In this edition of our monthly Research News Update, Here are the topics we discuss:
The Macro CHAOS:
There has been a CHAOS in the developed market currencies and sovereign bonds recently. To summarize the recent macro events:
Meanwhile, much of Europe has an acute energy crisis due to Russia halting their gas flows, combined with domestic energy policies over the past several years that gave Russia a lot of leverage over them.
Recession Indicators are flashing
A big piece of market news recently is that FedEx (FDX) missed revenue and earnings expectations for the most recent quarter, and then pulled guidance for the whole fiscal year, citing bad global macro conditions. FedEx and other logistics companies are big tells about the state of the global economy. Overall, most indicators continue to suggest global economic weakness ahead, particularly in the United States and Europe.
Inflation is still here (we are not copy pasting from previous reports, it really continues to be a problem)
Price inflation continues to be a problem as it came in above consensus expectations, even though it is down from the peak. In other words, it’s falling, but not nearly as fast as expected. The market was expecting 6.1% year-over-year core inflation, but got a 6.3% print instead. John Authors from Bloomberg pointed out that ‘services’ inflation has been substantial recently, although the energy prices have come down.
In other news, Iran is moving closer to joining the Shanghai Cooperation Organization, and Turkey stated their willingness to join as well. The organization is working towards doing more trade in non-USD terms.
The ETHBTC ratio has rolled over as seen in the chart below:
This ratio sharply rolled over this summer during the broad crypto bear market, but then the Merge date was firmly announced for September, and that contributed to a renewed period of hype and upward movement in the ratio. With that pre-Merge rally over, the ETHBTC ratio might be ready to fall again.
Currently the ratio is at 0.072. As long as it remains below the recent high of 0.085 it would continue to be bearish for ETHBTC. However, a breakout over that level would be an invalidation point in a charting sense.
If we look at the chart of Bitcoin’s market price relative to its realized price (the aggregate on-chain cost basis for network participants) below, it is signaling a bottom, typically an accumulation zone.
Coinchange doesn’t give financial advice nor trading strategies; but we do believe that dollar-cost averaging into a diversified portfolio is the best way to get exposure to crypto.
Bitcoin Hash Rate Hits New Highs While Price Stays Flat.
According to Cointelegraph, analysts say Bitcoin miners’ worst days are probably behind them, but the network's soaring hash rate and the uptick in difficulty are weighing on profit margins. The hash rate hitting a new all-time high means that profit margins will be further compressed and those that are unprofitable can continue to mine at a loss, assuming that BTC price will eventually go up, or they can go offline and wait until either the difficulty drops or energy costs improve.
This month let's focus on how the fees being paid by users become protocol revenue that then can be used to incentivize adoption and innovation.
The graphs below show cumulative protocol revenue over past 180days:
In contrast we can see that over the past 90 days, LooksRare declined by 5 places onto number 6. This shows that LooksRare fees generation has slowed the past 3 months while other protocols have seen their revenue increase more rapidly (Synthetix). This is evidenced by a volume decrease of ~92% since May for LooksRare (as LooksRare revenue comes from NFT trading fee). On the other hand Synthetix jumped 5 places on this timeframe as trading volume has increased ~400% from May to today (Synthetix revenue comes from trading fees).
If you wonder where those Dapps revenue benefits the most, the answer depends on the revenue share model that each of them has in place. Dapps can distribute part or none of this revenue in an automatic manner to their stakeholders. OpenSea is an example of a platform that does not distribute protocol revenue to its token holders. On the other hand Pancakeswap, dYdX, Synthetix or LooksRare distribute it in various manner with the most common way being governance token staking reward. While those governance token could potentially fall under securities law, it is still a meaningfull way to understand the real economic driver of some DeFi applications.
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In the world of cryptocurrencies, stablecoins have emerged as a digital medium of exchange with the stability of traditional fiat currencies.
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