s execution was less than flawless.
  • Banana Gun launched their token on September 11th, after a presale on September 8th that sold about 2 million tokens at a price of $0.65, raising roughly $1.2 million. The token peaked at over $8 on its launch day, with a lot of investor interest, as the token holders were promised revenue-sharing rewards. 
  • But it turned out that there was a bug in the fee calculations in the token’s smart contract, leaving the 4% transaction fee in the hands of the user who initiated the transaction instead of the protocol’s treasury. The team then decided to sell its treasury tokens (with an allocation of over 6 million tokens, or over 63% of supply) to recuperate the $325,000 of WETH the team had provided for liquidity on decentralized exchanges.
  • The selling pushed the price of the token down to just $0.025, although it has recovered to about $0.18 as of late. 
  • The team does have plans to re-do the airdrop with an audited contract in the future.