Data & Insights Recap - November 27, 2023

Sold on Solana

Source: The Block, CoinGecko

• Last week, we discussed how many on-chain metrics for Solana have been rebounding in turn with the price of its native asset SOL.
  • SOL has quickly become one of the best-performing crypto assets this year after it kicked off 2023 below $10 but has since surged up to over $50. 
  • While SOL was one of the hardest hit in the wake of FTX due to the network’s association with the disgraced crypto exchange, the blockchain has also been receiving praise for its quick and cheap transactions.
• One metric that we did not talk about but that has also seen explosive growth is DEX volume on Solana. Whirlpool, a new automated market maker from Orca, is the exchange that has seen the most traction, but others like Raydium have also seen volumes climb in recent weeks.
  • Of course, when prices of crypto assets go up, so does volume in terms of US dollars. Some of this growth can be attributed to that, especially considering that SOL/USDC is by far the highest volume pair reported by Orca. SOL will naturally be frequently traded on DEXs that are native to the Solana ecosystem. 
  • And while other tokens might not be performing as well as SOL, most have also been on the rise as of late. DEX volumes across all platforms have been growing. Across all exchanges, monthly DEX volumes for November are already the highest they’ve been since March, exceeding volumes for the past 7 months before this one even comes to a close. 
• But Solana-based DEXs, in particular, have been drumming up more dominance. The week of November 13th saw the ratio of Solana DEX volumes to Ethereum DEX volumes climb to 13.73%, the highest it's been in over a year. (It’s on pace to be 14.43% the week of November 20th, but the week has not yet closed.)
  • It also represents a very quick ascent, as the ratio was only 2.71% the week of October 9th. 
• While this change in ratio is significant and shows how Solana is asserting itself in the broader blockchain ecosystem, there is something to be said about how DEX volume has been growing relative to price.
  • ETH is up 20.8% since October 1st, whereas SOL is up 154.5%. SOL’s percentage increase is over 7 times greater than ETH’s, whereas the ratio between volumes has only increased roughly 5-fold. 
  • A lot of the growth of the Solana DEX roster can be attributed to how SOL has been a recent breakout crypto asset star, and its DEX growth relative to Ethereum lags behind its outperformance in price, seemingly indicating that it’s almost exclusively price-driven. 
  • That’s not necessarily true, as assets that are not ETH and SOL trade on all of these DEXs, but it is something to keep in mind when looking at the relative growth of Solana and its protocols.

Binance says bye to CZ

Source: The Block

• What is it with crypto exchanges and having all their drama play out in November right before the holidays? It was almost, but not quite, a blast of a deja vu seeing Binance settle with the Department of Justice and the departure of former CEO Changpeng Zhao (also known as CZ) as part of the plea deal. 
  • And perhaps at least part of this was to be expected. It was no secret that Binance was being investigated. The exchange had been sued by both the Commodities Futures Trading Commission and the Securities and Exchange Commission earlier this year, and certain quotes and anecdotes from those lawsuits seemed to hint at what was revealed by the DOJ. 
  • Most of the excitement went down on Tuesday, but on Monday, Bloomberg reported that the DOJ was looking for $4 billion from the exchange giant as part of a deal that would end the criminal investigation. This was actually perceived quite well, as BNB rose by over 5%, likely because a deal meant Binance could continue operating instead of possibly shutting down. 
• Then Tuesday came the actual indictment, with charges centered around money laundering, sanctions violations, and fraud. Binance would pay their dues and CZ would plead guilty and step down from the exchange. 
  • BNB reacted more poorly to the news of CZ leaving, but it has only dropped around 10%, which is not terrible given the circumstances. 
  • In general, the news was actually taken quite well more broadly, especially since Binance could keep its doors open. JPMorgan analysts called the settlement a positive since it was a “potential systemic risk emanating from a hypothetical Binance collapse.” 
  • And it seems Binance account holders were also not too phased. On Tuesday, net flows to the exchange on Ethereum came in at -$420.5 million. While this was the largest net negative day of flows the exchange had seen since June (when it was sued by the SEC), it was not that significant in the grand scheme of things. Net flow dropped a little bit to -$237 million the next day, and since then, flows have been very tepid. 
  • While many are speculating that this could mark an end to Binance’s pronounced dominance in the space, besides Richard Teng (former head of regional markets) taking over as CEO, not much seems to be changing.
  • While any enforcement action will leave a scar on a business, the fact that many of the charges were not all that surprising and Binance only had to pay a fine and change leadership looks like a pretty good outcome.

EVM attention

Source: Block Scanners

• In recent weeks, we’ve talked about the uptick in activity on Bitcoin, Ethereum, and Solana, but the hype has been extending further. 
  • Several other EVM blockchains have seen their number of transactions soar, namely Polygon, BNB Chain, Avalanche, Celo, and Fantom. 
  • As a reminder, an EVM chain is one that can run the Ethereum Virtual Machine, making it easy for existing Ethereum protocols to expand to these chains or for developers to release similar forks of existing projects. 
• The chart we are looking at has a 7-day moving average on the daily transaction count, but for all four of these chains, the average seemed to spike around the same time, roughly two weeks ago. 
  • For Polygon, the average climbed from 2.5 million on November 13th to 6.43 million on November 26th, helping propel it ahead of BNB Chain for the first time since February.
  • BNB Chain has seen growth from 3.44 million transactions on the 13th to 5.6 million on the 22nd but has since been falling back down, possibly due to some decrease in activity after the Binance drama. 
  • Avalanche’s shot up from 236,930 to 3.1 million over the past two weeks, allowing it to surpass Ethereum in terms of 7-day moving average for the very first time. 
  • Fantom saw its transactions more than double from 219,870 to 3.41 million from the 13th to the 26th, blowing past both Ethereum and Avalanche (but it is not the first time Fantom has put up more transactions than either of these chains). 
  • Celo was probably the biggest breakout star, jumping from 288,000 transactions to 3.82 million over the same period, putting it only behind Polygon in terms of transaction count. 
• It is not unexpected that we would see transactions rise on these chains in the wake of higher fees on Ethereum. When it gets more expensive to transact on Ethereum and other chains are offering similar experiences for cheaper, then people will naturally move there. 
  • And many layer 1 tokens have been partaking in the gains of the broader crypto industry, making it more attractive to get in on their chains’ action. Avalanche’s AVAX has had a particularly strong performance recently.
  • But for some chains, the 7-day moving average has been boosted up by an unsustainable spike. Looking at the unaveraged data for Polygon, we see transactions jump from 2.8 million on November 14th to 16.5 million two days later, just to fall back to 3.2 million on November 18th. Polygon was hit with a surge in minting Ordinals-like PRC-20 tokens, which caused the jump. Transactions do still remain slightly higher than where they were before the massive increase, though, and transactions spiked again on the 24th. 
  • Chains like Avalanche and Fantom seem to be having a more gradual path of growth that has not yet come dropping down. 

Part of the banned

Source: The Block

• The number of banned USDT addresses on Ethereum climbed from 935 to 972 last week, the largest one-day increase in banned addresses since October 2022. 
  • When Tether bans or freezes a USDT address, it means the address cannot conduct any USDT-related transactions. It can neither send nor receive the stablecoin.
  • The recent group of addresses to be hit with the ban is tied to a DOJ investigation that saw $225 million worth of the stablecoin now be frozen. In notional terms, it's the largest USDT freeze ever. 
• Tether was the firm to break the news, saying it worked with both U.S. investigators and the exchange OKX to ban the wallets associated with a group that was using a “pig butchering” romance scam to trick people into giving up funds. 
  • The DOJ also announced that it had seized $9 million worth of USDT linked to the same sorts of scams. 
• It’s another example of Tether working to foster “a secure environment,” as the use of the stablecoin has been receiving some skepticism as of late. 
  • In October, Tether defended itself against some claiming its role in terrorism finance needed to be under more scrutiny, saying it had worked with 31 law agencies across 19 jurisdictions to freeze 32 addresses that were linked to Hamas and Russia. (The number of banned addresses on Ethereum has been slowly rising since the last sharp uptick in October of last year. From October 8th, 2022, to November 19, 2023, the number gradually increased from 747 to 935.)
  • It serves as a reminder that while USDT exists as a stablecoin on a decentralized blockchain, it is still tied to the centralized issue Tether. USDT (and USDC, which has 206 addresses banned on the network) is still a form of money that tries to be compliant on the global stage.

Totality of total fees

Source: The Block

• An exciting flip took place earlier this month when the average transaction fee on Bitcoin surpassed that on Ethereum. 
• • But an even more significant, albeit similar, flip took place last week. 
  • For the first time since November 2020, the total amount in fees paid on Bitcoin overtook the amount of fees paid on Ethereum.
  • Unlike the average transaction fee, this metric has never even really come close to reversing over the past 3 years. It was almost taken as a fact that due to the complexity of transactions on Ethereum, that network would aggregate more fees each day. Even when the average transaction fee (the total fees spent divided by the number of transactions) between the two networks got close, the total fees spent on the network did not; it was more a function of how the number of transactions changed. 
• But now, with the flurry of activity we’ve seen on the Bitcoin network involving more complex concepts like Ordinals, the amount of fees being paid each day on the network surpassed $8 million last week, whereas it sat around $7.8 million for Ethereum. 
  • Total fees paid on Bitcoin for the majority of time from July 2021 to the start of this month stayed under $1 million. The 7-day moving average of fees paid has increased 11-fold since the start of November. 
  • It is yet another signal of what the Ordinals phenomenon is bringing to the world's oldest blockchain. Demand for Bitcoin blockspace is becoming more competitive, incentivizing people to pay these higher fees. While the fee structure on the two networks is different, the fact that across all transactions people are willing to pay more to engage with Bitcoin is indicative of its resurgence in popularity.
  • The inversion was short-lived, though. It only lasted for three days from November 20th to November 22nd. The 7-day moving average of total fees paid on Bitcoin has now slipped down to $5.3 million, below that of Ethereum, but the average transaction fee on the network still remains higher at $9.12.