Data & Insights Recap: Solana fees jump after Jupiter airdrop, Farcaster sees success with Frames

To the moon...or to Jupiter

Source: Dune Analytics

• Last week was a big one for Solana, as the long-anticipated launch of the DEX aggregator Jupiter’s token happened on January 31st.
  • The project issued 1.35 billion JUP tokens at launch, accounting for 13.5% of the token’s 10 billion total supply.
  • An airdrop was granted to 955,000 wallets, given to users who swapped over $1,000 on the platform before November 2nd of last year. 
  • Upon arrival, the token would get a liquidity pool on Jupiter itself and also begin trading on a swath of centralized exchanges, including Binance and OKX.
• With almost 1 million addresses being able to claim the airdrop and over 1 billion tokens hitting the market, it is not a surprise that we saw activity on Solana jump up last Wednesday.
  • For starters, the DEX aggregator saw $1.4 billion in trades executed in the 24 hours following the token going live, which helped it jump to the top DEX platform by volume for the day. The web3 wallet Phantom, which is best known for its Solana support, said it had never seen traffic at this level.
  • Not every eligible wallet has claimed their JUP yet, but according to data from @alpaxxx, only about a quarter of claimants actually still have their JUP; the rest have sold it off, which explains why volumes were so high upon launch.  
  • Unsurprisingly, this caused fees on Solana to rise. Over 12,000 SOL were paid in total fees on January 31st, the highest amount in over a year, amounting to $1.2 million. Of course, this is the cumulative amount across all transactions. Relative to other chains, the fees per transaction on Solana were still quite low, with Solscan reporting over 26 million non-vote and almost 150 vote transactions on the 31st. 
• One reason fees got so high is because users were paying more to get their transactions prioritized. You can tip validators on Jito, Solana’s largest liquid staking platform, by total value locked. Tips paid to Jito validators came in at 8,370 SOL on January 31st, or roughly $837,000. These tips work as incentives for validators to process transactions faster, similar to how the priority fee on Ethereum works. 
  • JUP, while holding relatively steady in recent days around $0.60, faced a bit of a downturn directly after the token launch, which is not uncommon for an airdrop as people try to cash out. In turn, users are willing to pay more to get their transaction in early to lock in a higher price for their sale. 
• It’s likely Jupiter can continue to hold onto some of this hype, as the platform has said they plan to airdrop 4 billion tokens in total and that future airdrops will include newer users. 

Out with the old, in with the new

Source: The Block

• A few weeks ago, the 7-day moving average of transactions on Ethereum rose to the highest level since November 2021.
  • While an impressive feat, the moving average only ticked up due to a one-day surge in the underlying data spurred on by a short period of inscriptions on the network.
• But recently, the 7-day moving average on new addresses on the blockchain has climbed to 99,280, the most since December 2022.
  • And unlike the jump in transactions, the rise seems to be driven by some steady growth and not some one-off spike. 
  • The moving average of new addresses on the network has been on a gradual upward trend since October of last year when Ethereum was only sporting around 70,000 new users a day. And while the moving average has declined a bit from the 99,000 peak, it is still quite high relative to a lot of 2023.
  • As we’ve talked about a few times over the past couple of months, the rally in crypto asset prices that kicked off when hope for bitcoin spot ETF approval began to get serious, along with the bullish sentiment for monetary policy going into the new year, has helped bring some more activity into the Ethereum space. Sectors like DEXs and decentralized lending have begun to see more users pour in as we rebound from the drawdowns at the end of 2022. 
  • Active addresses, for the most part, have been seeing a similar trend in that the moving average has been moving upward for the past 4 months.
• In general, people do seem to be optimistic about Ethereum so far this year, both in terms of it as a blockchain and for the price of its native token.
  • As we have discussed, some analysts think that a spot ether ETF could be on the table in the coming year, which would probably help bolster ether as an asset, like how anticipation for a spot bitcoin ETF boosted BTC.
  • But Ethereum is also slated for the Dencun upgrade to hit the mainnet this year, the latest major upgrade since Shapella. The upgrade has been deployed to the Goerli and Sepolia testnets and will hit Holesky later this month. The big implementation for Dencun is proto-danksharding, which should lower gas fees and increase scalability for the blockchain.
  • So, all in all, it’s not so shocking that we’ve seen some more attention in the form of new addresses on Ethereum, as 2024 is shaping out to be a big year for it. 

Starting strong to finish strong

Source: The Block

• Despite the fact that the 7-day moving average of crypto spot volume has come plummeting down in the wake of bitcoin spot ETF approval, total volumes for January managed to finish above those of December. 
  • The 7-day moving average rose to over $50 billion in mid-January, the highest level in over a year, and then subsequently came crashing down to around $27 billion quite quickly.
  • But despite all that, total monthly volumes came in at $1.5 trillion, just edging past the $1.1 trillion put up in December. It marks the most monthly volume since May 2022.
• Essentially, all this means is that the volume run-up in the first half of the month was large enough to compensate for the following decline.
  • And to be fair, while volumes did slump off, they are still quite elevated compared to most of 2023. The $27 billion is still only the lowest volumes have been since the start of December; it’s much higher than the often sub-$20 billion we’d see last year. 
• This is all to say that perhaps the recent drawdown is not a reason for a huge panic. It was expected to see a bit of a correction in the wake of the ETF approval, and for the most part, it seems like we have survived the thick of it.
  • Bitcoin, which was trading around $47,000 ahead of the approval and then fell all the way below $40,000 in its aftermath, has since rebounded to $43,000. It also, in the grand scheme of things, did not drop that low relative to its value through 2023.
  • The year is still young and, for the most part, has started out strong. If you zoom out from year-to-date to 1-year, things are still looking pretty good.

Funds are trading

Source: Yahoo Finance

• It has now been 25 days since the spot bitcoin ETFs hit the market, 16 of which were trading days.
  • Initially, the energy surrounding these new investment products was frenetic. At the start, GBTC alone was putting up billions of dollars in trading volume per day. On the first day of trading, over $4.5 billion worth of shares changed hands across all the freshly launched ETFs.
  • GBTC was also facing some pretty intense outflows in the beginning, as shareholders were finally granted the opportunity to redeem their shares in the trust for the underlying bitcoin they represented. 
• However, it now seems that we have now entered a more stable era for these ETFs as the initial excitement around them draws down. 
  • Things on both the volumes front and the outflows front have seen sizable drawdowns. During all 5 trading days last week, volumes across all ETFs did not exceed $1.6 billion, compared to the first 6 days of trading, where the lowest cumulative volume was $1.94 billion. 
  • And for the most part, the new ETFs have been strictly seeing net inflows. Grayscale was the only one that had outward pressure, since it already had a large AUM from its initial days as a trust. GBTC outflows were initially upwards of $500 million a day sometimes, but they have now slowed to below $250 million. There were some days when the outflows from GBTC amounted to more than the cumulative inflows into all of the other funds, making the net change in assets under management across the ETFs negative. 
  • On a similar note, since Grayscale was the ETF facing such strong outflows, its volumes initially dominated. On the first day of trading, GBTC accounted for over half of the daily trading volume across all the ETFs. But as time progressed, the GBTC exit trade has gotten less action, and Grayscale’s share of volume had dwindled down to as low as 31% some days last week. 
  • Even more significantly, on February 1st, BlackRock’s IBIT did more in volume than GBTC, the first-day Grayscale didn’t reign supreme. 
  • This is all to say that we seem to have entered a new period of normalcy for the ETFs as some of their initial momentum wears off. Grayscale, the main driver of a lot of the frenzy, has begun to see more tempered activity. And BlackRock and Fidelity seem to be the main winners in terms of new ETFs. 
  • Volumes for GBTC still remain much higher than when it was a trust. It’s possible that volumes will continue to be elevated since an ETF is a more versatile product than a trust, which will maintain more investor enthusiasm. 

Near and Farcaster

Source: Dune Analytics

• While the “social finance” category of crypto social media seems to have taken a bit of a downturn recently, the “decentralized social” sector seems to be taking off.
  • Something like friend.tech falls into the “social finance” group, where users were able to monetize themselves with people buying keys in them, which granted access to send private messages to the user. Friend.tech was incredibly popular in the late summer and early fall of last year, especially since it was launched on Base, the new layer 2 from Coinbase. But while daily transactions on the protocol used to exceed 500,000 in its heyday, now the platform is lucky if it sees 20,000 transactions. 
  • But something like Farcaster falls more into the “decentralized social” group. It essentially aims to be a more decentralized version of X or Reddit, using a hybrid of on-chain actions and off-chain data storage on peer-to-peer servers. Users can make posts or “casts” and join communities, and in October of last year, it became completely permissionless to join. 
• Farcaster had already gotten a slight boost in daily active users in October when it opened its doors to everyone.
  • The number of daily unique casters climbed from often under 1,000 to frequently over 2,000 per day. A similar trend emerged in terms of users reacting to casts, as well. 
  • But a more recent development has really caused Farcaster to take off. At the end of last month, the platform introduced Frames, which allow for interactive experiences within posts. A lot of creative uses for these Frames began to take shape, including a way to play Doom and watch the movie Tenet. 
  • The launch of Frames has brought the number of casters to skyrocket, climbing to over 19,000 per day as users experiment with what media they can share on the platform. 
  • Frames right now are all the rage, and people are excited about a new social media platform, especially since certain aspects of X have begun to deteriorate more recently. But this kind of rampant run into popularity is akin to what happened with friend.tech, which seems to have fizzled out. And while Threads, Meta’s attempt to capitalize on the disarray at X was not a decentralized alternative, it also had an initial popularity boost when it first launched and now is hardly talked about. 
  • But Farcaster itself is not that new. Only the introduction of Frames is, and it is quite novel for any form of social media, decentralized or not. It is possible that making an existing protocol better creates sustained growth in the user base. Frames launched over a week ago, yet the number of users has continued to grow. Other metrics like the actual number of casts and protocol revenue have also been rising in recent weeks and do not seem to have hit their peak.