Coin Metrics’ State of the Network: Issue 233

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By: Tanay Ved, Matías Andrade, & Kyle Waters 

Constructing on the upward momentum from the earlier month, digital asset markets prolonged their power into November. This market-wide rally elevated the complete crypto-asset market capitalization to over $1.4T, with BTC and ETH climbing over $37K and $2K respectively. Notably, the current upswing was not simply unique to the two largest digital belongings; SOL and a bunch of different altcoins have been additionally main beneficiaries of this broader market rally as optimistic sentiment round spot Bitcoin and Ethereum ETFs unfold to different sectors of the market. 

On this subject of Coin Metrics’ State of the Community, we delve into market information underpinning this transfer, to discern main beneficiaries and discover the numerous avenues channeling this momentum from spot markets to Grayscale’s institutional funds. 

Whereas the rally originated from the impending launch of a spot Bitcoin ETF, it gained additional momentum following the information of a possible ETF approval window on November 9th, coupled with BlackRock’s filing for a spot Ethereum ETF. Regardless of sturdy reactions to this information, a serious beneficiary was Solana (SOL)—experiencing year-to-date positive factors of 470% buoyed by catalysts of its personal.

As seen in the chart beneath, the value of SOL briefly reached $62 and is hovering round $55—a fivefold improve in value since January 2023. Trusted spot volumes additionally skilled notable upticks reaching $1.95B on November 1st and $2.15B on November 11th, marking the highest spot quantity since FTX’s collapse in November final 12 months. 

Source: Coin Metrics Market Data

Solana’s shut affiliation with FTX had initially solid a shadow over its prospects following the alternate’s meltdown, resulting in a interval of suppressed efficiency. Nonetheless, there’s been a noticeable shift in sentiment as market members re-evaluate the overhang of FTX’s chapter associated liquidations and oversold nature of the asset, leading to the stellar efficiency of SOL & GSOL, Grayscale’s Solana Belief. Community exercise can also be displaying indicators of resurgence as members acknowledge its potential as an affordable, excessive throughput blockchain, distinct from prior affiliations. Whereas the current launch of Firedancer testnet—a validator shopper aimed toward enhancing efficiency and development of decentralized functions—gives promise, members will likely be eager to see these developments translate into sustained community exercise. 

Over the previous week, BlackRock’s software for a spot Ether ETF, referred to as the “iShares Ethereum Trust,” has captured business consideration. This transfer signifies a broadening of their initiative to launch spot funding automobiles for bitcoin, increasing market entry for a various cohort of buyers, together with registered funding advisors (RIAs) and wealth managers. Whereas this software awaits SEC evaluate, the optimism for its approval is bolstered by the precedents set by current futures ETFs and bolstered by the district court’s ruling in favor of Grayscale, suggesting a doubtlessly favorable regulatory outlook.

Source: Coin Metrics Market Data

Sparked by this information, ETH spiked to over 2.1K for the first time since the Shapella improve in Could. The transfer was fuelled by exercise in spot markets, with trusted spot volumes breaking ranges final seen throughout FTX’s meltdown in 2022—reaching $8.5 Billion on November ninth. This resulted in a short lived rotation in the direction of ETH, as seen in the chart beneath. 

The ETH/BTC ratio reversed from beneath 0.052 to 0.056 on reviews that the iShares Ethereum Belief was registered as a company entity in Delaware, an occasion that additionally preceded the filling of the spot BTC ETF. This was shortly adopted by affirmation of the 19b-4 filing by Nasdaq, inflicting one other surge to 0.058 earlier than really fizzling out. On an extended time frame, the ETH/BTC ratio sits proper above ranges final seen in Could 2021, showcasing its relative underperformance. 

Supply: Coin Metrics Reference Rates

Regardless of the 13% rally and non permanent rotation in the direction of ETH since November 1st, near-term focus nonetheless stays on impending spot Bitcoin ETF approvals. Heightened exercise in derivatives markets over the previous month highlights this rising anticipation. 

Turning to the crypto derivatives markets, there was a big surge in open curiosity throughout the board. Open curiosity measures the quantity of contracts that are at the moment open—i.e., not but settled or closed. When open curiosity rises, it means extra market members are coming into new positions than closing current ones. Open curiosity of bitcoin futures traded on the Chicago Mercantile Alternate (CME) has soared in current weeks, notably surpassing open curiosity on Binance, the juggernaut of worldwide exchanges.

Source: Coin Metrics Market Data

One potential catalyst of this uptrend might be residual demand from an arbitrage commerce involving the Grayscale Bitcoin Belief (GBTC). This includes shorting futures, buying GBTC, hedging in opposition to spot value danger, whereas capturing on the remaining low cost (see subsequent part beneath) to the Internet Asset Worth (NAV) that will shut with the conversion to an ETF product. 

Final week, CoinDesk reported that the SEC has opened talks with Grayscale over the firm’s efforts to transform its belief to an ETF, constructing off Grayscale’s court docket win in August, which the SEC selected to not enchantment. On Monday, Grayscale CEO Michael Sonnenshein shared a post on X: “it’s been a ten year dress rehearsal. we’re ready for the main event.”

Whereas the remaining arbitrage would possibly clarify some of the uptick, open curiosity is broadly rising forward of the potential launch of a spot bitcoin ETF in the US. This prospect appears to be capturing the consideration of institutional gamers in the U.S. The burgeoning curiosity in the CME’s bitcoin futures is a important market indicator, particularly for institutional entities partaking with BTC and the market construction of BTC in the U.S. Furthermore, the open curiosity of ETH futures on the CME has picked as much as its highest degree since April, however to not the identical magnitude as BTC. Nonetheless, this dynamic would possibly shift in gentle of BlackRock’s current transfer to file for a spot ether ETF product. As talked about earlier, BlackRock’s software might foreshadow a rising institutional curiosity in ETH, doubtlessly resulting in an analogous surge in open curiosity as seen with BTC.

A big avenue for digital asset market members are Grayscale’s Belief merchandise—an array of funding merchandise offering publicity to particular person belongings like BTC, ETH and extra. With momentum constructing since Grayscale’s victory in the courts, the efficiency of their merchandise advantage a better look.

Supply: Coin Metrics’ Institutional Metrics, Grayscale 

Grayscale’s Bitcoin Belief (GBTC) is of explicit curiosity, as indicators level in the direction of its imminent conversion to a spot ETF. GBTC’s low cost to internet asset worth (NAV) has narrowed to 10% over the course of the 12 months. In the meantime, ETHE is buying and selling at a reduction of 14%, closing the hole from 59% low cost earlier this 12 months. BCH and LTC trusts have surpassed parity whereas SOL and LINK are buying and selling at premiums of 869% and 250%—showcasing the institutional urge for food for these belongings. Grayscale’s different trusts together with FIL, MANA, XLM and BAT have additionally seen rising premiums, signaling that buyers are betting on additional value appreciation or eventual conversion of these trusts to ETFs.

Source: Coin Metrics Network Data

Together with a surge in efficiency, there has additionally been an uptick in exercise on the Bitcoin and Ethereum networks. As seen above, every day complete transaction charges (in USD) hit $9.15M for Bitcoin and $12.8M for Ethereum on November 9th—the highest since Could. 

On Bitcoin, this spike in transaction charges partially aligns with heightened exercise round Ordinals and BRC-20 tokens, reminiscent of the elevated payment market in Could, the place transaction charges soared to $17.4M. That is additionally a welcome growth for miners, with charges constituting 21% of daily miner revenue. On the different hand, the surge in charges on Ethereum has helped flip issuance deflationary, whereas precedence charges see an uptrend consequently of elevated exercise on Ethereum mainnet.  

Source: Coin Metrics Formula Builder & datonomy

As alluded to earlier, this market rally reached a large spectrum of sectors inside the digital asset ecosystem. Trying again over this month up to now, a number of sector indices in the datonomy universe have fared nicely, with the complete market index (CMBITM) returning 11%. The Decentralized Finance sector at the moment leads the pack at 33.5%, adopted by Good Contract Platforms at 30.5%, Intermediated Finance at 28%, and the Metaverse at 27%, all benefiting from a powerful month for sensible contract networks and the tokens linked to their functions.

The current surge in crypto-asset markets encapsulates a broad-based rally, catalyzed by the prospect of spot ETFs for the two largest digital belongings. This has not solely bolstered market sentiment but additionally spurred community exercise and adoption, whereas promising to broaden entry for the asset class throughout a variety of members by way of a beforehand untapped funding automobile. Whereas the speedy affect of spot ETF approvals has but to be seen, the optimistic market response and heightened institutional participation underscore a wider acceptance and maturation of digital belongings.

Supply: Coin Metrics Community Information Professional

Bitcoin energetic addresses declined 5% whereas Ethereum energetic addresses gained 5% over the week. Lively addresses for the FTX Token (FTT) elevated by 585% as value rose to the highest ranges since FTX’s collapse, as hypothesis rose for the possibilities of a reboot of the alternate underneath recent management and oversight.

This week’s updates from the Coin Metrics crew:

  • Observe Coin Metrics’ newest State of the Market e-newsletter which contextualizes the week’s crypto market actions with concise commentary from the Coin Metrics crew, wealthy visuals, and well timed information.

  • Try Coin Metrics’ Trusted Exchange Framework 2.1 evaluating digital asset exchanges primarily based on thorough quantitative evaluation of transparency, resilience, information high quality and extra.

As all the time, in case you have any suggestions or requests please let us know here.

Coin Metrics’ State of the Community, is an unbiased, weekly view of the crypto market knowledgeable by our personal community (on-chain) and market information.

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© 2023  Coin Metrics Inc. All rights reserved. Redistribution shouldn’t be permitted with out consent. This article doesn’t represent funding recommendation and is for informational functions solely and you shouldn’t make an funding choice on the foundation of this data. The e-newsletter is supplied “as is” and Coin Metrics won’t be accountable for any loss or injury ensuing from data obtained from the e-newsletter.

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