Data & Insights: Base’s New Record Highs & NBA Topshot’s Return

No Sign of (SOL)wing Down

• Solana's DEX ecosystem has reached a notable milestone, with its weekly trading volume reaching 168% of Ethereum's mainnet DEX volume - a record high for this metric. 
  • This represents a big shift from the start of the year when Solana's DEX volume was just 48.85% of Ethereum's. This metric is calculated by dividing Solana's weekly DEX volume by Ethereum's weekly DEX volume and provides insight into the relative trading activity between the two chains.
  • October has seen Raydium, Solana's largest DEX, generate $22.3B in volume, while Uniswap on Ethereum has processed $38B.
  • Raydium has significantly expanded its market share from 7.6% in January to 18.4% in October, while Uniswap maintains its position as the dominant DEX in the Ethereum ecosystem.
• On Solana, the rise of pump.fun tokens have been a major driver of DEX volume, with the platform facilitating high-frequency trading of new tokens.
  • This week, the emergence of an AI agent has caught the attention of the crypto industry. Truth Terminal, an AI bot has released several tokens on Solana, prompting lots of social media attention and on-chain buzz. 
  • Solana's DEX volume surpassing Ethereum's mainnet volume is significant, but it's important to note that Ethereum's total DEX ecosystem extends beyond the mainnet to include Layer 2 solutions. As Layer 2s continue to become more popular, they could have a larger impact on the SOL v ETH DEX volume share. 
  • The nature of trading activity also differs between chains. Raydium’s top trading pools notably include trading of newer tokens, while Uniswap tends to see more established token pairs. 
• While the volume ratio represents a notable milestone for Solana, it's important to consider that raw volume metrics don't necessarily reflect the overall health or long-term sustainability of either ecosystem. The different trading patterns and user behaviors on each chain suggest they may be serving distinct market needs rather than directly competing.

Base Forges Forward

• Base, Coinbase's Layer 2 solution, has reached a new milestone with daily transactions exceeding 6 million on October 16th, marking significant growth from 330,000 transactions at the start of 2024.
  • The network's transaction count currently sits at 5.6 million at the time of writing, demonstrating sustained high activity levels despite normal fluctuations.
  • Base's Total Value Locked (TVL) has reached $2.46 billion, with DEX activity emerging as a primary driver through platforms like Aerodrome and Uniswap, which combined generate $5.7 billion in weekly trading volume.
• Base is also preparing for a significant technical upgrade with the implementation of permissionless fault proofs on October 30th this week:
  • Fault proofs serve as a security mechanism that allows network participants to challenge and verify the validity of transactions, enhancing the network's trustlessness.
  • This implementation aims to decentralize the network by removing single-entity control over transaction verification, potentially increasing security and censorship resistance.
• Base's rapid growth appears to be catalyzing a broader industry shift toward exchange/protocol-operated Layer 2s. 
  • The trend of major exchanges and protocols launching their own L2 solutions indicates a potential shift in how we approach scalability and capturing market share. 
• The success of Base's model—leveraging the exchange’s existing user base while maintaining technical compatibility with Ethereum—has provided a blueprint for other major players in the crypto space and could lead to more Layer 2 networks. 
  • Kraken's announcement of Ink suggests that companies are recognizing the potential benefits of operating their own L2, including reduced transaction costs for users and new potential revenue streams.
  • Similarly, Uniswap's move to develop Unichain further validates this approach, indicating that even decentralized protocols see value in controlling their own scaling infrastructure.

Onchain Year Round

• As October draws to a close, the DEX to CEX spot trade volume ratio stands at 14.12% as of the time of writing on October 27th.
  • This metric is the proportion of decentralized exchange (DEX) volume relative to centralized exchange (CEX) volume
  • The data has also been meticulously filtered to exclude flash trades—temporary, large-volume trades made using borrowed funds and repaid quickly. This ensures the DEX to CEX ratio reflects genuine market activity rather than artificial inflation of trading volume.
• For context, in January 2020, the ratio was a mere 0.04%, reflecting the dominance of centralized exchanges.
  • Over the next few years, we observed slow but steady growth in decentralized trading, as reflected in the ratio growing to 2.81% in January 2021, 11.2% in January 2022, 7.65% in January 2023 and 9.37% in January 2024.
  • Fast forward to October 2024, and we’re witnessing one of the sharpest increases in the DEX to CEX ratio to date. The current figure of 14.12% not only marks one of the highest points on record but also suggests that we’re nearing a new all-time high.
  • In fact, if we look at the trend over the past few months, this ratio has increased by an average of 8.5% every month since February 2024.
  • It is worth noting that this ratio is based on incomplete data for October, and the final figure could surpass this current peak once all the data is tallied.
• The increasing DEX to CEX ratio indicates that DEXs are capturing more market share than ever before as on-chain transaction speeds and costs have significantly improved over the years.

NBA Topshot Sales Hits 6-month Highs

• The 2024-2025 NBA season which began this week has propelled NBA Topshot NFT sales to their highest weekly levels since before the 2024 NBA playoffs began.
  • As of the week ending October 27, 2024, weekly sales have reached 43,600 NFTs, marking a significant resurgence in activity after a period of stagnation.
  • This represents a 94% increase compared to the previous week’s total.
  • Early 2024 saw relatively steady levels of activity, with weekly sales averaging around 43,000 NFTs in the months leading up to the 2024 NBA playoffs.
  • However, during and after the playoffs, there was a sharp decline in activity. Weekly sales averaged to just 26,000 NFTs in this period, reflecting a decrease in user interest during both the playoffs and the off-season.
• The data clearly shows that the excitement surrounding the start of the new NBA season has reignited interest in NBA Topshot NFTs.

MicroStrategy's Successful Strategy

• As of the time of writing, Microstrategy’s (MSTR) share price is up 238% year-to-date.
  • MicroStrategy has leveraged its corporate Bitcoin holdings to fuel exceptional performance to produce a staggering return that showcases its strategic positioning in both the enterprise software space and the cryptocurrency market.
  • At the beginning of 2024, MicroStrategy’s stock was already positioned for growth as it aimed to carry on momentum from the 353% gain it returned in 2023.
  • This strong performance was driven by the stock acting as a proxy for investors who wanted exposure to Bitcoin but through a publicly traded equity as the company holds a substantial portion of its reserves in Bitcoin.
• While Bitcoin itself has posted strong gains in 2024 so far, the MSTR share price has far outperformed the cryptocurrency.
  • BTC has a 60% YTD return at the time of writing, compared to the nearly 4X higher return provided by MSTR.
  • This stark contrast highlights the degree to which MicroStrategy’s stock acts as a leveraged bet on Bitcoin’s price movements.
  • MicroStrategy’s stock acts as a leveraged version of Bitcoin. The company’s use of debt to finance its Bitcoin purchases means that its stock price tends to move more sharply than Bitcoin itself. When Bitcoin rises, MicroStrategy benefits from amplified gains, as evidenced by the stock’s outperformance throughout the year.