The Hard Fork – Weekly Market Commentary

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This Week’s Topics:
1) Uniswap token launches, reaches $5bn valuation
2) Kraken receives bank charter approval
3) DEX monthly volumes and users hit new all-time high

 

Indices Round-up

 

TradeBlock Index Asset1 Price ($) 7d∆2
XMRX Monero 90.42 5.89%
XBX Bitcoin 10659.92 2.33%
ECX Ethereum Classic 5.93 1.10%
XRX XRP 0.24 -2.30%
BCX Bitcoin Cash 217.09 -2.74%
ETX Ethereum 356.14 -2.90%
EOSX EOS 2.59 -4.62%
LTX Litecoin 45.28 -5.36%
XLMX Stellar Lumens 0.07 -8.99%
ZCX Zcash 54.62 -11.84%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 09/14/2020 06:00 ET thru 09/21/2020 06:00 ET.

 

7 day price movers
Large cap alts largely traded down on the week while bitcoin rallied–at one point trading up more than 5%. The price action came about because of a reversal in capital flows from alts back into bitcoin after the red hot DeFi space saw some recent price declines signaling an exhaustion point for the time being. Among our indexed assets, monero and bitcoin traded up the most rising 5.89% and 2.33% respectively. Conversely, zcash saw the largest declines on the week, falling 11.84%.

In traditional markets, large cap US equity indices traded down 1-2 percentage points with tech stocks being the largest decliners on the week. The nasdaq index, which had been one of the strongest performers over prior months, saw its third straight week of declines. In the bond market, US treasury yields across the curve were up on the week with US specific concerns rising for investors, such as election risk and challenges associated with rising COVID-19 cases.
 

1) Uniswap token launches, reaches $5bn valuation
The largest decentralized exchange by trading volume, Uniswap, launched its own token (UNI) this past week to much fanfare. The UNI token is currently designated for governance which will allow token holders voting rights to decide how the Uniswap exchange operates and functions, including any future fee distributions or token buybacks. Future fee distributions can be quite lucrative as the exchange currently generates nearly $1.5 million in fees per day.
 

Figure 1: Digital currency platform fees


 

This past week, Uniswap launched the token by ‘airdropping’ it to a number of users of the platform, including Uniswap exchange users, liquidity providers, and holders of the “SOCKS” token which was sold prior. For simply connecting a wallet address to the Uniswap DEX platform in order to run a transaction, users were rewarded with 400 UNI tokens–worth $1,920 at time of writing. Users received 400 UNI per wallet address–meaning that users with many wallet addresses saw large rewards. At time of writing, 141,000 addresses had claimed tokens.

After launch, several exchanges, including Uniswap, listed the UNI token which traded as high as $7.80 on Friday. At time of writing the token paired gains to trade around $4.90 which puts the total market cap at $490 million and a fully diluted market cap at $4.9 billion.
 

2) Kraken receives bank charter approval
This past week Kraken announced that the State of Wyoming has approved the firm’s application to form the world’s first Special Purpose Depository Institution (SPDI), tentatively called Kraken Financial. After approval, Kraken became the first digital asset focused company to receive a bank charter recognized at both the federal and state level.

Kraken sought the banking license in order to open banking channels for itself as well as other digital currency companies which have often had fraught relationships with banks. Additionally, Kraken plans to bridge the divide between the digital currency space and traditional banking by offering retail banking services, debit cards, digital asset staking, and wealth management in both traditional investment products and digital currency investment products among other services.
 

3) DEX monthly volumes and users hit new all-time high
Decentralized exchange trading volumes hit a new all-time high this month with still ten more days left in the month. Across the leading DEXs, more than $17 billion in notional volume was transacted so far for the month of September. This was 50% higher than the volume seen in the previous month, and more than 400% higher than the volume seen in July. In the figure below we diagram total monthly notional trading volume across the leading DEXs.
 

Figure 2: DEX notional trading volumes over time


 

DEXs have seen explosive growth in recent months on the back of increased capital flows into DeFi tokens. Because DEXs are decentralized, the token listing process is democratized in that any user can add a token without a formal listing process being undertaken. As such, the latest and most sought after tokens within DeFi are often first listed on DEXs. Users have been flocking to DEXs, and in particular Uniswap, to trade new DeFi assets. Over the last month, Uniswap saw an all-time high of 3.75 million web visits. In our in-depth report last week, we dug into activity across DEX platforms and the impact that is having on Ethereum, with a focus on rising Ethereum gas fees.
 

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