Data & Insights: Solana Soars, Eigen Exodus

To DEX or not to DEX

• Decentralized exchanges (DEXs) are carving out an increasingly significant slice of the crypto trading pie.DEX to CEX Spot Trade Volume (%), the ratio of DEX to centralized exchange (CEX) spot trade volume, is on track to hit a new all-time high, currently sitting at 13.76% in July 2024, edging past the previous record of 13.7% set in May 2023.
  • This milestone comes as DEX volume reached $123 billion in June, compared to $1.11 trillion in volume on CEXs for the same period.
  • While impressive, it's worth noting that DEX volume actually peaked earlier this year at $203 billion in March 2024, suggesting there's still room for growth in this trend.
• The landscape of DEX trading is evolving, with some interesting shifts in market share:
  • Uniswap continues to dominate, accounting for about 40% of DEX volume in the past few months.
  • Notably, Raydium has seen substantial growth, more than doubling its market share from 8% to 19% since the start of 2024.
• Several factors are likely contributing to the increasing appeal of DEXs:
  • Improved liquidity: DEXs have made significant strides in addressing one of their historical weaknesses, making it easier for users to trade larger amounts with less slippage.
  • Enhanced user experience: Many DEXs have invested heavily in creating more intuitive interfaces, lowering the barrier to entry for new users.
  • Regulatory pressures: As centralized exchanges face increased scrutiny, some traders may be shifting to DEXs to maintain privacy and avoid potential restrictions.
• While the growth of DEXs aligns with crypto's ethos of decentralization, it's not without challenges:
  • Smart contract risks: DEXs rely on complex code that, if flawed, could lead to significant losses for users.
  • Regulatory uncertainty: As DEX usage grows, it may attract more attention from regulators, potentially leading to new compliance challenges.
• As DEXs continue to gain traction, they're not just changing how we trade crypto—they're reshaping the entire financial landscape of the blockchain world.
  • This shift towards decentralization aligns with the core ethos of crypto, potentially offering users more control and transparency in their trading activities.
  • The competition between DEXs and CEXs drives innovation across the entire crypto trading ecosystem, ultimately benefiting users with more choices and improved services.

Opensea setting sail again?

• The NFT market continues to navigate choppy waters in 2024, with June volumes hitting $300 million - a far cry from January's high of $867 million.
  • This decline reflects broader market trends, with NFTs feeling the pinch as one of the more speculative assets in the crypto ecosystem.
  • Despite the overall downturn, the battle for marketplace dominance is heating up once again, offering a fascinating glimpse into evolving trader preferences and platform strategies.
• Blur has long been the undisputed volume leader, consistently capturing 60-80% of the market share this year. The platform's success can be attributed to a few factors. 
  • The BLUR token: This not only provided trading incentives but also gave users a stake in the platform's success, fostering a loyal community. 
  • Implementing an NFT 'order book': This feature introduced more advanced trading tools to NFT trading, allowing for more efficient price discovery and deeper liquidity.
• Meanwhile, OpenSea, once the uncontested leader in the space, is showing signs of a potential comeback.
  • OpenSea's market share has surged to 37.34%, up from a low of 13.19%, suggesting that the platform's established brand and user base still hold significant appeal.
  • This resurgence comes despite OpenSea not having launched a token of its own, which could be fueling speculation that OpenSea will drop its own token. 
• However, the current state of the NFT marketplace landscape still shows that users' preferences are clear. 
  • Traders are increasingly gravitating towards platforms that offer more than just basic buying and selling functionality.
  • The success of Blur's orderbook system suggests a demand for more sophisticated trading tools in the NFT space, potentially blurring the lines between NFT and traditional asset trading.
  • However, OpenSea's resilience indicates that factors like user experience, brand recognition, and established networks still play a crucial role.
• As we move into the second half of 2024, the NFT marketplace battle continues to evolve. While Blur currently holds the upper hand, OpenSea's recent gains show that the game is far from over. Traders and investors alike will be watching closely to see how these platforms innovate to capture market share in an increasingly competitive landscape.

Coinbase International’s Futures Fireworks

• Coinbase International, the popular exchange's futures arm, lit up the crypto markets on July 5th with $3 billion in daily volume. This marks the highest trading activity since April 2nd and a dramatic surge from the platform's recent average daily volume of under $1 billion.
  • The volume spike coincided with a significant market downturn, as Bitcoin dipped to a low of $53,600 before staging a recovery. This price action triggered a flurry of trading activity, with the highest BTC price fluctuation reaching 7% on the day.
  • Ethereum and Bitcoin led the charge, contributing approximately $1.1 billion and $1.2 billion in volume, respectively. This near-equal split between the two largest cryptocurrencies highlights the balanced interest from traders during volatile market conditions.
• It's crucial to note that this volume surge occurred on Coinbase International, which deals exclusively in perpetual futures contracts. This suggests a heightened interest in leveraged trading during the market downturn, as traders likely sought to capitalize on (or hedge against) the sharp price movements.
  • The spike in futures trading volume during a downturn could indicate a mix of traders opening short positions to profit from falling prices and others buying the dip with leveraged long positions.
  • This event underscores the growing importance of Coinbase's futures offerings in the broader crypto derivatives market, which has seen substantial growth in recent years.
• While Coinbase is primarily known for its spot trading platform, which has become synonymous with retail crypto trading in the U.S., this volume spike on its international futures platform demonstrates the exchange's expanding footprint in the global crypto derivatives market.
  • The ability to attract $3 billion in daily volume suggests that Coinbase International is gaining traction among more sophisticated traders and institutions who typically dominate the futures markets.
  • This success in the futures market could be seen as a strategic diversification for Coinbase, potentially helping to offset any volatility in its retail-focused spot trading business.
• As the crypto market matures, increased volume on exchanges like Coinbase International highlights the increasing sophistication of trading strategies and the growing appetite for derivative products. We’ll keep an eye out to see if Coinbase can maintain this momentum in its futures offering and how it might impact the competitive landscape of crypto derivatives trading.

Solana Activity Soars, Market Cap Snores

• Over the past several weeks, we’ve noticed a notable surge in activity within the Solana network, with the 7-day moving average (7DMA) of daily non-vote transactions reaching 46 million, its highest level in over 2.5 years since January 2022. This marks a near-doubling from its most recent low of 21.9 million transactions in late April 2024.
• Non-vote transactions refer to all transactions on the network that are not related to validator voting processes, which can include various activities such as transfers, smart contract interactions, and decentralized application (dApp) usage
• This surge in non-vote transactions can be attributed to the booming "memecoin" economy within the Solana ecosystem, with platforms like pump.fun having contributed significantly to this growth. 
• Despite this rapid increase in transactional activity over the past three months, the market capitalization of SOL stands at $67 billion at the time of writing. This is approximately 20% lower than its value in late April 2024 and over 25% off its all-time high at the beginning of April 2024, according to CoinGecko.
• This reveals a significant discrepancy between the volume of non-vote transactions on the network and the market capitalization of Solana’s native token, as the latter has not reflected the notable rise in network transactions.
• According to its 7DMA, the Solana network boasts 1.45 million active addresses per day, indicating that the average active user conducts over 30 transactions daily. This is a stark yet expected contrast to Ethereum, where the average active address transacts just twice a day.
• While this metric does not account for potential spam addresses and bots, the high level of activity is a positive indicator of the Solana network’s overall health and usage.
• The disconnect between transaction volume within the network and the market capitalization of SOL raises questions, specifically whether the market is not yet fully appreciating the increased activity on the network or whether the market considers that the influx of transactions might be driven by automated bots or the “memecoin economy” do not necessarily reflect genuine user adoption in terms of utility.
• Furthermore, the sustained high levels of activity highlight the improvement in Solana's infrastructure, which continues to process a massive number of transactions smoothly. A stark contrast to 2 years ago when high levels of activity often overloaded the network, resulting in frequent network outages.

EigenLayer and Restaking Exodus

• On July 11, 2024, EigenLayer experienced its largest single-day net outflows in its history, with over $135 Million worth of net outflows, translating to approximately 43,550 ETH at that time. 
• Meanwhile, EigenLayer has seen over $68 Million worth of net outflows over the past week after taking into account the inflows that occurred on certain days.
• These net outflows, which have not been isolated incidents over recent weeks, have led to the total value locked (TVL) in EigenLayer to fall by ~27% from its all-time high of $20.1 Billion in early June 2024 to $14.66 Billion at the time of writing. This has resulted in EigenLayer losing over $5.4 Billion worth in TVL in a span of just over a month.
• This downward trend is not exclusive to EigenLayer. The wider restaking sector has also seen notable declines in TVL in recent weeks. Renzo, for example, has lost nearly half its TVL in just a month, plummeting from $4.07 billion in early June 2024 to $2.09 billion now. Other restaking protocols, including Puffer, KelpDao, Swell, and Eigenpie, have lost, on average, 22% of their TVL during this period.
• The decline in TVL can be attributed to several factors, with the most significant one likely being the announcement and/or launch of the largest restaking protocols’ respective tokens, such as Renzo with REZ and EigenLayer with EIGEN, marking the end of their respective airdrop campaigns. This has likely disincentivized farmers, leading to capital rotating out of these protocols into more promising airdrop farms.
• Interestingly, restaking protocols that have not announced a token launch and still have ongoing airdrop campaigns, such as Swell, have also experienced a notable decline in TVL. This could be attributed to market sentiment viewing Swell as an underwhelming airdrop opportunity, leading airdrop speculators to deploy their capital elsewhere. Additionally, the restaking sector might be perceived as oversaturated, further contributing to the decline.