Encryption Research Weekly Report (0513-0519): Market Confidence Rekindled, Long-term Outlook Optimistic

"Summer" - Charles Courtney Curran

Introduction:

The implied Volatility of BTC short-term out-of-the-money put options is still higher than that of call options, indicating that the market's concerns about the recent price pullback have not been eliminated, but the implied Volatility of long-term Options is still stable, showing that institutions are optimistic about the long-term prospects of BTC.

1. Investment and Financing Observation

Last week, there were a total of 26 financing and investment events in the encryption market, a decrease of 36.58% compared to the previous week. The total amount of funds exceeded 170 million US dollars, with no change in growth rate compared to the previous week, and the scale remained basically stable.

DeFi announced 9 investment and financing cases, among which Arbelos Markets, a cryptocurrency trading platform, completed a $28 million financing led by Dragonfly Capital.

GameFi track announced 7 investment and financing cases, among which Web3 game developer Seeds Labs completed a $12 million seed round financing, with participation from Blizzard Fund, etc.

Announcement of 1 financing in the AI track, ChainML, an AI platform that supports Web3, has completed a $6.2 million seed round of expansion financing, led by Hack VC.

Infrastructure and Tools Track Announces 4 Investment and Financing Cases, among them, Humanity Protocol announced the completion of a new round of financing with a valuation of 1 billion US dollars and a total amount of 30 million US dollars. Kingsway Capital led the investment.

CeFi announced a financing event in the field of centralized finance. Raven, a cryptocurrency exchange founded by former Wintermute employees, has completed a $2.7 million seed round of financing, led by Hack VC.

Other Web3/encryption applications announced 4 fundraisings, among which the encryption prediction market Polymarket has raised $70 million through two rounds of financing, with the recent round led by Founders Fund.

From the month-on-month data, the number of financing transactions in the encryption market last week ended the continuous two-week rise trend and showed a significant decrease, but the total scale of funds remained basically unchanged, indicating that while institutions were cautious in layout, they increased their bets on the invested projects, and the market heat focused on the DeFi, infrastructure, and GameFi sectors. In terms of VC, the active institutions are still Animoca Brands, followed by Founders Fund, Framework Ventures, Endeavor Ventures, and Electric Capital.

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About Polymarket

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Polymarket is a decentralized information market and contract trading platform that allows users to trade on the world's most controversial topics such as coronavirus, politics, current affairs, etc. Currently, betting on the 2024 US presidential election has become the most popular contract.

About Humanity

Humanity Protocol is a blockchain network that uses palmprint recognition technology and zero-knowledge proof to ensure the privacy and security of users. It aims to provide an accessible and non-intrusive method for establishing human proof in Web3 applications.

About peaq >

peaq is a DePIN network that supports the Internet of Things (IoT) on Polkadot. peaq enables entrepreneurs and developers to build decentralized applications for vehicles, robots, and devices, while empowering users to manage and earn income when connected machines provide goods and services.

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2. Industry Data

The number of new BTC wallets has dropped to the lowest level in 6 years.

The block data: In the past week, the average daily number of new BTC wallets is 275,000, the lowest since 2018. Other related indicators have also declined, with miner income measured by hashrate falling to an all-time low, and transaction fees and on-chain transaction volume on the network are also showing a downward trend.

From the trend perspective, the overall data shows a bottoming-out trend, and it is expected that data recovery and rebound will start to change and adjust with the market turning. In addition, despite the decline in on-chain indicators, new protocols on the BTC network are attracting record-breaking interest from venture capital firms, which precisely lays the foundation for market recovery.

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6 months ago, the average daily increase of BTC wallets was 625,000, which is more than double the current number. At that time, due to the listing of BTC spot ETF, the development of the BTC ecosystem, and the halving event, the number of new addresses reached nearly the highest level in history. >

BTC runes dropped 99% from the peak at the end of April

In the past week, the daily number of newly carved runes on the BTC blockchain has dropped to below 250, a decrease of 99% from the peak data at the end of April. However, rune transactions are still the most active part of May, mainly occurring in markets such as Magic Eden, OKX, Ordinals Wallet, and UniSat.

The decrease in the number of rune inscriptions corresponds to the overall market enthusiasm and activity. The main reason is the influence of market conditions. However, it also indirectly reflects that rune inscriptions have not been able to generate independent market enthusiasm like before. The subsequent trend still depends on the macro market conditions and the activity of the BTC ecosystem.

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According to the data board created by RUNES in Dune: From April 26th to 30th, an average of 14,700 new runes were engraved every day, with 23,061 runes engraved on April 26th, setting a record high;

Since the launch of Runes on April 20th, BTC miners have received a total of $4.5 million in transaction fees, approximately $189 per day. So far, there have been over 91,200 runes engraved on the BTC chain;

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Solana has become the public chain with the highest TPS at present.

CoinGecko data: The highest TPS (transactions per second) on the Solana blockchain reached 1504, making it the fastest large-scale blockchain, more than 5 times faster than Polygon and 46 times faster than ETH. However, Solana only achieves 1.6% of its claimed theoretical TPS (65000 per second). In addition, the second fastest blockchain is Sui, reaching a peak TPS of 854 in July 2023.

Compared with data, the average TPS of non-EVM public chains is 284, while the average TPS of EVM and EVM-compatible public chains is 74, which means that non-EVM public chains are nearly 4 times faster than EVM public chains. However, in terms of stability and security, ETH-based public chains still have the advantage, and the current TPS of ETH-based public chains is not a significant factor affecting or hindering their rapid development.

BSC and Polygon are the fastest EVM blockchains, with Binance Smart Chain (BSC) reaching up to 378 TPS and Polygon reaching 190 TPS, making them the fastest Ethereum scaling solutions currently.

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3. VC Holdings

Note: The above data is from the statistics on May 20, 2024, 19:00 (UTC+8).

4. Follow this week

May 20th

• FOMC voter and Atlanta Fed President Bostic accepted an interview with Bloomberg TV;
• Speech by Federal Reserve Director Barr on bank regulation;
• Vice Chairman Jefferson of the Federal Reserve speaks on economic outlook and real estate market.
• PayPal's new policy, which will take effect on May 20th, will remove buyer and seller protection for NFTs.
• BounceBit announced the schedule for asset withdrawal, BTCB, WBTC, FDUSD, and USDT that are not staked in Premium will not be available for withdrawal.
• The PYTH token will be unlocked on May 20th at 22:00, with a total of 2.13 billion tokens worth approximately $812 million, accounting for 141.67% of the circulating supply.
• Crypto Expo Dubai 2024;

May 21st

• FOMC voting member and Cleveland Fed President Mester interviewed by Bloomberg TV;
• US Treasury Secretary Yellen, ECB President Lagarde, and German Finance Minister Scholz delivered speeches;
• Federal Reserve Director Woller speaks on the US economy, and Federal Reserve Director Barr participates in fireside chat;
• Chiliz Chain plans to conduct the Dragon8 hard fork and introduce tokenomics 2.0;
• IoTeX and DMC jointly hosted an online event on the theme "Development Direction and Trends of DePIN in the East and West under the Expectation of Interest Rate Cuts?".

May 22nd

• FOMC voting members Bostic, Mester, and Collins participated in the panel discussion on "Central Banks in the Post-Pandemic Financial System".
• The third round of voting for Jupiter's LFG will begin on May 22nd.
• SEC and Terraform Labs, along with Attorney Do Kwon, will engage in court debates on the compensation plan for the fraud case on May 22nd;
• Bitcoin Pizza Day;
• The AVAX token will be unlocked on May 22nd at 8:00, with 9.54 million tokens worth approximately $340 million, accounting for 2.49% of the circulation.
• 18.49 million ID Tokens will be unlocked at 8:00 on May 22, worth about $14.26 million, accounting for 4.29% of the Circulating Supply;
• Microsoft Build Developer Conference;

May 23rd

• U.S. weekly jobless claims;
• Federal Reserve releases minutes of monetary policy meeting;
• The SEC will decide May 23 whether to approve VanEck's Spot Ethereum ETF application;
• Decentralized GPU cloud infrastructure Aethir will officially launch edge computing device Aethir Edge on May 23rd.
• Crypto V Summit;

May 24th

• US May Consumer Confidence Index;
• FOMC voting member and President of the Atlanta Fed, Bostic, participated in a student Ask Me Anything activity;
• Fed Governor Waller's speech;
• Voting on the proposal "Lido Alliance: Ethereum Alliance Ecosystem" will close at 12:00 on May 24;
• The SEC will decide on May 24 whether to approve the Spot Ethereum ETF application filed by ArkInvest/21 Shares;
• The Super Artificial Intelligence Alliance (ASI) is scheduled to launch on May 24th, and the merger of the three parties has been approved by proposal voting in various communities;
• Euler (EUL) will unlock approximately 4.66 million Tokens worth approximately $370,000 at 00:17, representing 0.34% of the current Circulating Supply;
• ETH Berlin will be held from May 24th to 26th, 2024 at CIC Innovation Park in Berlin, Germany;

May 25th

• Animoca Brands Japan has launched the "Fairy Tail" digital collectible card on Quidd at 05:00 on May 25th;
• The 5% tokens distributed by Notcoin to community members and exchange users will end on May 25th;
• Acala (ACA) unlocked 4.66 million Tokens worth approximately $500,000 at 08:00 AM, representing 0.48% of the current Circulating Supply;
• Bitcoin 2024；

Conclusion

Last week, the U.S. CPI inflation data was slightly lower than expected, which restored market confidence in the long-term rise of BTC. However, the short-term volatility remains high, and the macro environment is still a key driving factor for the performance of the encryption market. In addition, the number of financing transactions in the encryption market has ended the upward trend for two consecutive weeks, but the total amount of funds remains basically unchanged. This indicates that while institutions are cautious in their layout, they are increasing their bets on the projects they invest in, and the market is betting on the DeFi, infrastructure, and GameFi sectors.

This week, longing important events and conferences, such as Crypto Expo Dubai 2024, Microsoft Build Developer Conference, and ETH Berlin, will bring new technological innovation and cooperation opportunities to the industry. In addition, about $1.3 billion worth of tokens will be unlocked one after another, including $340 million worth of AVAX and $812 million worth of PYTH, which will inevitably bring great selling pressure to the market, after two months of coin price decline AVAX and PYTH FDV after the token is unlocked, there is a high probability that there will be no significant fluctuation. If the macro performance is favourable information, market confidence will be further strengthened and the long-term trend will be more optimistic.

Furthermore, the voting on the FIT21 bill in the United States is underway, which could potentially become a crucial event in the history of US encryption regulation and have a huge impact on the entire industry. It provides a strong favorable trend at the macro level and becomes a key factor influencing subsequent industry trends and market changes. It is recommended that investors pay close attention.