Data & Insights: Magic Eden's Sky High Volumes and Polymarket's Dominance

I’m tired boss

• Earlier this week on Tuesday, August 27, 2024, we saw yet another day of mass-long liquidations
  • This time, there were long liquidations totaling over $273 million with ~42% coming from Binance.
  • Tuesday's liquidation event alone made up over 41% of the week's total of nearly $658 million in long liquidations
  • These leveraged wipeouts we’ve grown so familiar with follows another poor week for BTC and ETH in terms of price performance, each experiencing a -9% week-over-week price drop.
  • This was further exacerbated by even deeper selloffs from altcoins. GMCI indexes for various sectors of altcoins such as Layer 1s, DeFi and Memecoins have all experienced weekly declines of 9%, 10.3% and 10.4%, respectively.
  • Meanwhile, AI-related tokens have been one of the worst-performing sectors of the market this week as exhibited by a 17.6% decline for the GMAI index last week following NVDA’s earnings report on Wednesday, August 28, 2024.
• Last Tuesday’s long liquidation event was also the 14th different single-day long liquidation worth over $250 million we’ve experienced in the last six months alone
  • The picture looks even more bleak when you zoom in further. As August 2024 has drawn to a close, there have now officially been 7 different single-day-long liquidations worth over $150 million for the month alone.
  • We lost count of how many mass liquidation events we've covered over the past couple of weeks. I'm tired boss, and it seems like the rest of the market feels the same way too.

Lending itself to pain

• The month of August 2024 has now concluded. With this, the monthly total liquidations in on-chain lending markets on Ethereum have reached upwards of $436 million.
  • Aave was responsible for $289 million, or 66% of the total, of these liquidations.
  • This represents the second largest monthly on-chain lending market liquidations in history, behind May 2021, which at the time saw ~$671M in liquidations.
  • I hope you’re not wondering what might have caused these abnormally high sums of on-chain lending liquidations because the answer is painfully obvious
  • The price of ETH recorded a -22% MoM decrease in August 2024, even going as low as 35% at the month’s lowest price point.
  • As ETH is widely used as collateral in DeFi lending platforms, especially on Aave, the price drop led to a decrease in collateral value for many loans.
  • This triggered a wave of liquidations as loan-to-value ratios fell below the required thresholds. The cascade effect of liquidations further exacerbated the situation, contributing to the high volume of liquidations observed.
• On-chain participants shouldn’t feel too lonely in this regard tho, as the cascading effects of the market’s drastic selloffs have not isolated themselves to just on-chain lending markets
  • As discussed previously, the market’s poor price performance in August has also caused 7 different days of futures long liquidations worth over $150M.
  • On-chain lending, perps on CEX, perps on DEX, on-chain activity, gas fees, you name it. The vast majority of crypto sectors have been victims of the brutal down-trending price action we have experienced in recent months.
  • Although one sector, which we cover later in this week’s newsletter, has been on an unrelenting upward trend this year with no signs of slowing down anytime soon, until at least the US presidential election in November.

Exchange volume returns

• August has marked the second-highest month for USD support exchange volume in 2024. With a staggering $193 billion in trades, the market has sent a clear signal that appetite for crypto is far from waning.
  • This volume surge falls second only to March's $276 billion, suggesting we might be witnessing the early stages of a resurgence in volume.
  • Notably, Crypto.com has emerged as a major winner in this uptick, surpassing Coinbase in volume and market share. The exchange now commands an impressive 49% of the USD support exchange volume market share, setting new personal records in the process.
  • While there hasn't been a significant catalyst like an ETF this month, the increasing intersection of crypto and politics could be playing a role. As the U.S. presidential election looms, candidates like former President Trump are ramping up efforts to court crypto voters, potentially driving increased interest and activity.
• This surge in trading volume carries significant implications for the crypto ecosystem:
  • Market Confidence: High volumes often signal strong market confidence, suggesting that despite recent price volatility, traders remain actively engaged.
  • Exchange Dynamics: The shifting landscape among exchanges, with Crypto.com's rise, hints at evolving trader preferences and potentially new competitive strategies at play.
  • Regulatory Attention: As volumes surge and crypto becomes a talking point in political circles, we may see increased regulatory scrutiny in the coming months.
  • Bull Run Indicators: Historically, sustained high trading volumes have often preceded or accompanied bull markets. Are we seeing the early signs of the next major crypto rally?
• As we move into the final quarter of 2024, all eyes will be on whether this volume surge can be maintained or even surpassed. With political attention on crypto intensifying and market dynamics shifting, the stage is set for an exciting and potentially volatile end to the year.

Betting big on the elections

• Polymarket, the crypto-powered prediction market, is continuing to grow its monopoly in the prediction market space, with its open interest skyrocketing past the $100 million mark. This meteoric rise signals a growing appetite for cryptocurrency-based political forecasting as the U.S. presidential election looms on the horizon.
• Polymarket's open interest has experienced a jaw-dropping 1,429% increase since the start of the year, climbing from a modest $7 million to an impressive $107 million. This growth trajectory speaks volumes about the platform's increasing popularity and the public's eagerness to put their money where their predictions are.
  • The presidential election is the star of the show, commanding a whopping 77% of Polymarket's weekly volume. This concentration suggests that crypto enthusiasts and political junkies alike are flocking to the platform to speculate on the outcome of one of the most anticipated political events of the year.
• While Polymarket reigns supreme, new contenders are entering the ring. Solana-based prediction market Drift recently launched its BET product, making waves with a significant one-day volume spike of $20 million. However, BET's average daily volume has since settled to less than $1 million, suggesting that there's still work to be done if they want to overthrow Polymarket. 
• This surge in prediction market activity carries several implications for the crypto ecosystem:
  • Mainstream Adoption: The growing interest in crypto-based prediction markets could serve as a gateway for broader crypto adoption, especially among those interested in politics but new to blockchain technology.
  • Market Sentiment Indicator: With such a large portion of volume focused on the presidential election, Polymarket could become a key indicator of market sentiment regarding the potential impact of election outcomes on the crypto industry.
  • Regulatory Scrutiny: As these platforms gain popularity and handle larger sums of money, they may attract increased attention from regulators and potentially regulatory scrutiny from US regulators.
• As we inch closer to the 2024 presidential election, all eyes will be on Polymarket and its competitors. Will we see open interest continue to climb? Could a dark horse platform emerge to challenge Polymarket's dominance? Or will regulatory concerns put a damper on the prediction market party?

Working some Magic

• Magic Eden, the multi-chain NFT marketplace, is conjuring up a storm in the NFT world, with daily trading volumes skyrocketing from a modest $1 million to a staggering average of $30 million. 
• The platform recently hit a jaw-dropping peak of $60 million in daily volume, showcasing the renewed interest in digital collectibles across multiple blockchains.
• This surge coincides with Magic Eden's announcement of its forthcoming utility token, ME, being developed by the ME Foundation. While launch details remain under wraps, the mere prospect has clearly ignited trader enthusiasm.
  • "The era of single chain maximalism is over," declared ME Foundation Director Matt Szenics, highlighting Magic Eden's $6 billion in total trading volume across various networks – a whopping 60% of all NFT revenue.
  • In a testament to its multi-chain prowess, Magic Eden reportedly commands 80% of all Bitcoin Ordinals and Runes trading volume, solidifying its position as a cross-chain NFT powerhouse.
• This resurgence in NFT trading volume on Magic Eden could carry significant implications for the broader crypto ecosystem:
  • NFT Renaissance: The dramatic volume increase suggests a potential revival of the NFT market, particularly on Solana and Bitcoin which had been relatively quiet in recent months.
  • Multi-Chain Adoption: Magic Eden's success across different blockchains underscores the growing importance of cross-chain compatibility in the NFT space.
  • Token Economics: The anticipation surrounding the ME token highlights the continued relevance of token incentives in driving platform engagement and liquidity. 
  • Market Consolidation: With NFTs generally out of favor, Magic Eden's dominance in Solana-based NFT marketplaces points to a potential consolidation in the sector, with stronger players absorbing market share.
• As the crypto world watches Magic Eden's ascent, questions abound. Will this volume surge sustain itself, or is it merely a temporary boost from airdrop speculation?