LBank Labs Weekly Digest (July 16–22) #4
*All on-chain data is dated as of 12:00 a.m. EST on Sunday, July 23rd.
Welcome back to LBank Labs Weekly Digest! Here we list all you need to know about the crypto market in the past week(Jul.16–22).
Author: LBank Labs Research team — Hanze, Johnny
Keywords: #EthCC #Layer2 #DeFi
1 Macro Market Overview
US stock market shaken by earnings season, Dow edges higher marking its longest winning streak in nearly six years. According to WSJ, the Dow Jones Industrial Average eked out its tenth-straight daily gain, surging 2.1% over the week. This demonstrates how the rally in stocks is spreading from a few chip makers and high-flying tech firms into other corners of the economy, such as healthcare, airlines, energy, and banking, reinforcing investor confidence that central banks can manage inflation without derailing the U.S. economy.
However, post-earnings falls from tech giants like Tesla negatively impacted the S&P 500 and Nasdaq Composite, which recorded a weekly gain of 0.7% and a decline of 0.6%, respectively. Most of this year’s gains have been propelled by a select group of megacap tech stocks, a factor that leaves the major indexes susceptible to a downturn if these key players stumble.
Additionally, web3-associated stocks encountered substantial pullbacks this week, with COIN, MARA, and MSTR posting losses of 4.2%, 4.7%, and 6.7%, respectively.
The SEC added Bitcoin ETF proposals from Valkyrie, the final participant in this round, in the Federal Register. Bloomberg ETF analyst, James Seyffart, confirmed Valkyrie’s proposal for a spot Bitcoin ETF was added to the Federal Register on Friday, as anticipated. Other proposals, including Bitwise and more, have been included earlier in the week and prior. Despite the SEC issuing a public consultation document last week, the official review process commences only upon publication in the Federal Register, initially set for a period of 45 days but can be extended up to 240 days.
The SEC has now begun to scrutinize these proposals for approval or rejection, with August 13, 2023, the next key date to watch. This is the deadline for Ark and 21Shares’ proposals, which were the earliest to be published in the Federal Register.
New US Senate Bill Would Tighten Controls on DeFi Protocols. The U.S. Senate is preparing to introduce a new bill called the Crypto-Asset National Security Enhancement Act of 2023 on Wednesday. By establishing strict anti-money laundering (AML) rules on DeFi protocols, this measure seeks to regulate the cryptocurrency sector.
2 Crypto Market Pulse
Market Data
Market volatility surged amid regulatory bills and potential sell-off pressure during the past week. Factoring in potential effects of regulatory bills, sell-off pressures from the US government’s confiscation, and the sale of Bitcoin, the market peaked at $1.22T on the 16th, followed by sharp fluctuations and a closing week market cap of 1.2% lower than the previous week.
Reflecting the broader market trend, both BTC and ETH ended lower than the previous week, falling about 1.1% and 2.8% respectively. Particularly notable was Bitcoin’s drop below the critical trading range of $30,000 to $31,000 on the 17th, a range that has dominated the past month. With the market in a state of high uncertainty, investors are advised to make decisions with caution.
By the end of the week, the total market cap reached $1.20T, with BTC and ETH ending at $29.85k and $1,871, respectively.
$XDC, $XLM, and $MKR emerged as Top 3 gainers, while $RPL, $LDO, and $GMX were Top 3 losers. The surge in $XDC is mainly linked to the launch of ChainIDE, alongside becoming the first blockchain firm to join The Global TFD and sponsoring the upcoming WebX 2023. Stellar ($XLM), a primary market competitor to Ripple ($XRP), has also experienced a substantial uptick due to XRP’s robust performance and the anticipation of its annual conference, Meridian 2023. MakerDAO’s token buyback plan also contributed to a 20% spike in $MKR. On the other hand, continued selling pressure negatively affected tokens like Rocket Pool ($RPL) and Lido DAO ($LDO).
Stablecoin dominance slides as the market cap falls to near 2-year lows. After 16 consecutive months of decline, stablecoin market dominance has fallen to 10.3% of the total crypto market capitalization according to Glassnode data. The continuous decline in stablecoin market value suggested an ongoing outflow trend in the crypto market. However, the data on exchange net position change suggests a deceleration in selling pressure, with a resumption of net outflows on the 21st.
In the derivatives market, trading activity peaked on the 17th and 20th. Concurrent with the swift drop and subsequent recovery of BTC price on the 17th, followed by another decline on the 20th, both Bitcoin and Ethereum reached corresponding liquidation highs. Influenced by multiple factors including regulatory bills and sell-off pressures, Bitcoin and Ethereum’s open interest showed a persistent decline throughout the week amid significant market fluctuations.
DeFi exhibited a downward trend, falling to $43.75B. Amid potential influences of the Senate’s new DeFi regulatory bill, DeFi market volatility peaked this month on the 20th, hitting a high of $8.06B, its highest since April. Over the week, while most blockchains fell, a few like Optimism and Tron saw minor gains of 3.84% and 0.04%, respectively.
The NFT market witnessed another slump last week, reaching its lowest point in a year. The market fell by 7.95% over the week, with the total value declining to $5.83B. This downturn broke past the previous annual low recorded in November last year at $5.88B, indicating that the market has entered a trough.
LBK Labs’ Recap
As of the latest market update, the trading range remains relatively narrow due to investors’ cautious stance, primarily influenced by ongoing developments surrounding the legal case of XRP. The disappointment expressed by SEC chair Gary Gensler over the court’s ruling on the securitization of XRP token has added to uncertainty, with the possibility of an appeal by the SEC further complicating the situation.
Several noteworthy observations are currently being analyzed to gain deeper insights into market dynamics:
- Selling Pressure: 1.) A likely source of selling pressure is anticipated to arise from the US government’s sale of confiscated BTC. It was observed that there were consistent transfers of 1000–3000 BTC to exchanges earlier last week, which have subsided in the last few days. 2.) Furthermore, short-term holders seem to dominate BTC exchange inflow volume as they realize profits from positions opened in mid-June.
- Institutional Behavior and Strong Support: Around the current BTC price, approximately 300k of BTC buys have occurred on exchanges. This suggests that institutional players are likely involved in this behavior, indicating strong support at the current price level.
- Liquidity Analysis and Price Levels: The liquidity zones above the BTC price of $31,000 are not significantly prominent. However, on a three-month horizon, considerable liquidity is present around the $24,300 mark. While it is improbable to witness the price dropping to such low levels without extremely negative news, it is essential to remain attentive to potential downside risks.
In conclusion, the market remains in a state of heightened uncertainty, and prudent decision-making should be exercised by investors in light of the unfolding events and observations in the cryptocurrency space.
BTC price optimistic: $31000 — $33500
BTC price neutral: $29500 — $31000
BTC price pessimistic: $26500 — $29500
3 Major Project News
[Defi] Uniswap Labs unveiled UniswapX, a new trading protocol at EthCC. UniswapX uses a Dutch auction to find the best price. Swappers submit their order to a network of fillers. These fillers search their liquidity sources. The one offering the best price wins. If the filler can not complete the trade, the price drops until the next filler can. It offers gas-free transactions, no-cost failed txs, and protection against MEV to boot.
[Layer2] cLabs proposed a major upgrade for Celo to migrate from an EVM-compatible L1 to an Ethereum L2, initially leveraging OP Stack. The main differentiators include 1) a decentralized sequencer powered by Celo’s existing validator set, 2) off-chain data availability via EigenLayer and EigenDA, operated by Ethereum node operators, and 3) a design that retains Celo’s 1-block finality.
[Layer2] Boojum Upgrade: zkSync Era’s New High-performance Proof System for Radical Decentralization. Boojum is the name of their Rust-based cryptographic library, to implement the upgraded version of the ZK circuits for zkSync Era and the ZK Stack. Boojum demonstrates world-class proving performance, complementing the zkSync Era sequencer which can already process over 100 TPS. To enable user-powered, decentralized proof generation provers, it only requires 16 GB of RAM, enabling massive future prover decentralization. Boojum is now live on Mainnet
[Layer2] Mantle Network unveiled the launch of its mainnet alpha at EthCC. This early phase of the system is designed to provide developers with a platform to build and test their applications ahead of a full network launch at a later date. Mantle is an L2 to watch for now thanks to its modularity: it relies on its own transaction execution, the Ethereum L1 for settlement, and EigenLayer for maintaining data availability (DA).
[Layer2] At EthCC, StarkWare announced the launch of open-source projects Starknet Foundry and Starknet Appchains. According to Github, Starknet Foundry is a high-speed toolkit for developing Starknet contracts, designed and developed by the former Protostar team at Software Mansion, based on the local Cairo test runner, and written in Rust by Blockifie. Starknet Appchains, on the other hand, can be launched by applications using the Starknet stack, boasting features such as customizability and decentralization.
[SocialFi] The Lens team unveiled their V2 system and new functionalities at EthCC. V2 brings even greater control to builders and integrators as well as people exploring web3-powered experiences. With Open Actions, users and developers can bring their own smart contracts to enable any external smart contract action on a Lens publication. This capability can even be extended to cross-chain actions with oracle support, such as actions on Ethereum and L2s.
4 Key Fundraising Data
Last week witnessed a total of 22 financing events, raising a substantial amount of over $411.35 million*. Compared to previous weeks, total funding amounts significantly increased last week, hitting a new high for the month. The DeFi, Service, GameFi, and Infrastructure sectors all caught the attention of investors, with each sector raising approximately $50 million. According to Cryptobank data, the largest funding event of the week came from the Social sector, led by Polychain Capital, amassing a total of $200 million, which accounted for nearly half of the week’s total funding. Further details are given below.
* 5 events of unknown amount are included, which have been excluded from the remaining data
Below, we listed the most noteworthy fundraising deals for you:
1. [Service] Polygon and Solana Foundation lead $30 million seed round in Cosmic Wire
Cosmic Wire, a web3 company focused on developing technology that enables “seamless data transfer and interoperability across different blockchains,” raised $30 million in a seed round of financing led by Solana Foundation and Polygon.
Cosmic Wire endeavors will use the funds to improve its ecosystem while helping people to exert better control over their data and online interactions.
- Official Link: https://www.cosmicwire.com/
2. [GameFi] AI Metaverse Startup Futureverse Raises $54 Million
Futureverse, a startup formed out of 11 different startups from sectors including blockchain, artificial intelligence, the metaverse, and gaming, has raised $54 million in Series A round led by 10T Holdings. Other investors included Ripple Labs Inc., the digital asset company that was recently the subject of a high-profile ruling that could impact crypto regulation. Futureverse co-founders Aaron McDonald and Shara Senderoff declined to disclose the startup’s valuation.
- Official Link: https://www.futureverse.com/
3. [Infra] Blockchain Capital Leads $40M Round for Crypto Firm RISC Zero
RISC Zero, creator of infrastructure that helps developers build zero-knowledge proof software, has raised $40 million in a Series A round led by crypto-focused investment firm Blockchain Capital.
The funds will help RISC Zero bring its Bonsai computing platform to market. Other investors in the round included Galaxy Digital, IOSG, RockawayX, Maven 11, Fenbushi Capital, Delphi Digital, Algaé Ventures, IOBC, Tribute Labs’ Zero Dao, and Alchemy, according to a press release provided to CoinDesk.
- Official Link: https://www.risczero.com/
4. [FOF] LBank Labs and Symbolic Capital Join Forces to Empower Web3 Innovation Worldwide
LBank Labs, at the forefront of blockchain venture funding, is delighted to share the news of its investment in Symbolic Capital. This strategic collaboration is poised to ignite innovation and provide robust support for the expansion of highly-scalable Web3 infrastructures worldwide.
Symbolic Capital is a leading, thesis-driven venture capital firm co-founded by Sandeep Nailwal (founder of Polygon) and Kenzi Wang (partner at Borderless Capital). Rooted in the founders’ own experiences of overcoming funding hurdles in their early days, Symbolic Capital places a special focus on identifying and accelerating the best blockchain founders. Even in the face of what some term a ‘funding winter’ for crypto, Symbolic Capital maintains its bullish outlook on the future of Web3, viewing it as the next evolution in the digital ecosystem.
- Official Link: https://www.symbolic.capital/
See you next week! 🙌
📢 Disclaimer: The weekly crypto market insights are provided for informational purposes only and should not be considered as financial advice. The cryptocurrency market is highly volatile and unpredictable. Prices and trends can change rapidly, and past performance is not indicative of future results. Always conduct thorough your own research and consult with a qualified financial professional before making any investment decisions.
