Market Overview
GM and welcome to this week’s edition of CoinStats Scoop! 💫 Our streak of green weeks corresponding to the start of this newsletter is unfortunately over, but there’s still ample good news throughout the crypto ecosystem and we’re a week closer to the Merge. 🐼 Overall, it was a rough week for markets but the fundamentals remain unchanged!
BTC and ETH gave up significant gains and many altcoins, as they normally do, fell more than the industry leaders. Unfortunately, markets don’t consistently go up, and mean reversion is a powerful force 🙃 Corrections occur in all healthy markets. After ~two months, we saw the market rally led by ETH doubling from around 1k to 2k, BTC going from almost 18k to just shy of 25k, and countless altcoins gaining multiples more than that, so a reversion and profit taking were likely.
Now markets may be down, but that doesn't mean protocols and their associated tokens stop building and pushing updates that then lead to growth. The highlights this week include
Frax Finance (FXS) as market participants eagerly await updates including frxETH and frxSwap,
Jump Crypto contributing to the scalability and reliability of Solana, and
Chiliz (CHZ) rallying 14% on the week as their Socios owned ecosystem of soccer club fan tokens exploded.
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.
CoinFund announces launch of their new $300M crypto fund
Shima Capital raises $200M for first crypto fund from Bill Ackman, Dragonfly, Animoca, Andrew Yang, and others to invest in early stage crypto
Dragonfly Capital rebrands as Dragonfly, acquires crypto fund Metastable Capital ($400M+ AUM) founded in 2014
Stablecoin issuer Tether (USDT) announces that top 5 global accounting firm BDO will now handle their reserve attestations and that Tether will start providing monthly reserve updates
Billionaire and famed investor Steve Cohen launches crypto startup “On-Chain Investments” and hires the reformed hacker Acidphreak to lead development of strategy
Latin American e-commerce giant Mercado Libre announces plans to launch an Ethereum standard token to replace loyalty rewards in the company’s loyalty program, allowing customers to exchange for products or the native Brazilian reals
Socios gains regulatory approval in Italy to expand their soccer fan token ecosystem that includes Manchester City, FC Barcelona, Juventus, and many others
Polygon, $MATIC creator, leads $25M investment into web3 venture studio SuperLayer
Ethereum Name Service (ENS), creators of the .eth domains, has now created over two million ENS names
Jump Crypto announces their plans to build an open source Solana validator client to “increase the throughput and reliability of the network”
Merge Tokens & Security
We and the broader crypto community have been emphasizing the bullish outcomes expected from Ethereum’s transition to PoS over the recent weeks. But it’s also important to talk about the security best practices leading up to, during, and after the Merge. We’ve established that the Merge is ETH’s consensus mechanism transitioning from Proof-of-Work to Proof-of-Stake. But what happens to the PoW fork? Well, we’ve seen previous chain forks result in Ethereum Classic and Bitcoin Cash, so we can form our expectations accordingly and lean on the advice by the founder of the protocol Compound Robert Leshner.
As Robert states in the thread, which we highly advise to read, “if Ethereum forks (such as a proof of work chain splitting off), the ‘state’ of Ethereum won’t transfer with it. Every stablecoin and DeFi application on the fork is likely to fail immediately. You won’t suddenly be double wealthy.” The most important takeaway is that the users of virtually any Ethereum decentralized application will have a PoW parallel token available in their wallets and potential hacks, scams, replay attacks, etc. will unfortunately be abundant. The thread continues, “in times of great uncertainty, people question things less. Be extra frosty about what you read, click, and sign…don’t ‘sell all my worthless (POW) USDC for a little bit of (POW) Ether.’ If you’re not sure what to do, do nothing. Seriously.”
We’ve consistently emphasized the importance of ETH’s Merge for the future adoption, usage, and growth for the crypto ecosystem at large. But first, let's make sure that our assets are safe and sound so we can freely enjoy and benefit from future growth!
Awareness & Demand Grows
Last week there was an interesting analysis of public companies actively investing in the crypto ecosystem that reinforces crypto’s organic demand and ensures its future. Crypto is sometimes wrongly portrayed as useless or unnecessary by mainstream media outlets, but this analysis by Block Data shows that many of the largest, wealthiest, and most influential institutions in the world are deploying their capital to build up the crypto ecosystem.
Some key takeaways from Block Data’s analysis highlights the vast capital allocated to the crypto ecosystem and shows sectors that legacy institutions are allocating to, including:
The 40 analyzed companies invested roughly $6 billion into crypto startups between September 2021 and June 2022
Largest allocators include Alphabet, BlackRock, Morgan Stanley, Samsung, & Goldman Sachs
19 of the 40 companies deployed capital in some form of NFT solutions and services
Crypto gaming services were a core investment trend across the companies
Banks have started to increase their exposure to crypto and blockchain services given increasing client demand
The excellent research done by Block Data further confirms what we wrote two weeks ago regarding institutional validation. It’s another reminder that while markets and prices are experiencing a downtrend, the demand, interest, and focus on crypto increases across all people and institutions across the world.
Read of the Week
“The Releveraging” — 0xHamz
We know, we know there’s been an abundance of ETH Merge talks recently, but it truly is one of the most important events in the history of crypto!! 🤯 So, our Read of The Week once again puts the Merge into the spotlight. But this time the focus is on its impact on the flows affecting the valuation of the ETH asset. as the subtitle of the article explains, “ETH will experience a 0-to-1 change in buy/sell pressure post a successful Merge.” Reflexivity is one of the most powerful effects on markets and ETH’s reflexive nature will drastically increase post-merge.
“ETH price direction and magnitude is important to consider since its network fee capture and transaction volumes are highly correlated with ETH KPIs. ETH is both reflexive and recursive — prices create the fundamentals needed to create higher prices…This leads to more trading, buzz, culture and fee capture…After a successful merge crypto will have a core asset with a high single digit staking yield - this has implications for DeFi…The great releveraging thesis begins when a core crypto asset has positive yield derived substantially from fees”
After the Merge, issuance of total ETH/day will be drastically reduced. That, combined with ETH’s yield generation post merge, creates reflexivity properties that will positively impact DeFi and altcoin volumes, leading to higher transaction count which in turn elevates fee capture and yield to ETH stakers creating a releveraging cycle benefitting ETH. Once again, we reiterate that we can’t wait to see the pandas post-Merge and watch ETH reflexivity take off! 🐼
Tweets & Memes
Binance casually sending $2.8 billion of ETH for $0.32 in transaction fees
Sometimes it’s extremely difficult explaining crypto to friends
Amazing depiction of the leveraged fallen people this cycle including Do Kown and 3AC
There’s been countless “ETH killers” that have come and gone
Wrapping Up
Tokens may have been down this week, but the fundamentals of crypto adoption and optimistic attitude toward the future remain the same. Institutions continue deploying capital, builders continue pushing developments, and the ETH Merge is a week closer to creating a reflexive spark through markets! That spark can only be capitalized if your assets are safe. So continue prioritizing security as we push forward on our crypto journey. 🔒
As always, 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! 🐼
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