Data & Insights Recap - November 20, 2023

Fee-ld day

Source: The Block

• Many people like to hold out hope for “flippenings” in the crypto space. Things like ETH’s market cap overtaking BTC’s, or SOL’s surpassing ETH’s. But many other flips happen all the time, like last week when we talked about CME eclipsing Binance in terms of bitcoin futures open interest. 
  • And yet again, another, smaller inversion seems to be upon us. This time in the form of the 7-day moving average of the average transaction fee on Bitcoin and Ethereum.
• For context, from July 2021 through August 2023, Ethereum always dominated in terms of fees. At the height of the bull market in late 2021, the average transaction fee on Ethereum was over $50, while it was just around $3 on Bitcoin. 
  • There are, of course, nuances in how these fees diverged so much. In 2021 really, the only thing you could do on the Bitcoin network was send bitcoin to people, whereas Ethereum had an emerging decentralized finance ecosystem. 
  • In turn, many transactions that were being done on Ethereum in the bull market were more complex than just sending ether to another party, which thus increased transaction costs. 
  • But as we entered the bear market and activity died down on both chains, we saw a narrowing of the fees on the networks. Ethereum seemed to always maintain its lead, but the difference in the 7-day moving average began to sometimes drop below a dollar. 
  • In 2023, Bitcoin also introduced some new features, too, as the Ordinals protocol generated a lot of hype for allowing NFT minting and new token issuance. 
• In mid-October, the 7-day moving average of the average transaction fee overtook that of Ethereum for 9 days in a row, the first time BTC had taken the lead in over two years. 
  • Bitcoin’s fees weren’t actually rising all that much during that period, but Ethereum’s were continuing to drop.
  • The recent rally, though, began to push fees on both blockchains upwards again, and Ethereum regained its lead in late October.
• But recently, Ordinals have seen a big resurgence, both in terms of minting and trading volumes, which has helped drive demand for blockspace on Bitcoin, leading to Bitcoin posting higher average transaction fees than Ethereum every day since November 9th. 
  • The gap has also gotten pretty wide, over $5, marking a reversal from trends we’ve seen in previous eras where on-chain activity picks up.
  • While fees on Bitcoin remained virtually unaffected in the latter half of 2021, the new features added to the blockchain have helped it also become a hub for on-chain activity and speculation in a more excited market. 

Withstanding withdrawals

Source: The Block

• One of the main “wins” of 2023 was the fact that once withdrawals were enabled from the Beacon chain, the number of ETH securing the network continued to increase.
  • As a reminder, back in September 2022, the Ethereum network completed The Merge, which switched the network from Proof-of-Work consensus to Proof-of-Stake.
  • In order to become a validator, you had to deposit 32 ETH to the Beacon chain, and up until April of this year, that ETH had to remain in the contract, so you could never wind down your validator. 
• In April, Ethereum activated the Shapella upgrade, which enabled withdrawals from the Beacon chain contract for the first time. 
  • To some doomsayers, this signaled the potential erosion of security on Ethereum, as stakers would now remove all their funds and rewards earned so far and then no one would be left to validate transactions on the blockchain. Many also braced for a price dip for ETH as many suspected people would withdraw and sell. 
  • But for the most part, there was not much reason to withdraw. Staked ETH accrued rewards and liquid staking allowed people to partake without actually losing liquidity. 
  • There was an influx of withdrawals when Shapella first went live (a lot of it was just rewards being withdrawn, but the principal amount remained), but from May 8th to November 14th, the amount of ETH withdrawn each day only exceeded 100,000 once. And deposits more often than not exceeded withdrawals, allowing the number of ETH securing the network to show steady growth. 
  • The stream of deposits was attributed to some people feeling less worried about staking now that they knew there was no chance their funds would be lost forever (which was unlikely but still not confirmed before the upgrade actually went live). 
• Another reason that some cited for both the lack of withdrawals and the heightened amount of deposits is that there was not much reason to sell ETH earlier this year. 
  • If you were optimistic about the coming of another bull market, then it didn’t make sense to exit your ETH position. ETH was sitting below $1,600 in mid-October.
  • While the price of ETH did surge a little on the heels of Shapella being implemented, it began trending downwards shortly after…until the most recent rally, which has pushed ETH back above $2,000 again. 
  • ETH is still relatively low compared to 2021 and 2022, but it’s still an improvement compared to most of this year. 
  • November 15th marked the largest daily withdrawal amount since April, with 171,820 ETH being withdrawn. It was the most negative daily net change since April, as well. 
  • While selling is not the only reason to withdraw, it is interesting to see withdrawals increase along with the value of ETH. 

Into the SOLar system

Source: HelloMoon

• It’s difficult to talk about the most recent sentiment shift and not talk about Solana. SOL has been one of the best performers as of late, as it moved from under $22 at the start of October to over $66 in November.
  • Some of the gains were unsustainable, and it now sits around $60, but it is still a remarkable turnaround. 
  • SOL was under $15 this time last year, pushing its 1 year performance to almost 400%, the highest returns among layer 1 tokens, beating out bitcoin, which is also up an impressive 128% since last November. 
  • It’s hard to point to a specific catalyst for Solana’s explosive growth besides the recent broader bullish sentiment. It was helped by the excitement coming out of the Solana Breakpoint conference that took place in Amsterdam that took place around the time the rally began. 
  • There was a lot of room for SOL to bounce back. It was one of the hardest-hit tokens at the end of last year because of the token’s ties to FTX. It was often dubbed a “Sam Coin” due to its association with the former CEO of the collapsed exchange. 
• Beyond just price action, the blockchain itself has been getting more hype as of late. Cathie Wood, the CEO of Ark Invest, spoke highly of Solana in an interview last week, praising it for being faster and cheaper than Ethereum. 
  • And the Solana DEX aggregator Jupiter just did an airdrop, which some people were speculating on earlier in the week, which helped drive up some activity on the chain. 
  • But even beyond airdrop excitement, it does just seem like the blockchain is seeing growth across metrics. Of course, the value moved on-chain has climbed to the highest it's been in a year, partially because of a rise in the price of SOL and other SPL tokens. The 7-day moving average of on-chain volume crossed $10 billion last week for the first time since November 2022. 
  • The 7-day moving average of non-vote transactions on the network has grown from under 16 million at the start of October to over 20 million recently. There was a period in the middle where the average spiked to over 30 million due to two days in October when transactions surged on the network but were not sustained. 
  • Active addresses on the network have climbed to 343,000, the highest amount since June and reversing a broader downward trend that has been tracking since May. 

The Punks are rocking

Source: NFT Price Floor

• The floor price for a CryptoPunk NFT has climbed over 10 ETH so far in November. 
  • The floor price refers to the cheapest price you can buy an NFT for. 
  • On November 1st, the floor price for a CryptoPunk was 46.87 ETH and climbed to 58.95 ETH on November 12th and still remains quite high. 
  • CryptoPunks have been the most dominant NFT by floor price since the spring, but its second most expensive competitor, Bored Ape Yacht Club, has not seen the same growth. Its floor price is actually slightly lower than the 30.24 ETH it was at the start of the month. Most other collections have also been unchanged recently.
• It’s hard to point to an exact reason why CryptoPunks have seen their floor price rise so quickly, but earlier this month, the co-founder of Yuga Labs went on a $1.5 million NFT buying spree, looking to grab some non-BAYC NFTs.
  • The main staple in his purchase was a rare CryptoPunk that he picked up for $1.14 million. 
  • CryptoPunks actually did have their highest weekly trading volume since July 2022, the week of November 5th, at just over $19 million. But that still came in less than the $33 million that BAYC did, but the volumes were not as significant a milestone for the collection.
  • 151 CryptoPunks sales were done that week, too, another metric not reached since over a year ago. 
  • Part of the rise can just be attributed to the recent bullish sentiment we’ve seen, which could have more people eager to get back into the NFT market. But for the moment CryptoPunks seem to be the blue-chip collection benefitting the most from the recent market turnaround. 

Tethered to success

Source: The Block

• If you are a frequent Data & Insights reader, then you are no stranger to Binance’s quest to find a stablecoin to replace the now-befallen Binance USD. 
  • The two main targets that Binance has tried are TrueUSD (TUSD) and First Digital USD (FDUSD).
  • But a struggle faced by both of these stablecoins is that they are much lesser known than BUSD. There was a point in time when BUSD was the third largest stablecoin by market capitalization, behind just the giants USDT and USDC. 
  • TUSD actually is the fourth largest stablecoin by market capitalization right now, but its market cap is only $3.3 billion. BUSD’s market cap peaked at over $23 billion. So even though TUSD has recently climbed in rankings, its presence is still quite small. 
  • And even though BUSD can only be burned, its market cap still sits above that of FDUSD. The market cap of FDUSD has not even surpassed $1 billion yet. To be fair, FDUSD is one of the newest stablecoin entrants, arriving on the scene just this past June. 
  • Binance, over the past few months, has been trying to promote trading of pairs with these stablecoins. When Binance ended its zero-fee bitcoin trading promotion in March, BTC/TUSD was left without fees, making it the most attractive way to trade bitcoin on the exchange. BTC/FDUSD got the same treatment once it was listed.
• And this did work. TUSD was basically unheard of at the start of the year and was hardly listed on any exchanges, but by August, it was the quote asset for over 17% of volume being done due to the surge of its usage on Binance. Similarly, for FDUSD, it already accounted for 14.47% of volume last month despite launching less than half a year earlier. 
  • But BUSD, at its peak, was accounting for over one-fourth of quote asset volume. While TUSD and FDUSD have seen their dominance grow (TUSD’s has actually been shrinking recently as Binance moved to give FDUSD more favorable terms), they still pale in comparison to what once was. 
  • This, in turn, has led to USDT seeing a rise in its power as a quote asset on exchange. So far in November, 71.08% of spot volume has been done in pairs quoted in USDT. That is on pace to be the highest share it's ever had, but time will tell how the rest of the month shakes out. 
  • And it does make sense that USDT would be the main benefactor here. It is the stablecoin listed by most exchanges, and Binance also offers USDT trading. It is also the largest stablecoin by market cap. But it is interesting that its spot superiority might rise to new heights due to the fact that Binance can’t find a new stablecoin to stick like BUSD.