Weekly Crypto Ecosystem Update brought to you by @

Let's talk about some narratives and events happening in crypto from the last week!

Tokens pushed higher this week in a rally fueled by positive macro in legacy markets and the outlook towards the Merge. While it’s a positive to see another green week, crypto markets are still pretty bound by macro and economic outlooks and we will have to see how the next Fed meeting in September goes. 

TradFi markets continued their recent recovery U.S. inflation figures were announced, which were lower than expected (8.5% actual, 8.7% expected) giving investors some renewed confidence as the Fed's actions up to know indicate a possible soft landing and weakened recessionary sentiment.

Within crypto itself, ETH continued to chug ahead and briefly touched the $2k mark ahead of the Merge  - BTC dominance fell and the ETH/BTC ratio has climbed higher. ETH gained about ~15% this week and  alt-L1s felt ETH's downstream moment as SOL (+15%), AVAX (+19%), ATOM (+11%),  and NEAR (+14%),  grew steadily. LDO (+13) and AAVE (+9%) were some of the winners within the DeFi sector on the back of, once again, Merge sentiment and Aave's upcoming GHO stablecoin release. 

L2 narrative tokens OP, GMX, VELO, SNX underperformed this week as momentum cooled off a bit after weeks of immense growth surrounding positive L2 sentiment. 

On a more cumbersome topic, the industry was rocked this week with the U.S. Treasury’s OFAC announcing that it added 

Tornado Cash's GitHub, site, and many constituents have begun to go offline/be censored, and  one developer has already been arrested in the Netherlands. Not only this, but many protocols and companies, such as Circle, dYdX, Aave, Uniswap, Balancer, Infura, POKT, and Metamask have begun to reinforce the OFAC decision and blacklist wallets associated with Tornado Cash.

This event is an unprecedented decision and has brought up the ethics of decentralized practices, autonomous code, and regulatory oversight in crypto.  

Stay tuned for next week's post of Crypto Ecosystem Updates :)

RunTheMarkets

Crypto Ecosystem Updates: 8/7-8/13

Going to start posting weekly crypto ecosystem updates here on Vertical! Thanks to @0xSpoder for the referral :)

The upcoming merge and L2 narratives are  driving current market rotations. While the broad market rally has been primarily centered around ETH, tokens and protocols that are exposed to or benefit from The Merge such as GMX, SNX, LDO, and OP have continually outperformed ETH over the past several weeks. If we take a look at the plot below (ETH vs. several aforementioned tokens), we can see clear outperformance and growth. Chart via 

Several key protocols have led to the recovery of the DeFi sector itself, as converging narratives such as collapsing ETH fees, capital flowing out of L1s, performance during Celcius/Voyager meltdowns, and increased cash flows have brought positive conversations.  

 in TVL on Wednesday as well, likely through 

 with AAVE and SNX are the likely sources for the jump. Optimism’s native token price surge and successful token launch should be referenced and studied by neighboring L2 market participants like Arbitrum, zkSync, StarkWare, as they should try to use similar strategies when releasing their own native tokens. 

There's been increased talks of crypto's de-coupling from legacy/TradFi markets. However, with announcements such as 

 and Instagram expanding their NFT integration and third party wallet support, TradFi and legacy market participants are pushing back at expanding their hold over crypto markets. 

However, for the time being, due to the recent collapse of LUNA/3AC, most exposure to broad crypto ecosystems from legacy markets is mainly through crypto-related industry firms. Microstrategy is essentially a psuedo-BTC ETF and Coinbase has been highly coupled with crypto movements for some time.

Systems are changing and markets are beginning to adjust, with crypto become less and less niche as times goes on. Protocols are experiencing healthy pivots due to the cash flow narratives and the growth of L2 ecosystems, The Merge is propping up ETH and subsequent ecosystems - good times so far, but we'll have to watch out for macro conditions following August and into the Fed's next meeting.

Crypto Ecosystem Updates: 7/30-8/6

 in daily active addresses, with over 1.06 million concurrent active users that day. This occurred on the same day as the FOMC meeting, where the Federal Reserved announced that they were raising rates by 75 basis points, a record increase. This ETH metric is startling in the face of such news, so let's dive into the on-chain stats and figure out what may have cause this spike.

The first sign we want to look into is the number of active receiving and sending addresses. There was a considerable spike in the number of active sending addresses, while the number of receiving addresses stayed relatively the same. This may signal some sort of consolidation pattern.

Another clue to note: small ETH transfers, sized between $100 - $1000, also increased dramatically during this time period. There is a pronounced, large increase in transactions between $500-$1000, signaling that this most likely isn't the work of bots. What could this mean? 

If we look at block-by-block, more granular data, we start to notice a clear pattern. There is a large spike in ETH transfers during a 6-hour timespan in the early hours of 7/26 (UTC). This time period and spike corresponds to the earlier active address metrics.

When analyzing the on-chain data over at Etherscan, we notice that the Binance 14 wallet accounts for a large proportion of all txs during several sampled blocks during that time period. After pulling balance updates for Binance 14, we can see that the number of transfers received by the account spikes at the same time period as the granular data spike above shows. 

After parsing through a bit of data, is becomes evident that this Binance 14 wallet is the main source of activity during this spike. Binance 14 received about ~625k inbound ETH transfer between midnight to 12 PM UTC on July 26th. The average transfer amount was ~0.45 ETH, which matches up with the spike in smaller-sized txs mentioned earlier. 

This quick on-chain analysis using tools from 

 reveals that the ATH of active ETH addresses was not a coincidental occurrence nor a spike in real user activity, but simply Binance doing wallet management and batched transfers across their exchange wallets. Verifying and analyzing such on-chain data allows us to provide actionable insights into user/exchange activity. This is necessary for coming to concrete conclusions about graphical data and verifying its legitimacy. 

I'll be publishing further work using CoinMetrics' data tools to help other parse through on-chain data and explore ETH and other chains. 