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SPIRIT Blockchain – Weekly Wrap-up 9/2/2022

Here’s what happened in blockchain and crypto this week.

Bitcoin and cryptoassets look set to recoup most of their earlier losses this week in line with a rebound in global equities. Stocks rallied as today’s U.S. jobs report showed moderately higher unemployment that could ease hiking pressure on the Fed. The Bitcoin network’s mining difficulty bounced back this week, experiencing the biggest increase since January. Although this weighs on miner profitability given the ongoing weakness in the price of Bitcoin, some on-chain metrics suggest the worst could be behind for the mining industry. Bitcoin holders remain similarly unfazed. Despite the uncertainties brought about by the recent price drop below the $20,000 level, on-chain metrics show that the majority of holders have been using a very simple strategy for more than a year: “hodling”. 
 

On Wednesday, the Bitcoin network’s difficulty rose by a whopping 9.26% amid a surge in hashrate. Bitcoin’s 7-day average hashrate is up almost 14% over the past two weeks to nearly 225 EH/s – briefly reducing the block time of some Bitcoin blocks to only 9 minutes. This surge shows that miners continue to deploy next generation mining rigs while others are coming back online given lower energy prices after the hot summer months.

Some Bitcoin miners are not out of the woods yet, however, as highlighted by weakness in widely watched mining metrics such as Luxor’s hashprice (i.e. the dollar value of 1 TH/s of hashing power per day) or Blockware’s Bitcoin Energy Gravity model. The latter metric implies that the average electricity price that miners are currently willing to pay to make a profit continues to drop. Although the recent increase in hashrate weighs on miner profitability in the short term some on-chain metrics suggest that overall, the pressure is easing for the mining industry.

On-chain metrics are also painting a more bullish picture for Bitcoin and the mining industry. On Friday, the time-tested “hash ribbons” indicator flagged a strong signal, suggesting the end of the miner capitulation period (see also our recent tweet). Bitcoin miner capitulations occur when a significant portion of miners turn off their machines over an extended period of time or divest of their bitcoin treasuries. The relationship between the price of Bitcoin and its average operating cost of production for mining rigs plays an important role in Bitcoin price cycles. Historically, miner capitulations mark bitcoin price bottoms in that they are characterized by significant selling pressure from weaker miners forced to tap into their treasuries to maintain their operations or debt servicing. 

Another widely-watched metric is long-term holders, or “HODL waves”. Data from analytics firm Glassnode highlights that the portion of Bitcoin that has stayed in wallets for five years or longer is higher than ever before. Particularly those investors purchasing BTC in 2017 or earlier continue to hold on to their stake, with the trend pointing to more “hodling” in recent months. As of mid-August, the percentage of the BTC supply remaining untouched in a wallet for at least five years reached a new all-time high of 24.35%. According to a recent Cointelegraph articlethat cites data from the trading analysis platform TipRanks, 62% of wallets have held BTC for one year and above and 32% of wallets are shown to have held for a month up to a year.

 

Market Overview

The global cryptoasset market capitalization currently amounts to $1.04 trillion –  largely unchanged since Friday last week, with bitcoin accounting for 37.3%. Among the Top 30 cryptoassets by market cap, Polygon (MATIC) outperformed, gaining roughly 9.5% over the week. During the same period, the price of bitcoin (BTC) fell by 6% to $20,365 while the price of ether (ETH) decreased by 3.5% to $1,637. The total value locked (TVL) in DeFi sits at $60.4 billion – slightly down from $60.8 billion last week – with Ethereum accounting for about 58.5% of TVL.

 

This Week’s Headlines

  • Former Goldman Sachs banker’s trading blockchain is backed by leading market makers and VCs, Bloomberg reports
  • MicroStrategy and its executive chairman Michael Saylorsued for tax fraud by D.C. attorney general
  • Futures exchange FTX.US Derivatives adds former CFTC Commissioner Jill Sommers to its board
  • Social media firm Snap disbands Web3 team amid layoffs
  • Compass Mining hosting partner shuts down site in Georgia amid 50% power spike
  • Babylon Finance to shutter protocol after losing $3.4 million in Rari hack
  • Crypto.com reportedly pulls plug on $495 million UEFA Champions League sponsorship deal
  • Ticketmaster to release tickets as NFTs on Dapper LabsFlow blockchain
  • OpenSea commits to “solely supporting” NFTs on proof-of-stake Ethereum blockchain
  • Meta now lets you post NFTs and other digital collectibles to Facebook

 

Notable Deals and Fundraising

  • Animoca set to announce $100 million funding deal led by Temasek, Bloomberg reports

  • Online investing platform BnkToTheFuture to buy Salt Lending for an undisclosed amount
  • NFT organization Proof Collective raises $50 million from a16z and others
  • Estonia-based crypto options platform BITLEVEX raises $50 million
  • Web3 game developer Xterio raises $40 million in SAFT sale
  • Creator-owned livestreaming platform Stacked raises $12.9 million in a Series A round
  • DeFi oracle provider Redstone closes a $7 million seed funding round
  • GoGoPool raises $5 million to provide decentralized staking on Avalanche
  • Web3 protocol Koop raises $5 million in funding to focus on creator economy
  • Luabase raises $4.5 million to get reliable Web3 data at scale
  • Solana automation network Clockwork raises $4 million in a seed round
  • Top executives from Genesis and Galaxy are raising a $500 million fund
  • Reddit co-founder’s VC firm Seven Seven Six to to raise another $177.6 million to invest in tokens
  • Wave Financial to acquire Swiss investment firm Criptonite Asset Management

 

Manuel Trojovsky, Head of Crypto Investments & Research

 

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