M6 Labs L1, L2 & DeFi Weekly

GM, Anon! It appears that the market is on the rise once more. Could this signal that we're emerging from the recent downturn and heading towards new all-time highs? We certainly hope so! In the meantime, airdrops are in full swing, adding to the excitement in the crypto ecosystem across the board. Let’s dive in!

Alpha Take

State Of The Market

TLDR

• BTC dominance has risen, indicating a preference for Bitcoin over alternative digital assets.

• Altcoins have dipped from their recent local high, suggesting a short-term decline in investor interest and confidence.

• GBTC's dominance in daily trading volumes among ETFs has diminished, now representing approximately 30% of the market.

• Solana's bridge activity has surged by 335%, largely due to the Jupiter airdrop, stimulating cross-chain interactions and liquidity flows.

• Ethereum staking has reached its highest point since last summer, with approximately 30M ETH staked, reflecting growing confidence in Ethereum's future.

• Various airdrops have captured attention, including DYM's mainnet launch setback, Stride's Celestia stakers' airdrop, and Eigenlayer's removal of caps on staking pools to attract liquidity.

Industry Updates: In the realm of finance and regulations, Federal Reserve Chairman Powell hinted at a delay in interest rate cuts until after March to ensure sustainable achievement of the 2% inflation target, with expectations of three cuts this year, albeit at a slower pace than anticipated. Meanwhile, US Treasury Secretary Yellen advocated for crypto legislation to address existing gaps in enforcement, while Trump expressed concerns over central bank digital currencies and AI's power. 

• In other developments, the SEC introduced a rule potentially requiring DEX liquidity positions above $50M to register, and a judge ruled in favor of the SEC in demanding Ripple disclose financial statements. 

• On the market front, New York Community Bank stock plummeted 25%, prompting concerns over its assets, while Major French Bank SocGen announced plans to cut around 900 jobs. 

• Solana forged a partnership with Abu Dhabi Global Market to accelerate web3 adoption in the UAE, as OKX encountered potential probes in South Korea. In regulatory changes, Thailand exempted value-added tax on crypto gains, highlighting a distinction from India's persistent controversial crypto tax stance. 

• Concurrently, Hong Kong initiated an inquiry into Worldcoin due to data privacy apprehensions. Amidst the recent market stagnation, Michael Saylor capitalized by acquiring an additional 850 BTC.

• In ETF news, Ark Invest and 21Shares amended their joint application for a spot Ethereum ETF, focusing on cash-based transactions and hinting at ETH staking. Additionally, FTX filed a motion to offload a stake in AI startup Anthropic, while Binance faced a data leak on GitHub, exposing security measures. 

• Finally, Chinese scholars emphasized the urgency of addressing cryptocurrency-related money laundering, with the revised draft of China's Anti-Money Laundering Law expected in 2025.

Project Updates: Within the Ethereum ecosystem, some significant developments have emerged. Notably, the Ethereum experiment ERC404, blending NFTs and crypto, has gained considerable traction, boasting $87M in trading volume. 

• Additionally, prominent bots like BananaGunBot have integrated support for ERC404, signaling growing adoption. 

• Meanwhile, the Ethereum Dencun upgrade has gone live on Holesky, introducing "proto-danksharding" to enhance scalability and reduce transaction costs for layer-2 blockchains.

• In a bid to enhance scalability and explore new avenues for growth, the Ethereum Name Service (ENS) has expressed openness to constructing its layer 2 solutions. ENS director Khori Whittaker underscores the organization's commitment to intensive research and development efforts, with a particular focus on Optimism and other layer 2 solutions.

• Elsewhere in the DeFi space, dYdX has unveiled its ambitious 2024 product roadmap, centered on three core areas: permissionless market, core transaction enhancements, and UX/onboarding updates. This roadmap includes plans for instant liquidity through LP Vaults, scalable oracles, and the implementation of cross-margin and isolation margin features.

• EigenLayer has reopened uncapped restaking deposits, coinciding with a surge in market capitalization, while Dymension gears up for its imminent mainnet launch.

• On the accessibility front, MetaMask has expanded its functionality to allow users to purchase cryptocurrencies directly through Robinhood, aiming to streamline the crypto acquisition process for its users.

• In terms of innovative advancements, 0xngmi has introduced smolrefuel for gasless swaps, offering a convenient solution for users navigating gas fees. Additionally, Helium Mobile has been added to Coinbase Assets Roadmap.

• Frax has recently launched Fraxtal, its Layer 2 network, alongside various partner applications, marking a significant expansion in its ecosystem. Concurrently, Ondo Finance has broadened its offerings by introducing its US Treasury-backed stablecoin to the Sui blockchain. These developments highlight a growing trend of financial innovation and blockchain interoperability, with Frax enhancing its network capabilities and Ondo Finance leveraging new blockchain platforms to extend the reach of its stablecoin.

• However, not all news is positive, as Polygon Labs has announced a 19% reduction in its workforce, citing the need for "enhanced performance." Furthermore, the 3AC Founders-Backed Exchange OPNX is set to cease operations by February 14, marking the end of its tenure as a hybrid bankruptcy claims platform and crypto exchange.

Inflows & Outflows: Last week, digital asset investment products received significant inflows totaling $708M, bringing the year-to-date inflows to $1.6B and total global assets under management to $53B. 

• Bitcoin dominated the inflows, comprising 99% of all flows, with Solana also seeing notable inflows of $13M. 

• The focus remained on the US, with newly issued ETFs averaging $1.9B inflows over the last four weeks, totaling $7.7B since launch. 

• However, there were minor outflows from short-bitcoin products totaling $5.3M. 

• Despite this, trading volumes in ETPs fell compared to the prior week, but remained well above the average in 2023. 

• Regionally, the US saw $721M inflows, with significant reductions in momentum of outflows from incumbent issuers observed in recent weeks. 

• Additionally, blockchain equities experienced $147M outflows from one issuer, while other issuers saw $11M inflows.

In January, the crypto venture capital space saw a total of 113 publicly disclosed investment projects, marking a 10.8% increase from December 2023 and a 1.8% increase from January 2023. 

• Among various industries, DeFi accounted for approximately 19% of financing, while infrastructure projects constituted about 12%, NFT/GameFi and CeFi each represented around 12% and 6%, respectively, and L1/L2 made up roughly 4%. 

• The total fundraising amount for the month reached $650M, showcasing a 28.6% decrease from December 2023 but a 3.2% increase from January 2023. 

• Notable funding rounds included HashKey Group's Series A funding, Core Scientific's successful equity offering, Flowdesk's Series B round, and Sygnum's strategic financing round. 

• Other significant investments were made in projects like Portal, Polymer Labs, Ingonyama, Axiom, Kiln, and SkyArk Chronicles, illustrating the diverse range of initiatives garnering investor interest in the crypto space.

This rise in BTC dominance suggests a preference among investors for Bitcoin over other digital assets at the moment.

• the dip in altcoins from their recent local high indicates a relative decline in investor interest and confidence in alternative crypto. This downturn can be attributed to factors such as profit-taking, market corrections, or a reevaluation of risk appetite among investors, highlighting the cyclical nature of altcoins.

As the initial hype around spot Bitcoin ETFs begins to subside and trading activity normalizes, the landscape of Bitcoin investment vehicles is evolving. 

• GBTC, which initially commanded the lion's share of daily trading volumes among ETFs, has seen its dominance diminish. 

• While GBTC once represented over half of the daily trading volumes, it now accounts for approximately 30% of the market. 

• Notably, last week saw the emergence of a new leader in trading volumes: IBIT. 

• This shift highlights the dynamic nature of the Bitcoin investment market and the ongoing diversification of investor preferences within the space.

Solana's bridge activity has seen a dramatic increase of 335% over the past seven days, largely driven by the Jupiter airdrop, one of the largest token distributions on the blockchain to date. 

• This surge in activity highlights the growing interconnectivity between Solana and other blockchains, particularly Ethereum, from which the majority of the bridged funds originated.

• The Jupiter airdrop has been identified as a key driver behind the significant uptick in bridge activity, showcasing how strategic token distributions can stimulate cross-chain interactions and liquidity flows.

The net flow of ETH staking has reached its highest point since last summer, reflecting a significant increase in the amount of Ethereum being locked in staking contracts. This surge is indicative of the growing confidence in Ethereum's future and its staking ecosystem.

• Approximately 30 million ETH, representing about a quarter of Ethereum's total supply, are now staked. This milestone underscores a strong belief in the security and potential returns from Ethereum's proof-of-stake mechanism.

• The number of validators waiting to stake their ETH has hit the highest level since late October 2023, moving the ecosystem closer to 1M validators. This growth suggests increasing participation and investment in Ethereum's network security​​​​.

Airdrops

• This week, DYM, a token recently launched on Binance and subsequently listed on major exchanges like Kucoin and Bybit, has been the talk of the town as it continues to reach new highs. However, the project faced a hiccup during its mainnet launch due to a consensus issue with its primary validator, Chorus One.

• Stride has also garnered attention with its airdrop targeting Celestia stakers, demonstrating the strategic importance of engaging with active blockchain communities.

• Meanwhile, "Heroes of Mavia," a Binance-backed project, celebrated a milestone of 1M downloads with a significant airdrop, showcasing the impact of such campaigns on user acquisition in the gaming sector.

• Eigenlayer's decision to remove caps on its staking pools, coinciding with TVL surpassing $3B, has generated anticipation for the project's future, illustrating how airdrops can bolster visibility and attract liquidity. 

• Wormhole's surprise airdrop announcement came as surprise with the snapshot already having being taken.

• The recent rush to order the Solana phone underscores the growing interest in leveraging blockchain functionality in everyday devices, while the airdrops associated with owning the mobile device highlight a novel approach to incentivize adoption and loyalty among users.

• Degen stands out for its targeted approach to rewarding Farcaster users.

• While the Pyth Network's second phase of token airdrops supports over 160 decentralized applications, signaling a commitment to ecosystem development.

Blue Chip and Majors Overview

Dymension (DYM)

Dimensions highly anticipated airdrop took place on Tuesday with the network’s mainnet going live. The airdrop saw Dymension distribute $390M  worth of DYM tokens among early users and select communities. What’s more, the DYM token surged in value following the launch of the mainnet. DYM has registered a staggering increase of 72% over the past 24 hours, according to data sourced from CoinGecko. The token is trading at an all-time high of $6.10, beating its previous all-time high of $6.08, set barely 24 hours earlier.

Solana (SOL) 

Solana has been in the news for two major reasons over the past week. The protocol’s active users hit an all-time high on the 31st of January, reaching 875,940 active users. This was the highest since the protocol’s inception in 2020. However, the other reason is nothing to cheer about, as Solana faced its first major outage of 2024, with the network going down for 5 hours. The freeze triggered a drop in the price of the SOL token, which dropped by 4% in the hours after the freeze. In the days leading up to the outage, SOL was trading above the $100 mark.

• Bitcoin (BTC) - The world’s largest crypto has seen considerable movement as whales begin to accumulate the asset with the Bitcoin halving event on the horizon. BTC made considerable gains over the past 24 hours, rising by over 4% and edging closer to the $45K mark. Currently, the cryptocurrency is trading at $44,727, as bulls eye the $51K price level.

• Ethereum (ETH) - Ethereum jumped past $2400 as building bullish momentum took the asset past the $2380 zone. ETH’s recent gains can be credited to two major events, as it emerged that the supply of staked Ethereum tokens hit 25% on Thursday. This is a critical milestone for ETH as the staked supply represents ETH removed from circulation. The second catalyst is the amendment of spot Ethereum ETF filings by Ark Invest and 21 Shares, sparking anticipating of an imminent approval. However, the past 24 hours have seen the price remain unchanged, even as the Dencun upgrade went live on the Holesky testnet on Wednesday. ETH has been stuck between $2200 and $2400 since the 23rd of January. In fact, the token has registered an increase of just 1.0% over the past week.

• Monero (XMR) - Things have gone from bad to worse for Monero as the XMR token plummeted by around 30%, falling to a 20-month low after it emerged that Binance would be delisting the token from the 20th of February. Monero slumped to as low as $114 before falling further, dropping to $101.65, and recovering. Currently, XMR is trading at $133.

• Banana Gun (BANANA) - Banana Gun has seen considerable bullish activity over the past 30 days, registering a considerable increase. BANANA has seen an increase of almost 87% over the past 30 days, going from $8.60 to its current price of $17.10.

• Unibot (UNI) Meanwhile, UNIBOT has been in the red, losing almost 24% over the past two days. The volatility in BOT’s price can be attributed to Unibot issuing a native Solana ecosystem token. Developers hope the UNISOL token will ultimately boost UNIBOT’s value accrual.

• Bittensor (TAO) - Following Vitalik Buterin’s comments, Bittensor (TAO) registered a considerable increase over the past month. TAO hit another all-time high on the 6th of February when it reached $516. However, the token’s price has dropped since, falling just over 9% in the past 24 hours. The TAO token is currently trading at $439.

• Sui (SUI) - Sui, the Layer-1 blockchain from the creators of the Diem crypto project, broke into the top ten DeFi rankings on the 30th of January, achieving this milestone within a year of launch, Sui also registered a massive increase in TVL which registered an increase of 1000% in just four months. However, the SUI token has pulled back after its recent bull run, dropping from $1.64 to its current level of $1.55. We could see positive momentum return after it emerged that Ondo Finance will expand its US Treasury-backed stablecoin to Sui.

• Dogwifhat (WIF) - Meme coins have been on the rise if we look at Dogecoin, Shiba Inu, and Bonk. However, in recent days, WIF has been the exception, as the token has dropped considerably since reaching its all-time high. However, the token has registered a 26% increase in the past 24 hours and is currently trading at $0.220. The news that Bitfinex will be listing the token can be attributed as one of the reasons for this increase.

• Myro (MYRO) - The MYRO token saw an unprecedented surge in January 2024, gaining a staggering 3605% over the past year. This surge was fueled by celebrity endorsements, social media posts, increased trading volume, and positive investor sentiment, and saw the token reach its all-time high of $0.258 on the 19th of January. However, the price has dropped since, with MYRO currently trading at $0.066.

• Optimism (OP) - Back in December, it was predicted Optimism would see a price drop following the unlock of 24M OP tokens. OP defied these predictions, instead surging to an all-time high of $4.23 on the 12th of January. Now, with another unlock on the horizon, how OP will react remains to be seen. Currently, the token is trading at $3.37, up nearly 5% over the past 24 hours.

• Arbitrum (ARB) - 2024 has been rather eventful for Arbitrum, with the ARB token reaching its all-time high of $2.39 on the 12th of January. However, since then, the price of ARB has been on a downward trajectory, falling as low as $1.56 on the 23rd of January. However, the price has recovered since and is currently trading at $1.89, looking to get back above the $2 level.

• Flare (FLR) - The FLR token’s performance over the past month has been nothing short of impressive. During the past week, when most cryptos have struggled, FLR has surged by 44%, reaching $0.033, its highest price level for 2024. While the token has since retreated, it has gained an impressive 65% over the past month and is currently trading at $0.029.

• Chainlink (LINK) - The Chainlink (LINK) price has been on an upward trajectory since late October 2023. By December, LINK had surged to $16 before entering a period of volatility. However, LINK embarked on another bullish run since late January, with its price rising by over 40%, considerably surpassing Bitcoin, Ethereum, Solana, and Cardano. Chainlink was also recently integrated across Avalanche, Base network, BNB-chain, and Ethereum.

• Injective (INJ) - The recent token unlock saw 3.67M INJ tokens enter the market. As expected, the INJ token price registered a drop following the unlock, dropping down to $30.68 before recovering and rising to $38.85. However, frustratingly, INJ has been unable to move past $40 since the start of the year. The previous unlock of INJ tokens dropped the price by 12%.

• Jupiter (JUP) - Jupiter has seen a considerable slump since making its much-hyped debut of the JUP token through its airdrop. The token is currently trading at around the $0.55 mark, an increase of 6% over the past 24 hours. Make no mistake, interest in the JUP token is high, thanks to major strides being made by Jupiter in the DeFi sector.

• Pyth Network (PYTH) - Pyth Network recently kicked off the second phase of its airdrop, which will see PYTH tokens distributed to over 160 DeFi applications. The PYTH token has nearly doubled after bottoming in early January when the price hit $0.23. Since then, PYTH has reported an increase of 89% and is currently trading at around $0.49. However, some analysts have predicted that PYTH risks a 10% price correction.

• Ethereum Name Service (ENS) - The native token of the Ethereum Name Service, ENS, has been quite bullish over the past month, registering an increase of 55%. The token has been one to watch after its partnership with domain name registrar GoDaddy, which has had a positive impact on the price. The token is currently trading at $21.05.

• Stride (STRD) - Stride has made a series of major announcements over the past couple of weeks, such as its partnership with dYdX and the airdrop of 5M STRD tokens to stTIA holders. The token’s price has also been on the up since the beginning of February. In fact, STRD has gained over 75% over the past couple of days, and is currently trading just under $6.

• Pendle (PENDLE) - On the 2nd of February, Pendle was testing the resistance at $2.54, and it was predicted it could see a move to $3.19. This gave investors a sweet buying opportunity. That prediction came true on the 7th of February when PENDLE surged to its all-time high of $3.30. However, the price has since dropped, with the token down 7% over the past 24 hours and currently being traded at $2.91.

• OKT Chain (OKT) - The OKT Chain was last in the news in December 2023, when it surged by 80% in 24 hours due to heightened interest from the inaugural inscription-minting event hosted on the OKT chain. However, since then, the token has been on a downward trajectory, with its price more than halved since the heady days of December 2023. OKT token is currently trading at $16.44.

• Space ID (ID) - Space ID has seen a remarkable surge of over 80%, driven by the news of Upbit introducing a Korean won trading pair for the ID Coin. This has led to considerable optimism and investor interest, pushing the token’s price past $0.5. The surge in price can be attributed to the anticipated surge in demand from the Asian market following Upbit’s announcement.

• COQ Inu (COQ) - COQ Inu claims to be the #1 meme coin on AVAX. The token hit its all-time high in December 2023, when it rose to $0.0000039. However, the token has lost considerable value and is currently trading at $0.0000014.

• Manifold Finance (FOLD) - FOLD has registered a significant jump over the past 24 hours, rising by over 18%. The token had dropped to $9.19 on the 29th of January and encountered considerable volatility until the 5th, after which it could break past the $10 level. Currently, the token is trading just under the $15 mark.

• Aleph.im (ALEPH) - Aleph.im recently launched Twentysix Cloud, an enhanced marketplace for decentralized cloud computing. The token is currently trading at $0.32 and has shown an impressive price trend over the past month, rising by over 120%.

• Blur (BLUR) - Blur was one of the stars of the crypto market in 2023, reaching astronomical highs. It continued this trend in 2024 as well, registering impressive gains despite the unlocking of 50 million BLUR tokens. The token is trading at $0.61, up nearly 40% over the past 30 days.

• Immutable (IMX) - IMX is another token that has maintained an upward trajectory in 2023 and 2024. This comes as no surprise as the blockchain gaming specialist is known for its innovation. The company recently announced the launch of its Immutable zkEVM mainnet. IMX has been fairly bullish over the past 30 days, registering an increase of over 16%, and is currently trading at $2.28.

• Ronin (RON) - Ronin has given followers and investors plenty to cheer about in recent weeks. Following the news of the RON token’s Binance listing, Ronin has announced a new collaboration with Japan-based GMonsters and mobile game publisher MIXI, bringing titles from the Fight League franchise to Ronin. No doubt, the price of RON reflects this positive sentiment and has registered an increase of 5% over the past 24 hours, with the token currently trading at $2.66.

• Heroes of Mavia (MAVIA) - Heroes of Mavia recently airdropped its MAVIA token to over 100K players, with the token spiking by 36% soon after its debut. The token surged to $4.04 before correcting and dropping to its current price of $3.53. Over a million users downloaded the game since its release last week, with the token’s marker cap crossing $100M.

Smart Money Movements

• We've observed a notable shift in smart money activity recently, transitioning from LBP Meta to ERC404 meta. Over the past week, smart money addresses have shown significant engagement with ERC404 tokens, particularly with $PANDORA leading the pack, attaining a market cap of $200M.

• $PANDORA currently stands as the favored token among smart money players, owing to its association with the ERC404 standard. This standard, although unofficial and experimental, aims to blend the attributes of fungible tokens and NFTs, garnering attention and adoption.

• Another interesting token within the ERC404 narrative is $MNRCH, which has caught the interest of numerous smart money addresses.

• In contrast, smart money has divested from $RSTK, a pioneering restaking protocol constructed on EigenLayer.

• Additionally, smart money activity has been detected in My Pet Hooligan NFTs, a gamefi project that gained traction following the launch of $KARRAT.

• Furthermore, noteworthy activity has been observed on Hyperliquid, with several smart money addresses interacting with it, likely in anticipation of an upcoming airdrop, contributing to heightened engagement and interest.

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