Data & Insights: ETH ETFs, LayerZero Growth, and AI Token Insights

ETH ETFs: A Slow but Steady Burn

• We’ve just passed two months since the launch of the Ethereum ETFs in the US, and we thought it was an appropriate time to do a roundup. Since their launch on July 23, 2024, Ethereum ETFs have been chugging along, accumulating $13 billion in cumulative spot volume across nine funds. 
  • For context, the BTC ETFs surpassed $13B in cumulative volume in the first seven days. While the ETH ETF performance might appear weak, trading volume in the initial days was in line with analyst predictions.
  • Daily trading volumes have settled into a rhythm, consistently hovering between $100-250 million. While not as explosive as some had hoped, this steady flow indicates a sustained interest from institutional investors.
  • The Grayscale Ethereum Trust (ETHE) has remained the frontrunner, commanding a 40% of the volume share. With $4.23 billion in assets under management (AUM), ETHE accounts for nearly two-thirds of the total $6.7 billion AUM across all Ethereum ETFs.
• Despite the initial hype, the ETFs' impact on Ethereum's price has been muted. The lukewarm price action suggests that much of the anticipation may have been priced in before the ETFs hit the market.
• However, the importance of these ETFs extends beyond mere price movements:
  • They represent a crucial step towards mainstream acceptance and regulatory validation for the crypto industry.
  • The sustained on-chain activity generated by these ETFs is vital for the longevity of Ethereum miners, who face challenges with lower transaction fees in the post-Merge era.
• Looking ahead, the upcoming U.S. presidential election could provide an unexpected boost to the crypto ETF landscape. Both major candidates have signaled support for the industry, potentially paving the way for a more crypto-friendly regulatory environment.
• As we watch this space evolve, one question looms large: Can Ethereum ETFs replicate the success of their Bitcoin counterparts, or will they carve out their own unique path in the world of institutional crypto investments?

LayerZero to LayerHero ETH ETFs

• LayerZero, the cross-chain messaging protocol, is witnessing a resurgence in activity, with daily messages rising to 98,000 on Saturday. This surge comes hot on the heels of the protocol announcing a second airdrop, breathing new life into the ecosystem.
  • The recent spike represents a 433% increase from the previous low of 18,400 messages, signaling a renewed interest in the protocol.
  • This resurgence is particularly noteworthy given the protocol's recent lull in activity, which had seen daily messages hovering around the 20,000 mark for several weeks.
• The announcement of a second airdrop appears to be the catalyst for this sudden uptick in activity. LayerZero's strategic move includes an interesting twist:
  • Wallets that claimed ZRO tokens in the first airdrop but showed no subsequent activity are excluded from this round, incentivizing sustained engagement with the protocol.
  • This criterion serves as a clever mechanism to distinguish between genuine users and opportunistic "airdrop farmers," potentially fostering a more active and committed user base.
• The implications of this strategy extend beyond just boosting short-term numbers:
  • By rewarding active users, LayerZero is encouraging ongoing interaction with its protocol, which could lead to more organic growth and development of its ecosystem.
  • The 30-day claim window for the new airdrop could sustain this heightened activity level as users scramble to meet potential criteria for future token distributions.
• As people start to claim their tokens, we’ll have to keep an eye out for the daily activity of LayerZero.
  • Will this surge in activity translate into long-term adoption and use of the LayerZero protocol?
  • Or will we see a drop-off once the airdrop excitement fades, similar to patterns observed with other protocols post-token distribution?

Core Scaling Up Bitcoin

• The Core blockchain, a Layer 2 scaling solution for Bitcoin, is experiencing a rise in Total Value Locked, reaching an impressive $411 million. This surge represents a significant milestone in the evolution of Bitcoin's scaling ecosystem.
  • Core's TVL has jumped from near-zero in early 2024 to its current position, taking the top spot over other Bitcoin L2 solutions like Rootstock and Bitlayer.
  • This growth trajectory suggests a rapidly increasing interest in Bitcoin scaling solutions, potentially driven by the need for more efficient and cost-effective Bitcoin transactions.
• Core, like other Layer 2 solutions, aims to address Bitcoin's scalability issues:
  • By processing transactions off the main chain, Core likely offers faster and cheaper transactions while still leveraging Bitcoin's security.
  • The dramatic increase in TVL could indicate that users and developers are finding value in Core's approach to scaling Bitcoin.
• However, the sustainability of this growth remains a key question:
  • The concentration of TVL in Core, compared to other Bitcoin L2s, might suggest a "winner-takes-most" scenario emerging in the Bitcoin scaling landscape.
  • It's unclear whether this growth is driven by a few large players or represents broader adoption across the ecosystem.
• While Core's growth is impressive, it's important to note that the Bitcoin L2 space is still in its early stages:
  • The total TVL across all Bitcoin L2s remains a fraction of Ethereum's L2 ecosystem, indicating significant room for growth.
  • The success of Core could pave the way for increased innovation and competition in Bitcoin scaling solutions.

ChatGPT (Good Pumpable Tokens)

• The GMAI index, a measure of the market’s top AI tokens, was the standout performer amid last week’s market-wide bounce, increasing by over 30% this past week.
  • In comparison, the GM30 index, a measure of the top 30 tokens by market capitalization, recorded just a 9.8% increase.
  • Meanwhile, BTC and ETH recorded a 7.5% and 11.5% week-over-week increase, respectively.
  • The top 3 weighted assets of the GMAI index is FET, RENDER and TAO. Among these, TAO, the native token of Bittensor, was the strongest performer with a ~56% increase to cap off the week.
  • Meanwhile, FET and RENDER rose by roughly 20% and 14%, respectively.
• Bittensor is a peer-to-peer network that commodifies the creation, sharing, and maintenance of machine learning (ML) data.
  • Bittensor was previously covered in a research report by The Block Pro Research. 
• The resurgence of the “Crypto x AI” narrative as of late was likely catalyzed by the release of OpenAI’s o1 model on September 13, followed by rumors of OpenAI’s oversubscribed $6.5B funding round at a $150B valuation on September 20.
  • For context, the price of TAO has nearly doubled since the release of ChatGPT o1 at the time of writing. At the same time, FET and RENDER went up by 23% and 16% respectively, over the same time period.

Arkham’s Overnight Popularity

• Arkham Intelligence, the blockchain analytics platform, has seemingly gained over 490K new followers in a single day on X.
  • This does present a curious case as there have not been any fundamental catalysts or announcements that could’ve likely triggered this event. Moreover, it is also likely that the majority of these new followers are merely bots and not real people.
  • However, despite this, the contributions and viral posts that come from Arkham that could boost its socials cannot be discounted either.
• Just this past week, a viral case emerged of two suspects being charged over a crypto theft worth over $230 million.
  • This case was uncovered by ZachXBT, who regularly utilizes the Arkham platform to investigate onchain movement of funds.
  • However, it is worth noting that a number of other reasons over the week also likely contributed to the spike in Arkham’s X followers, such as them being the first known party to uncover the BTC holdings of the Kingdom of Bhutan, as well as regular updates on notable on-chain activity.
• Meanwhile, the utility token of the Arkham platform, ARKM, has increased by over 16% over the week.
• Arkham's growing influence underscores the increasing importance of transparency and security in the crypto industry.
  • By providing tools for on-chain analysis, Arkham enables researchers and investigators like ZachXBT to trace illicit activities and promote accountability among industry participants.
  • Their platform has become an valuable resource for exposing fraudulent schemes and uncovering hidden assets, which not only helps in legal pursuits but also in fostering trust within the industry.