Coin Metrics provides financial intelligence focused on the cryptocurrency market. The company offers a range of data products and services designed to help individuals and institutions make informed decisions regarding crypto investments. Their main product, the CM Market Data Feed, supplies real-time and historical data on various crypto assets, recently enhanced by integrating data from the Cboe Digital Exchange. Coin Metrics distinguishes itself from competitors by its commitment to transparency and its open-source roots, which emphasize the economic significance of public blockchains. The company primarily serves institutional clients, such as financial institutions and asset managers, through a subscription model that grants access to extensive datasets, including market and network data. The goal of Coin Metrics is to empower clients with reliable data and analytics to support their trading, investment, and risk management activities in the rapidly evolving crypto market.

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Coin Metrics

Innovation once more appears to be heating up in the digital asset space as old paradigms are set aside and new horizons become realized, the team at Coin Metrics noted.Coin Metrics also mentioned that Bitcoin is evolving “from a specialized chain whose primary purpose is to serve as a settlement layer for transactions to a more general-purpose platform that leverages its extraordinary security to serve layer-2 functionalities.”Similarly, with the recent Dencun upgrade, Ethereum is moving “towards a modular blockchain architecture, with specialized layers to handle its functions.”According to the report from Coin Metrics, we are also “witnessing the birth of new layer-1 blockchain like Aptos, leveraging different virtual machines, and others like Monad, bringing parallel execution capabilities to the EVM.”In this issue of Coin Metrics’ State of the Network, Coin Metrics explore “the diverse landscape of layer-1 blockchain networks and understand their implications for the broader crypto ecosystem.”In the crypto ecosystem, a Layer-1 (or L1) is “the base layer or the foundational blockchain network upon which other layers and applications are built.”L1 blockchain networks are “standalone, decentralized ledgers that operate independently and establish their own rules for consensus, transaction validation, and data storage.”These networks serve as “the infrastructure and provide the essential functionalities required for the development and deployment of decentralized applications (dApps) and other blockchain-based solutions.”Numerous layer-1’s have emerged over the past cycles, “with each gaining varying levels of traction and maturity.”While all L1 networks share the fundamental characteristics of being decentralized and securing their respective ecosystems, they can “be broadly categorized into two types: specialized networks and general-purpose platforms.”Specialized Networks: These L1s are designed “primarily to facilitate secure peer-to-peer transactions and serve as robust settlement layers.”The Coin Metrics report noted that examples “include Bitcoin, Litecoin, and Dogecoin. While they may not directly support complex smart contracts or decentralized applications, their primary purpose is to leverage strong security guarantees and decentralization to provide a reliable and trustless transfer of value, even if additional functionality is added through protocols such as Omni or in the form of L2s or roll-ups built on top.”General-Purpose Platforms: These L1s are designed to “serve as programmable platforms that can support a wide range of decentralized applications and smart contracts. Examples include Ethereum, Tron, Solana, Avalanche, and others.”These networks often prioritize features “such as programmability, scalability, and interoperability to enable the development and deployment of various decentralized solutions, including decentralized exchanges, lending and borrowing protocols as part of DeFi, etc.”Layer-1’s can be further categorized “by their architectural differences or approaches to core blockchain functions, including execution, consensus, and settlement.”Monolithic: This includes L1’s such as Bitcoin and Solana, which “handle the execution and settlement of transactions as well as the maintenance of consensus within a single layer.”Modular: This includes L1’s like Avalanche, Cosmos and recently Ethereum, “with its rollup-centric roadmap. Modular blockchains separate these functions into distinct, specialized layers.”While these categories provide a high-level generalization, “understanding the nuances and trade-offs between these categories of L1 networks is essential for comprehending the broader dynamics and potential of the decentralized ecosystem as it evolves.”To get a deeper understanding of Layer-1s, Coin Metrics has taken “a data-driven look at how these networks span different approaches and provide innovative solutions to the underlying problems posed by decentralized networks.”The performance capabilities of L1 blockchains “can be influenced by several technical factors such as their consensus mechanism, block size (amount of data that can fit in a block) and block time (time it takes to add a new block to the blockchain), to name a few.”The Coin Metrics report explained that these factors “can directly impact the transaction speed and network throughput of the L1 and therefore the user experience of the blockchain.”Due to the unique design choices and architectural trade-offs of L1’s, these metrics “do not serve as a direct comparison, but as a means to understand their technical differences.”Shorter average block times, as “exhibited by Solana (approximately 0.4 seconds) and the Avalanche C-Chain (2 seconds), result in a faster execution of incoming transactions.”The Coin Metrics report further noted this is “particularly beneficial for high-frequency transactions such as financial trading on applications like decentralized exchanges (DEX’s), micro-transactions or gaming related interactions where speed is critical. Furthermore, AVAX-C and Ethereum also feature constant block times, which make for a very tight distribution around the average (with some outliers coming from missed blocks).”On the other hand, Bitcoin and Litecoin “have larger average block times (around 10 minutes for Bitcoin and 2.5 minutes for Litecoin), which prioritize network security over transaction speed.”This same relationship can also be understood “as a tradeoff between the ease of participation in the consensus process and the performance of the underlying network.”This is evident when we “consider the size of the blockchain as a function of the size and rate of creation of new blocks.”Blockchains that have longer block times and “smaller” blocks, like Bitcoin, “are easier to synchronize with as an independent node operator.”Compared to Ethereum, the requirements “are greater as the network performance requirements for including blocks on a faster basis add up to a larger download size and require a more performant computer and network infrastructure to maintain comparable oversight over the network as would be afforded.”The report also noted that with stablecoins starting to proliferate across various L1’s, the value transferred in each stablecoin provides “a crucial proxy for their usage across these blockchains. Tether (USDT) has maintained a strong footing on Tron due to its low fees and proclivity to emerging markets, with an adjusted transfer value of $14B and a median transfer value of $312.”This is followed by USDC and USDT on Ethereum currently “displaying a transfer value of ~$6B, with median transfers of ~$800 and ~$1000, respectively.”With the re-emergence of the Solana ecosystem, USDC has also “gained traction on the blockchain, with an adjusted transfer value of $3B

Stablecoin Transactions Across Tron, Ethereum, Solana Serve As Crucial Proxy For L1 Blockchain Usage – Report

The upcoming Bitcoin halving is expected to make a significant impact on cryptocurrency trading markets while a maturing digital assets ecosystem sees Ethereum (ETH) facing considerable competition from other smart contract platforms.A lot has changed since the BTC halving of 2020. In an environment of macro-economic uncertainty, with significant inflation and looming federal funds rate cuts, ripple effects of the planned US election cycle, overall geopolitical tensions, and rising debt levels, one event stands out as a “beacon of certainty” — Bitcoin’s 4th halving, the team at Coin Metrics notes.With its first block (genesis block) mined back in 2009, Bitcoin came into existence as a digitally scarce, decentralized virtual currency with a fixed / pre-determined monetary policy, predictable inflation rate, and a fixed supply of 21M BTC, the Coin Metrics report states.This week, the Bitcoin network is expected to undergo the fourth halving 15-years into the flagship cryptocurrency’s existence—an event fundamental to its economic policy as well as unique value proposition on the global stage, the Coin Metrics report adds.The Coin Metrics State of the Network examines the significance of the halving, its overall impact on key stakeholders in the ecosystem as well as any potential effects on the BTC price as the 4th Bitcoin halving approaches.As explained in the research report, each halving event is a key moment in Bitcoin’s lifecycle, as it directly affects its issuance and inflation rate, effectively cutting down on block rewards (newly issued BTC that incentivize crypto miners to generate blocks, keeping the network secure) and possibly sending shocks to the market value of BTC because of its increased scarcity.As suggested by its name, a “halving” is a term used to refer to the reduction of BTC issuance by 50%, thus effectively halving Bitcoins inflation rate— which is the rate at which new bitcoins enter the market, the Coin Metrics report explains.It adds that with this halving, Bitcoins issuance will decline from 900 BTC per day (1.8% issuance rate) to 450 BTC per day (0.9% issuance rate).As a result, the rewards crypto miners get for validating new blocks and securing the network (excluding fees) are reduced in half, thus directly impacting their incentives and profitability.The report further explains that halving is programmed to take place every 210,000 blocks, which is approximately every 4 years, and it is “immutable”—the rules governing this process are “etched into the very code” that underpins the Bitcoin network.The report adds that since Bitcoin’s inception in 2009, the network has undergone three halving events, each reducing the block reward for cryptocurrency miners in half.The research report from Coin Metrics points out that the first halving back in November 2012 lowered the reward from (50 BTC to 25 BTC), followed by the second in July 2016 (25 BTC to 12.5 BTC), and the most recent in May 2020 (12.5 BTC to 6.25 BTC).The research report also notes that the upcoming halving is estimated to take place on April 20, 2024 at block 840,000 and will slash the block reward down to just 3.125 BTC.But as Bitcoin progresses along this fixed / pre-determined schedule, with a decaying issuance rate and about 19.7M of the capped 21M supply currently mined, each incremental halving will have “a diminishing impact on overall supply,” the Coin Metrics report explains.As a result, the significance of future halvings will “gradually wane” as Bitcoin approaches its finite supply, the report adds.It’s worth noting that crypto miners serve an important role in the Bitcoin ecosystem, acting as “the backbone for the security and integrity of the blockchain,” the report explains.The Coin Metrics team also mentions that miners use computational power from specialized hardware to hash transaction data, “seeking a nonce—the solution to a hash function—that when found, validates a new block and adds it to the Bitcoin blockchain.”In exchange for the computational work, BTC miners are given with a block reward (block subsidy) consisting of “a predetermined amount of newly minted bitcoins and transaction fees from transactions included in a block.”The report further notes that block subsidy forms the “primary economic incentive” for miners.But with this reward being cut by 50% from 6.25 BTC to 3.125 BTC, miners will be “stress-tested” as a “substantial source of income diminishes.”Consequently, transaction fees are “expected to play an increasingly important role for miner revenue, along with the appreciation of BTC’s value amid greater demand,” the report explains.It adds that since the 3rd halving, Bitcoin revenue from block subsidy “climbed to $43B, 180% higher than the prior halving in 2016.”Although transaction fees presently account for a relatively smaller portion of the overall miner revenue, they are growing in significance with each halving, with fees “bringing in a total of $2.5B—doubling from the prior halving,” the report reveals.And total BTC mining revenue continues to reach new heights, with block rewards “bringing in more than $76M in a single day on March 11th, a new all-time high.”While the block subsidy will decrease in BTC terms, appreciation of BTC’s market value “has offset this decline, leading to greater USD-denominated revenue for miners.”The report points out that with BTC showing strength towards the start of this year, miners will “hope for this trend to sustain post-halving.”In addition to this, Ordinals, which enable the inscription of data like images, video and text into non-fungible tokens, have also “boosted transaction fees for miners.”The Coin Metrics team also notes that in Q1 2024, miners have reportedly “earned an average of $3M daily in transaction fees, well-above historical norms.”Notably, in May and December 2023, revenue from fees surged to $17M and $24M respectively, “representing close to 40% of total miner revenue from fees on those days.”With the upcoming launch of “Runes” — fungible tokens on the Bitcoin network— alongside the halving, miners may see further increases in transaction-fee based income, “potentially counteracting the impacts of a declining block subsidy.”The report adds that bitcoin mining profitability is said to be “intricately linked to the efficiency of the mining hardware used, as well as the cost of electricity needed to power it.”Newer ASIC models, such as the Antminer S19 and S19 XP are profitable “at any electricity cost below $0.13/kWh and $0.20/kWh compared to older models like the S9 and S17.”The Coin Metrics report explains that this is because technological advancements in ASIC design “have led to more energy-efficient miners, allowing for profitable mining operations at higher electricity rates.”But this metric is set “to get cut in half, making these models unprofitable even at $0.08/kWh, the average industrial rate in the United States.”As the 4th Bitcoin halving nears, miners with access to the most efficient hardware and cheapest electricity “will be better positioned to withstand the reduction in block rewards.”As a result, crypto mining firms have been employing strategies such as partnering “with renewable energy providers, locating operations near cheaper and sustainable energy sources, implementing advanced cooling techniques and harnessing stranded energy to enhance sustainability and profitability.”The report further reveals that those “burdened with older, less efficient hardware will find it increasingly challenging to maintain profitable operations, potentially leading to a consolidation of mining power among the most efficient operators and a gradual phasing-out of less efficient ASICs from the network.”The update from Coin Metrics adds that this, in turn, could impact hash rate— which is “a measure of computational resources being allocated to mining.”Bitcoin’s hash rate has reportedly “grown to 605 EH/s in the run up to this halving. However, post halving, there is typically a temporary decline in hash-rate as less efficient hardware goes offline.”In order to maintain the target block time of 10 minutes, a drop in hash rate “may be met with a downward adjustment in Bitcoins difficulty, easing the hashing process under changed conditions.”Although the halving is a supply-side event, the diminishing impact of issuance would “suggest that demand plays a crucial role in driving the market value of an asset with an inelastic supply like bitcoin.”The launch of spot BTC ETFs in January has “catalyzed a substantial source of new demand, altering Bitcoins market dynamics when compared to prior halving cycles.”Sustained inflows into US based and recently approved Hong Kong BTC exchange-traded products, “alongside other sources of demand from funds to public company balance sheet holdings and smart-contracts, will help absorb pressure from forced selling and newly issued supply more effectively.”As with every halving, a central question on everyone’s mind is: how will the halving “impact bitcoin’s price?”Although we can extrapolate insights from performance during past halving cycles, they may “not directly indicate future outcomes.”Given then we’ve had only three prior halvings under varying market conditions and different investor profiles, “predicting whether the halving is priced in can be misleading despite it being an event known well in advance,” the report adds.Bitcoin’s price tends to “move in four-year cycles.”If we look back to each halving epoch, Bitcoin price has appreciated substantially in the year “following each halving event.”Before the 1st halving in 2012, bitcoin returned over 14,000%.After the 1st and 2nd halving, BTC’s price increased by over 5100% and 1200%, respectively, “eventually reaching an all-time high approximately 500 days into the halving.”In the current epoch leading up to the 4th halving, we’ve seen an appreciation “of 664% as of April 15th, with BTC reaching an all-time high of $73K before a halving for the first time.”The role of ETF-induced demand and subsequent attention has resulted in “a slightly different dynamic and promises to play an outsized role going forward.”Several other factors could also “provide a boost to the demand side of the equation, such as broader macroeconomic and liquidity shifts, regulatory changes, growth in global digital asset adoption, and speculation, which could all influence BTC’s price trajectory.”The historical drawdowns illustrate “the resilience in Bitcoin’s price trajectory.”Despite consistently retracing over 70% away from all-time highs during halving cycles, the price has “rebounded and established new highs toward the beginning of every cycle.”The report continues to note that as the 4th halving approaches—even though BTC was able “to reach ATHs even before the halving is triggered—it is important to factor in price volatility, which could arise as a result of external conditions or increased attention and speculation around the halving itself.”The Bitcoin halving exemplifies “a predictable monetary rhythm amid uncertain financial conditions.”Bitcoin’s inherent scarcity and deflationary nature make it a unique asset “across various economic cycles. While the reduction in block rewards will strain miners, it will drive them towards more efficient and sustainable operations.”The convergence of this supply side event and strong drivers of demand suggest that Bitcoin is “poised for its next phase of growth.”With no shortage of innovation on Bitcoin—such as the upcoming Runes and Bitcoin L2s, boosting transaction fees and scalability, Bitcoin is “well-positioned for its next epoch,” the Coin Metrics report notes.In another update covering the upcoming BTC halving, it is noted that this event is important for investors.Historically, halvings have been crucial moments for bitcoin appreciation, the Bitso report adds while noting that after all the previous events, cryptocurrency prices “have increased significantly 365 days after each halving: after the 2012 event it rose more than 8,000%, after 2016 more than 250% and in 2020 more than 500%.”Although it is important to emphasize that past performance does not guarantee future performance, many investors see the event as an opportunity “to make profits, based on analysis of the asset’s historical behavior.”According to Bitso’s report, there are several reasons why the halving is considered a “moment of optimism.”As stated in the report, scarcity is a major factor in determining the value of any asset. With fewer new bitcoins entering circulation, those already in motion “become rarer and therefore more valuable.”This aspect contributes to “the attractiveness of Bitcoin as an investment alternative.”Bitcoin recently hit a new All Time High (ATH) of $73,600, nearly two and a half years after the peak of the last bull market. This is due to “a combination of factors,” the report claims.Among them are, in addition to the halving: the introduction of BTC ETFs by large traditional financial managers (which in turn increases demand) and institutional FOMO “with companies allocating a percentage of their resources in bitcoin, due to its attractive profitability in relation to risk.”The report argues that this milestone is important “not only for Bitcoin but for the entire market.”Generally, when Bitcoin experiences an increase in its value, it tends to have “a positive effect on all cryptos, as it stimulates interest and confidence in other crypto projects, pointing to a possible recovery or growth of the industry.”According to Bitso’s report, this is because it is “the largest and most well-known cryptocurrency and its performance is often considered an indicator of the overall health of the sector.”As investors await the next halving and watch the rise in bitcoin prices, companies in the sector are also preparing for a possible “crypto summer.”Bitso, Latin America‘s crypto-powered financial services company, claims it is improving its tech infrastructure to handle high transaction volumes during these periods of “increased interest in the assets.”With the Bitcoin halving rapidly approaching, CI has received comments regarding the upcoming milestone and what it could mean beyond market speculation and price watching.Marcos Nunes, CEO of the decentralized payments network Gnosis Pay, says:“It’s becoming increasingly clear that Bitcoin and digital assets offer more than simply ‘paying with crypto’ for users

Bitcoin Halving To Significantly Impact Crypto Markets While Ethereum Faces Unprecedented Competition From Other Smart Contract Platforms – Report

Centralized exchanges (CEX’s) serve as a crucial intermediary between crypto market participants and blockchain networks, “facilitating billions of dollars of value transferred each day,” the Coin Metrics team noted.Many user’s first interaction with crypto is “likely to occur through an exchange.”However, exchanges vary greatly in quality “across their primary functions,” the Coin Metrics report added.In this issue of Coin Metrics’ State of the Network, they’ll delve into how they “assess exchange quality.”As the use-case for crypto data has expanded, “the importance of precise, high quality data has been further emphasized.”Coin Metrics created the Trusted Exchange Framework “to vet which exchanges should be included to calculate precise market metrics as well as select the highest quality constituents for indexes.”Coin Metrics assess exchanges based on the following categories:Data Quality: The level of confidence that the exchange’s reported data is accurate.The level of confidence that the exchange’s reported data is accurate. Transparency: The quality of publicly disclosed information from an exchange, such as its quality of its Proof of Reserves or its publicly disclosed balance sheets.The quality of publicly disclosed information from an exchange, such as its quality of its Proof of Reserves or its publicly disclosed balance sheets. Resilience & Security: How well an exchange protects its users against market and security risks.How well an exchange protects its users against market and security risks. Regulatory Compliance: An exchange’s ability to meet regulatory requirements via its existing licenses, adjusted by the relative of the regulatory environment it conducts business.An exchange’s ability to meet regulatory requirements via its existing licenses, adjusted by the relative of the regulatory environment it conducts business. API Quality: An exchange’s quality to be used as a programmable entity.During the early stages of the crypto industry, it was “common for exchanges to artificially inflate their trading volume in order to attract customers and falsely demonstrate legitimacy.”In 2019, Bitwise conducted a comprehensive analysis of fake volume in crypto exchanges in which they claimed that 95% of volume is “fake”.Inspired by Bitwise’s methodology, Coin Metrics “created a series of tests for detecting and filtering out fake volume.”Thus we can arrive at their best-guess estimate “for crypto trading volume, which we call our ‘Trusted Volume’.”As of April 26th, 2024, trusted volume on “a rolling average weekly window is at $40 billion, about half of the $80 billion peak this year and a little over a third from the all-time highs of May 2021.”For comparison, NYSE and NASDAQ daily trading volumes “hover on the order of $1-2 trillion according to CBOE data. Note that this trusted volume metric is a lower bound estimate; DEXes and centralized exchanges outside of our coverage universe are not included.”This raises the question of what percentage of “all crypto volume is fake.”According to the analysis from Coin Metrics, it depends “on how you count all fake volume.”Any exchange can theoretically generate “an infinite amount of fake volume from wash-trading bots.”Additionally, fake volume tends to “not be evenly distributed across exchanges: regulated, reputable exchanges have a significantly lower proportion of its total volume as fake, while less reputable exchanges tend to have a higher or even majority of its total volume to be fake.”In reality, the vast majority of real usage “happens on exchanges where most of its activity appears organic

Auditability Of Data In Crypto Is One Of The Blockchain Industry’S Most Defining Characteristics – Report

In the latest Coin Metrics State of the Network, the researchers take a data-driven look at the most important events that impacted the digital assets industry in Q1 2024.The demand and strength of inflows into bitcoin exchange-traded products “have been unprecedented, catching many by surprise and making them the fastest growing ETFs in history,” the Coin Metrics report noted.After a quarter since launch, “about $12B has flowed into these vehicles, holding ~4% of BTC’s current supply. Of the 11 issuers, BlackRock’s IBIT has been the clear winner, amassing close to 250k BTC (~$17B) since inception, with several other issuers gaining market share.”Conversely, Grayscale’s GBTC has been “an outlier with large outflows, primarily due to higher fees and the repercussions of the Genesis and FTX bankruptcies,” the Coin Metrics report added.Despite the occasional volatility in investment flows, “with some days experiencing exceptionally high activity, the introduction of spot bitcoin ETFs has undeniably been the foundation for the broader rally across digital asset markets.”The Coin Metrics report further noted that Q1 provided us with “a glimpse of the strong market appetite for these products; however, participants will be keen to see the enduring appeal and the impact of derivatives-based ETFs entering the mix going forward.”With the successful completion of the Dencun hard-fork on March 13th, Ethereum (ETH) has reportedly “achieved yet another crucial milestone in its roadmap, undergoing a major infrastructure upgrade to enhance the blockchains scalability.”The Coin Metrics report pointed out that this event “was anticipated not only by Ethereum users, who’ve grappled with high transaction fees during periods of congestion, but also by layer-2 (L2) solutions that have faced elevated costs associated with storing or settling data that has been processed off-chain, down to Ethereum’s layer-1.”However, the introduction of “blobs” through EIP-4844, has “alleviated these bottlenecks, setting the foundation to improve the economic feasibility of the network for all stakeholders involved.”EIP-4844 addresses Ethereum’s scalability issues “by creating space for ‘blobs’ of data.”As a more efficient form of data-storage compared to calldata, layer-2’s can utilize blobspace to settle transactions to Ethereum’s layer-1, which acts “as a data-availability and settlement layer. Since the upgrade, the network has processed over 209K blobs as of March 31st.”This is brought to fruition through “blob-transactions,” a new transaction type involving the use of blobs which are “made available for periods of approximately 18 days—unlike calldata, which is stored permanently.”The temporary nature of blobs “enable them to be priced at a lower cost, thus significantly reducing the data-availability costs (DA) costs for L2’s.”Alongside the growth in digital asset market valuations, stablecoins resumed their expansion in Q1.The Coin Metrics report further noted that the “supply of US dollar-pegged stablecoins surpassed $135B, growing by 13.5% over the quarter in aggregate.”Tether (USDT), the stablecoin juggernaut, “crossed a $100B, with its circulating supply on Ethereum growing by 16%, while supply on the Tron network rose by 11%. Circle’s USDC had a strong start to Q1, expanding by 22% to $27B in supply—close to levels observed around the regional banking crisis of last year.”While USDT has dominated centralized exchange volumes, USDC trading pairs “are gaining a larger presence across spot markets as liquidity improves.”The Coin Metrics report also noted that the “increasing market share of the two leading stablecoins can also be partly attributed to the shutdown of BUSD issued by Paxos, in addition to an overall boost in demand for digital assets.”As the year’s first quarter draws to a close, the digital asset landscape has experienced transformative growth and pivotal developments “that signal a maturing and increasingly diverse market.”While speculation and exuberance has pervaded the market, progress has been made on several fronts, from “the launch of spot bitcoin ETFs, to infrastructure upgrades and adoption across layer-1 and layer-2 ecosystems paving the way for greater accessibility and innovative use-cases.”Q1 also marks a pivotal turn in market sentiment as we “leave behind the shadows that clouded over the industry, with the sentencing of Sam-Bankman Fried.”Looking ahead, there are various developments “on the horizon that could shape the digital assets industry going forward.”The report concluded that the “resumption of Coinbase’s case with the SEC, the potential introduction of Ethereum ETFs and Bitcoins fast-approaching 4th halving will undoubtedly keep participants on their feet.”

Digital Assets Report: Stablecoin Usdt Dominates Centralized Exchange Volumes As Usdc Trading Pairs Gain Large Presence Across Spot Markets

Kyle Waters and Tanay Ved from Coin Metrics noted that digital assets rebounded sharply in 2023 as market conditions “improved across the board and institutional interest accelerated alongside the impending launch of a spot Bitcoin ETF.”Looking to 2024, there are a number of important developments on the horizon, according to Coin Metrics.The report from Coin Metrics noted that after a decade-long effort, the final steps “to introduce a spot Bitcoin ETF to the US financial markets are underway, with products likely launching from a number of high-profile issuers like BlackRock and Fidelity Investments in 2024.”The long-awaited approval of spot ETFs “carries many implications that could shape the digital assets market for years to come.”As the industry anticipates the SEC‘s decision on the ARK & 21Shares Bitcoin ETF, the issuer with the earliest final deadline of January 10th, “the latest amended SEC filings from issuers appear to signal an impending green light from the SEC at the time of our writing.”However, the Coin Metrics report pointed out that the specifics “regarding the initial wave of approvals and the exact launch date remain uncertain. It’s widely expected that the SEC will simultaneously approve multiple issuers to avoid perceived favoritism, as observed in the Ethereum futures ETF launch last fall.”Currently, there “are 11 major spot ETF filers that are prepared for a potential approval in the coming week.”The Coin Metrics report added that there “are many different aspects to the launch such as the estimated magnitude of inflows to the ETFs, the competitive dynamics between ETF issuers, and Bitcoin’s maturing market structure. Some issuers have already begun a marketing push, while other issuers look to compete on having the lowest fees.”Coin Metrics says it believes it’s also important “to consider Bitcoin’s on-chain supply dynamics, which may evolve in the medium term, and where Coin Metrics’ data can help shed the most light. Bitcoin’s supply, easily auditable and trackable on-chain, helps make it a unique financial asset. Anyone who runs a Bitcoin node can trace the whereabouts of all BTC and follow coins as they move.”This allows us to “deduce holder behavior, the dispersion of supply, active addresses, and many other on-chain metrics that would be impossible to compute for a more opaque asset. An important trend running parallel to ETF talks is an increasing percentage of bitcoin being held by long-term holders.”The Coin Metrics report also mentioned that “over 6 million BTC, or 30% of the total supply today, hasn’t moved in over five years.”Coin Metrics considers this dormant BTC “as excluded from Bitcoin’s ‘free float’ supply.”Moreover, only 30% of all BTC was “active on-chain in 2023, with the majority remaining untouched.”Although it is important “not to oversimplify the determinants of BTC’s price, a dynamic variable impacted by many unknowns, this growing illiquidity mixed with outsized inflows into the ETF could squeeze the market, thereby encouraging more supply to enter the liquid market.”Many other factors will be interesting to watch, the report added while noting that counteracting forces “will shake up the onshore crypto exchange landscape, with an ETF possibly enticing buyers away from spot exchanges through lower fees and less frictions.”But at the same time, Coin Metrics says that “exchanges like Coinbase are set to gain as an ETF custodian (Coinbase is the named custodian in 8 of the 11 major filings including BlackRock’s iShares Bitcoin Trust).”More broadly, the ETF is expected “to enhance and affirm the legitimacy of digital assets, likely benefiting US exchanges down the road as the industry continues to mature

Digital Assets Market Poised For Mainstream Adoption, Anticipated Launch Of A Spot Etf Stands As Milestone In Bitcoin’S History – Report

Dollar cost averaging (DCA) has become a key strategy for investors navigating the “unpredictable realms” of digital assets, according to an update shared by Coin Metrics. Coin Metrics explains that this approach “involves regularly investing a fixed amount, regardless of the current market cycle—a simple yet powerful strategy that contrasts starkly with the risk and stressful experience that investing in volatile assets can bring to novice investors. Because of this, DCA is often espoused as a pragmatic way to manage investment risks.”. The Coin Metrics report further noted that “increasing access to market data and a deeper understanding of these dynamics now allows for a more informed application of DCA.”

Digital Assets: Dollar Cost Averaging Within Crypto-Asset Market Has Shown Strategy Helps Manage Volatility – Report

Open interest for Bitcoin futures, as indicated by recent activity on centralized crypto exchanges, has recorded a new high, a trend that points to a boost in overall trading volumes across the largest cryptocurrency in terms of market cap and global adoption.CoinGlass data reveals that the total open interest for Bitcoin (BTC) futures recorded a record level of $38 billion this past Friday (March 29, 2024).From the beginning of this year, daily open interest in BTC futures surged by over 100% dating from January 1, 2024 when it had been reported to be around $17.2 billion.Notably, this increase comes with the BTC price rise to above the $70,000 mark which represents a two-thirds appreciation YTD.Open interest is a term used to refer to the measure of the aggregate value of outstanding/unsettled BTC futures contracts which have been issued via centralized digital asset exchanges.Open interest suggests heightened crypto market activity as well as trader sentiment regarding a certain type of asset.It’s worth noting that these figures are not the only indication of an overall positive crypto market outlook.With the BTC price increasing and transaction fees remaining elevated during this time period, Bitcoin miner revenue notably reached a new all-time-high this month, exceeding $76 million in a single day, according to an update shared by Coin Metrics.The leading 3 publicly-traded Bitcoin miners Marathon Digital, CleanSpark as well as Riot Platforms continue to compete for investor attention, each leaning into a differentiated strategic focus, the Coin Metrics report added.Marathon Digital’s new “Slipstream” service now allows for extra-large transactions, with the firm mining the 3 largest Bitcoin blocks ever at 3.98+ MB each, the Coin Metrics team revealed.Bitcoin’s estimated power consumption also reached a new high of 19.6 GW in February 2024, though the average ASIC is on its way to becoming considerably more efficient, consuming only 30.99 J/TH

Bitcoin Futures Open Interest Reaches New High, Btc Mining Revenue Sets All-Time High – Report

As a fundamental aspect of validating and securing proof of stake (PoS) blockchains, staking on the Ethereum network has captured significant attention since “The Merge,” according to an extensive report from Coin Metrics.The Coin Metrics team notes in their weekly report that currently, over 31M ETH (~26% of supply and $120B in value) has “been staked, with nearly 980K active validators securing the Ethereum network.”As mentioned in the Coin Metrics report, this robust security foundation “renders attacks against the network prohibitively costly.”Fundamentally, staking pools and custodial staking platforms bring together ETH stakers and infrastructure providers (i.e., node-operators), “allowing deposits of any ETH increment in return for a tokenized claim on capital staked—known as a liquid staking derivative (LSD).”As a result of lower barriers to entry and greater accessibility to get yield on ETH, “adoption of this sector has grown tremendously.”The report from Coin Metrics added that “a vibrant ecosystem of LSD’s have emerged from Lido’s stETH to Coinbase’s cbETH and Rocket Pool’s rETH, with diverse token models.”Boosted by their fungibility, composability, and yield, liquid staking tokens are “a predominant form of liquidity on decentralized exchanges (DEX’s) and collateral across lending markets, stablecoin products, Layer-2’s and now restaking applications, showcasing their utility across the ecosystem.”In their latest State of the Network Coin Metrics focus on the market dynamics and risks of this sector, looking at the largest one’s in the market today.As stated in the update from Coin Metrics, Ethereum’s staking ecosystem has “grown substantially, with staking pools and liquid staking tokens garnering meaningful adoption.”The report added that enhanced accessibility and utility have led to “the deep integration of LST’s within the on-chain ecosystem.”However, as highlighted in this report, this growth comes with crucial trade-offs, “emphasizing the need to monitor associated market risks.”With Ethereum stakeholders contemplating the implementation of staking related EIP’s (Ethereum Improvement Proposals), such as “max-effective balance”, “max churn-limit” and potential issuance changes, the trajectory of this sector is “poised to evolve,” according to Coin Metrics.The report explained that liquid staking tokens also have a unique role to play in the emerging practice of “restaking”—a concept popularized by EigenLayer.The update pointed pointed out that users can either deposit liquid staking tokens or restake “natively” by setting withdrawal credentials towards EigenLayer contracts, “enhancing yield from validating other networks by leveraging Ethereum’s economic security.”While this unlocks additional utility, it introduces implications around “the concentration of LST’s into restaking protocols, liquidity in secondary markets and the integration of ‘liquid restaking tokens’ (LRT’s) across the on-chain ecosystem.”The report from Coin Metrics concluded that the intersection of liquid staking tokens “within the restaking ecosystem constitutes a key trend to focus on as this sector continues to evolve.”

Staking On Ethereum Network Captures Significant Attention Since “The Merge” – Report

In the State of the Network report, Coin Metrics continues their focused series on Bitcoin mining, spotlighting data across the crypto mining ecosystem.According to the Coin Metrics update, mining stands as “one of the most intriguing parts of the digital assets industry, often capturing the interest of the public and enthusiasts.”As the industry matures, crypto mining is moving well “beyond its hobbyist days,” the report claims.With over a dozen publicly-traded mining companies “listed on American and Canadian stock exchanges, mining has now become a sector commanding the attention of equity analysts on Wall Street.”The report from Coin Metrics added that this past year has “been an eventful one for Bitcoin miners, marked by a major expansion in hashrate across North America and the globe, accompanied with a surge in miner revenues—a welcomed departure from the challenges of 2022.”This all occurs as “each block brings us closer to the next halving event in spring 2024.”The race to mine fresh BTC before “the predictable cut in block rewards is intensifying.”As stated in the Coin Metrics report, changes “to core mining infrastructure, regulatory discussions, new debates within the Bitcoin community, and advancements in miner efficiency all create a complex scenario for operators and analysts alike.”480 Quintillion Hashes per SecondBitcoin’s hashrate—a measure of the computational resources “being allocated to mining—surged in 2023.”Hashrate has leaped “to 480 EH/s from 250 EH/s at the start of the year, boosted by publicly traded mining companies who took no rest in expanding operations throughout the bear market.”As explained in the Coin Metrics report, improving market conditions “have helped miners regain the narrative, with total quarterly mining revenue exceeding $2B in Q2, Q3, and Q4 of this year, on the back of bitcoin’s 150%+ YTD climb over $40K.”The Coin Metrics report added that the string of good news “was extended by an unexpected revival in the long-subdued Bitcoin fee market, with over $180M in transaction fees dished out to miners in Q2 and over $200M paid out so far this quarter.”The cost side of the equation has “also improved, with industrial electricity rates coming down in the US. Even though average rates in the US have risen to $0.085/kWh from $0.075/kWh in April, they are still lower than the peak rates paid in 2022.”Publicly traded mining companies (or simply the “pubcos” in industry parlance) continue to aggressively switch “on a selection of the most efficient and modern machines like the Bitmain Antminer S19 XP. With competitiveness rising (see analysis further along in this report) sustaining a modern fleet of ASICs has become essential for survival.”But even as the good times roll, Coin Metrics points out that miners must “avoid complacency: in just about four months time Bitcoin’s next halving event will cut block rewards from 6.25 BTC to 3.125 BTC—as well as mining companies’ top lines. Miners are currently racing to collect the final Sats from blocks minting out 6.25 fresh BTC.”Though the halving is “a predictable element of Bitcoin’s monetary design, it still presents a complicated calculation for operators managing substantial capital investments in physical infrastructure and computing resources.”At the macro level, conditions vastly “improved in 2023 for Bitcoin miners. Even the fee market, which was frenzied in Q2, has returned in Q4. But along with it, a new debate is now gripping the Bitcoin community.”The report added that Bitcoin miners’ wishes “for better hashing days were granted in 2023

Bitcoin And Crypto Mining Sector Growing Steadily With Over A Dozen Publicly-Traded Mining Firms – Report

In their State of the Network report, Coin Metrics is examining the major developments that shaped the digital assets industry in 2023 through a “data-driven lens.”After a challenging 2022, this past year “brought a number of positive developments across the ecosystem, from new institutional entrants to key technical upgrades.”The Coin Metrics team further noted that while the regulatory environment was arguably the most challenging it has ever been, “especially in the US, the new battles should force clarity on a number of outstanding questions.”With a period of monetary tightening seemingly coming to an end, both crypto and equities surged in 2023, “with many digital assets posting gains above 100%, including bitcoin (BTC), which has risen 150% in 2023.”As noted in the Coin Metrics report, the start of 2023, still “shadowed by the FTX collapse, saw a swift turnaround in digital asset markets, with BTC climbing from $16K to $23K in January—a rise that would set the pace for the whole year.”The report added that “a growing sentiment started to emerge that the worst was over, and that FTX‘s downfall, as a centralized entity, did not tarnish the core principles and potential of public blockchain technology.”However, events early in the year also “introduced a recurring theme for 2023: escalating regulatory pressure in the United States.”The report also mentioned that “a series of enforcement actions in Q1 demanded the digital assets industry’s attention, including the SEC‘s Wells notice to stablecoin operator Paxos over Binance’s stablecoin BUSD, leading to the halting of BUSD issuance.”BUSD’s supply plummeted from “a peak of $16B to $1B over the year, dropping $4B in the week after the notice.”The BUSD enforcement marked “the beginning of a broader effort from US regulators to rein in offshore exchange giant Binance, the largest exchange by spot volume.”In March, the US Commodities Futures Trading Commission (CFTC) unveiled “a civil enforcement against Binance and its founder Changpeng Zhao (CZ) for numerous alleged regulatory violations.”Onshore operators were also “subject to new regulatory scrutiny.”The Coin Metrics report pointed out that many started “to face intensifying pressure in Q1, with bank regulators publishing informal guidance documents singling out cryptocurrency and cryptocurrency customers as a risk to the banking system, leading some in the industry to go as far as dubbing the actions ‘Operation Choke Point 2.0’—an alleged coordinated, government-led campaign to stymie the digital assets industry in the US.”Zooming out to the macroeconomic environment, banks began “to face a mundane, but troubling situation of devaluing treasury securities amid a rapid increase in interest rates, most notably impacting the tech-friendly Silicon Valley Bank (SVB).”SVB’s collapse in March, following a bank run, “not only raised concerns about the health of the US banking sector, but also tested the stability of the USDC stablecoin, as Circle had $3.3B of its reserves held at SVB. USDC’s price briefly dipped before recovering back to the $1 peg following federal assurances which guaranteed all deposits.”The turmoil led to a reshuffling of “the $100B+ stablecoin market, with a notable shift from USDC to offshore-issued Tether (USDT). It also marked a growing divergence between Tether and USDC, a trend that would continue in 2023.”The banking crisis further “impacted crypto asset liquidity by disrupting real-time payment systems like the Silvergate Exchange Network and Signature Bank’s Signet, after the two crypto-friendly banks were also shuttered.”Despite the challenges, BTC and ETH “experienced a rally in the immediate aftermath of the SVB crisis.”The core features of digital bearer assets “like bitcoin—ease of self-custody, lack of intermediation, and on-chain transparency—became more pronounced than ever, resonating with the original sentiment that led the pseudonymous Satoshi Nakamoto to introduce Bitcoin during the Great Financial Crisis in October 2008.”This momentum would carry over to Q2, “striking a chord with institutions that began to express greater appreciation for Bitcoin’s unique qualities.”During Q2, Coinbase secured a significant partnership with BlackRock, “becoming a key crypto-native ally as BlackRock’s chosen custodian in the ETF application, the month of June also saw the SEC launch a landmark case against the leading US exchange.”The SEC also “accused Coinbase of operating as an unregistered securities exchange and labeled various assets, including SOL, MATIC, and ADA, as alleged securities.”This action brought the long-standing industry debate “about the distinction between crypto securities and commodities into sharp focus.”In response, Coinbase swiftly moved “to counter the allegations, and the broader industry is now bracing for an outcome that could significantly influence the future trajectory of the digital assets industry in the US.”Despite a series of external events both positive and negative, the industry “continued to push ahead this year, advancing with key planned upgrades.”In April, Ethereum completed its ‘Shapella’ hard fork, which activated “withdrawals of staked ether (ETH) and validators’ accumulated staking rewards.”The success of the upgrade “eliminated previous liquidity risks associated with staking, and immediately enticed a new surge of staking deposits, a trend that would continue throughout most of 2023. Even as the staking APR currently hovers around 4%, staked ETH has hit 28M, or just under one quarter of the entire ETH supply.”The second half of 2023 brought “a reinforcing shift, with significant legal victories and the re-engagement of institutions providing a counterbalance to the regulatory pressures of earlier months.”A revitalization in digital asset markets “unfolded in Q4 as BTC surged over 50%, marking a resurgence in market sentiment and valuations.”This rebound was driven “by heightened institutional interest, as reflected in the near-record levels (over $5 billion) in BTC futures open interest on the Chicago Mercantile Exchange (CME), a venue preferred by institutional participants.”The report further noted that this “offered clearer evidence of Bitcoin’s evolving market structure, as investors actively positioned themselves in anticipation of a spot bitcoin ETF and the next Bitcoin halving.”Accompanying this surge in derivatives market activity, spot volumes escalated to yearly highs.Supply trends also reinforced “a bullish outlook, with free float supply hitting the lowest levels since March 2017, and only 30% of BTC moving in the past year, indicating a strong holder base.”These developments collectively “closed a chapter of uncertainty that clouded the industry, paving the way for a more mature and optimistic future for the asset class.”The strength in digital assets is evident “when we look back at returns by major asset classes in the investable universe over 2023.”The Coin Metrics report concluded that the “outperformance of crypto-related equities and digital assets shines through, with Coinbase (COIN) a major beneficiary of the market rebound.”As macroeconomic tides potentially undergo “a shift over the coming months, the digital asset industry is primed for a phase of maturation and expansion.”

Digital Assets Industry Primed For A Phase Of Maturation And Expansion – Research Report

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