Adoption

Ethereum on-chain data suggests ETH sell pressure could be a non-event after the Shanghai upgrade

A recent Binance report details the status of Ether staking and explores why the Shanghai upgrade may not result in the ETH sell pressure some traders have predicted.

The upcoming Ethereum Shanghai hard fork is slated to occur in March 2023, and the upgrade will cap off the network’s move to proof-of-stake (PoS), which started during the Merge on Sept. 15, 2022. Once Shanghai is implemented, previously locked Ether (ETH) will gradually become liquid for the first time since December 2020. 

According to on-chain Etherscan data, over 16.6 million ETH is currently locked in the PoS staking protocol, which was valued at $28 billion on Feb. 16, 2023. Ethereum’s move from proof-of-work (PoW) to PoS has started to achieve the original goal, which was to make Ether’s supply deflationary. In the 154 days since the Merge, over 24,800 ETH has been burned to make the token 0.05% deflationary on a yearly basis.

Key Ether stats since the Merge. Source: Ultra sound money

On. Feb. 16, the total Ether supply sits at 120 million, meaning that a little over 10% of the supply will be unlocked, with yield rewards starting with the Shanghai update.

Let’s explore what on-chain metrics can help identify what may happen during the Shanghai upgrade.

A portion of locked ETH is liquid thanks to liquid staking derivatives

In order to benefit from yield rewards before the Shanghai update, investors had to lock their ETH and run a reliable node. The minimum staking requirement of 32 locked ETH is entirely illiquid, meaning traders had limited utility options for these coins.

Liquid staking derivatives (LSD) allow users to benefit from staked Ether while retaining the ability to sell the derivative token received on the secondary market. The LSD protocols took a fee and locked the native Ether, giving users another token that represents a stake in the pool.

Liquid staking derivatives did not gain prominence until Lido and other protocols began to see a rush of cash flow after the Merge. Since Ether staking began, liquid staking has surpassed illiquid staking. As of Feb. 13, 57% of staked Ether is liquid versus 43% illiquid.

Liquid vs. illiquid staking. Source: Binance

Since a majority of the locked Ether is through LSD, investors currently have access to liquidity, which could reduce sell pressure post-Shanghai.

Very few stakers are in profit

Back in December 2020 when Ether staking opened, the price of Ether ranged from $400 to $700. Conversely, many investors began staking when Ether was near its all-time high of $4,200. According to Binance:

“We note a sizable amount of ETH (around 2M) was staked at prices in the US $400–700 range — this represents the earliest stakers in Dec 2020 — a group that is likely illiquid given that liquid staking was far less known at the time.”

Because of Ether’s 69% correction since hitting an all-time high, many of the investors who staked their Ether are currently at an unrealized loss.

Price when staking occurred. Source: Binance

The minority of stakers who are in profit are likely to be strong believers in the Ethereum network since the date for liquidity was still unknown at this time. With a large number of stakers at a loss and those who are profitable likely to be long-term investors, Ether’s price may not see a massive dump when the tokens are able to be unstaked.

Lido overtakes solo stakers

On Jan. 2, 2023, Lido officially overtook MakerDAO as the highest total value locked in decentralized finance. As of Feb. 13, Lido is also the largest staking entity in Ether. With over 5 billion ETH staked in Lido, the protocol represents 29.2% of all entities. Notably, almost 30% of all stakers have the option for current liquidity through Lido.

Solo stakers who run nodes took a risk to run nodes from home or with a small group. Solo stakers likely believe that Ether is a long-term currency since nodes carry cost and risk. Solo stakers currently make up 24.9% of all stakers.

Staked Ether by entity. Source: Binance

With nearly 55% of all staked Ether being held by either solo stakers or Lido, the risk of an Ether price dump may be reduced.

While the on-chain data surrounding the Shanghai fork may be bullish for the Ethereum network, some analysts are still predicting the potential for a sharp downside in Ether’s price.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Artificial intelligence, robots and blockchain deliver next-generation healthcare, today

Emerging technologies are revolutionizing medicine – person by person and pill by pill.

Pharmacy visitors expect quick service – to have their prescription filled quickly, or over-the-counter remedy purchased in just a few minutes. In this rapid interaction, little thought goes to the journey of that medicine from a microscope slide to mass production. 

In reality, the drug discovery process is incredibly time and research-intensive. Despite significant advancements in manufacturing and discovery, the average time to bring a drug from the initial stage to market is 10-15 years and costs millions of dollars.

Emerging technologies are transforming healthcare and drug discovery. Artificial intelligence, for example, is doing the “dirty work” of drug discovery by running simulations of drug efficacy instead of timely trial-and-error testing. Blockchain secures healthcare records and connects patients with new clinical trials. AR and VR tools help patients overcome phobias and fear during medical treatments. AI will help future drugs reach the market (some believe this can be cut down to just five years!), delivering life-changing results for illness sufferers worldwide. 

The biggest obstacle to achieving these changes and this tech going mainstream? Us, the patients. We all need to understand the power and promise of these technologies and push for them – or, at least, not fear them.

Supporting AI and blockchain in the healthcare sector

There’s a popular image going around on social media that reads, “AI will not replace jobs. People using AI will replace people’s jobs.” With its easy-to-use interface, ChatGPT is showing people how AI might look in our day-to-day lives. One thing you probably can’t ask the chatbot for? A new compound for a pill to cure deadly diseases. And that’s good because AI applications in medicine should be managed by professionals.

These professionals have known about the power of AI for years, working behind the scenes to develop real use cases. Insilico Medicine brought its knowledge into the spotlight when it announced its “sixth-generation” robotics laboratory in early January. Sixth-gen status means the lab is fully automated, with robotics and AI algorithms conducting ​​target discovery, compound screening, precision medicine development, and translational research. 

You may be wondering, what does fully automated mean for the scientists previously doing these jobs at Insilico? It’s just as the image I mentioned earlier suggests: by integrating technology and speeding up processes, researchers can focus on the “human” side of their work. They are free to focus on critical tasks like clinical trial development and side effect studies because they know technology handles the rest. Ask anyone in biotech: AI is now foundational to drug discovery,

AI-native Insilico Medicine is no stranger to this emerging tech. In 2019, the company partnered with clinical trial startup Longenesis and a South Korean medical center to create a blockchain-powered health data management tool. They designed the platform to protect patient information and comply with guidelines like the Health Insurance Portability and Accountability Act (HIPAA) and General Data Protection Regulation (GDPR). Patients may have known these guidelines existed but did not understand how to manage their data effectively. In contrast, blockchain technology brings these regulations to life, empowering patients to manage their privacy and monitor their data. That’s where the future of health tech lies, at patients’ fingertips. 

Calling all patients: Healthcare transformation is in your hands

One of the lasting takeaways from COVID-19 was how crisis catalyzes breakthroughs. When faced with a common threat, scientific collaboration was not just a feel-good initiative–it was a dire mandate. The results were astonishing and historic. Scientists from around the globe used existing research to produce a vaccine in just a year, remarkably faster than the typical 5-10 year vaccine development timeline. 

The breakthroughs continued after vaccine distribution. Scientists today are applying the mRNA technology used in COVID jabs to develop new vaccines. Their targets? Devastating and hard-to-treat diseases like colorectal cancers and Lyme. AI and other technologies will help accelerate this process and propel this innovation forward, supporting researchers to change (and save) lives. 

2020 also taught us that public health matters for everyone. The onslaught of COVID brought concepts like mRNA and cytokine storms into daily life as people tuned into news reports and scientific publications to stay informed. This trend needs to continue. We have a responsibility to stay educated about healthcare breakthroughs as they impact us immeasurably. I cannot stress this enough: to take advantage of the future of medicine, you need to keep an open mind. 

I have complete faith in the crypto community to take this to heart. We’ve seen the technology behind Bitcoin redefine the digital art world with NFTs. We’ve witnessed DAOs revamp how teams manage projects. We’ve raised money for the world’s most important causes using decentralized tech. Now, it’s time for us to explore the next frontier of health. Scientists are building a future where AI-discovered medicines, virtual appointments and psychedelic mental health treatments will be the norm. Are you ready to be part of it?

The scientific community came together before to deliver life-changing research, and it is time for us to rally again in support of a more digital future of health. I encourage you to donate to research organizations, get smart on health tech and explore what artificial intelligence and personalized medicine could mean for your personal care. Resources are available across the web, and joining communities like nonprofits, DAOs and Discord chats is a great place to get started. In conclusion: technology can and will transform our health. It’s up to us to bring this transformation to life.

SEC enforcement action creates a silver lining for GMX, Lido (LDO) and Maker (MKR) price

Traders are pivoting into decentralized solutions like GMX, LDO and MKR as the U.S. Securities and Exchange Commission cracks down on the crypto industry.

The United States Securities and Exchange Commission (SEC) has started ramping up its crackdown on the crypto industry and recent enforcement actions had a negative impact on crypto prices last week and at the start of this week. 

The SEC is focusing on stablecoin issuers. The most recent SEC stablecoin crackdown was on Feb. 13 through the issuance of a Wells notice to Paxos Trust Company, the issuer of Binance USD (BUSD). While Paxos says that BUSD is not a security and thus outside the SEC’s jurisdiction, some lawyers say the answer is not so simple, which creates fear that other top stablecoin issuers like Circle’s USD Coin (USDC) could be next.

The SEC is also putting crosshairs on centralized exchanges (CEX) by questioning how they can use customer funds as qualified custodians. On Feb. 15, a five-member SEC panel will vote on whether to make it more difficult for crypto firms to hold digital assets.

Centralized staking platforms have also come under the SEC’s microscope and because staking programs provide investors with yield, the SEC believes these offerings are securities. On Feb. 9 the SEC began its assault on these programs by reaching a $30 million settlement over Kraken’s earn program.

Interestingly, traders have not adopted a fully risk-off position to the recent SEC activity, and certain decentralized solutions like GMX (GMX), Lido (LDO) and Maker (MKR) are soaring.

Let’s take a closer look at what’s with decentralized service providers.

Maker’s DAI stablecoin benefits from Paxos outflows

After the Wells Notice was sent to Paxos by the SEC, BUSD redemptions surged to $342 million in 24 hours. Redemptions from BUSD to Paxos burn the outstanding debt token. So while Binance said they continue to support BUSD, its market cap will decrease over time with Paxos barred from minting new tokens.

Stablecoin market caps. Source: Nansen

While the drawdown has slowed, the BUSD market cap has dropped from $16.2 billion before the Feb. 13 SEC announcement to $15.4 billion on Feb. 14. The $15.4 billion market cap marks a monthly low for the third largest stablecoin.

BUSD market cap. Source: CoinGecko

On the heels of the SEC’s enforcement action,  Maker — the issuer of the decentralized stablecoin DAI — has seen an increase in usage and fees. Over a seven-day period, Maker fees have increased 8.37% and skyrocketed on Feb. 13 to $667,000 in 24 hours.

Maker fees and token holders. Source: Token Terminal

Maker is the top 10 performing token on CoinGecko when sorted by percentage returns, gaining over 8.8% in seven days. With the uncertainty surrounding other large stablecoins like USDC after the SEC’s enforcement announcement, Maker’s fees could continue to increase.

GMX hits a new all-time high on as CEX uncertainty grows

GMX, the native token of the GMX decentralized derivatives exchange, has previously benefited when a major centralized exchange saw high outflows. GMX tends to see a boost in fees and its token price. As Binance net outflows reached $788 million in the 24 hours after the Feb. 13 SEC announcement, GMX price rose to a new all-time high of $83.02. On Feb. 15, Binance saw another $535 million in net outflows.

Binance daily net flow. Source: Dune

On Feb. 10, GMX hit its all-time high of fees received, reaching $5.7 million. And with the daily active users increasing 16.2% to 2,150, the outflow from Binance may lead to sustained growth for the budding exchange.

Investors seem to be betting on GMX’s growth, making it the ninth top token on Feb. 14 by returns in seven days, gaining 12.9%.

GMX key metrics. Source: Token Terminal

Lido stands to gain market share in the coming months

After the SEC’s $30 million settlement with Kraken, BTC and altcoin prices dropped, while LDO price surged.

Within 24 hours of the Feb. 9 SEC announcement, LDO gained 13.2% and investors seem to believe that Lido can repeat this action as it is a top twelve performing token with 16% seven-day gains.

In addition to price growth, Lido’s usage as a decentralized staking platform has skyrocketed, seeing $35.8 million in 30-day fees.

Lido key metrics. Source: Token Terminal

While Lido has not witnessed an increase in average daily active users, the potential for future enforcement actions against Coinbase might translate to an increase in Lido’s market share among Ether stakers.

What is clear is that the string of recent SEC crackdowns on centralized staking, centralized exchanges and stablecoins are leading investors to position themselves in decentralized solutions like GMX, Lido and Maker.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

SEC enforcement against Kraken opens doors for Lido, Frax and Rocket Pool

Kraken has put an end to staking as a service, and Coinbase could eventually be forced to follow suit. Will this create opportunities for LDO, FXS and RPL?

The United States Securities and Exchange Commission is ramping up pressure on the crypto sector. On Feb. 9, the SEC reached a $30 million settlement with Kraken over the centralized staking program it offered to its users.

The news of the crackdown sent the price of Bitcoin (BTC) to a three-week low as investors became fearful of the regulatory enforcement. Ether’s (ETH) price also corrected on the news, cementing the token’s worst-performing day of 2023.

While the overall crypto market was down after the SEC announcement, bright spots arose, with decentralized liquid staking tokens LDO, RPL and FXS quickly rebounding from their sharp corrections.

According to Crypto Twitter analyst Korpi, Kraken and Coinbase represent 33% of all staked Ether, and if U.S.-based centralized exchanges are “forced” to cease offering staking-as-a-service programs, liquid staking derivatives providers could absorb that market share.

Based on recent tweets, crypto traders are well aware of this potential outcome, and this could be part of the reason for the short-term rebound seen in Lido’s LDO, Rocket Pool’s RPL and Frax’s FXS. Let’s take a look at some fundamental data points that might back their bullish thesis.

Centralized staking could be banned for U.S.-based investors

The aftermath of Kraken’s capitulation to the SEC could spill over to other centralized exchanges that offer staking as a service. While not all SEC commissioners agreed with the crackdown on Kraken, the settlement puts other companies in the hot seat, such as Coinbase and its Earn program.

On Feb. 8, Coinbase CEO Brian Armstrong described how disastrous he believes the SEC’s crackdown on staking would be for U.S. investors.

The SEC’s decision to regulate cryptocurrencies through enforcement actions rather than clear regulations caught the ire of the crypto community due to its ”anti-crypto” actions.

Decentralized staking as a service could solve securities issues

If a wider crackdown on centralized staking services ensues, that market share of stakers could be absorbed by decentralized providers like Lido, Rocket Pool and others. In the aftermath of the SEC’s decision, Rocket Pool briefly reached $1 billion in total value locked (TVL).

Lido, the largest liquid staking provider, has over $8.5 billion in TVL. And while the platform did not see an initial boost in usage after the SEC’s decision, large inflows may begin as users seek new places to stake their Ether.

Lido daily active users and TVL. Source: Token Terminal

The crypto market may be down since the SEC decision, but RPL and LDO prices are up. Within 24 hours of the Feb. 9 SEC announcement, RPL’s price increased by 14.5% and LDO gained 13.2% before correcting to $2.39.

The increase in prices seems to be from large whales accumulating major amounts of tokens.

The growth shows that even as the market is down, investors are betting on increased platform usage, which will translate to more fees for the organization.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Avalanche (AVAX) price is up, but do fundamentals support the rally?

AVAX price has been in a strong rally since the start of 2023, but a sustained uptick in its DeFi components is needed in order to sustain the current bullish momentum.

Avalanche (AVAX) witnessed a meteoric start to 2023, gaining 98% in 30 days, and traders are now curious about whether the rally will extend throughout February. AVAX’s year-to-date gains for 2023 have outpaced those of Bitcoin (BTC) and Ether (ETH).

Recent reasons for AVAX’s rally can be attributed to an Amazon partnership announcement on Jan. 11. The partnership is meant to easily deploy nodes on the Avalanche blockchain with Amazon Web Services (AWS). Ava Labs, which supports the Avalanche ecosystem, hopes the partnership increases blockchain usage for enterprises and governments.

While AVAX price has benefited from the news, some analysts predict that the move could have been a bull trap.

Let’s dig into the fundamentals to see if on-chain network activity supports the recent AVAX rally.

AVAX fees from DeFi are up

After the AWS news, AVAX price was not the only metric seeing a quick rise. On Jan. 14, Avalanche network hit a year-to-date high of $31,218 AVAX fees received. The increase in fees compared to the previous 30 days is 59%, signaling that positive price appreciation helped boost the fees that the network received.

Avalanche network fees and AVAX price. Source: TokenTerminal

While the Avalanche fee base is increasing, it still lags behind top EVM-compatible blockchains like Ethereum, Binance Chain (BNB), Optimism (OP) and Polygon (MATIC). Over the past 30 days, the fees Avalanche has generated rank 9th out of all blockchains.

Top blockchains sorted by fees. Source: TokenTerminal

Notably, layer-2 competitor Polygon earned close to four times the amount of fees compared to Avalanche. Even with the astounding growth thaAvalanche has experienced in 2023, the network will need to substantially increase fees to overtake more blockchains.

Active addresses and users are down

A sign of blockchain health is the number of active addresses, users and transactions. Despite reaching a year-to-date high on Jan. 18 of 1.84 million transactions, Avalanche’s transaction count is trending down.

A similar downtrend is witnessed when looking at active addresses in the Avalanche ecosystem. Active addresses denote transactions taking playing on unique wallets for a given day. After reaching a year-to-date peak of 54,978 active addresses on Jan. 31, only 34,624 active addresses were registered the following day.

Active addresses and transactions. Source: Avalanche

The downtrend in Avalanche activity is creating further separation between other blockchains. According to TokenTerminal, Avalanche’s all-time high (ATH) number of daily active users is 131,000, which is dwarfed by Polygon’s ATH of 737,000. Avalanche is now far from its all-time high of daily users, registering only 44,000.

Blockchains sorted by daily active users, Source: TokenTerminal

For blockchains to create sustainable fees, there needs to be daily active users participating on the network.

AAVE dominates Avalanche DApps

The active users on Avalanche seem to have a preference for using Aave (AAVE) on the AVAX blockchain. Over 36% of all Avalanche transactions flow through the Aave protocol. Investors have staked over $353 million on Aave’s Avalanche version, far surpassing the second-most popular protocol by verified total locked value (TVL), the Trader Joe decentralized exchange (DEX).

Top Avalanche DApps. Source: DefiLlama

While Aave and Trader Joe are leading the Avalanche blockchain, when looking at DEX activity on other blockchains, they witness far less trading volume. DEX volume directly correlates to the fees that a protocol receives.

Ethereum DEX activity leads the way with over $1.6 billion in daily volume, whereas Avalance only sees around $104 million.

DEX activity by blockchain. Source: DefiLlama

While Avalanche is currently witnessing immense growth from the AWS announcement, the blockchain is still small compared to competitors. The goal of the AWS partnership was to help increase network activity by reducing barriers to entry. Reaching the goal may increase Avalanche adoption but other ecosystems seem to be out to a large and early lead.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin on-chain data and BTC’s recent price rally point to a healthier ecosystem

Positive signs of Bitcoin’s recovery can be seen in on-chain, spot exchange and futures data.

Bitcoin (BTC) had a rough time all throughout 2022.

But fresh on-chain and futures market data show positive signs that the leading cryptocurrency by market capitalization has started to recover.

After a bevy of short liquidations, the futures market is pointing toward renewed equilibrium. According to data from Glassnode, short position liquidations cleared out unhealthy market speculators, on-chain and exchange data now point to an improving spot market and exchange netflows.

A large group of investors that were previously at a loss is now back in the category that Glassnode analysts label as “unrealized profits.”

Massive short liquidations set the groundwork for new investors to thrive

Futures data typically hold an equilibrium between longs and shorts. As the market moves, investors tend to update their futures to avoid liquidation. Conversely, in mid-January, investors were caught off guard which resulted in an all-time high of 85% short liquidations.

Futures liquidation long versus short ratio. Source: Glassnode

The short liquidation dominance has helped fuel the current Bitcoin rally. In January, over $495 million in short futures were liquidated. Liquidated shorts create automatic Bitcoin purchases, thus driving up the BTC price. The year-to-date liquidations have three large waves that peaked at $165 million in one day of liquidations.

Total liquidations. Source: Glassnode

After the historic amount of short liquidations, the futures market is trending toward longs. On Jan. 30, 51.46% of open interests are long positions rather than shorts.

Long versus short ratio. Source: Coinglass

The liquidation of shorts not only helped Bitcoin price rally but also seemingly suggests a return of positive sentiment in the BTC market.

Glassnode researchers said:

“Across both perpetual swap, and calendar futures, the cash and carry basis is now back into positive territory, yielding 7.3% and 3.3% annualized, respectively. This comes after much of November and December saw backwardation across all futures markets, and suggests a return of positive sentiment, and perhaps with a side of speculation.”

Bitcoin annualized premium. Source: Glassnode

Centralized exchange netflows reach equilibrium

In March 2020, centralized exchange (CEX) Bitcoin balances reached an all-time high. Since then, Bitcoin has flowed out of spot exchanges. Approximately 2.25 million BTC are currently held across 21 of the top exchanges, which is a multi-year low. The 11.7% of the total Bitcoin supply held on centralized exchanges was last witnessed in February 2018.

Bitcoin exchange balance. Source: Glassnode

Typically throughout Bitcoin’s history, exchange inflows and outflows are similar, creating an even balance. This balance was disrupted in November when net outflows of Bitcoin from exchanges reached $200 million to $300 million per day. The large outflow during this period was historic, resulting in 200,000 Bitcoin leaving exchanges ovethe month.

Bitcoin net position change on exchanges. Source: Glassnode

As Bitcoin started gaining bullish momentum in January, centralized exchange inflow and outflow has normalized. The net flows are now closer to neutral, with a reduction in the high outflow trend.

Multiple Bitcoin investor cohorts return to the “unrealized profit” zone

Bitcoin’s movement in and out of exchanges helps provide analysts an estimate for investors’ BTC acquisition price. During the 2022 bear market, only investors from before 2017 were in potential profit. Investors arriving to Bitcoin after 2018 were all at an unrealized loss.

According to Glassnode researchers:

“Through the 2022 downtrend, only those investors from 2017 and earlier avoided hitting a net unrealized loss, with the class of 2018+ seeing their cost basis taken out by the FTX red candle. The current rally however has pushed the class of 2019 ($21.8k) and earlier back into an unrealized profit.”

Bitcoin average withdrawal price. Source: Glassnode

The fact that a growing number of investor cohorts have returned to profitability is a good sign, especially after Bitcoin witnessed record realized losses in December.

Two of the largest investor groups, those who purchased BTC on Coinbase and Binance, hold an average BTC acquisition price of $21,000. As Bitcoin continues to try to reach $24,000, any upcoming correction caused by macro factors may push down the unrealized profits in these groups.

Exchange average withdrawal price. Source: Glassnode

Positive signs of Bitcoin’s price recovery can be seen in on-chain, spot exchange and futures data. The futures market is indicating a renewed equilibrium following a record-high amount of short liquidations.

The market is now showing improved exchange netflows and spot market activity suggests that investors are slowly trickling back into the crypto market.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Binance stablecoin BUSD sees a sharp market cap drop amid solvency and mismanagement worries

Persistent worries about Binance’s solvency, increased regulation of the crypto sector and questionable use cases are chipping away at BUSD’s market capitalization.

Stablecoins in the cryptocurrency market help provide U.S. dollar-pegged tokens within the volatile industry. In bull markets, the market capitalization of stablecoins tends to decrease as investors flock to more volatile assets; and in bear markets, investors seek shelter in low-volatility stablecoins, thus increasing their market caps.

On Jan. 26, the total market capitalization for stablecoins like Tether (USDT), USD Coin (USDC), Binance USD (BUSD) and Dai (DAI) is over $131 billion.

Stablecoin supply dominance. Source: Glassnode

Stablecoins are so crucial to the future of crypto that Moody’s, a well-respected analytics agency, is planning to develop a scoring system, which may help reduce the speculation and fear that some investors have with stablecoins.

Such fear amid a lack of stablecoin transparency has led one of the top stablecoins, BUSD, to see a major usage decline in recent weeks.

Let’s examine the factors affecting the BUSD stablecoin.

BUSD’s market cap takes a major hit

While the BUSD market cap witnessed a large bump on Sept. 30, 2022, those gains came from Binance’s decision to forcefully swap the exchange’s USDC holders to its own stablecoin. Those gains have since evaporated. At the time, the automatic conversions took $3 billion off of USDC’s market cap.

BUSD’s market cap has continued to fall due to problems with the dollar-pegged tokens’ management that first came to light in January 2023. While Binance pushed back on reports that the stablecoin was not fully backed, investor fears led to a major exodus.

According to blockchain analytics provider Nansen, the circulating supply of BUSD decreased to $15.4 billion on Jan. 25. The drop represents a decrease of $1 billion from the previous week and $2 billion compared with December 2022.

Stablecoin market caps. Source: Nansen

The most recent decline sped up BUSD’s market cap decrease from $22 billion when worried investors rushed to withdraw money from Binance after it misrepresented the amount of digital assets in its collateral reserves by combining corporate holdings on reports.

BUSD inflows struggle

When the price of Bitcoin (BTC) is on the rise, like it has been recently, stablecoins typically see a decrease in inflow as investors sell for other assets. A way to measure demand for stablecoins is to look at exchange inflows.

According to analytics provider CryptoQuant:

“Higher value indicates investors who deposited a lot at once are increasing recently. For stablecoin, value rise indicates buying pressure.”

This means negative numbers show a decrease in buying pressure. While all stablecoins are seeing lower demand or inflows, BUSD has witnessed nearly 3x more inflow.

All stablecoins’ inflow versus BUSD. Source: CryptoQuant

The massive decrease in demand may continue as the markets continue to rise and questions around BUSD remain.

The majority of BUSD is on Binance

Stablecoins see an uptick in demand when they are utilized in trading pairs with altcoins. The trading use case works on both centralized exchanges (CEX) and decentralized exchanges (DEX).

A concerning statistic surrounding BUSD is the lack of stablecoin use outside of its parent exchange, Binance. While $13.8 billion in BUSD resides on Binance, the next closest tally is $32.6 million in BUSD on Crypto.com. While Crypto.com may be the second-largest exchange for BUSD, USDC is the largest stablecoin on the CEX, with $582 million, dwarfing BUSD’s numbers.

Stablecoins on exchanges, sorted by BUSD. Source: Nansen

The lack of use cases following the major decrease in demand for BUSD does not bode well for its market cap if the trend sustains over a long period of time. Combining these two negatives with the recent move by SWIFT to ban dollar transfers lower than $100,000 on Binance suggests that the stablecoin could continue to face major headwinds.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Bitcoin dialogue at WEF requires ‘open-mind’ — Davos 2023

“It’s about taking inspiration from what we’ve done.” Lugano’s Plan B hopes to drive Bitcoin adoption dialogue at future World Economic Forum conferences.

The World Economic Forum (WEF) convenes in Davos annually, taking over the Swiss skiing town. The main promenade is flush with events and companies renting out properties, with an increasing presence from companies in the cryptocurrency and blockchain space.

The entrance to the WEF compound is restricted by cement barriers and security personnel, drawing an invisible line between the conference and the rest of Davos. Curiously, the last building on the fringe of the conference was branded with familiar logos, that of Polygon and the ever-recognizable Bitcoin (BTC) symbol.

Cointelegraph stumbled upon Pietro Poretti while shooting footage of the Bitcoin logo emblazoned on the Tech Lodge stand. Poretti is the director of Lugano’s Economic Development department. This Swiss city has opened up BTC and crypto payments for various municipal accounts for its residents through its Lugano Plan B project.

Bitcoin was not on the official agenda of the WEF in 2023. Crypto and blockchain featured across different workshops during the week, but these conversations focused more on Web3, the metaverse, central bank digital currencies and blockchain payment systems rather than decentralized cryptocurrency adoption.

Pietro Poretti speaks to Cointelegraph’s Gareth Jenkinson outside the World Economic Forum compound in Davos in January 2023.

2023 is the second year that Lugano’s Plan B set up shop in Davos, as it looks to meet new people, create connections and share its story driving real-world BTC adoption and use cases. The project has been operational since March 2022 and Poretti says while it is in its infancy, it’s about educating and demonstrating the utility of cryptocurrencies:

“It’s about promoting crypto payments throughout the city by the city administration. Soon in Lugano, you’ll be able to pay taxes, fines, anything you pay to the municipality.”

Lugano Plan B merchants accept payment in the native LVGA tokens, Bitcoin, Lightning Network payments and Tether (USDT). This year, sharing experience with other industries, policymakers and public officials has been a focus. Poretti says payments innovation has been approached with “small but very concrete steps” focused on providing different but complementary payment gateways.

“I think that at the end of the day if people see the benefits of having an alternative, it’s not something necessarily will replace or is going to replace.”

Lugano’s cryptocurrency payments initiative could serve as a tangible case study for the adoption of decentralized payment options worldwide, including inside the WEF. That has not yet happened, but representatives from other cities have asked Lugano for the “hows and whys” of their Plan B initiative, which Poretti describes as progress:

“We think that it’s not about duplicating the exact same approach elsewhere in the world, but maybe it’s about taking inspiration right from what we have done and and and learn something also from our experience. I think that in this respect, Lugano still is a little bit of a pioneer.”

While the likes of Ripple and Circle were prominent cryptocurrency ecosystem participants involved in WEF workshops, Poretti believes a more open-minded approach will be required for Lugano to sit at the table to outline their crypto-adoption efforts.

Related: TradFi and DeFi come together — Davos 2023

This requires many moving parts, including financial and legal services participation and political support for similar initiatives. Perhaps most importantly, Poretti believes users will drive discourse and adoption of solutions like Bitcoin:

“If your citizens are on board and they say, ‘let’s try, we are curious, we are open,’ then when we start seeing the benefits.”

Poretti believes this drives job creation, stimulates economic growth and ensures technological and digital adoption.

Bitcoin Suisse was another Swiss-based cryptocurrency industry player that Cointelegraph managed to connect with in Davos. CEO Dirk Klee highlighted the company’s role in founding Crypto Valley and its early work to drive BTC adoption in Switzerland, which has become a leader for worldwide cryptocurrency adoption in many respects.

“I would call it the world headquarters of wealth management and the early adopters, right? We’re partially crypto natives, but who grew into wealthy individuals early on.”

Klee said that Switzerland’s reputation as a well-regulated and safe place to do business has also helped the local cryptocurrency ecosystem grow over time while conceding that its an ongoing journey.

Highlighting tough market conditions over the last year, Klee suggested that the industry is at a point where trust and confidence need to be built before considering more participation in events like the WEF:

“A lot of trust has been destroyed and eroded in the last year and we want to be kind of the center point of the next stage of institutionalization, making the place more accessible, easier to use, but also safer.”

Klee also wants to see the likes of Bitcoin Suisse potentially involved in cryptocurrency workshops in future WEF conferences and described going mainstream as “the ultimate goal.“

The likes of Lugano and various Swiss regions are prime examples of the potential for cryptocurrency adoption for everyday payments. Furthermore, the presence of Plan B and Bitcoin Suisse in Davos proves that the industry is driving its own conversations with interested parties outside the walls of the World Economic Forum.

Bitcoin price rally provides much needed relief for BTC miners

Bitcoin’s prolonged breakout above $22,000 is easing pressure on razor thin profit margins for BTC miners.

Bitcoin mining powers network transactions and BTC price. During the 2021 bull run, some mining operations raised funds against their Bitcoin ASICs and BTC reserves.

Miners also preordered ASICs at a hefty premium and some raised funds by conducting IPOs. 

As the crypto market turned bearish and liquidity seized within the sector, miners found themselves in a bad situation and those who were unable to meet their debt obligations were forced to sell the BTC reserves near the market bottom or declare bankruptcy

Notable Bitcoin mining bankruptcies in 2022 came from Core Scientific, filing for bankruptcy, but BTC’s early 2023 performance is beginning to suggest that the largest portion of capitulation has passed.

Despite the strength of the current bear market, a few miners were able to increase production throughout 2022 and on-chain data shows Bitcoin miner accumulation began to increase in December 2022 and momentum appears to be continuing into 2023.

Bitcoin’s rally to $22,000 improves miner margins

The 2023 Bitcoin rally which saw BTC price hit a yearly high of $22,153 on Jan. 20, a 17% 7-day increase, has significantly helped BTC mining operations.

An increase in Bitcoin price and the network’s hashprice are helping BTC miners that kept net positive balances at the end of 2022 which is improving business stability. In addition, now Bitcoin miners are mostly back in profit.

Public miners Bitcoin sold vs mined. Source: Hashrate Index

While more miners are turning back on Bitcoin mining rigs, the difficulty is increasing which may hinder future upside. With conditions improving will Bitcoin miners continue to accumulate or continue the trend of selling?

Recapping 2022, Jaran Mellerud a Bitcoin mining analyst for Luxor Mining said:

“Between January and November, the public miners offloaded 51,180 bitcoin, while producing 47,284 bitcoin.”

BTC hashprice, a metric that measures the market value of mining or computing power, provides insight into Bitcoin mining operations’ profitability.

Since Jan. 1, 2023, hashprice is up by over 20% and on Jan. 19. Bitcoin mining’s profitability grew from $0.06 per Terra Hash per day (TH/d) to $0.07874 TH/d and this has benefited from BTC’s price rally. Hashprice has not witnessed the recent levels since early October 2022.

Bitcoin hashprice. Source: Hashrate Index

Although Bitcoin mining profitability has improved since the start of 2023, the industry is still facing rough waters ahead. According to Nico Smid, co-founder of Digital Mining Solutions:

“The recent increase in hashprice is positive, but many miners are still operating on thin margins. A year ago, the hashprice was at $0.22/TH/day. While the market has reached its lowest point, the current economic conditions for mining remain challenging.”

Bitcoin miners are still selling the bulk of their mined BTC

Bitcoin miners are benefiting from the uptick in price and data shows many are continuing to sell their rewards.

Bitcoin miner positions and revenue. Source: CryptoQuant

The most robust mining operations actually limited debt and expansion or used a strategy of selling minded BTC while in profit. Using self-reported data, Anthony Power, Bitcoin mining analyst for Compass Mining, compiled a list of miners reserves at the start of the year versus the end of the year.

Marathon Digital, the top holder out of the listed Bitcoin mining companies, held 8,133 BTC at the end of December 2022. The company is planning to increase production based on hashprice profitability to further their advantage.

Mining difficulty could hinder profits in the future

With more Bitcoin miners turning their BTC rigs back on, the mining difficulty metric adjusted upward by 10.26% on Jan. 16. Bitcoin difficulty indicates the time and cost to mine BTC in order to receive rewards. The adjustment was the largest since October 2022 and the increase in difficulty makes it more expensive for Bitcoin miners to earn rewards through the proof-of-work (PoW) consensus mechanism.

Bitcoin mining difficulty. Source: Hashrate Index

With the upcoming Bitcoin halving event due in 2024, mining BTC will become even more difficult and possibly more expensive for miners, providing more stress on already thin margins. On the upside, the last halving event in 2019 was followed by a 300% gain for BTC the year before.

While miners are currently seeing some relief after a tough year, potentially rough roads lie ahead. The business operations are seemingly improving with Bitcoin miners selling for profits rather than taking on debt against Bitcoin holdings.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Bitcoin price strength intensifies as risk-loving traders bring volume back to the crypto market

An increase in Bitcoin trading volume and positive on-chain data appear to be the primary forces behind BTC’s newfound strength.

The beginning of 2023 has provided Bitcoin (BTC) with bullish indicators and the rally to a year-to-date high at $21,647 has crypto traders hopeful that the worst part of the bear market has ended. The surge effect of BTC’s bullish price action is also carrying over to Ether (ETH) and Bitcoin mining stocks.

The reduction in Bitcoin Fear and Greed index to neutral is possibly driven by volume increases, Bitcoin on-chain data and BTC price decoupling from equities markets. While not all analysts believe a market bottom is in, let’s dive into the data.

Trading volume and volatility return

Bitcoin’s price spike has been accompanied by massive growth in trading volume. Over the last week, BTC volume has more than doubled, reaching $10.8 billion, a 114% increase over sevendays.

Bitcoin trading volume. Source: Arcane Research

Increased trading typically correlates to an increase in volatility. While the current 2.4% seven-day volatility levels are still below the 2022 seven-day average of 3.1%, Bitcoin has remained consistent during the 2023 rally.

BTC 30-day and 7-day volatility. Source: Arcane Research

Centralized exchanges (CEX) have been struggling with low trading volume, meaning lower fees for the business, inducing layoffs. The increase in volume for all exchanges is likely welcomed news.

Trading volume increases coincide with profits returning

Bitcoin on-chain realized profits are retesting the adjusted spent output profit ratio (aSOPR) value of 1.0, which some analysts believe to be a key resistance level. The aSOPR metric historically shows a change in the overall market trajectory as profits are absorbed by trading volumes.

BTC aSOPR 7-day exponential moving average. Source: Glassnode

According to Glassnode,

“An aSOPR break above, and ideally a successful retest of 1.0 has often signaled a meaningful regime shift, as profits are realized, and sufficient demand flows in to absorb them.”

Reversing a trend that started in May, the on-chain realized profit and loss ratio for BTC is up over the 1.0 level, hitting 1.56 profits over losses on Jan. 16.

When more traders are in the green on BTC purchases and realizing profit without the price plummeting, it signals market strength.

Realized profit and loss ratio for BTC. Source: Glassnode

On-chain analytics are also showing positive signs that Bitcoin’s recovery is potentially on the way. The more the market can absorb sell pressure without price capitulation speaks to the reduced overall market fear and possible macro shift.

Related: Bitcoin on-chain and technical data begin to suggest that the BTC price bottom is in

Bitcoins softening correlation to equities

Volatility, realized profits and trading volume are helping Bitcoin decouple from equities. As reported by Cointelegraph, Bitcoin’s price action typically has been closely correlated to U.S. equities.

Bitcoin’s 30-day correlation to the Nasdaq reached 0.29 on Jan. 17, the highest BTC divergence from equities since December 2021.

Vetle Lunde a Senior Analyst at Arcane Research explains what decoupling means to the Bitcoin market.

“Softening correlations is a positive development in the market.”

Bitcoin’s previous correlation could have been caused by institutional investors bundling BTC with other risk assets and large growth companies like Tesla holding exposure.

Now that institutional investors and growth companies are holding less Bitcoin, correlation to markets may lessen in the future.

Equities markets could continue to flutter due to the resiliency of high inflation, but Bitcoin’s divergence from the stock market could help BTC become an investment hedge. According to some analysts, if Bitcoin can become a hedge to equities, institutional investors may return to the market.

The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.