In case you missed it, please find the replay for Kathryn Rooney Vera’s 2024 Economics & Market Strategy Outlook Conference Call which took place Tuesday, March 5, at 11:00am ET featuring many of StoneX's top experts, including Eric Rose - StoneX Digital’s Head of Digital Asset Execution.
Replay link available here: StoneX 2024 Outlook Virtual Event
Slide deck link available here: StoneX 2024 Outlook Presentation (StoneX Digital’s slides begin on 41)
Summary
- Market trading color: High volatility week with $BTC at all-time highs, alts soar, options surge, L2s prep for Dencun upgrade
- Theme of the week – ETH Denver key topics and presentation summaries
- Sector commentary: Bitcoin hits record highs, Ethereum’s potential, meme coin volatility, TradFi’s NFT interest, and AI powered crypto startups
Market Trading Color (Nolan Aibel)
It has been a volatile week to say the least. After reaching all time highs of $69,324.58 on Tuesday and subsequently sinking 14% toward $59,000, $BTC has chopped around between the $63,000 and $67,000 range. The first three days of this week alone has seen over $1.13B in longs and $492.3M in shorts liquidated. With this leverage wiped out, funding rates were subdued, yet still remain slightly elevated and ticking higher. After noting a lack of liquidity pockets in yesterday’s color, we’ve begun to see build up above at $67,500. Despite this, if ETF flows continue on the torrid path they’re on, it is only a matter of time before we break through ATHs again. The first three days of the week has seen over $1.5B USD and 23,569 $BTC in net inflow. This $BTC intake is nearly 9x the amount miners were able to mine over the same time frame. The total number of trades the 10 spot ETFs are doing daily have skyrocketed this week as compared to QQQ and SPY. This is even before the ability to trade options on these ETFs. And yes, we know we are comparing 10 ETFs vs individual ETF tickers and products that have lower dollar entry, however this is still impressive given the small lifetime of these products. If we want to get down to the individual level, $GLD held the record for decades as the fastest ETF to $10B. It took 3 years for the ETF to reach this level, $IBIT has crushed this record in under two months.
In the world of alts, it has been a busy week with a few narratives leading. We’ll get this out of the way quickly however meme tokens have clearly been the largest winners this week. $PEPE +131.7%, $FLOKI +130%, $SHIB +127.3%, and $WIF +124.9% have led the way in this category as retail continues to come back online, a popular metric for true bull market activity. Other than memes, AI tokens have been a winner as we near the $NVDA conference. Of the higher marketcap tokens in this category, this past weeks highest performers have been $FET +83.9%, $AGIX +64%, and $RNDR +20.9%. Both have now firmly planted themselves inside the top 100 in terms of marketcap. Another category worth mentioning is Layer 2s. As we head towards the Dencun upgrade, L2s are seeing an uptick in daily fees. As fees associated with transacting on these L2s decrease significantly post upgrade, look for momentum to pick up on these tokens. Past week performance: $OP +17.5%, $MATIC +8.3% and $ARB +5.9%.
Source: TheTie
With the increased volatility mentioned above, taking a look at options, both $BTC and $ETH implied vols are screening at yearly highs of 70.02 and 72.39 respectively. This is being driven by heavy upside call buying at 70k and 75k. There has even been upticks at higher strikes of 80k and 105k. March 29th and Jun 28th are the two dates with the highest open interest.
Source: Deribit
Key Topics at ETH Denver
- Liquid Staking Tokens (LSTs)
- For LSTs, the talking points where point dashboards for airdrops and the effects that locked up ETH have on the security and supply of Ethereum. For those unfamiliar, instead of being airdropped tokens for engaging an ecosystem, there is now a leaderboard with points earned by various activities which can lead to airdrops down the road. Our previous weekly discusses this more in detail.
- Gaming
- The popular opinion suggests that the next catalyst for driving mass adoption onto the blockchain hinges on gaming. However, the current state of blockchain-based games often resembles those from the early 2000s, akin to titles found on Xbox, such as Halo. Although we remain cautious about gaming achieving mass adoption in this cycle, there remains potential for a breakthrough game that leverages aspects of blockchain technology.
- The popular opinion suggests that the next catalyst for driving mass adoption onto the blockchain hinges on gaming. However, the current state of blockchain-based games often resembles those from the early 2000s, akin to titles found on Xbox, such as Halo. Although we remain cautious about gaming achieving mass adoption in this cycle, there remains potential for a breakthrough game that leverages aspects of blockchain technology.
Source: StoneX Digital @ ETH Denver
- ETH L2s
- ETH L2s feels widely discussed at this point. With most discussions are on how the Dencun upgrade will reduce costs for L2s to transact on Ethereum. An Arbitrum researcher I spoke with said the anticipated cost reduction is expected to be approximately 3 to 4 times lower.
- BTC L2s
- BTC Layer 2 solutions are generally viewed as high beta plays to Bitcoin, with many facing significant technological challenges ahead. The narrative alongside limited investable options, seem to be driving price action more than fundamentals at this point.
- Memecoins
- Memecoins have been popular recently due to the significant increase in price. Some people were observed wearing knitted hats, which is a sign supporting the token $WIF (depicted as a dog wearing a hat). The enthusiasm surrounding memes mirrors the narrative outlined in our 2024 macro piece, suggesting that memecoins are to this market what NFTs were in the previous cycle. This entails a community-driven ecosystem with a lower entry barrier and higher liquidity for exiting. Even technology stacks are showing interest, as demonstrated by the ERC404 standard.
- Real World Assets (RWAs)
- RWAs, although frequently discussed, failed to garner much interest among many crypto natives, except for a few specific use cases on particular layer 1s. For instance, at a L2 booth, a person interested in founding an RWA project approached them. The L2 representative bluntly told the founder that RWAs are the least compelling and most boring aspect in the space and that the founder could do better.
Below are a couple of presentation summaries that we found interesting:
The Macro View: Valuation Perspectives From a TradFi Veteran | Brian Russ - BMO Financial Group
- The speaker is Brian Russ, who has experience in investment banking, corporate banking, hedge fund management, and family office management.
- Brian discusses four valuation models for the Ethereum blockchain: discounted cash flow, precedent transactions, market comparables, and Metcalfe's law.
- In the discounted cash flow model, he projects Ethereum's future profits based on wallet growth and applies a discount rate to determine present value of $458B.
- The precedent transactions model compares Ethereum to early-stage tech companies and calculates its value based on their price-to-earnings ratios and gets a market cap of $321B.
- Market comparables model looks at other Layer 1 blockchains' market caps relative to their total value locked and applies it to Ethereum for a market cap of $376B.
- Metcalfe's law values Ethereum based on the number of active users squared, emphasizing network effects for a target at $225B.
- The presentation concludes by averaging the valuations from the four models to determine Ethereum's fair value that is around $345B. He stressed that the data from the presentation was a little old and to give the price target 10%/15% wiggle room.
Source: BMO Financial Group
The DePIN Advantage: Supercharging Crypto's Role in AI | Doug Petkanics - Livepeer
- Livepeer is a deep infrastructure network building the world's open video infrastructure for seven years, one of the longest-running deep infrastructure projects.
- Decentralized networks like Livepeer offer cost-effective alternatives to traditional cloud services, with claims of being 10 to 50 times more cost-effective for video encoding.
- Livepeer intends to expand its capabilities to include AI compute on its network, leveraging a subnet model for AI job submission and GPU utilization, building on its existing infrastructure and experience in video processing.
- Doug highlights the rapid evolution of artificial intelligence technologies over the past 18 months, particularly in areas such as language models (LLMs) and image generation diffusion models.
- Introduces the concept of decentralized physical infrastructure networks coordinated by blockchain, offering democratized access to blockchain-based projects coordinating real-world infrastructure, such as GPU networks for AI compute.
- Highlights the advantages of cryptoeconomic incentives in scaling up infrastructure networks and democratizing access to compute resources.
- Provides examples of real-world applications powered by Livepeer, such as video transcoding for millions of users and internet TV shows.
- Urges action to create open and decentralized video infrastructures to avoid regulatory capture and ensure open access to AI technology.
Filecoin & AI: Building the Next Generation of Data Storage | Clara Tsao - Filecoin Foundation
-
Speaker introduces themselves as the founding officer of the Filecoin Foundation, discussing the importance of decentralized storage in conjunction with AI and Web 3.
- Filecoin Foundation oversees governance of the Filecoin network, which is the largest decentralized storage network globally.
- Highlights the global reach of the Filecoin network with 3,300 storage providers across all continents.
- Studies suggest that AI-generated data will represent 90% of new content on the web in the near future, with an expected 34% growth by 2030.
- AI generates massive amounts of data, such as self-driving cars producing approximately 1.4 terabytes per hour. Filecoin offers a cost-effective solution for storing large datasets, making it advantageous for AI applications.
- Most AI is owned by big tech companies, raising concerns about data centralization and monopolies. Filecoin's decentralized storage network with over 3,300 storage providers worldwide offers resilience against data monopolies and single points of failure.
- Emphasizes Filecoin's scalability with 7.1 exabytes of available storage, catering to various AI-related businesses and applications.
- Raises concerns about centralized data ownership by major tech companies and the risks associated with it, advocating for decentralized storage solutions.
- Highlights Filecoin's contribution to resilience against data ownership monopolies and mitigating risks of data misuse, citing the example of Cambridge Analytica.
How to Capture Alpha in 2024: AI and Gaming Projects | Joanna Liang - Jsquare, Greg H. - Shardeum
- There is a growing interest in bringing decentralized solutions to emerging markets like India and Nigeria, where there is a demand for alternatives to centralized systems due to factors such as high inflation rates and regulatory constraints.
- Ongoing technological advancements, such as Ethereum's upcoming upgrade, Duncun, and the introduction of Dank Sharding, demonstrate the industry's commitment to improving scalability, efficiency, and functionality.
- Subs Squid claimed to deliver decentralized and permissionless indexing up to 100 times faster than existing solutions, showcasing the efficiency gains achieved through technological innovation.
- The presence of active communities and growing user bases in various regions highlights the potential for mass adoption of decentralized technologies, indicating a shift towards broader societal acceptance and integration.
Aggregated Blockchains: A New Thesis | Brendan Farmer - Polygon
- The speaker discusses the importance of safety guarantees in cross-chain interactions to prevent under-collateralization and ensure asset fungibility.
- Three safety guarantees provided by the aggregation layer are highlighted: safety for asset fungibility, synchronous composability, and asynchronous composability.
- Safety for asset fungibility ensures that even if a ZK rollup is compromised, it cannot compromise the shared bridge's funds, thus quarantining soundness issues to specific chains.
- Synchronous composability safety guarantees that chains cannot finalize inconsistent states, ensuring consistency across chains within the ecosystem.
- Asynchronous composability safety ensures that transactions executed across multiple chains cannot be unbundled, preventing inconsistencies that could lead to under-collateralization or fund loss.
- The aggregation layer offers a foundation of safety for other coordination mechanisms to be built on top, enabling a horizontally scalable ecosystem.
- Chains can operate asynchronously or synchronously based on their needs, allowing for trade-offs and heterogeneous execution environments.
- Challenges in ensuring safety and liveness in cross-chain interactions are discussed, especially in the context of lower latency than Ethereum finality.
- Brendan emphasizes that safety guarantees and low latency interoperability are achievable with a ZK ecosystem but not with optimistic rollups.
- Proof aggregation is mentioned as an essential aspect of the aggregation layer, ensuring consistency and safety in cross-chain interactions.
- The vision for Polygon under the aggregation layer involves creating an ecosystem of thousands of chains with freedom and sovereignty for each chain.
- Polygon aims to be non-rent-seeking and extractive, providing a permissionless environment for chains to access shared liquidity and focus on building their applications.
Sources: ETH Denver, StoneX Digital
Sector Commentary
- Layer One / Altcoins
- Bitcoin ($BTC): Bitcoin Hit a Record High. Here's What Might Happen Next (link)
- Bitcoin ($BTC): Bitcoin Tumbles 6% After Hitting Record High as Mounting Sell Orders Cap Price Gains (link)
- Bitcoin ($BTC): Bitcoin Soars to a Record – but What's the Price? And What Was the Old All-Time High? (link)
- Bitcoin ($BTC): Bitcoin investment vehicles amass over 1 million BTC, worth around $67 billion (link)
- Bitcoin ($BTC); Solana ($SOL): Bitcoiners, Solana Acolytes Crash Ethereum Conference in Denver – for a Reason (link)
- Ethereum ($ETH): Ethereum network is valued fairly, but ETH could still see 17x return — Brian Russ (link)
- Ethereum ($ETH): 3 reasons why Ethereum (ETH) price could hit $4K in the short-term (link)
- Meme Coins: Pepecoin Becomes Biggest Meme Coin Gainer as DOGE, SHIB Rally Eases (link)
- DeFi
- DeFi TVL breaks $100 billion for first time since May 2022 (link)
- Institutional investors execute on-chain AVAX tokenized loan (link)
- Op-Ed: Why Blockchain Payments Are Misunderstood (link)
- Jupiter’s Perpetual Crypto Trading Falters as Bitcoin Hits Record (link)
- Solana-based DePIN io.net hits $1 billion token valuation in latest funding round batch (link)
- AI / NFTs / Web3
- Protocol Village: Stacks Says Blockdaemon, NEAR, 6 Other Industry Players Join as Signers (link)
- VanEck’s new NFT platform SegMint highlights TradFi’s keen interest in Web3 tokenization (link)
- NFT utility continues to captivate fashion and luxury brands — NFT Paris (link)
- Coachella and OpenSea launch NFTs with music festival utility and keepsakes (link)
- Fetch.ai announces GPU rewards for token holders after $100M infrastructure investment (link)
- USC Professor's Crypto Startup 'Sahara' Raises $6M to Reward AI Trainers (link)
- RWA / Metaverse / Gaming
- Digital Infrastructure: Capital Markets / Exchanges / DAOs / Mining
- Institutional crypto investment poised to increase this year, study finds (link)
- SEC pushes back BlackRock, Fidelity spot Ethereum ETF proposals (link)
- Bitcoin ETF Giant Grayscale Introduces a Crypto Staking Fund (link)
- Bitcoin Soared to an All-Time High. So Why Aren't Miners Blasting Off, Too? (link)
- Hut 8 to deploy bitcoin reserves in new treasury strategy (link)
- Crypto Miners Still Selling Their Bitcoin as Reward Halving Looms, Blockchain Data Show (link)
- Bitcoin/Euro Suffers Flash Crash on Coinbase (link)
- Ari Paul (BlockTower Capital): “IMO, we're in the 5th inning of the crypto bull market” (link)
- How the Bitwise Crypto Hedge Fund Returned Double Digits (link)
- Decentral Park Capital’s Kelly Ye on Bitcoin’s Latest Surge (link)
- Runa Digital Assets: “Platform Wars: Are You Not Entertained?” (link)
- MicroStrategy set to raise $600M via convertible notes to buy more Bitcoin (link)
- MicroStrategy stock spikes over 20% as BTC price continues skyward (link)
- Tether's USDT Stablecoin Touches $100B Market Cap, Benefiting From Crypto Trading Frenzy (link)
- Deutsche Börse rolls out crypto trading platform focused on institutional clients (link)
- SEC Overstepped Bounds in Kraken Lawsuit, State AGs Charge (link)
- Coinbase surges into Apple App Store top 100 for first time in two years (link)
