Data & Insights Recap - December 11, 2023

I can see the futures

Source: The Block

• Not too long ago, we talked about how the options market has been on a tear in the final stretch of 2023 as bitcoin’s price climbs as a result of spot ETF optimism and a broader crypto rally in the wake of expected rate cuts from the Fed in 2024. 
  • Last week, bitcoin options open interest hit a new high, again, of around $17.9 billion. It had previously climbed to a new high ahead of November contract expiration.
• But we also discussed how futures were not seeing the same hype. One of the main potential factors that was causing the divergence was how options thrive in periods when volatility is expected, which has been the case ahead of an ETF decision. 
  • But while the rally for bitcoin started in October, the narrative surrounding it has shifted from being mostly ETF-oriented to being more macro-oriented. At the start of the rally, many traditional assets were doing poorly on the heels of rising geopolitical conflict and inflation uncertainty across the globe. Meanwhile, bitcoin was rising (we saw a negative correlation between stocks and bitcoin) in the hopes that a new venue for retail crypto traders was in the works. 
  • Then, the November Fed rate meeting came, where FOMC members held rates steady. A slew of economic data was signaling inflation was more moderate and some policymakers’ speeches indicated that the era of hiking rates was over. So, at the start of last month, we started to see a broader rally take place. Bitcoin’s gains started being reported along with gains in the S&P 500 and Treasuries. 
• The moral of the story is that the rally shifted from being something with maybe short-lived momentum (it was unclear whether the rally would persist beyond an initial surge post-ETF approval) to something that looked like it was going to be more prolonged.
  • The potential for price growth on a longer time horizon lends itself more to futures, where crypto pioneered the “perpetual” future with no expiration date. The vast majority of crypto futures activity happens in these perps. 
  • Options are, of course, still attractive; the ETF decision does still serve as a price catalyst that should be coming in the near future, and there are options that expire on a longer time horizon if you’re looking to make a more lasting bet. 
• It seems the shift has inspired more action in the futures world, with bitcoin futures open interest climbing to $16.5 billion on December 6th, the highest it has been since April 2022; and much like bitcoin’s price itself, reaching pre-Terra collapse levels for the first time. 
  • Of course, the value of the bitcoin underlying these contracts is playing a part in the growth, but it still seems to signal that some more action might be moving into the futures market as macro sentiment shifts.

Put yourself on the App (Store)

Source: Sensor Tower

• While crypto prices have exploded over the past few months, many are wondering whether the more casual retail traders have re-entered the scene.
  • Back at the height of the bull market, we saw crazy signals that crypto was entering the mainstream: Coinbase dominated the App Store, Jimmy Fallon had Paris Hilton on his show and they talked about Bored Apes, Tesla started accepting bitcoin payments, Venmo began offering crypto trading, etc. 
  • While bitcoin’s price briefly crossed $44,000 last week and still seems to have a lot of bullish momentum, it doesn’t feel like we’ve seen a lot of this broader hype. 
  • Perhaps there is a good reason: coverage of the FTX fallout and subsequent trial of Sam Bankman-Fried did bleed into the more mainstream outlets. While in the bull market of 2021/2022, there was no real big scandal that marked crypto (although it did have a somewhat scam-y mainstream reputation), the recent markup is coming right after a once beloved crypto figurehead was just found guilty on seven criminal counts. The many collapses in crypto in 2022 have left sour tastes in many people’s mouths and it's fair to assume that some people are still skeptical, even though higher prices usually pique retail curiosity. 
• Many people take the Coinbase App Store ranking as one of the most important trading signals. They think that when Coinbase is peaking on the App Store, then that signals maximal crypto interest and marks the top of the market.
  • But Coinbase is having trouble even staying in the top 500 free apps in the United States and has shown a little bit of improvement in the free Finance category, but really anything to get excited about. It has just barely cracked the top 20, although it started September not in the top 50. Fellow US-accessible exchange Kraken has also not shown much upwards momentum.
• One app that, surprisingly, has seen a big surge in ranking is Binance.US. In the free Finance category in the US, it jumped from 189 on November 29th to 26 on December 4th, just a spot below Coinbase. It has since stayed in the top 50. 
  • Binance.US is definitely not the exchange you’d expect to be cranking up the app downloads. For starters, they had to halt USD deposits and withdrawals after losing its banking partners in the wake of an SEC lawsuit, which also forced it to delist USD pairs, a big problem for an exchange catering to US clientele. It did secure a partnership with MoonPay, which allows customers to buy USDT, which they can use to trade on the exchange, but it’s a higher barrier to entry. 
  • Binance itself also just settled for a large sum with the Department of Justice, which saw its former CEO Changpeng Zhao step down both from the exchange and the board of Binance.US. The US subsidiary of the exchange giant was quick to clarify it was not a party of the settlement. 
  • There has not been a substantial rise in Binance.US volumes to suggest that this growth in app downloads is amounting to something (there has been a bit of a rise but it’s small enough to be justified by elevated asset prices). It is still an interesting phenomenon to see take place, though. 
  • It does seem possible that the US App Store delisted the Binance app itself and then re-ranked Binance.US to take its place. The day before Binance.US’s rank shot up, Binance was ranking around a similar level and then disappeared from the top 500 free finance apps. 

Slowly but surely

Source: The Block

• While activity on many networks has been on the rise recently, one blockchain that has not seen such explosive growth despite a rise in native token price is Ethereum. 
  • This has been true for much of the year. The 7-day moving average of transactions on Ethereum has stayed between 906.4k and 1.14 million the whole year, not showing much volatility. On the other hand, Bitcoin’s transaction count has jumped around between 246k and over 600k throughout the year. 
• To be sure, Ethereum’s transaction count has shifted with demand. The 7-day moving average climbed from one of its lowest points all year at the end of April, around 936,000, and then climbed up to its previous yearly peak of 1.14 million by May 8th. This was all going down when May’s memecoin mania first broke out, but the more interesting metric to look at was often how much ETH was being burned or daily ETH emissions as a way to track activity, especially since those metrics seemed to show a bit more of a pronounced surge when interest was rising. 
  • Looking at un-averaged transaction data, we saw growth from 887k on April 29th to 1.2 million on May 5th, a 36% rise. The amount of ETH burned, on the other hand, jumped from 3.74k to 14.6k over the same period, an over 280% increase. 
• But we have been seeing some pretty significant and sustained growth in the transaction area as of late (of course, the same can also be said about ETH burned). The 7-day moving average has been trending upward since mid-October, rising from 980,860 on October 19th to 1.15 million yesterday.
  • This just eclipses the previous 2023 high, which took place during the memecoin hype, but the surge has been much more subdued. The memecoin fad helped transactions go very quickly to an unsustainable level as fees went climbing along with it, and memecoins could only entertain for so long. 
  • But now we have seen a more subtle rise, and fees have also been gradually getting more expensive, but it’s less jarring than what went down in May. Interest in using Ethereum is also likely a bit more organic now that the market is faring a bit better. There are more people using DEXs, trading NFTs, and partaking in on-chain lending, amongst other things. 
  • It seems fitting that the 7-day moving average of transactions on Ethereum would hit its yearly high now, as the network begins to take on more activity as we move into a new bull market as opposed to reaching a peak as a result of a speculative trading frenzy.

What's in a TVL?

Source: DefiLlama

• It was another big week for the Solana ecosystem. It is no secret that Solana has recently seen a lot of metrics start to pick up as SOL’s price appreciates, but the network also hosted one of the most anticipated airdrops last week.
  • The governance token for the liquid staking protocol Jito launched on December 7th and saw over $1 billion in trading volume on its first day live. 
  • Around 9,800 users received part of the 80 million JTO tokens earmarked for the airdrop by interacting with protocol and staking SOL. The minimum airdrop was 4,941 JTO, which is worth over $20,000 at peak price. JTO’s value was up only since its launch into the weekend, starting around $2 and climbing to $4.36, but it has since dropped back down to $2.91.
  • Of course, some people who got the token traded it, some people held it, but regardless it injected a lot of liquidity into the Solana ecosystem. Almost 10,000 addresses just got thousands of dollars to use. 
• This brings us to a metric that had a significant spike from December 7th to December 8th: Solana’s total value locked.
  • Some people don’t really like to consider TVL as a metric worth tracking and to a certain extent, they are right. Locked-up capital isn’t necessarily contributing anything to an ecosystem. Solana, in particular, used to take a lot of heat when its TVL was quite low relative to other layer 1s (at the start of October, its TVL was under $330 million, putting it below some of the newer L2s in terms of dominance). But even though Solana lags behind some competitors in TVL, it can still put up comparable metrics like DEX volumes, showing that the value locked isn’t everything, as long as there’s enough liquidity, it doesn’t matter how much you exceed the necessary threshold.  
  • And Solana’s TVL has had a crazy run-up recently, partially because of the price performance of SOL and other SPL tokens. From October 1st to December 1st, TVL more than doubled. Solana is now the 5th largest blockchain by TVL. 
  • But in particular, Solana’s TVL had an unusual jump of over $100 million on the days surrounding the JTO airdrop, climbing to almost $830 million on December 8th compared to $705 million a day earlier. 
  • And this TVL excludes the value locked in Jito itself since it’s a liquid staking protocol and users get a staking derivative token to utilize, so you risk double counting if a user deposits SOL to Jito but then uses their JitoSOL to provide liquidity elsewhere. If you include liquid staking TVL, Solana’s value locked climbs to over $2 billion. 
  • It seems people were putting to use some of their JTO rewards in many places, with major lending protocols and DEXs on Solana all seeing sizable TVL rises in the wake of the airdrop. 
  • And regardless of how you view TVL as a metric, it’s still a signal of where money is flowing and where people want their money to be. And for now, Solana seems to be attracting a lot of it.

Penguins' volume gets pudgy

Source: The Block

• There must be something in the freezing cold Antarctic water. The NFT collection Pudgy Penguins posted its second-highest week of volume ever from December 3rd through December 9th, with $26.67 million worth of penguins being traded. 
  • Not too long ago, we talked about this collection for making headlines securing a toy deal with Walmart. The toy line is one of the main appeals of owning a Pudgy Penguin: you earn licensing royalties from the toys that are sold (and they’re not just sold at Walmart; they’re available on Amazon, too).
  • The penguin toys even made an appearance on Yahoo Finance during a segment about the state of the toy industry going into the holidays, and their Amazon storefront says they’re a Toy Insider Top Holiday Toys winner for 2023, so it seems as though the toys have gotten some mainstream recognition.
  • The Pudgy Penguins Instagram account (which seems to focus more on the toy aspect of the brand than the NFT one) has amassed over 1 million followers, which is almost 9 times as many followers as their X account has. 
  • However, beyond the fact that it does seem like the toy collection is faring well, there has not been much big Pudgy Penguin news to cause this massive surge in trading. Volumes have been slowly growing since hitting a lull at the start of November, but the volumes more than tripled from the week of November 26th to the week of December 3rd. 
• On November 30th, the Pudgy Penguins teased a collaboration with Nouns Dao. There was not much detail provided, but it suggested that something was coming December 8th. On the 8th, more information was revealed, indicating 1,000 collectibles would be made in this collaboration, with 500 going to people who bought them on the NTWRK app and the other 500 going to existing holders and high-end boutiques. 
  • But the fact that some holders were going to get some of the collection was not actually revealed until the 8th, but the buying spree started much earlier. On December 3rd, a user paid 65 ETH (roughly $153,000) to buy three of these Pudgy Penguins. Other transactions show that these NFTs were frequently being bought for tens of thousands of dollars throughout last week, although the highest day of volume was the 3rd. 
  • From December 3rd to December 9th, there were 1,210 Pudgy Penguins sales with an average price of around $22,130. The number of sales was the highest since February, but still much lower than the number of sales at their peak in August 2021 at over 8,000. The fact that volumes are so high while sales are relatively low shows that the collection has grown a lot in value. 
• This weekend Pudgy Penguins also announced a new web3 game, ‘Pudgy World’, that will be released on zkSync Era. Similar to the toys, holders of the penguins will earn royalties through products related to the game’s ecosystem. 
• While there might not have been any specific spark that triggered the elevated volumes for Pudgy Penguins, they do seem to be one of the only collections that is effectively using their IP to help bring returns to their holders.