Round Tripping
a weekly recap of the crypto ecosystem
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tl;dr: ETH supply reaches all-time lows, STG 10% supply reduction, bullish unlocks continue, the AI meta & market exhaustion, & NFT tokens ahead of BLUR’s launch
BTC dominance 39% | ETH dominance 18% | DeFi TVL $49.5B |
Total Crypto Market Cap $1.1T | Stablecoin Supply $137B |
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Over the past week+, we’ve had an onslaught of tradfi news that included a rate hike (.25 basis points) and FOMC, earnings from Apple, Amazon, Google, Microsoft, and Meta, non-farm payrolls, and more. Most of these events, thankfully, went essentially as expected with the exception being a brief after market hours (lol) scare when apple lost ~6% on the release of its earnings. Ultimately, the market quickly processed the news and Apple flipped green.
In crypto land, the above tradfi events having only brief negative impact lead to another week of good conditions for the crypto markets. More specifically, the good conditions this week, similar to the weeks prior, have continued to expand to the outer boundaries of the risk curve which has historically indicated broad market fatigue.
Every passing day comes with a growing number of crypto tokens looking to benefit from previously healthy market conditions that now entails efforts to reduce supply or rebrand to incorporate the most recent trend, AI, into their roadmap or protocol. This, along with several other factors, leads me to believe that the recent ~two month rally feels as if it it’s running on fumes evidenced by:
tokens that are providing the largest returns continue to shift to the outer boundaries of the risk curve which historically signals exhaustion & corrections with increased flows to BTC for safety — BTC dominance up, alts way down
stablecoin inflows, outside of the blip last week, continue to remain flat/down
narrative exhaustion with the most recent narrative, AI, speed-running the usual cycle rotation length to being played out in increasingly shorter timespans
total altcoin market cap staying relatively flat, CANTO being the exception, signaling that new money has yet to enter the ecosystem while the overall environment remains PvP where profits are taken to stables, BTC or ETH
All of that being said, I remain aligned with the thinking that 2023 will be filled with weeks to months of downwards chop with intermittent rallies similar to the past two months. Whether we call it several bear market rallies, an echo bubble, or insert your preferred terminology here, I think that the potential looming correction, along with others throughout the year, will be relatively short-lived before another rally commences.
The past few weeks are a great example of this as the above picture shows that BTC’s price today, ~22.6k is effectively the same as it was on January 20th while also being down ~7% since the recent 24.3k peak a week ago. Importantly, in the two weeks prior to that screenshot, BTC went from 16.8k to ~22.6k, something I’m expecting to see often throughout the year. As the old adage goes, two steps forward, one step back.
A fundamental change in market conditions not-withstanding (essentially CPI surprise increasing and equities selling off), 2023 seems likely to provide numerous cycles of the above. Weeks of relentless rallies where being constantly plugged in is rewarded with multiples of positive returns, which leads to risk shifting to the boundary edges, followed by days/weeks where the downward momentum feels overwhelming before the cycle repeats again.
While I’ve made the case for the market to be overextended, there are a few recent trends/narratives that remain semi-healthy. The first, least-healthy of these is centered around token unlocks and teams scrambling to announce something before unlocks or delaying them all together. This week, we saw The Sandbox announce that Saudi Arabia has, “signed a memorandum of understanding but without revealing details explaining the scope of the agreement.” Conveniently, the partnership between the Saudis and SAND came days before a scheduled toke unlock that will see ~$300M of tokens, 12.5% of the total supply, likely hit the market.
Continuing that trend, we also saw the X2Y2 team, ahead of their scheduled unlock, announce that none of the 25M team tokens or 12.5M treasury tokens would be sold. While commitment to the future growth of X2Y2 is definitively more authentic than the timely SAND announcement, X2Y2 has dually benefitted from that announcement and the other relatively healthy ongoing trend of NFT tokens rallying ahead of BLUR’s token launch on Tuesday the 14th.
X2Y2, LOOKS, and NFTX, while down from recent tops, are all up ~40%+ since I last wrote about the ongoing narrative in the January recap. While avenues to their mid to long-term success is opaque due to OpenSea and Blur’s dominance, NFT tokens could continue garnering momentum in the near term leading up to BLUR’s drop and assumed lofty valuation.
Historically, stimulus provided to the NFT ecosystem through airdrops (APE, LOOKS, X2Y2, etc.) has resulted in NFT prices rallying which is something to expect in the near-term following BLUR’s release. Obviously, heightened NFT activity contributes to gas fee increases, something we’ve seen in recent months through the open edition meta, which results in the slow burn of ETH supply.
ETH’s structural changes leading to a decreasing supply, something I’ve written about numerous times, is the last, and healthiest, ongoing trend. As you can see, the protocol upgrades of EIP-1559 and the transition to PoS have resulted in a net reduction of ~1.7M of ETH issuance worth around ~$2.8B. This creates a dramatic, underlying shift in the capital needed to support and eventually expand the price of ETH the asset.
All of this continues to happen in a “bear market” providing a crystal clear picture for the positive reflexivity ETH will enjoy when accommodating market conditions eventually return. Irregardless of how bright the long-term future of ETH looks, the near-term, macro-correlated future provides uncertainty. In addition, the structural changes ETH endured provide a volatile, short-term bill due in the form of unlocks enabled at the Shanghai upgrade in mid-March, something we’ll cover in-depth in Sunday’s edition of Round Tripping.
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funding:
EigenLayer, ETH restaking proto, raising $50M series A; $500M token valuation
Arpeggi Labs, collaborative music NFT platform, raising $11M
TeraWulf, BTC miner, raises $32M from public equity offering
Breed VC raises “considerable portion” of $20M target for first crypto fund
Block Joy, blockchain nodes as a service, raises $12M from series A/seed
Giga Energy, BTC mining infra company, raising $10M series A
Sec3, crypto security firm, raises $10M seed
Pow.re, crypto mining company, raises $9.2M series A with $150M valuation
Addressable, crypto marketing & social graph company, raises $7.5M seed
Sovereign Labs, zk-rollup infra company, raises $7.4M seed
Oh Baby Games comes out of stealth, based Pas & company raise $6M seed
Fungify, NFT index/algo lending protocol, raises $6M
Everscale, L1 chain in development, raises $5M strategic investment
Archimedes, leverage lending/borrowing protocol, raises $4.9M seed
VitaDAO, science funding & longevity research DAO, raises $4.1M
Squid, Axelar-based cross-chain liquidity protocol, raises $3.5M seed
Port3 Network, crypto social data portal, raises $3M seed
Sumi Network, decentralized communication/store solutions, raises $3M seed
news:
Genesis and parent DCG reach initial agreement with main creditors
English Premier League announces four-year licensing partnership with NFT sports gaming company SoRare, deal valued around $150M
BTC mining company Luxor and Udi partner to mine BTC’s largest block ever containing a Taproot Wizard NFT (“inscription”)
Intain, structured finance platform, launches IntainMarkets, an AVAX subnet for issuing and trading asset-backed securities on-chain
Bitcoin Suisse joins Liquid Collective, to offer ETH liquid staking solutions to its private & institutional clients
Hamilton Lane opens tokenized fund on Polygon’s MATIC
Twitter working to implement fiat payments built to allow crypto capabilities later
Visa testing how to “accept settlement payments from issuers in USDC starting on Ethereum and paying out in USDC on ETH”
BTC’s Lightning Network sees new high of 5,490 BTC locked in payment channels
tokens & protocols:
BNB — introduces Greenfield, a new storage-based network for user data control
OP — announces major upgrade Bedrock is planned for March 16th
STG — proposes reissuing STG eliminating 10% of supply owned by Alameda
LDO — Lido introduces Lido V2 — the “Next Step In Decentralization”
METIS — ETH L2 integrates fiat to crypto gateway Banxa to ease onboarding
XMON/SUDO — lockdrop & airdrop for SUDO now live for XMON holders, proposal is live to turn on SUDO transferability
UNI — a16z uses 15M UNI tokens to vote against deploying UNI v3 on BNB
AVAX — dexalot, CLOB DEX launches Avalanche subnet
BTRFLY/GMX — Recacted Cartel launches Pirex GMX
INJ — launches composability for SOL based assets
LYRA — now live on Arbitrum, integrated with GMX
JOE — partners with Layer Zero to convert JOE into omni-chain fungible token (OFT) enabling users to seamlessly move tokens across BNB, AVAX, & Arbitrum
StarkWare — open-sources the entire Starknet stack including the L2s Prover
RDNT — outlines upgrades coming in Radiant v2
TON — launches $20M liquidity incentive program
Connext — completes Amarok upgrade enabling cross-chain messaging & apps
Pyth — SOL-based oracle network expands to support Arbitrum
Prime Protocol — cross-chain margin platform launches testnet on Arbitrum
around the ecosystem:
Nic Carter on Operation Choke Point 2.0 & the ongoing crypto crackdown
Messari’s detailed report on the State of Avalanche
Balaji announces the launch of his Network State Podcast
tweets:
