In November, Bitcoin outperformed the S&P for the third consecutive month, surging by 9% to reach an 18-month high. This uptrend was fueled by investors acquiring over $1 billion in EU-listed crypto ETNs and MicroStrategy adding another $600 million in spot Bitcoin. Notably, the imminent possibility of approval for various spot US Bitcoin ETFs in January is generating significant client interest and inquiries.
Simultaneously, the US dollar experienced its most significant decline (-3%) since November 2022, prompted by evident signs of weakness in the Q3 earnings reports of major retailers like Wal-Mart and Target and a softer labor market. This weakness in the US consumer sector raised expectations that the Fed might implement rate cuts as early as Q1. Separately, concerns about a disorderly wind-down of Binance diminished after the largest crypto exchange reached a settlement with the US DOJ, ensuring its continued operation.
In a notable shift, Ethereum outpaced Bitcoin with a 12% increase, marking the first time since July. The MVIS Digital Assets small-cap token (MVDASC) experienced a remarkable turnaround, soaring from negative year-to-date returns in mid-October to a year-end gain of +55%, although still trailing behind the +85% YTD gains of large-cap cryptocurrencies. Notable performers in the space included Coinbase equity (+62%), DeFi tokens (+41%), and layer 1 smart contract platforms like Solana (+54%) and Avalanche (+89%). Centralized exchange tokens such as BNB lagged.
Reflecting our ho-ho- hopes and expectations for a very strong 2024 for Bitcoin and other decentralized smart contract platforms, we are releasing separately our Crypto Predictions for 2024 blog.
Smart Contract Platforms
Blockchain Share of Daily Fees
After a strong October (+21%), layer 1 blockchain tokens rose another 28% in November. Activity on blockchains and prices tend to be reflexive, resulting in a spike in fees for nearly all blockchains. As prices go up, speculators increase their activity, leading to more on-chain fees and increased demand to buy blockchain tokens to pay for gas. The principal winner in fee-generating usage was Bitcoin, whose fee share increased from 12.5% to 27.5%, with fees averaging around $4.5m per day. Ethereum maintained its market share of fees month-to-month, averaging around $7.6M.
Ethereum activity was high enough in November that, once again, Ethereum became deflationary. In November, around 46k ETH were burned, and this ETH was worth $93M at the time of writing. Ethereum also saw an interesting blog post by a co-founder and spiritual leader, Vitalik Buterin, where he discussed resurrecting the Ethereum scaling solution Plasma and incorporating ZK-proofs to make Plasma more functional. While an informative post, Vitalik’s writing seems to correspond to an uptick in interest in alt-L1s with execution scaling embedded in their roadmaps, whereas Ethereum does not. Additionally, Ethereum validator entity Bitcoin Suisse saw 100 of its validators slashed for 1 ETH on November 14 due to inactivity, and this has catalyzed Ethereum community discussion. Most of the Ethereum community expressed concern on social media that there is a need to ensure slashing is applied to validators who act maliciously, not those who suffer outages outside their control.
November L2 Daily Average Fees
Ethereum L2s had an interesting month as increased activity translated to higher fees across the board. Notably, the top fees producing L2 of November was Starknet, who averaged $199k in daily fees, barely surpassing Arbitrum at $191k and ZKSync at $178k. Part of the driver for Starknet is renewed speculation of a coming $STARK token airdrop that would accrue pro-rata for usage of Starknet. Interestingly, fees on Linea exceeded both Base and Optimism.
A controversial addition to the L2 space is a project called Blast, which has attracted over $612M in just over a week. Blast, a project created by the Blur team, is contentious because it lacks a functioning chain or even a testnet. Blast is simply a 3/5 multisig wallet whose only functionality is to take deposits and stake them on Ethereum yield-generating projects like Lido. This is interesting because it brings up the fact that L2s, with ~$14B in deposits, are capital inefficient as those funds effectively sit on their bridges without earning any yield. This could spark an interesting movement to make those idle funds more dynamic in earning fees. Amid the uptick in L2 activity, OKX announced it will launch its own L2 to Ethereum built using the Polygon CDK. Kraken noted publicly that it is considering launching its own L2 like Coinbase’s Base. Polygon also made headlines by partnering with Ethereum-rival NEAR to build zkWASM technology and announced a $90M incentive program called Polygon Village for developers to build on Polygon.
Outside of Ethereum, the Cosmos community experienced further drama as controversial Prop 848 passed. The proposition, which cuts ATOM’s maximum inflation from 20% to 10%, received great pushback from both the Cosmos validator community and Cosmos co-founder Jae Kwon. In a post on Twitter, Jae Kwon threatened to hard-fork the Cosmos and airdrop a new Cosmos token to community members. This new Hub would effectively compete with Cosmos and cleave the community into separate projects. Hopefully, sparking renewed interest in the Cosmos amongst traders, the dYdX chain went live with perpetual futures trading on its beta release. To support dYdX, CCTP has finally arrived on Noble, allowing Ethereum USDC holders to bridge their USDC to Noble and receive native USDC, which could be moved to dYdX.
AVAX (+85.9%)
Avalanche Daily Fees vs Daily Active Addresses
Avalanche’s AVAX token was a top performer in November, having a mammoth (+85.9%) rally. Avalanche has made major efforts to attract financial entities to use its blockchain of blockchains and focused on the tokenization of off-chain assets. In November, those efforts partially paid off as Ava Labs partnered with JP Morgan’s Onyx and Apollo Global to build a proof of concept with the Monetary Authority of Singapore using Avalanche Evergreen Subnets. This will allow Onyx Digital Asset to access WisdomTree funds tokenized on an Avalanche subnet blockchain. Adding fuel to this price momentum for AVAX, Republic, a crypto-focused investment firm, will launch a tokenized fund called Republic Note on Avalanche. Republic Note attracted more than $30M in investment at launch. Other positive news for Avalanche included the launch of blockchain game Shrapnel’s token $SHRAP, which many speculate could be the first blockbuster crypto game.
In November, Avalanche also saw a spike in fees that resulted in a 600% month-to-month increase in blockchain fees as transactions on Avalanche’s C-chain increased as much as 20x on several days. Most of this activity, over 95%, was due to ASC-20 inscriptions. Like Bitcoin inscriptions, these allow users to add any data to AVAX tokens using the extra data space in each transaction referred to as Call Data. While the flurry of activity was substantial, it was short-lived as transactions and fees reverted to their average after about a week. Remarkably, the spike in fee activity did not translate into a substantial increase in usership as daily active addresses peaked around 79k, which is just over double Avalanche’s average over the past two months.
Solana (+51.2%)
Solana DEX Volume
The month of November began amid Solana’s annual developer conference, where several fascinating announcements and technology demonstrations took place. The founder of Solana, Anatoly Yakovenko, re-asserted Solana’s competitive positioning as a low-latency, high-throughput chain that would scale to meet the needs of hundreds of millions of users. To meet this vision, Kevin Bowers of Jump Trading introduced his team’s new Solana client, Firedancer, which was capable of processing more than 6M TPS using Solana’s existing network. To take advantage of this broad leap in capabilities, Sling Money, Backpack NFT, and Star Atlas discussed each project’s respective potential for payments, verified decentralized exchanges, and gaming.
Token releases from several important Solana projects also helped Solana’s price. These included dominant MEV staking entity Jito ($JTO), 80% market share DEX aggregate Jupiter ($JUP), and price oracle with nearly total market share of Solana price feeds, Pyth ($PYTH). Due to the price performance of Solana and the anticipated launch of these tokens, a positive feedback loop of price and volume occurred on Solana, which surged DEX volumes by 320% month-to-month and resulted in Solana fees increasing 100% and usership up 50% compared to October.
BNB (+1.0%)
Layer 1 Daily Users, Market Share
BNB price action for November was not encouraging, but this is primarily due to the announcement of the DOJ settlement against Binance and Binance’s CEO Changpeng Zhao (CZ). Though the price of BNB initially rallied in relief after the news came out, the token began a downward spiral once it became clear that the charismatic and highly capable CZ would be leaving Binance, which may be a negative for the BNB chain’s future growth. Likewise, speculation is bouncing around crypto circles that the DOJ or the regulators in the US may push new allegations against the highly centralized BNB chain. The popular sentiment is that the US government will pursue a similar path in this case against Binance and BNB to what it did with BitMex. In the BitMex case, after presenting the entity’s founders with criminal charges, the US Government pressured the regulatory bodies in other countries to pursue action against BitMex. This supposition was partially confirmed on November 29 when the Philippines’ SEC argued that Binance was running an unregulated exchange and blocked access within the country to Binance.
BNB’s on-chain metrics further demonstrate a deterioration in usage. Unlike most smart contract platforms in November, BNB saw usership decline (-4%). Another negative statistic for BNB is that its TVL increased only (+6%), making it one of the worst among smart contract platforms in November. Additionally, from the standpoint of market share of usership, BNB has been losing since early 2023, when it held 23%, and now it is down to around 16%.
APT (-0.4%)
Aptos once again has struggled to find its footing amid the broader bull market despite the enormous potential of its technology. This has translated into very poor activity on its blockchain in November as daily active addresses are down (-44%) month-to-month, and fees have decreased (-16%) since October. This performance may be explained by the possibility that Aptos’s reputation is recovering from a 5-hour blockchain outage on October 18. Indicative of the tepid perception of Aptos, it only gained 19% in TVL compared to its main Move-based rival, Sui, who gained 129%.
Going forward, Aptos’ major challenge is attracting a strong developer and user community. While Move is a fascinating, high-potential programming language for smart contracts, its growth has been stunted by the general crypto developer exodus and a lack of community on Aptos. Additionally, Move lacks the deep pool of developer libraries and tooling available on Ethereum and even Solana. As such, it will be an uphill climb for Aptos to get people excited about its ecosystem because it has not yet demonstrated that people will build applications that attract organic usage.
DeFi
Uniswap, Thorchain, & Curve 2023 Volume
The MarketVector Decentralized Finance Leaders index (MVDFLE) markedly outperformed $ETH in November, returning 41% as investors positioned themselves into tokens that will benefit from an increase in on-chain trading. Of the index components, Thorchain ($RUNE) had the most impressive performance this month, +122%. $RUNE’s outperformance can be attributed to the significant increase in activity that has occurred on the protocol, as the decentralized native asset settlement chain saw new yearly highs in volume for the second month in a row. The increase in volume has rocketed the protocol up the decentralized exchange rankings, with Thorchain now recording the third most volume of any protocol, behind Pancake Swap and Uniswap. Similarly, $UNI saw an outsized return of 44% this month as the protocol maintained its strong market share. $MKR, $LDO, and $AAVE returned 13%, 29%, and 21%, respectively. $CRV lagged behind the other decentralized exchanges, appreciating only 15% this month. $CRV’s underperformance can be explained by the protocol’s declining market share as the decentralized exchange saw only a slight increase in volume of 11%, significantly underperforming its peers Uniswap and Thorchain, which experienced increases in volume of 51% and 84%, respectively.
Metaverse and Gaming
The MarketVector Media and Entertainment Leaders index (MVMELE) returned 19% in November, slightly outperforming $ETH but seeing nowhere near the returns in DeFi, likely due to the continued lack of usage of metaverse ecosystems and value accrual to their respective tokens. Of the top metaverse tokens, $APE, $MANA, and $SAND returned 19.3%, 19.4%, and 20% in November. While MVMELE didn't see jaw-dropping returns this month relative to $ETH, many tokens in the gaming/metaverse sector performed extremely well. This was likely a result of investors favoring smaller “moonshot” tokens that could have significantly more upside in a bull market than the higher-valued tokens that the index is composed of. This price action can be observed in tokens like $PRIME, $AURY, and $ATLAS, valued significantly lower than the mainstream metaverse tokens and rallied an impressive 181%, 200%, and 223%, respectively.
NFTs
The NFT market experienced a notable surge in activity this month, with the total NFT volume witnessing a substantial growth of almost 200%, reaching $906 million. This uptick can be attributed primarily to heightened speculation of Bitcoin inscriptions, which rose by an impressive 2300% to $373 million, surpassing Ethereum NFT volume for the first time. Simultaneously, NFTs on Solana demonstrated a robust increase in volume, rising by 165% to $76.5 million. Solana NFT investors mainly acquired Mad Lads and Tensorians in anticipation of these collections establishing themselves as the blue-chip NFTs on Solana.
On the Ethereum side, $BLUR, the governance token of the leading NFT exchange by volume, observed a significant rally of 117%, reaching $0.50. This substantial movement can be attributed to the resurgence of NFT speculation and the unveiling of Blast, a new NFT-centric Layer 2 under development by the Blur team. Blast is set to focus on launching NFT-specific decentralized applications (dApps), such as NFT perpetual markets, and have low transaction fees to drive NFT trading. Furthermore, Blast intends to conduct an airdrop of the $BLAST token to participants in Blur Season 3. Notably, Blur Season 3 will deviate from past seasons, as rewards will be evenly distributed between NFT traders and Blur stakers, departing from the previous practice of exclusively benefiting NFT traders on the Blur platform. Since the announcement, approximately 362 million $BLUR have been staked, constituting roughly 33% of the circulating supply. Additionally, Blast garnered over $600 million in deposits to the contract within its initial week post-deployment, with these assets unable to be withdrawn until February. Distinguishing itself from other Layer 2 rollups on Ethereum, Blast introduces a unique mechanism whereby deposited assets earn yield through rehypothecation on the backend. Specifically, $ETH is exchanged into Lido's $stETH, and stablecoins are swapped into MakerDAO's yield-bearing $sDAI, with the yield produced from these tokens automatically blasted to user’s wallets.
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