VanEck Crypto Monthly Recap for September 2024
Bitcoin reacted strongly to the Fed’s rate cut and China’s stimulus, rallying 7.7% and beating Gold (+5%), Ethereum (+3.2%), MSCI ACWI (+2.3%) and the S&P (+1.7%). Bitcoin ETP buyers returned with US versions attracting $1.2B in net inflows, a substantial rebound from August’s negative number and not far from the monthly average of $2B. Cumulatively, the US ETFs have bought more Bitcoin than has been mined since their launch, which makes them very important to price formation. We will have more on this topic in an upcoming ChainCheck. Notably, Bitcoin’s daily correlation with the Nasdaq is back to late 2023 levels, above 0.62 on a 30-day average. Allocators may want to see this fall before getting more aggressive.
- Notable Performers - Sui, Solana and Aptos
- Ethereum’s Gambit and L1 Token Value
- Notable Laggard - Polygon
Memecoins paced gains +31%, while DeFi +19%, Layer 1s +11%, and crypto equities +11%. ETH continued to lag +3%, reflecting market share loss and much lower fee generation. However, ETH’s market share appears to have bottomed mid-month at 5-year lows. Concurrently, Bitcoin Dominance rose to a 4-year high of 59% before slipping slightly. We remind readers that Bitcoin dominance peaked last cycle right after the election, at 70%, before falling back to 62% by the end of 2020. We think a Kamala Harris victory could produce a different outcome, challenging the pattern seen in the last cycle.
Price Returns
| September (%) | YTD (%) | |
| MarketVector Meme Coin Index | 31% | NA |
| MarketVector Infrastructure Application Leaders Index | 23% | -14% |
| MarketVector Decentralized Finance Leaders Index | 19% | -18% |
| MarketVector Smart Contract Leaders Index | 11% | 4% |
| MV Global Digital Assets Equity Index | 10% | 14% |
| Bitcoin | 8% | 49% |
| Nasdaq Index | 3% | 21% |
| Ethereum | 3% | 14% |
| S&P 500 Index | 2% | 20% |
| Coinbase | -2% | 3% |
Source: Bloomberg as of 9/30/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.
Up-tober arrived early this year on the back of positive macro developments and an increase in on-chain activity. Across L1s, transaction activity increased (+3.5%) with Ethereum recapturing significant market share, from (31%) of total SCP fee revenues in August to (45%) in September. This came at the same time as Solana’s revenues collapsed, spurred by a collapse (-75%) in memecoin activity, from (24%) of all SCP revenues in July to (10%) in September. While DEX volumes for all SCPs were down slightly month on month (-1.5%), the count of Daily Active Addresses (DAAs) was up (+28%) from August’s average. Daily Active Addresses also reached a new all-time high of around 18.1M on September 12, 2024. Though DAAs is an imperfect proxy for usership due to the ability of people to control many wallets, monitoring DAAs still is valuable when it is triangulated with other metrics.
Fee Market Share: ETH, TRX, BTC, SOL, BNB
Source: TokenTerminal as of 9/27/24. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.
On-chain liquidity, as measured by the market capitalization of stablecoins for cryptocurrencies, has reached $172.5B which is $3B more than at the start of September and $32.5B more than at the beginning of 2024. However, most likely tied to the decline in DEX volumes and CEX Volumes (-20%), average daily stablecoin transfer volumes dropped from $58B per day in August to $50B per day in September.
Stablecoins on the Rise
Interest in stablecoins continued to grow in September as Sony Bank and Revolut announced they will launch stablecoins. Meanwhile, Blackrock partnered with stablecoin issuer Ethena to create a new stablecoin, called UStB backed by Blackrock’s onchain BUIDL treasury fund. Following Ethena’s earlier launch of a stablecoin backed by derivative positions on ETH, the large crypto market maker DWF will debut its own synthetic stablecoin as early as 4Q2024. Circle announced that its stablecoin USDC is now available for usage in Brazil and Mexico. Ripple claims that its own stablecoin will first appear over the coming weeks. Meanwhile VanEck-backed Agora Finance,1 with its AUSD offering, continued strong growth with $60M in AUM and onchain trading volumes exceeding $500M since launch.
The rush to create new stablecoins backed by fiat assets and short-term debt has been gaining momentum as more financial institutions recognize their potential. Stablecoins began in earnest with the introduction of Tether in 2014 and initially found usage quickly routing liquidity between crypto exchanges to rectify interexchange pricing disparities. The market capitalization of stablecoins has grown roughly 39x since 2020 which compares to 8x for that of BTC. The vast majority of stablecoins, more than (99%) by supply, are pegged to the US dollar. Additionally, (~93%), are backed by fiat assets like cash deposits, repurchase agreements and short-term US treasury debt. Stablecoins are now the base pair for most of cryptocurrency trading on both centralized (CEXes) and decentralized exchanges (DEXes). For example, (87%) of Binance’s trading volumes are based in either FDUSD, USDT, or USDC.
The business model of the stablecoin issuer is to partner with entities that can attract usage demand such as crypto exchanges, blockchains, and dApps. These partnerships involve the sharing of revenues that stablecoins generate on the assets backing their assets with the partners that bring new holders. For example, Coinbase, which is a distribution partner of Circle’s USDC, receives roughly (50%) of Circle’s revenues. Due to the sizable revenue opportunities and disputes over value add, stablecoins firms and their partners often have a tenuous relationship. Recently, Binance again reassessed its partnership with Tether’s USDT and instead chose to back FDUSD on Binance’s exchange. To direct trading to FDUSD, Binance offered free trading on BTC, ETH and Binance’s four other highest volume spot tokens if traders employed FDUSD. The result was that trading in Binance’s flagship product, BTC, went from being based in USDT in 99% of trades in the month prior to FDUSD’s debut in September 2023, to roughly 40% afterwards.
FDUSD Now Accounts for 60% of BTC Volumes in 2024
Source: Binance as of 9/13/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.
Notable Performers - Sui, Solana and Aptos
Sui, Aptos and Solana DAAs Are Up 984% Since Jan 2024
Source: Artemis XYZ as of 9/26/2024. Past performance is no guarantee of future results. Not intended as a recommendation to buy or sell any securities named herein.
So-called “monolithic” blockchains, which bundle consensus, execution, and data availability layers into a single protocol stack, outperformed in September, especially Sui whose SUI token was up (+118%) to reach $5B market cap. Sui also saw strength in active addresses (+140%) and revenues (+48%) compared to August. The biggest driver of activity on Sui has been memecoin speculation and the introduction of native stablecoins like AUSD and USDC. Sui is a project we closely watch due to its unique object-based architecture that supports higher throughput of transactions and lower latency than competitors like Solana and Ethereum. If we are to segment our investment theses on Layer-1 blockchains, we put Sui in the camp with Solana and Aptos as chains that are leveraging their high-performance characteristics to appeal to Web2 developers. Solana (+14%) and Aptos (+23%) also outperformed in September.
In late September, Solana supporters gathered for Solana’s annual conference in Singapore. Among the most impactful announcements was the release of the much anticipated “Frankendancer” on Solana Mainnet and stand-up of “Firedancer” on Solana testnet. Both of the “Dancers” are new upgrades to Solana’s core software which will enable Solana to process more transactions. The Dancers are a series of progressive implementations with Frankendancer launched first to incorporate some of Firedancer’s early features. Firedancer claims to be able to scale Solana transactions throughput by a factor of 20x while also making the blockchain, known for days of downtime a few years back, more reliable. Thus far, it has been able to achieve 89k TPS on testnet. The leader of Solana, Anatoly Yakovenko, is so confident in Firedancer’s breakthrough capabilities that he has announced he will remove Solana’s “Beta” tag once Firedancer is implemented.
Aptos had a strong September despite a ~11M ($90.2M) token unlock, an (-8%) decline in fee revenue, and a (-2%) drop in DEX volumes. The main price catalyst for Aptos was the upgrade to Aptos’s core software called Raptr that helped attract a (+30%) MtM increase in DAAs. Expected to launch in “the near future,” Aptos claims its end-to-end finality could be as low as 800ms while supporting “much higher throughput.” This compares to current Solana finality of ~2-3s while putting it on par with Sui’s which is currently around 800ms. We are excited to see more specific details of the upgrade in an upcoming whitepaper release. While the improvements in Aptos’s technology is laudable, for Aptos’s APT token to work, it will need to marry its advanced capabilities with compelling, novel use cases that summon new users to its blockchain. As this has not occurred yet; Aptos’s share of Sui/Solana/Aptos’s userbase has fallen from (12%) at the start of 2024, to (5%) today.
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