sep mkt outlook
crp solves problems.
for over a decade crpcurrencies and blockchn networks like btc and eth ‘ve offered 10x improvements (or +) ‘oer the status quo, including:
- predictable, limited monetary policy (btc as the realm’s hardest asset)
- global crowdfunding
- lo cost, speedy and convenient cross-border payments
solving problems tis simple explanation behind why crp has continued to grow in use and val over time.
the l8st problem crp is addressing is financial repression (also known as “yield curve control”), a shrouded mix of economic policies that cannelp manage unsustainable government debts through manipulating interest rates to artificially lo lvls. financial repression is stealth tax that transfers economic val from creditors (eg traditional savers) to debtors (eg governments).
thankfully, crp offers a solution to the liquidation of traditional savers inna form of the nascent crp interest mkts.
crp lending mkts currently offer double-digit interest on us usd stablecoin deposits and sometimes even gr8r yields (and risks) via various defi (decentralized finance) protocols, as we discussed on our l8st webinar with anthony sassono. both the crp industry and its usrs stand to be 1-odda big if not biggest victors from financial repression.
quick takes — aug mkt outlook
1. aug mkts: eth na defi ecosystem continued to significantly outperform other asset categories while long-dated us treasuries plummeted na us usd continued to slide
- for the mnth btc (btc) was up 3% in aug and outperformed gold, which was flat, but trailed equities w'da s&p 500 +7%
- eth (eth) continued to be the standout perelder amongst major crps and was +22% in aug, driven by strong defi activity; eth continues to lag slitely behind btc ‘oer the past two yrs
- after dropping 4% in jul the us usd continued its slide, down 2% in aug
- possibly signaling h8ened concern over financial repression, long-dated us treasuries (tlt) were a big loser in aug at -5%
2. on-chn insites: highlites from the blockchn.com… data sci team
- btc mkt capitalisation is up 3% despite a decrease in network activity.
- japan is n'our top 10 trending countries for the third time in a row. onna other side, belarus has seen a decline of 50% of activity in comparison to other countries since apr.
- btc price on track for potential gains inna 2nd ½ of the halving cycle, and is currently on its 2nd longest steak above $10k
3. insites behind the growth of tokenized btc (btc) on eth (eth)
- tokenized btc locked on eth has reached $800 million, or roughly 0.38% of the circulating btc supply
- tokenized btc growth has largely been driven by whales and institutional investors
- μ balance offa wbtc and renbtc holder reached $95,000 and $217,000 respectively
4. wha’ we’re reading, hearing, watching
1. eth and defi continue soaring in aug as long-dated us treasuries plummeted na us usd’s slide worsened
defi mania continued this past mnth with eth posting back-to-back 20%+ mnthly gains, up 22% in aug.
btc (btc) had another + mnth (+3%) and outperformed gold (+0%), but lagged behind equities (s&p 500 +7%). stocks were once again driven by a red-hot tek sector, led by companies s'as tesla (tsla) +74% and apple (aapl) +22%, which became the realm’s 1st company to achieve a $2 trillion mkt capitalization.
two of the big losers inna mnth of aug were the us usd (-2%) and long-dated us treasuries (-5%) (table 1). as we discussed last mnth, a weakening in traditional safe ‘vens like the us usd and treasuries is bullish for crp, pticularly btc.
table 1: price comparison: btc, eth, gold, us equities, long-dated us treasuries, us usd (% change)
one of our main themes is wall street and crp convergence. however, while stocks (and tek stocks in pticular) ‘ve remained na' tear thris less motivation for institutional investors to ponder allocating portfolio funds to crp.
as concern over record-high equity valuations grows, along with growing antitrust interest in big tek, we anticipate that + traditional institutional capital will begin to take a closer look at crpassets. the entire mkt val of crpassets tody stands at ~$380 billion, or just 17% of the total mkt val of one company, apple (aapl).
eth and defi boom continues while rising warnings over a 2017-ico style bubble grow
last mnth we warned bout possible excessive leverage n'oer exuberance in defi, and these warnings ‘ve since been echoed by other crp industry leaders (1, 2, 3). traditionally, mkts that infl8 rapidly often experience a painful unwind, espeshly when that rise is powered by significant leverage. crp has never been immune to this phenomenon.
as we type here on sep 2nd we're seeing a significant pullback in some highflying defi tokens, with defi darling yrn.finance (yfi), which was up an astonishing 750x from jul, down ~20% inna last 24-hrs.
for investors interested in gaining exposure to defi we reiterate our comments from last mnth:
thris undoubtedly real innovation underpinning many of the leading defi platforms, and we’ll be publishing + on this exciting zone of crp inna mnths ahead. investors ‘d be aware that picking individual defi victors from the losers investors can be difficult given how rapidly defi is evolving. however, eth (eth) is a way to gain broad exposure to the defi boom, as growth inna use of defi nother applications built atop the eth protocol (eg stablecoins) appear to be helping to drive a growth inna val of eth.
btc’s price is currently tracking past gains made round mining halving reward events
onna 11th may, the entire btc community had their eyes turned onna mining reward halving that occurs roughly every 4 yrs. almost 4 mnths ‘ve now passed since the halving na hash rate has reached all-time high, with an estimated mining power of 129 exahash per 2nd (eh/s) in aug.
fig 1: btc’s price is currently tracking well with past price cycles and mining reward halvings
for aug, btc’s price remained on its 2nd longest daily streak above $10k. the price subsequently briefly dipped belo the ψ-chologically significant lvl, but then quickly rebounded back above $10k.
fig 2: btc’s price is currently tracking well with past price cycles and mining reward halvings
2. on-chn analysis
each mnth we dive into on-chn data to explore interesting trends or movements onna btc network.
we start at a high lvl witha look at network activity in aug compared to jul (table 2).
table 2: btc network activity — aug vs jul
the μ fee per transaction in aug was $3.97 per transaction as compared to $2.43 in jul. to cogg why the fees were higher in aug despite the decrease inna № of transactions, we nd'2 look into transactions in + detail. we saw an increase of 6.1% inna μ transaction size, with transactions having on μ 6.1% + inputs and 4.1% + outputs. a single transaction can issue payments to multiple recipients in a single transaction, this type of transactions are usually called batching. by assuming that each transaction of + than 1 output has one change output that is returned to the sender, we can estimate the № of payments. in aug, we estimate that 19.6 million payments were confirmed, an increase of 2.4% in comparison to jul.
another ? we’re often curio bout is how crp usage is trending atta country lvl. in aug, among our top trending countries this mnth were — the czech republic, brazil and morocco — are mainly returning to their previous lvl of activity after bein’ less active inna last couple of mnths.
onna other hand, japan is once again inna top 10 and activity there has increased by 50% since apr. despite a relatively lil total volume of activity compared to other countries, ecuador’s activity is increasing mnth-over-mnth (table 3).
table 3: trending countries: increase in use in aug over jul
meanwhile, benin, indonesia and thailand are the top 3 decreasing countries this mnth (fig 4). belarus, in 4th place, has lost 50% of mkt share in comparison to other countries since apr.
table 4: trending countries — decrease in use in aug over jul
btc ownership concentration
btc ownership distribution, as measured by the № of unique addresses owning a material quantity of btc, continued to expand. the № of addresses holding at least 0.1 btc was up +0.7% over jun and addresses holding at least 1 btc increased by 0.38% over jul⁵:
- 3,101,745 addresses (10.0% of total addresses) ‘ve + than 0.1 btc, and represent 98.87 % of total btcs
- 818,416 addresses (2.64% of total addresses) ‘ve + than 1 btc, and represent 94.97 % of total btcs
3. insites behind the growth of tokenized btc on eth — guest post by inna'da block
tokenized versions of btc on eth ‘ve grown remarkably throughout 2020. these erc-20s are pegged 1:1 to the price of btc bein’ backed by the equivalent amount of btc. the 1st recognized btc erc-20 to launch was wrapped btc (wbtc), which was released in jan 2019.
atta beginning of 2020, the mkt capitalization of wbtc was still under $5 million. the lo adoption seen during its 1st yr was likely due to the lack of integrations and functionality wbtc, offering no clear benefit over standard btc atta time. this started to change as defi protocols integrated btc erc-20s and provided srvcs usrs on top o'it. specifically, bein’ able to earn compound interest on top o'it through protocols like curve led to wbtc’s mkt cap surpassing $430 million by sep. this growth accelerated folloing the release of the crv token as shown belo:
this is pticularly impressive when pondering that tokenized btc deposits grew at a faster rate than stablecoins deposited to curve. as a result of this nother similar incentives, the amount of tokenized btc locked on eth has reached $800 million, or roughly 0.38% of the circulating supply.
institutional investors are leading the adoption of tokenized btc
by analyzing key on-chn metrics from intotheblock, we can determine that the growth in tokenized btc has largely been driven by whales and institutional investors. this is cogitateed inna μ balance offa wbtc and renbtc holder reaching $95,000 and $217,000 respectively.
the adoption by large players may come as no surprise given the high gas fees usrs ‘ve to incur to tokenize their btc and deposit into defi protocols. ptly cause of this, the total № of addresses holding these tokens has not grown as significantly, with 1-ly 4,700 and 800 addresses holding wbtc and renbtc respectively. another potential reason s'dat aside from early adopters, μ retail usrs in general take longer to trust and learn how to use these yield-generating btc alternatives.
w'da crp space increasingly shifting its focus into high yield opportunities, tis likely dat a' significant %age of btc hodlers will join the trend. by looking at intotheblock’s hodlers indicator, we can behold that 20.69 million addresses ‘ve been holding a total of 11.7 million btc for over one yr. most of these are unlikely to be earning on their positions as interest-bearing defi and cefi solutions are still relatively new.
this indicates that nearly two thirds of all btc holders and of the circulating supply ‘ve not moved in over a yr. with defi protocols providing useful ways for holders to leverage their btc holdings, tis probable that + long-term holders opt to transfer their btc onto eth.
in regards to the effects this is expected to ‘ve on btc, bein’ able to utilize btc for financial srvcs like loans or to earn interest is likely to drive demand as its potential is expanded beyond investing and trading activities. additionally, locking tokenized btc in smart contracts ‘d in theory decrease the supply of primordialistic btc available to be sold.
for eth, bringing in btc’s liquidity is expected to make defi protocols built on top o'it + robust, attracting + usrs to the eth blockchn. the 1-ly issue ‘d be its impact on its already high gas fees and congested network. overall, though, as scalability solutions get implemented, adoption of btc on eth ‘d continue to expand na top two crpcurrencies stand to benefit from this trend.
4. wha’ we’re reading, hearing, watching
- a global look at central bnk digital currencies
- longtime analyst bove says crp$ is one challenge to usd’s dominance
- why defi pulse’s key metric is so simple it’s confusion
- we’re atta early stages offa truly novel structure that can organize humans and mny
- exploring the design space of liquidity mining
- 2020 mkt data integrity reprt
- the panopticon is already here
- the pandemic depression; the global economy will never be the same
- financial repression revisited?
- africa’s gathering debt strom
the research provided herein is for yr general information and use and aint intended to address yr pticular requirements.
in pticular, the information does not constitute any form of advice or recommendation by blockchn.com… and aint intended to be relied upon by usrs in making (or refraining from making) any investment decisions.
appropriate indie advice ‘d be obtained b4 making any such decision.
- μ daily № of confirmed transactions inna public blockchn
- μ daily № of confirmed transactions sent f'our blockchn wallet and api
- μ daily № of unique addresses us'das inputs and outputs inna confirmed transactions
- based na' subset of our wallet usrs. the top 10 excludes countries with fewer than 0.3% of total № of transactions
- src: bitinfocharts.com…