TitanSwap Monthly Report August
At the beginning of the month, the market began to rally higher as signs of a supply squeeze on the Bitcoin chain took shape and Ethereum successfully achieved an EIP1559 hard fork. The market quickly had a strong week, with BTC prices recovering from a low of $37,524 to $45,215. And with the market powering higher, a bullish rally gradually arose, supported by growing evidence on the chain, with prices reaching new multi-month highs, along with investor confidence, conviction, and positive sentiment. By the end of the month, a market structure similar to that of the early bull market had actually developed. Price lows were at $46,465 and price highs were at $50,461. As the Bitcoin and other cryptocurrency markets rallied higher, a significant on-chain divergence continued to form on Bitcoin and Ethereum. Activity on both chains has been quiet relative to the bullish highs, and the bullish trend in supply dynamics remains in play even as price momentum continues to move upward. At the end of August, we briefly characterized these divergences.
On net value, a significant number of investors are actually still holding bitcoin, and they have strong confidence, which is a powerful signal for the bulls.
In this context, profits have been realized throughout August as prices continue to move higher. This suggests potential market forces that can absorb this constant supply of sold bitcoin.
OnChain Activity Diverges
It is impressive that on-chain activity has remained divergent while prices have rebounded. Despite the return of prices to higher trading ranges, demand for block space on Bitcoin and Ethereum remains well below recent peaks. Currently, there are about 275,000 active entities on the Bitcoin network per day, about 21.4% below the January peak.
Ethereum’s active addresses are similarly down 33% from their May peak and currently stand at about 450,000 addresses per day. It is worth noting that current activity on both Bitcoin and Ethereum chains is similar to the range of accumulation prior to the bull market in the mid-to-late 2020s.
Interestingly, within the Ethereum ecosystem, we observe a considerable divergence in on-chain attention. While the number of transactions and active addresses is declining, the size of transaction fees is increasing significantly. This is most likely due, at least in part, to the strong demand for NFT transactions and investments. Total transaction fees for the Ethererum network are currently around 10,000 Ether per day, a relatively high level compared to the ‘DeFi summer’ and the bull market of 2021.
However, the high level of market interest in NFTs has not come without a price, and DeFi tokens appear to be the losers in this binge. The chart below shows on-chain trading data for the four blue-chip DeFi tokens, AAVE, COMP, UNI and YFI. The top row shows the active addresses interacting with the tokens, and the bottom row shows the token values for transactions denominated in USD.
Looking at the full chart gives a somewhat darker impression, and we see a structural decline in investor attention against all four tokens, especially as most broke new lows this week.
Bull Market Supply Dynamics
Whether divergent on-chain activity is bullish or bearish is a complex issue, as more digital asset trading volume is occurring in off-chain exchanges and derivatives. In addition, technological advances such as batch trading, the adoption of SegWit, and the use of lightning networks and other layer 2 technologies have made bullish or bearish a dynamic issue. Supply dynamics, on the other hand, and specifically the maturity of Bitcoin, provide a pretty powerful signal to help us judge any direction.
The younger bitcoins are those that are less than 3 months old. They are the most likely to be sold during volatility. The declining share of younger coins in the hoarding wave indicates that the market tends to hoard rather than sell. Younger coins currently represent only 15% of the total bitcoin supply, indicating that a very strong downward trend is at work.
TitanSwap has recently optimized and changed the presentation of trading data. Compared to previous versions we provide more comprehensive and clear data for traders to make reference and make a rational investment or trading judgments regarding market changes. After users connect their wallets, they are allowed to add their own selections for quick and easy access.
To make it easier for TitanSwap users to grasp emerging good investment opportunities in a timely manner, we have created an instantly updated categorized display of emerging liquidity pools in the ETH and BSC networks. However, with opportunity comes risk, and this is still a judgment call to be made by users based on their own experience.
The next step will be to further deepen the data and transaction level.