Data & Insights Recap - BTC dominance spikes, Bitcoin becomes most expensive L1 again

World domination

Source: CoinGecko

• While the stock market was closed this weekend and unable to react to the news of Israel being the target of an Iranian drone attack, the crypto market was ready to respond. 
  • Assets across the board took a dip as traders recalibrated their portfolios and scaled back risky bets. Bitcoin itself fell from over $70,000 on April 12th to just over $63,000 at the end of April 13th, dropping roughly 11.6% from its high on Friday to its low on Saturday. 
  • But bitcoin was actually one of the cryptocurrencies least impacted. According to Coinglass, on April 13th, there were over $757 million worth of long liquidations on centralized exchanges, but only $261 million worth were on bitcoin positions. 
  • While most crypto assets do fall into the “risk” category for traders, bitcoin is arguably the least risky cryptocurrency, boasting the largest market capitalization and a decent track record of institutional adoption. On the other hand, something like DOGE is more speculative, and it fell almost 30% from its high on the 12th to its low on the 13th. 
  • Most assets seemed to have hit a relative bottom towards the end of Saturday and have seen a slight rebound since but remain relatively flat. 
  • In theory, bitcoin had the potential to actually surge in this situation, given that it is also supposed to be a “safe haven” since it is not tied to any one government or country. Gold has been on a tear recently due to fears over Middle Eastern conflict, which could have spread over to what is often referred to as “digital gold” as well. 
  • But, without the stock market open, bitcoin and its cryptocurrency companions were forced to take the brunt of the fall.
• Even with bitcoin taking a hit, it still was a top performer.
  • Bitcoin’s dominance, or the share of bitcoin’s market cap relative to the total market cap across cryptocurrencies, jumped to 52.86% on Sunday, the highest it's been since April 2021. 
  • Bitcoin’s dominance dropped as low as 43% in February as altcoins surged amidst a broader rally, pushing bitcoin to its lowest level of dominance since March 2023. 
  • That has now all been reversed as bitcoin took more tepid heat over the weekend, allowing it to claim its most sizable market share in three years. 

Fly me to the Runes

Source: The Block

• The upcoming bitcoin halving is almost upon us. While this is mostly exciting since it slows bitcoin’s issuance, cutting the block reward down to 3.125 BTC, some people are excited about it because of Runes.
  • What is Runes? Runes is a new protocol from Casey Rodarmor, the Bitcoin developer behind Ordinals. While the primary ideas behind Ordinals focused on bringing non-fungibility to Bitcoin by differentiating specific satoshis by the order in which they were minted, the BRC-20 token standard also emerged, helping to bring new issuance of fungible tokens to the network. 
  • Runes is like BRC-20 in the sense that its goal is to allow new tokens to be traded on Bitcoin, but unlike BRC-20, Runes will use a UTXO (unspent transaction output) model. Essentially, Runes is supposed to be a more efficient implementation of token issuance, designed to impose network clog. 
  • Rodarmor announced Runes back in September 2023, giving people plenty of time to get excited about it. Given the success of BRC-20, it's not surprising that many are betting Runes has the potential to be the next big thing. Back in January OKX said it would be enabling support for Runes across its wallet and marketplace.
  • There has already been a lot of success in the Runes anticipation market, with the token PUPS, currently a BRC-20, doing millions of dollars in trading volume a day this month, according to CryptoSlam. It was the second most voluminous NFT/BRC-20 collection of the past 7 days. Each BRC-20 PUPS token will have a claim to the PUPS Runes token, which will convert over once Runes launches. 
  • The PUPS project does emphasize the fact they are just a memecoin on their website, which could explain why they are attracting so much attention, given that memecoins are so popular right now.
• All of this Runes hype activity has naturally pushed transaction fees on Bitcoin upwards. The 7-day moving average of the average transaction fee on the network has climbed from $4.11 earlier in the month to $12.17 now. 
  • While this is still low compared to the highs we saw in December during a bout of Ordinals hype, the jump has been enough to push fees on Bitcoin above those on Ethereum. Ethereum fees have continued to slide as cheaper layer 1s and scaling networks attract a lot of activity away from what was once the de facto DeFi blockchain.

Don't hate, validate

Source: Ethereum Validator Queue

• Staking on Ethereum has become all the rage recently with the recent popularization of restaking, which we talked about a bit last week. 
  • In a fun update, EigenLayer did launch on the Ethereum mainnet last week along with its EigenDA data availability layer. Coinbase Cloud and Google Cloud are among the protocol’s first operators, and it announced six actively validated services that will be secured through EigenLayer’s restaking on Friday. 
  • This launch opens up restakers on the platform to actually start earning additional yield on their staked ETH, which previously they were not. For the most part, people were depositing early into the protocol in anticipation of the higher yield and for speculation of an airdrop as EigenLayer dealt out restaking points.
  • Naturally, in order to use EigenLayer, you have to first be staking ETH. You can either do that yourself by spinning up a validator, or you can use a liquid staking protocol to get a staking derivative token to deposit. To get your hands on liquid staking token, or LST, you can deposit to one of these protocols, or you can also buy them since the point of having an LST is to give the holders liquidity, and some people are looking to get access to the underlying value. 
• Since one of the main ways to get into EigenLayer is to contribute to securing Ethereum, we have seen a surge in new validators recently.
  • As a reminder, Ethereum completed The Merge back in September 2022, converting the network to Proof-of-Stake. Prior to The Merge, people were already allowed to spin up a validator on the Beaconchain, which was running in parallel with the Ethereum mainnet. But staking really exploded in popularity in the wake of the Shapella upgrade, which took place in April 2023 and enabled withdrawals of the staked ETH, which previously could not be accessed. The withdrawal feature gave some people peace of mind that their funds were safe and could be returned. 
  • In turn, there became a huge line of validators looking to join the Ethereum network. The validator queue got as long as 96,000 back in June 2023. The validator entry queue is essentially in place to ensure stability in the Ethereum network and prevent too many validators from coming online (or leaving in the case of the exit queue) in one epoch. But as time moved on, the queue cleared out and the rush into becoming an Ethereum validator slowed. The queue stayed below 10,000 from October 2023 through the end of March this year. 
  • But now, as more people try to join in on the restaking hype, the validator entry queue has climbed to 20,000, signaling strong demand to secure the network. 

Sue you

Source: Dune Analytics

• April is proving to be a month to remember for the decentralized exchange powerhouse, Uniswap.
  • For starters, it crossed the $2 trillion in total trading volume on April 5th, solidifying its status as a major DEX player as competition heats up across networks, particularly on Solana, where Uniswap does not have a presence. 
  • On a more sour note, the platform got served a Wells notice from the Securities and Exchange Commission last Wednesday, with many thinking this signaled the start of a war on DeFi.  
• The SEC going after crypto is nothing new, but in the past, we have primarily seen big-name cases for the agency being brought against centralized players.
  • Uniswap is somewhat of a unique case. Many crypto platforms have backed off from U.S. clientele due to fears of stringent regulatory action. In turn, some DeFi platform frontends block users with a U.S. IP address (although some people circumvent this with a VPN), but Uniswap does not engage in this practice. While frontends are typically one of the most user-friendly ways to interact with DeFi protocols, they are not the only way. 
  • In Uniswap Labs’ mind, it simply operates a website that gives people access to the Uniswap protocol, which is simply a set of smart contracts. This does make them a ripe target for the SEC, especially given their market dominance. 
  • Online, there has been an outcry of support from the crypto community, with many noting the significance of the fight. Uniswap founder Hayden Adams posted on X that he’s not surprised, “just annoyed, disappointed, and ready to fight.”
• There is still a long road ahead for this battle. Coinbase received their Wells notice back in March 2023, and so far, not much has come of it, even over a year later. 
  • The price of UNI, the Uniswap governance token, did dip a bit on the news, dropping from over $11 right before the announcement to hovering below $9. However, UNI got a boost in late February from a proposal to grant rewards to token holders, so the token was still up 23% year-to-date on Friday. However, the market crash over the weekend pushed UNI down further. 
  • And it seems interest in Uniswap itself is not waning, with daily volumes climbing over the weekend and continually hitting the $3 billion threshold. 
  • The fees collected by the exchange’s frontend skyrocketed toward the end of last week, as well, but not due to increased usage. Uniswap Labs hiked the 6-month-old 0.15% charge that was added to certain swaps on its web interface to 0.25%.
  • The change seemed to go into place just hours after Uniswap announced its Wells notice without much announcement. It’s possible that the increased fees will help go towards bolstering Uniswap Labs’ coffers ahead of their legal battle. On Ethereum alone, the interface has generated over $500,000 of revenue in one day after the switch. 

Going for gold

Source: The Block

• If you read any newsletters that are more macro-oriented along with what you read from The Block, then perhaps you’ve been caught up with the fact that gold has continued to surge to record highs recently, continually being boosted by geopolitical tensions. 
  • Given the recent success of the safe-haven asset, it would perhaps be expected that this would translate over to some more action in the gold stablecoin market. 
  • However, the gold stablecoin market has historically been pretty bleak. The two major players are Tether, with XAUT, and Paxos, with PAXG, but compared to the two firms’ dollar stablecoins, USDT and USDP, these seem like just a blip. Even with the recent run up in gold, XAUT has a market cap of $580 million, and PAXG’s even lower at just under $450 million.
  • XAUT’s supply has been constant, around 246,500 since March 2022, whereas PAXG’s supply has been declining from a peak of around 340,000 in August 2022 to just 182,650 now.
• Looking at trading volume on centralized exchanges for these gold stablecoins, we have seen a bit of an uptick, but that can partially be attributed to the rising value of gold.
  • The 7-day moving average of trading volumes for both stablecoins climbed relative peaks in mid-March and then began falling again despite gold continuing to climb. The peaks were also much lower than highs reached earlier in these stablecoins’ careers, like during the 2023 regional banking crisis. 
  • Volumes have now been on a slow rise since hitting a low in May. This weekend did prove pivotal for PAXG, though, as its volume (un-averaged) jumped up to $71 million on April 13th, the highest level since May 2022, as reports of Iranian drone attacks on Israel stoked fears of broader conflict. XAUT volumes also picked up slightly, but not to the same degree. 
  • That being said, $71 million of trading volume is still quite low for a crypto asset. The larger dollar-pegged stablecoins tend to do billions of dollars of volume a day on-chain alone. On CEXs, volumes for dollar stablecoins are naturally much higher since many exchanges that don’t support USD use these stablecoins as a main quote asset. They are even popular on exchanges with USD support to offer a crypto-native option for trading. 
  • So, it seems as though the gold-backed stablecoin market is still a pretty niche subsector despite the recent popularity of gold in the broader market.