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Plus: Macro tensions carry on
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Weekly Fees — Sum of total fees spent to use a particular blockchain in a week. This tracks the willingness to spend and demand to use Bitcoin or Ether.
- Ethereum daily fees reached an all-time high of $228M, with the Bored Apes’ Otherside land sale surpassing all precedents
- Bitcoin recorded a modest increase of 3% in fees
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges over the past seven days. Crypto going into exchanges may signal selling pressure, while withdrawals potentially point to accumulation.
- Half a billion worth of Bitcoin was deposited into centralized exchanges
- Meanwhile, $400M of ETH left exchanges, with these divergences possibly being related to the smart contract platform’s outperformance
BAYC’s On-Chain Impact Sets Record Highs
Last weekend Ethereum saw the largest spike in network fees in its history, greater than DeFi summer, than the dog-token mania and NFT frenzy earlier in 2022. Yuga Labs, the creators behind Bored Ape Yacht Club sold over $320 million worth of digital land for its upcoming metaverse. The impact this sale had on-chain is second to none.
Via IntoTheBlock’s free DeFi Insights
$1k+ Transaction Fees — Multiple transactions on the Ethereum blockchain went as high as four figures due to the excessive demand
- Within 3 hours of beginning, Otherside’s sale had led to more fees on Ethereum than in the total for the previous two weeks
- The vast congestion of the network led to criticism both to Ethereum and Yuga Labs for the way the sale was done
- Yuga Labs has pledged to refund users for the exorbitant transaction fees and teased their move to a separate chain, presumably with higher capacity
Via IntoTheBlock’s ETH supply indicators
58k ETH Forever Gone — the day of the Otherside sale marked the most deflationary day in Ether’s history by a large margin
- Almost 0.05% of Ether’s supply was burnt in a single day due to EIP-1559’s deflationary mechanism
- At an annualized rate, this would represent an 18% decrease in ETH’s supply
While this may be beneficial for Ether holders, it is certainly contrasted by the negative user experience both BAYC’s community and Ethereum’s broader user base had to go through due to such fees.
Via IntoTheBlock’s BAYC financial indicators
BAYC Top? The minimum price of a Bored Ape plummeted over 25% within five days of the Otherside sale
- Based on NFTX’s floor price, the minimum cost to acquire a BAYC reached an all-time of over $400,000 the day after the sale
- At the time of writing this has fallen to under $300,000
- This, however, would not be the first time the BAYC floor price drops to such extent without recovering
Overall, it is hard to overstate the impact Bored Apes has had on Ethereum, and crypto in general, as depicted by on-chain data. While its metaverse land sale broke records of all kinds, the community’s reaction to the high fees and drop in BAYC’s floor price raises questions of whether this was the top for now.
Macro Tensions Carry On
This week markets took a sudden u-turn following the federal reserve’s meeting. Market participants welcomed Jerome Powell’s statement of no 75-basis points on Wednesday, rising strongly, just to end at lower levels on Thursday. Stock market indices and crypto moved in sync, yet again.
Via IntoTheBlock’s Capital Markets Insights
Hawkish Outlook — While there might not be single hikes of 75-basis points, Powell signalled a likely path of multiple 50-basis point increases
- Higher interest rates have led to greater yields in treasuries, making these relatively more attractive than riskier assets such as stocks and crypto
- Additionally, Powell confirmed the beginning of quantitative tightening (QT), which would effectively reduce the money supply.
Via IntoTheBlock price data and official Fed St. Louis data
All-time High Correlation with Money Supply Change — the fed’s aggressive expansion of monetary supply following Covid has resulted in the strongest correlation with crypto price changes
- So far, the 1-year correlation (r) between Bitcoin’s monthly price changes and M1 supply changes appears to have peaked at 0.69 in February
- As the fed’s hawkish outlook began to be priced in correlations dropped, likely as the market looked to anticipate these actions
Overall, bearish sentiment continues to prevail as the fed looks to slow down inflation at all costs. This has led to stronger correlations between stocks and crypto over the past six months.
While there is no clear ending to these correlations, it is worth noting the market’s forward-looking nature could lead to markets hitting a bottom prior to the economy reaching its lowest point. Ultimately, as we have covered in previous newsletters, crypto continues to innovate and make steps towards its long-term future despite its short-term being led by broader economic forces.
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BAYC’s On-Chain Impact Sets Record Highs was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
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The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.