on-chain

BNB Chain on-chain activity bucks bear market downtrend in Q4: Messari

Average daily addresses on the Binance blockchain network grew by 30% year-on-year in Q4.

The Binance-native blockchain BNB Chain continued to show steady activity growth in the fourth quarter of last year despite the broader crypto bear market, according to recent research.

In a “State of BNB Chain Q4 2022” report published on Feb. 5, Messari researcher James Trautman revealed that the Binance network had continued with an “aggressive strategy to deploy financial and human capital across its ecosystem.”

Due to these ongoing updates and developments, average daily active addresses and transactions “bucked a downward trend and grew by 30% and 0.2%, respectively,” the researcher noted.

BNB Chain daily active addresses. Source: Messari

Bear markets are usually quiet periods in terms of on-chain activity, however, teams use this time to continue building and developing their products.

Trautman wrote that while “2022 was a tumultuous year for the crypto industry,” BNB Chain “lived up to its Build N’ Build name with network upgrades and ecosystem expansion that showed considerable strength through Q4.”

BscScan reports that daily transactions on BNB Chain have remained steady at around 3 million since mid-August. However, daily BEP-20 token transfers have seen an uptick in activity this year, with a 66% increase to just over 5 million on Feb. 5.

BNB Smart Chain unique addresses are currently at an all-time high of 250 million, according to BscScan. Average daily new unique addresses grew by 41.3% year-on-year.

Messari attributed the growth to the adoption of several ecosystem protocols such as Web3 onboarding protocol Hooked, a surge of DeFi activity on Venus Protocol and increased NFT activity on the OpenSea marketplace.

Meanwhile, BNB Chain DeFi total value locked has increased by 25% since the beginning of the year to reach $6.62 billion, according to DeFiLlama.

“BNB Chain executed a growth strategy that facilitated significant strides toward adoption. It made several upgrades to core functionality, integrated with strategic partners, and expanded into DeFi, NFTs, GameFi, and beyond,” said Trautman.

Related: Binance delves into decentralized Web3 storage with BNB Greenfield

However, despite the uptick in user activity, financial performance was down. Average transaction fees decreased, which contributed to less revenue generation, it noted.

Network revenue declined 10% for the quarter but Messari stated that the fundamentals were still positive, concluding that:

“Ultimately, it was a positive sign that the catalysts for user growth came on the heels of a foundational user base and a more favorable valuation for BNB Chain’s network, especially after the FTX drama unfolded during Q4.”

Looking ahead, Trautman said that he expects BNB Chain to be able to continue its growth, including adding scaling solutions and boosting throughput.

The BNB Chain’s native token, BNB, has dropped 1.2% over the past 24 hours, falling to $326, according to Cointelegraph. The token has gained 25% over the past month but remains down 52.5% from its May 2021 all-time high of $686.

Six on-chain metrics suggesting Bitcoin is a ‘generational buying opportunity’

Six tried and tested on-chain metrics are repeating patterns last seen at the bottom of the past three bear markets.

Several on-chain metrics from the Bitcoin (BTC) network are flashing buy signals following this year’s rally.

Bitcoin has broken out of its torpor to notch up a 37% gain since the beginning of 2023. However, on-chain data is still signaling it could be a “generational buying opportunity,” according to analysts.

On Jan. 24, researcher and technical analyst “Game of Trades” identified six on-chain metrics for his 71,000 Twitter followers.

The first metric is an accumulation trend score highlighting zones of heavy accumulation in terms of entity size and the number of coins bought.

“Large entities have been in deep accumulation mode ever since the FTX collapse,” the analyst noted, adding that “similar accumulation took place in the 2018 and 2020 bottoms.”

The Bitcoin entity-adjusted dormancy flow is a measure of the ratio of the current market capitalization and the annualized dormancy value.

Whenever dormancy value overtakes market capitalization, the market can be considered in full capitulation which has been a good historical buying zone.

According to Glassnode, this metric fell to its lowest level ever in 2022.

BTC entity- adjusted dormancy flow. Image: Glassnode

Bitcoin’s reserve risk can be used to measure the confidence of long-term holders relative to the price of BTC. This also fell to its lowest-ever level at the end of 2022, according to Glassnode data.

Bitcoin’s Realized Price (RP) is the value of all coins in circulation at the price they last moved — in other words, an estimation of what the entire market paid for their coins.

According to Woo Charts, Bitcoin has been trading below this level since FTX’s collapse in November until Jan. 13. It is currently just above the RP, which represents another buying opportunity.

The Bitcoin MVRV Z-score shows when BTC is significantly over or undervalued relative to its “fair value” or realized price. When the metric leaves the extremely undervalued zone it is often considered the end of the bear market.

BTC’s MVRV Z-Score. Image: Glassnode

Finally, there is the Puell Multiple examining the fundamentals of mining profitability and its impact on market cycles.

Lower values, as they are at the moment, indicate miner stress and represent long-term buying opportunities.

Related: Bitcoin halts volatility at $23K as BTC hodlers see mass return to profit

The analyst concluded these six on-chain metrics are “pointing towards an exceptional risk-reward setup in Bitcoin.”

The metrics are all at similar levels to market cycle bottoms in 2015, 2018, and 2020, they added.

At time of publication, BTC was trading down over 1.9% over the past 24 hours at $22,675, according to Cointelegraph data.

What blockchain analysis can and can’t do to find FTX’s missing funds: Blockchain.com CEO

Peter Smith says the hardest thing to trace is the funds that enter the banking system.

Blockchain.com’s founder and CEO, Peter Smith, believes that on-chain analytics will play a significant role in locating the billions in missing FTX customer funds, though it will have its limitations.

On Dec. 20, Fox Business host Liz Claman said that blockchain’s selling point was that it makes crypto transactions transparent and traceable, and asked Smith what could be traced in the case of FTX’s missing customer funds.

Smith said that blockchain sleuths have already done a fair bit of work in chasing the money trail, adding that it could in fact be the banking system where the trail could turn cold:

“The most challenging thing for [blockchain analytics] firms working on this today is when money moves off chain and into the banking system because they’re no longer able to track it.”

He cited an example of when Sam Bankman-Fried or associates purchased real estate, as that would have originated from a bank. Those assets would be hard to trace back to FTX or a blockchain once they leave the crypto ecosystem, he said.

The interviewer also questioned whether shadow banking was used. This is a system of lenders, brokers, and other credit intermediaries operating outside the realm of traditional regulated banking, which can be used to mask transactions.

Smith explained that for funds still in the crypto ecosystem, on-chain analytics will be tremendously helpful to liquidators in their efforts to untangle the FTX mess, “since those are records that can’t be changed or altered.”

Things that can be traced on-chain include where FTX lost its customers’ money, such as in trading bets, liquidity farming or withdrawing it for real estate or venture investments. On-chain analytics can also be used to see how much crypto users deposited with FTX, he added.

“A lot of the money was lost in trading positions … real estate, venture capital investments … all of that occurs outside the on-chain ecosystem in crypto.”

In a related development, FTX’s new chief financial officer, Mary Cilia, told a procedural hearing on Dec. 20 that the firm has identified over $1 billion in assets.

Related: SBF signs extradition papers, set to return to face charges in the US

FTX reportedly located about $720 million in cash assets in U.S. financial institutions authorized to hold funds by the Department of Justice. Cilia stated that around $130 million was being held in Japan and $6 million was being kept for operational expenses. Most of the remaining $423 million are stored at unauthorized U.S. institutions — mainly at a single broker, she said, declining to elaborate.

Prosecutors and liquidators have been sifting through the FTX wreckage trying to claw back as much as $8 billion in missing customer funds.

Ethereum price falls below $1.1K and data suggests the bottom is still a ways away

ETH price has stalled around the $1,100 level, but several data points suggest the altcoin’s sell-off is far from complete.

Ether (ETH) price nosedived below $1,100 in the early hours of June 14 to prices not seen since January 2021. The downside move marks a 78% correction since the $4,870 all-time high on Nov. 10, 2021.

More importantly, Ether has underperformed Bitcoin (BTC) by 33% between May 10 and June 14, 2022, and the last time a similar event happened was mid-2021.

ETH/BTC price at Binance, 2021. Source: TradingView

Even though Bitcoin oscillated in a narrow range two weeks before the 0.082 ETH/BTC peak, this period marked the “DeFi Summer” peak when the Ethereum network’s total value locked (TVL) catapulted to $93 billion from $42 billion two months earlier.

What’s behind Ether’s 2021 underperformance?

Before jumping to conclusions, a broader set of data is needed to understand what led to the 31% correction in the ETH/BTC price in 2021. Looking at the number of active addresses is a good place to start.

Ethereum network daily active addresses, 7-day average. Source: CoinMetrics

Data shows steady growth in active addresses, which increased from 595,620 in mid-March to 857,520 in mid-May. So, not only did the TVL growth take investors by surprise, but so did the number of users.

The 31% Ether underperformance versus Bitcoin back in June 2021 reflected a cool-off period after unprecedented growth in the Ethereum ecosystem. The consequence for Ether’s price was devastating, and a 56% correction followed that DeFi Summer.

Ether/USD price at Coinbase, 2021. Source: TradingView

One must compare recent data to understand whether Ether is heading to a similar outcome. In that sense, those who waited for the 31% miss versus Bitcoin’s price bought the altcoin at a cycle low near $1,800 on June 27, 2021, and the price increased 83% in 50 days.

Is Ether flashing a buy signal right now?

This time, there is no DeFi Summer and before this year’s 33% negative performance versus Bitcoin, the active address indicator was already slightly bearish.

Ethereum network daily active addresses, 7-day average. Source: CoinMetrics

By May 10, 2022, Ethereum had 563,160 active addresses, in the lower range from the past couple of months. This is the exact opposite of the mid-2021 movement that occurred as Ether price accelerated its losses in BTC terms.

One might still think that despite a relatively flat number of users, the Ethereum network had been growing by presenting a higher TVL.

Ethereum network total value locked, USD. Source: Defillama

Data shows that on May 10, 2022, the Ethereum network TVL held $87 billion in deposits, down from $102 billion a month prior. Therefore, there is no correlation between the mid-2021 cool-off after DeFi Summer and the current 33% Ether price downturn versus BTC.

These metrics show no evidence of similarity between the two periods, but $1,200 might as well be a cycle low, and this will depend on other factors apart from the network’s use.

Considering how weak active addresses and TVL data were before the recent price correction, investors should be extra careful when trying to predict a market bottom.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.