Data & Insights Recap: Liquidation Fireworks and Farcaster's Surge

Liquidation Fireworks

• While the US celebrated Independence Day, crypto bears had their own festivities, with significant selloffs and liquidations marking the 4th of July celebrations.
  • From the weekly open, BTC and ETH have tumbled by more than 14% and 18%, respectively, to each of their lowest levels of $53.5K and $2.8K that occurred on Friday, July 5th.
  • According to Coinglass, over $416 million worth of long liquidations occurred on centralized exchanges during the 4th of July, followed by an additional $320 million the next day.
  • These selloffs brought the total value of long liquidations for the week towards over $1B.
  • It’s not all gloom and doom, though, as both BTC and ETH experienced a minor relief bounce over the weekend, albeit short-lived, with prices for both assets seeing an ~8% from their respective bottoms before falling back under $56,000 and $3,000. A treat for volatility lovers, with BTC’s annualized 30D volatility continuing its upwards trend, recording 37% as of Sunday, July 7th.
  • However, we’ll have to wait and see whether this short-term positive momentum could pave the way for further recovery in the market or whether we’re headed towards a deeper sea of red down the line.
• In contrast, the S&P500 and NASDAQ continued their strong performances, ending the week in the green. This divergence pushed BTC’s Pearson correlation with the S&P 500 and NASDAQ to -0.78 and -0.79, respectively, the lowest since December 2019!
• The substantial selloffs in the crypto markets this week can be largely attributed to the combined selling pressures from the German government and Mt. Gox.
  • For context, the German government has been actively selling BTC seized from a film piracy operation, where they originally confiscated 50,000 BTC. On-chain data shows that they still hold over 41,000 BTC as of this writing.
  • Meanwhile, defunct exchange Mt. Gox was set to begin distributing $9 billion worth of BTC and BCH repayments starting July 2024.
  • On-chain data shows that an address believed to belong to the German government sent 900 BTC to various centralized exchanges on the 4th of July.
  • Simultaneously, wallets labeled as Mt. Gox transferred 1,545 BTC, worth roughly $85 million at the time, to the centralized exchange Bitbank.
  • These significant BTC movements and deposits coincided with a ~5% drop in BTC's price that same day, fueling strong speculation that these events were the primary catalysts for the sell-off.

Crypto.com's Retail Therapy

• Crypto.com has been steadily climbing the ranks in terms of USD support exchange volume market share. This trend could suggest a potential resurgence of retail participation in the crypto markets, as Crypto.com users have historically been retail investors. 
  • As of July 2024, Crypto.com's market share has reached 31%, marking a significant recovery towards its peak of 44% observed in April 2022. This growth appears to be coming at the expense of smaller U.S. exchanges, who collectively saw their market share diminish from 14% to 12% this year.
  • Coinbase and Kraken are the dominant exchanges in the US, with Coinbase consistently holding around 45% of the market share. Kraken's market share has slightly declined from roughly 20% to 17% this year.
• Crypto.com's market share has historically been associated with increased retail trader activity. This could signal a broader trend of retail investors re-entering the crypto space or shifting their preferences among exchanges.
  • Crypto.com's trading volumes have remained relatively consistent at around $30 billion monthly. This suggests that the exchange's users have been sticky while other exchanges saw a reduction in volume. 
• Crypto.com has historically been a big spender in the marketing department. The exchange has a history of high-profile initiatives, including:
  • Formula 1 Sponsorship: In 2021, Crypto.com became a global partner of Formula 1, one of the world's most-watched sports. This multi-year deal included a track-side presence at F1 events and co-branded digital content, exposing the Crypto.com brand to millions of viewers worldwide.
  • Arena Naming Rights: In a move that made headlines, Crypto.com secured the naming rights to the former Staples Center in Los Angeles in 2021. The deal, reportedly worth $700 million over 20 years, renamed the iconic venue to "Crypto.com Arena," home to major sports teams like the LA Lakers and LA Clippers.
• These high-profile moves have undoubtedly boosted Crypto.com's brand recognition, potentially contributing to its current market share growth.
• This shift in market share could lead to some interesting implications. The apparent influx of retail traders could inject new dynamism into the crypto markets, potentially influencing market behavior. However, Crypto.com’s native coin CRO is down 9.4% in 2024. We’ll keep an eye out for this trend to see if anything else develops.

Depositors Giveth and Withdrawers Taketh

• Unique depositors into Ethereum layer 2 rollup solutions, specifically optimistic and zero-knowledge (ZK) rollups, have reached a yearly low, with just 34.92K users over the past week.
  • This represents a 33% decrease compared to the previous week’s total and is a stark contrast to mid-April 2024 when this figure reached upwards of 250K unique depositors in a single week.
  • This week’s figures mark a nearly two-year low, highlighting a significant drop in user engagement within Ethereum rollup solutions. The decline may be attributed to various factors, including shifting user preferences, a lack of ecosystem growth in terms of dApps, as well as a lack of incentive for users to continue using these rollups following airdrops from Arbitrum, Optimism, ZKSync and Starknet, all of which occurred within the last two years.
• With the recent decline in unique depositors, Ethereum layer 2 rollups have experienced a corresponding drop in their Total Value Locked (TVL).
  • Near the beginning of June 2024, rollups received 36.1K unique depositors for the week, which at the time marked the lowest figures since October 2022. Notably, this period also saw the combined TVL of both optimistic and ZK rollups record an all-time high of $25.7 billion.
  • Since then, their combined TVL has fallen by over 20%, now standing at just over $20.5 billion at the time of writing.
  • The combined TVL for optimistic rollups has decreased by over 17% from ~$21.5 billion at the beginning of June 2024 to ~$18 billion at the time of writing. Meanwhile, the combined TVL for ZK rollups has seen a more drastic decline, falling by over 33% from $3.77 billion to $2.5 billion at the time of writing.
  • This decline is likely a direct consequence of the reduced number of unique depositors engaging with rollup solutions over the past several weeks, with the decline in TVL for ZK rollups also heavily caused by recent airdrops for Starknet and ZKSync.
  • The recent decline in ZK rollups can be further explained by the recent surge in unique withdrawers over the past few weeks. In the last week alone, ZK rollups saw over 20K unique withdrawers. While this figure is substantial, it is notably less than the previous two weeks, which saw weekly unique withdrawers peak at 40K and 48K, respectively.
• Despite the recent decline, Layer 2 solutions have seen an increase in TVL this year. 
  • TVL on Layer 2 chains has rocketed by 74.77% this year, climbing from $22.6 billion to $39.5 billion since January. 

Farcaster's Fantastic Surge

• Farcaster, the decentralized social media protocol, is experiencing a remarkable uptick in user engagement. Data shows that the platform reached an all-time high of 73,700 unique casters last week, marking a significant milestone in its growth trajectory.
  • This surge in unique casters comes alongside impressive overall stats: the platform now boasts 62.58M total casts, 280.12K total users, and 3.05K total hubs. With 190.54K connected addresses and a network size of 142.83 GB, Farcaster is carving out a significant space in the decentralized social media landscape.
  • Notably, the protocol has generated 611.03 ETH in revenue, demonstrating its potential for value creation within the ecosystem.
  • A possible explanation for the surge in users could be founder Dan Romer’s announcement that they are working on a new tool to enable in-app payments using USDC. 
  • The goal of the feature is to solve the persistent problem of having to look up someone's alphanumeric wallet address. The tool will enable users to send directly to another person's Farcaster ID. 
• Farcaster offers users a unique social media experience. Users can post text-based content, optionally including images, and join topic-specific communities. What sets Farcaster apart is its blockchain integration - users sign up with a wallet, enabling direct rewards and community engagement in ways traditional social platforms can't match.
• While the platform shows promising growth, some metrics suggest users aren't finding longer-term motivation to stay on the platform beyond using the initial exploration of the app.
  • Daily active casters and average casts per day show a slight downtrend over the past month. The recent spike in unique casters could be a new wave of users who are interested in exploring the platform. 
  • Interestingly, the daily average links have seen a dramatic uptick in the last few days, potentially indicating increased content sharing and network effects.
• The platform's Cast Activity heatmap also reveals interesting usage patterns.
  • Peak activity appears to occur during U.S. daytime hours, hinting at a concentration of users in those time zones. However, the consistent activity across all hours suggests a growing global user base.
• VC Backer Breck Stodghill of Haun Ventures said that for Farcaster to be successful, the team needs to continue focusing on building quality features and usable products.  

New BTC Addresses Surge

• Despite the market downturn, the number of new addresses on the Bitcoin network has reached a two-month high, with the 7-day moving average (7DMA) recording over 317,000 new addresses on Friday, July 5th.
  • This increase is particularly noteworthy given that BTC's price has fallen by over 10% during the same period.
  • To put this in perspective, the beginning of last week saw the 7DMA at just 263,000 new addresses. This marks a substantial 20% week-on-week increase.
• So, what does this mean for the Bitcoin network?
  • One might assume that an increase in the number of new addresses in a network would lead to increased activity, right? Well, not necessarily.
  • The 7-day moving average of the average transaction fee on Bitcoin reached lows of just $1.75. Meanwhile, the 7-day moving average of the average transaction fee on Ethereum stands at $2.5. For context, just three months ago, the 7DMA average transaction fee on Bitcoin was over ten times higher than Ethereum’s.
  • Meanwhile, the total fees paid on Bitcoin have also severely underperformed Ethereum, with the 7-day moving average of total fees paid on the network being $1M, just 1/3rd of Ethereum. A notable fall from grace for the Bitcoin network.
  • This discrepancy highlights an intriguing dynamic within the Bitcoin network. While new participants are joining, they are not necessarily translating into higher transaction fees or increased on-chain activity for the time being.