The Weekly 269
The Market
BTC rallied ~10% from $43,000 to $47,000 by the end of Friday, and has briefly exceeded the $48,000 level intra-day Friday, matching the level last seen right after the market rally following the spot ETF approval. There are multiple reasons causing the optimism in the market. First, the GBTC outflows continue to decline to below $100M per day, while inflows to other spot BTC ETFs continue to see steady inflows and have recently picked up pace as shown below.
Secondly, February 10th marked the start of the Chinese New Year (a.k.a. Lunar New Year). Studies have shown that Bitcoin has averaged a 9% rally since 2015 in the first 10 days of the lunar new year. This, in the context of China’s recent liquid injection into the lackluster economy, the tanking of the China stock market and the recent discovery that China has never completely banned crypto, all point to BTC being the desired asset for Chinese-based capital.
Lastly, we are 2 months away from Bitcoin halving, with bullish analyst forecasts surfacing again. While history doesn’t necessarily indicates the future, we do see BTC transaction fees picking up again, reflecting the continuation (or just the start!) of the Bitcoin ecosystem renaissance.
While it’s too early to say we are out of the woods regarding the market correction from the ETF approval news, we see the $48,000 price level as an important psychological threshold to monitor. If the BTC price can maintain a level above $48,000, then the next resistance level to observe is around $52,300. Beyond that, we anticipate minimal resistance for the BTC price as it moves toward the previous all-time high of $69,000 and potentially surpasses it
The ETHBTC ratio has failed to stay above the resistance level that was broken right after the BTC spot ETF approval, despite the Dencun upgrade on track to be deployed on mainnet on March 13.
We believe the modular chain development could be both a blessing and curse for ETH price. On one hand, faster and cheaper transactions are expected to attract more transactions and users to the Ethereum ecosystem, which is beneficial for ETH as the native currency for the ultimate settlement layer. On the other hand, by batching transactions before settlement (L2s) and offloading data to other DA solutions, ETH’s profit margin will be drastically reduced. L2s are estimated to cut Ethereum cost by 10X. DA Solutions is estimated to comprise 90% of the settlement cost, which means the transaction volume has to grow 100X to preserve the same revenue Ethereum is earning if every transaction moves to the cheaper solution. Furthermore, with the explosion of L2s and their need for cheaper and faster deployments, the DA and Rollup-As-a-Service (RAAS) solutions are increasingly seen as a one-stop-shop for L2s and become horizontal layer that could replace Ethereum, rather than complimenting it.
Additionally, recent developments from Babylon open the possibility of using BTC as a staking asset to secure other PoS chains, similar to how EigenLayer allows staked ETH to secure other PoS networks. This could pose serious competition to ETH, consider the vast amount of BTC available and potentially interested in earning a yield.
Source: Spartan Research
DeFi Update
Epic Games has recently added 20 Blockchain based games to their platform, which is very encouraging as Web2 distribution platforms warm up to Web3 games. Video games have long relied heavily on centralized distribution platforms like Steam, Epic Game Store, Apple's App Store, and Google Play for distribution. These platforms provide access to hundreds of millions of users, infrastructure supporting game download/update, monetization and marketing. However, challenges such as monopoly, competitive shelfspace, and high revenue-sharing costs exist. Despite this, centralized platforms remain crucial for developers' success, especially if they want to reach out to the vast number of gamers out there who are already so entrenched in those Web2 platforms. Currently, the gaming distribution platforms’ policies toward blockchain-related games varies:
Steam: the largest PC game storefront by market share has banned games that use blockchain technology or allow NFT and crypto currency trading.
Epic Game Store: Steam’s biggest rival has changed their policy last December to not rate blockchain based games as “Adult Only”, effectively allowing them to be distributed on Epic.
Google: Google play updated their policy last July, allowing developers to let users buy, sell or earn digital assets in apps as long as they maintain transparency and adhere to the Real-Money Gambling, Games, and Contests policy. Google search also allows NFT gaming ads since last September, giving developers access to the most powerful Web2 marketing engine.
Apple: Apple App store allows Web3 games but with very restricted rules that enforce In-App-Purchase only through Apple’s payment rails.
In DPC’s Gaming deep dive, we mentioned how the improvement in blockchain technology and past investments in Web3 games have set the stage for a Web3 game renaissance for 2024. For those games to expand beyond the crypto-native crowd, it’s critical for them to be discoverable by mainstream gamers. The recent policy updates by major Web2 gaming distribution platforms present attractive opportunities for Web3 gaming developers to reach a broader audience, despite the more restrictive and extractive terms. We also see promising Web3 players such as Ultra, which seeks to redesign the PC game distribution models altogether to be more friendly to Web3 games. As investment, technology and distribution are all coming together to support Web3 games, all we need is a few good games to ignite the Cambrian explosion!
Top 7d Gainers and Losers
Top 100 MCAP Winners
Dymension (+84.44%)
Beam (+40.36%)
Kaspa (+38.26%)
BONK (+30.91%)
Immutable (+30.86%)
Top 100 MCAP Losers
Monera (-27.73%)*
Frax Share (-12.50%)
Jupiter (-10.83%)
Ronin (-7.56%)
WEMIX (-7.33%)
*Based on an opening price of $1.2707 on CoinMarketCap.
About Decentral Park
Decentral Park is a founder-led cryptoasset investment firm comprised of team members who’ve honed their skills as technology entrepreneurs, operators, venture capitalists, researchers, and advisors.
Decentral Park applies a principled digital asset investment strategy and partners with founders to enable their token-based decentralized networks to scale globally.
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.