Crypto Markets Persevere, Investor Appetite for Web 3 Grows, and More!

The crypto market traded sideways over the past week, with some notable outperformers. Last week’s big news was that Jane Street and Jump Crypto – two of the world’s largest market makers – would pull back from trading digital assets in the U.S. due to increasing regulatory pressure. Bitcoin and Ethereum decreased by 1.69% and 1.58% week-over-week, respectively. On the decentralized finance front, Lido stood out with a 15.76% price increase over the same period. Lido’s outperformance is likely due to the release of Lido v2 on May 15, which enabled users to finally redeem their stETH (staked ETH). Lido remains the largest staking provider in Ethereum, with a ~31% market share.

Figure 1: 7-Day Price and TVL Developments of Cryptoassets in Major Sectors

Source: 21Shares, CoinGecko, DeFi Llama. Close data as of May 15, 2023.

Key takeaways

• Jane Street and Jump Crypto will cease market-making in the U.S. for digital assets, except BTC and ETH, due to increasing regulatory pressure.

• Bitcoin’s BRC20 is splitting the community while inspiring other legacy payment networks to continue innovating.

• Tether posts $2.48B in excess reserve, Lido Finance V2 Goes live.

• Blur launches Blend, an NFT lending protocol, while Business Insider declares the death of the metaverse.

Spots and Derivatives

Figure 2: Total Liquidations

Source: Coinglass

On May 10, we saw over $100 million in liquidations after a pseudonymous source tweeted false information alleging that Bitcoin wallets controlled by the U.S. government were on the move. Most positions liquidated were long, as BTC dropped 5% from ~$28,200 to ~26,800 in less than an hour (see Figure 2). The market’s overreaction was entirely avoidable. For instance, we built a dashboard over two months ago that anyone can access to monitor the U.S. government-controlled wallets in real-time.

Figure 3: Average fees paid per Bitcoin Block

Source: Glassnode

The increase in activity resulting from the introduction of Ordinals and BRC-20 has prompted miners to amass greater revenue from fees compared to inflationary issuance in the previous month. The disparity between the earnings miners derive from block issuance versus fee accumulation has been observed on only five occasions throughout Bitcoin’s history, as depicted in the chart above. It is crucial to acknowledge the notable disparity at hand in order to comprehend the captivating new paradigm that Bitcoin has embraced.

Next Week’s Calendar

Source: Forex Factory, CoinMarketCal

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Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

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