Market Overview
GM and welcome to this week's CoinStats Scoop! 💫 The launch of this newsletter corresponded to a streak of green weeks across the crypto market. Unfortunately, this week starts a new streak of down markets, but it’s one that we will break together. The markets may be down again, but crypto never stops and we’ll always be here to keep you up to date with the latest trends, news, developments, and protocol upgrades. Let's keep ahead of the game! 🤑
As we mentioned, and you’re surely aware, the broad crypto market ticked lower this week, led by BTC losing 6% and ETH falling 8%. While the decline in prices over the past two weeks may seem alarming to some, contextualizing is paramount. In our August 1st edition, we wrote, “macroeconomic news is still largely driving the market, but every day we’re advancing closer to the long-awaited ETH Merge.”
Whether we like it or not, macroeconomic news remain in control of not only legacy markets across the world, but crypto as well. The selloff this week occurred mostly on Friday, as the president of the U.S. Federal Reserve spoke about global central banks' commitment to fighting inflation that could require “maintaining restrictive policy stance for some time…as these are the unfortunate costs of reducing inflation.” Now, that may sound scary, and the market’s reaction certainly was, but the important thing to remember is that this was not a crypto-specific selloff. Nothing about the core crypto protocols and underlying thesis was weakened this week. It’s just that markets are extremely complex and wax and wane through business cycles across the world.
Macro-induced selloffs can be deep, scary, and volatile but the bright side is that they’re macro-induced! Sure, it can hurt markets in the short term and no one likes lower prices, but the core fundamentals that brought us to this space are stronger than ever. In our opinion, selloffs unique to crypto because of underlying crypto leverage or failures by players in the space (3AC, LUNA, etc.) are much worse because they’re within the crypto ecosystem.
LUNA, etc.) are much worse because they’re within the crypto ecosystem. The core of crypto remains unchanged and is improving yet again this week. It is evidenced by continuous protocol developments: Coinbase announcing their liquid staking token cbETH ahead of the Merge, THORChain (RUNE) announcing their native DEX aggregator for access to ERC-20 tokens, Compound (COMP) officially launching Compound III, and the Ethereum foundation confirming the Bellatrix upgrade on September 6th that enables the Merge to commence on the projected date of September 15th. Crypto always advances forward no matter the macro uncertainty and we’re once again a week closer to the largest fundamental improvement to crypto ever achieved! 🐼
News & Developments
Below are some of the most impactful announcements over the week that indicate crypto’s rising demand across a broad swath of institutions, protocols, corporations, and legacy companies. Announcements, interest, and product developments continue, planting seeds for the next bull run and wider crypto adoption.
Animoca Brands Japan, a subsidiary of web3 gaming giant Animoca Brands, raises $45M from banking behemoth MUFG
Bitcoin Depot, a crypto ATM company, to go public in SPAC with an initial $885M valuation
Y Combinator, United States’ most highly regarded venture capital incubator, alumni come together to raise $80M for Orange DAO to deploy capital to the crypto ecosystem
Symbolic Capital launches a new $50M fund for early-stage crypto investments
Ready Player Me, an interoperable metaverse avatar platform, raises $56M
World-renowned brand Nike’s NFT revenue reaches $185M+ through past acquisition of NFT collection RTFKT — Nike has amassed $93.1M in primary sales & $92.2M in secondary sales
Chromie Squiggle NFT sold for ETH ($225k), Pudgy Penguin sold for 400 ETH ($600k)
Trends & Strength to Follow
As the market has turned over in the past few weeks, one of the most important things to do is monitor “relative strength.” Relative strength in financial markets refers to identifying value and momentum in assets that have performed well relative to the market as a whole or specific benchmarks. In the crypto ecosystem, the obvious benchmarks are BTC and ETH. Generally speaking, while markets trend both higher and lower, there are usually tokens or assets that outperform on the way up and down both.
While BTC, ETH, and most other tokens have slid lower over the past two weeks, there has been notable relative strength in a few tokens and ecosystems. The first of these is the Cosmos ecosystem represented by the ATOM token. In a week that saw BTC (-6%) and ETH (-8%) fall again, ATOM and tokens in the Cosmos ecosystem showed impressive relative strength. ATOM gained 7% this week while a slew of Cosmos tokens including EVMOS (+25%), OSMO (+4%), and JUNO (+4%) showed relative strength and outperformed the broad market.
Another ecosystem that has shown impressive relative strength in recent weeks is Arbitrum. We've previously discussed the importance of rollups scaling Ethereum and would highly recommend reading what we wrote in the July 25th issue under “Rollups Scaling Crypto.” Outside of the Merge, scaling Ethereum and reducing transaction costs are the most important focus in crypto. As the thread below outlines, and Arbitrum has confirmed, there is an $ARBI token airdrop coming to users of their chain and ecosystem at some point in the near future. This has led to speculation on Arbitrum ecosystem and the adjacent ecosystem – tokens such as GMX (+31%) and SNX (+13%) have shown strong relative strength as well.
The above tweet threads are two good high-level overviews of Arbitrum and Cosmos explaining how market participants can get set up and involved across the two ecosystems. The relative strength of these two ecosystems has been observable for a few weeks now, so it could be coming to an end in the near future. That's why users should be careful deploying capital. That being said, the main takeaway is not necessarily about the Cosmos and Arbitrum ecosystems (although they have fundamental upgrades coming soon!). Rather, it is about identifying tokens and ecosystems that show relative performance. This is important and can be extremely beneficial in both protecting downside and capturing upside!
Read of the Week
“DeFi’s (non)Progress This Cycle” — Celia Wan
Celia’s article is an informative, data-driven analysis on the past, present, and future of DeFi’s standalone performance as well as in comparison to L1 token returns, such as SOL, AVAX, MATIC, etc. The opening line is a somber but true revelation about the current state of the market: “you know it’s the end of a cycle when people start to question everything they believed during the bull market.” Declining prices have a unique way of forcing questions regarding what we all once believed.
Cycles result in lessons learned, and one of the core takeaways from the previous cycles explained by Celia is, “The old model of attracting users to DeFi with liquidity incentives and airdrops is no longer working. DeFi brought users to L1s without caring what exactly these users do.” Before concluding the post and outlining key takeaways, Celia reminds readers of what we believe in and what to look forward to by saying,
“DeFi will be exciting again when new categories emerge that can bring real users to blockchains, who have actual financial needs that DeFi can serve. And the rise of NFTs and Web3 in the second half of the cycle has already signaled a different kind of demand than over-leveraging on tokens. These categories will attract new users and bridge them back to DeFi, and this will be the story of the next cycle.”
As the above quote eloquently states, we’ve barely scratched the surface of what can be built in crypto. The intersection of DeFi, NFTs, and novel Web3 enabled use cases will ultimately usher in another explosive cycle. Past lessons of failed captured growth through things such as mercenary liquidity incentives will be learned and internalized. DeFi, NFTs, and crypto at large will rise again as the combination of these powerful primitives is consistently built and iterated upon.
Tweets & Memes
Vitalik at EthMexico flaunting his amazing wardrobe, as per usual
The confluence of factors that influence the crypto market at any given time is vast!
The simple ground-breaking ability to transfer crypto and stablecoins across the world
Good thread on the shift in where value and price are captured across tokens
Wrapping Up
Whew, what a week! Markets may have been down, but builders never stop. Even during what appears to be a few rough weeks in crypto, the developments and updates from protocols and institutions never stop as we push through a macro-induced selloff. During selloffs, relative strength can be one of the most important metrics to observe as crypto has vastly expanded to the point where not all ecosystems are impacted at the same level.
The convergence of DeFi and NFTs creating novel crypto protocols that expand demand and adoption are continuously brewing behind the scenes and we’re getting closer to the long awaited Merge! 🐼 As always, CoinStats will be here to guide, inform, and service your needs as we progress forward.
Thanks for reading, and let’s hear your thoughts, comments, and feedback as we work together to improve CoinStats Scoop. We’ll see you next week! 🥂