The Market
BTC briefly touched $53,000 last Tuesday before falling to $51,000 by the end of Friday. The price action in February, after the GBTC outflow slowdown, has found a support level at around $50,500 and a resistance level at $53,000. As the inflows into the spot BTC ETFs stabilize around ~$200M per day, the next phase of growth will depend on the speed of institutional adoption. So far, no TradFi institutions have included BTC in their broad asset allocation portfolio. Vanguard still bans BTC ETF on their platform, considering it as speculation rather than investment. Interestingly, Fidelity Canada has decided to include 1-3% BTC spot ETF in their All-in-One Conservative ETF (Ticker: FCNS), which is an asset allocation ETF that targets a conservative risk profile (40% Equity/60% Fixed Income). The AUM for FCNS is only $188M currently, but it sets a precedent of a reputable TradFi institution considering BTC as part of a strategic allocation to an investor’s portfolio, which is big news.
The ETHBTC ratio has reverted its downward trend since mid-February. There are a few tailwinds supporting ETH’s rally:
1. Airdrop season coming to the Ethereum ecosystem, fueled by the Modular chain related thesis. With EigenLayer’s potential $1B worth of airdrops, ETH holders stand to benefit. As we mentioned in our last weekly, ETH staking amount has gone up, thanks to LRT yield farming, which reduces the liquid ETH supply.
2. The ETH ETF decision date is coming in May 2024. While the street is less optimistic about the approval probability, they do think the approval is a question of when, not if, as stated by the Grayscale CEO.
3. Risk appetite is returning to crypto. As the crypto bull market continues, we expect more capital to rotate from BTC to ETH and Altcoins, similar to the trends observed on the onset of DeFi summer 2020. BTC dominance is currently at 53%, below the peak level of 70% right before DeFi summer, but one can argue there are more mature developments in the crypto market, so the peak BTC dominance level could go down. Although we might not have seen the peak of BTC dominance yet, Metamask has recently announced that their monthly active users have reached an ATH of over 30 million. We do not view this as peak market FOMO, but rather as an indicator that crypto is gaining wider adoption.
4. Fundamentals have improved for ETH. With the Dencun upgrade scheduled to happen on March 13, we see increased activities on Ethereum and major L2s, reverting the lackluster performance from last year. We consider L2 supper chains such as Optimism and Arbitrum as the biggest beneficiaries of the Dencun upgrade, since their cost is reduced by 10X and the RollUp-as-a-Service tools make it so easy to spin up an app-specific roll up on these superchains.
As the narrative shifts back to the Ethereum ecosystem, Solana’s performance has been lagging. The SOLETH ratio has fallen back to a level last seen in mid-December 2023, before SOL’s steep rally from $73 to its peak at $123 at the end of 2023.
Solana DEX volume has trended down from the peak level in December, fueled by airdrop farming activities related to the TGE of the large Solana DeFi protocols. As a result of the trading volume decline, the biggest DEX protocols (JUP, ORCA and RAY) on Solana are all down by more than 20% in price YTD. We see the Solana ecosystem entering a consolidation phase, but there are quite a few developments in the Solana ecosystem that we are still excited about:
Token Extension: As we wrote in our past weekly, token extension serves as a developer friendly way of implementing privacy, account abstraction, and token customization in one package. While it’s still at an early stage of adoption, we think the TAM is very big, especially if it gets adopted by RWA tokenization use cases.
Compressed NFTs: Compression NFT enabled by Solana’s Metaplex platform allows minting millions of NFTs at a fraction of the cost. It’s the key to unlock real consumer applications, whether it’s token gated events, fan engagement, social media or Depin applications. Despite negative price action, Metaplex’s NFT minting has experienced accelerated growth YTD.
Jupiter Launch Pad: Although the initial launch of JUP on its own launch pad caused some controversy, the Jupiter team is making launchpad development a key product priority for 2024. Given how lucrative Binance launchpad’s practice has been, we think there is a lot of room for growth for a DEX-run launch pad, especially given Solana’s close knit community. As the bull market comes, the launchpad business will get boosted revenue from both the number of projects launched and high return multiples on those projects.
How these new developments can quickly find product market fit and gather users will impact the price action. Of course, there is also Firedancer that could drastically improve Solana’s performance. We think Solana has entered a build phase with a great tailwind from last year’s price rally. Meanwhile, Ethereum might have just started a new price discovery phase as the modular chain thesis driven price hype meets the test of real use cases. It’s going to be a tight race between the two ecosystems and the winner will ultimately be the users who can enjoy better infrastructure and applications built on them.
Top 7d Gainers and Losers
Top 100 MCAP Winners
JasmyCoin (+166.40%)
Worldcoin (+74.73%)
SingularityNET (+63.60%)
Uniswap (+45.30%)
Fetch.ai (+38.38%)
Top 100 MCAP Losers
Starknet (-18.63%)
Dymension (-14.29%)
Chainlink (-8.19%)
Celestia (-8.01%)
SATS (-7.36%)
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.