Weekly Recap
May 3, 2024
Crypto Fundamentals #75
Coinbase announced that it smashed earnings expectations
Jimmy Zheng
COO
Alex Weseley
Research
Coinbase announced that it smashed earnings expectations
This week, Tokyo government announced subsidies for security token projects (Ledger Insights). BlackRock led a $47 million funding round in Securitize - firm providing asset tokenization services like BlackRock’s Ethereum BUIDL Fund (Blockworks). A bill was introduced to congress proposing clear tax guidelines for block rewards (Announcement, Coincenter).
🌞 Coinbase Earnings
💫 FriendTech v2 Launch
🌞 Eigenlayer Announces Launch of Eigen Token
💫 Aave Rebrands and Announces v4 Update
The week saw a continued divergence in prices across the peer set as average and median WoW prices increased by 2.4% and 1.2%, respectively. On one side, OSMO and FTM saw single-digit declines of 4.9% and 2.5%, respectively. Meanwhile OP saw ~24% WoW return as a16z was revealed to be part of the $90mm private sale of OP tokens previously announced in March 2024. Other ETH layer 2 networks including ARB and MATIC were also up single digits over the week. Interestingly, ATOM saw a 7.1% WoW increase while Osmosis, the premier DEX on Cosmos declined 4.9% over the same timeframe.
This week Robert Mitchnick, head of digital assets at BlackRock, stated that BlackRock has been playing an educational role in hosting diligence and research conversations with a variety of capital allocators including pension funds, sovereign wealth funds, insurers and family offices. Mitchnick also added that “when we think about this space, we see the potential for digital assets to benefit our clients and capital markets, with a focus in three areas: cryptoassets, stablecoins and tokenization. And these pillars, they're all interrelated. That's a really important thing for people to understand. And the work that we do across each informs our strategy and our insights for the others.”
Meanwhile, the S&P 500 and NASDAQ moved up 0.27% and 0.93% WoW, as the Federal Reverse noted that it would be holding interest rates steady at 5.3% and that inflation has not made progress towards the Fed’s 2% goal. The Fed added that it continues to be “highly attentive” to inflation risks, as the CPI increased from 3.1% in February to 3.4% in March.
On Thursday, Coinbase announced that it smashed earnings expectations: beatings EPS estimates by 400%, and revenue estimates by about 30%. Like last quarter, Coinbase has issued an NFT of their quarterly earnings on Base, which can be minted by anyone and gives holders a 20% discount in Coinbase’s online shop.
The big question people were looking to answer was: is retail back? The answer is: probably no, retail is not back. Looking at Coinbase’s Q4 2022 earnings report (the first time they split trading volume into consumer and institutional) we can see that consumer trading volume in Q4 2021 was $177bn. In contrast, even though Bitcoin has reached all-time highs, consumer trading on Coinbase was a measly $56bn this past quarter (70% less than 2021). On the other hand, institutional trading volumes have now surpassed Q1 2022’s mark of $235bn.
This supports what most have theorized: price action in 2024 has been mostly driven by institutional players and excitement around the Bitcoin ETF. That said, it is possible that Coinbase’s numbers are not fully representative of the market. Retail investors may be opting to gain cryptocurrency market exposure through the Bitcoin ETF instead of using centralized exchanges. It is also possible that retail investors have started using other exchanges instead.
Friend.tech, a decentralized social (DeSoc) app on Base, released its highly anticipated native $FRIEND token alongside its v2 application. The launch fell flat on its face, with folks on X criticizing the product for not meeting quality expectations. Specifically, many users cited that the UI was not great and that the application was not working due to issues on the back end. In August of last year, friend.tech helped revive the DeSocial scene, generating millions in daily fees and revenue. The most recent spike is a result of friend.tech v2’s launch, which generated a flurry of trading volume.
Using Artemis’ Base Activity Monitor we can see that back in August 2023, and through October, friend.tech (the main player in the Social category, grey) commanded up between 20% and 50% of all usage on Base by gas spend.
With the v2 launch, it seems that the platform has created some interesting product innovation around clubs - a gated chat room of sorts. We will see over the next few weeks if users are sticky this time around and there is PMF, or if new activity is solely driven by the airdrop.
On the topic of DeSoc product market fit, it is interesting to see that Farcaster, another major DeSoc app, seems to have achieved fit on some small scale at least. According to the latest data, there are about 40k DAUs on Farcaster, a number which has been fairly consistent since late March, and is actually higher than the initial spike in February 2024 when the hyper around the Frames began.
DeSoc is a sector within blockchain that holds a lot of promise which has been yet unfulfilled. Projects like friend.tech, Farcaster and Lens are experiments in bringing our social experiences onchain, and are pioneering the space. With the right application, DeSoc could prove to be the consumer sector that brings millions of people on chain. For an overview of the whole DeSoc space, check out Galaxy’s recent DeSoc report.
In another high profile token launch, Eigenlayer announced their protocol token EIGEN: The Intersubjective Work Token. Notably, the launch was very conservative in terms of its regulatory compliance. To this end, the token launch was geofenced, i.e., users in certain countries (like the US) were restricted from claiming the token. Additionally, the token is non-transferrable for the time being (this goes for all tokenholders). In launching a token, the designers must consider the relevant laws. If the token is ever to be made available in the US, that means adhering to US securities law. Of course, the crypto industry has been embattled with securities concerns brought forth by the SEC. The Howie test, the primary test used to determine if an asset is a security, is still quite subjective. One of the prongs of the test is whether or not there has been ‘an investment of money’. Are free token airdrops an investment? The SEC thinks so. By making tokens non-transferrable, the EigenLayer team did its best at staying within the boundaries of US laws. Check out this great thread by Jake Chervinsky, Chief Legal Counsel at Variant, for a more in depth discussion on the regulatory landscape surrounding tokens (from a real expert).
Aave, the Ethereum-based borrow lend protocol, has dominated the DeFi lending space over the 5 years, and has consistently held ≥50% market share since June 2021. The protocol is set to undergo its first major upgrade in years, and has also undergone a visual rebranding to underscore the change. The upgrade is set to introduce a cross-chain liquidity layer, improvements to Aave’s native stablecoin GHO coupled with the introduction of RWAs into the Aave ecosystem. The team also hopes to begin integrating Aave into non-EVM chains. The current target for the implementation of MVP code is Q2 2025. Read the full governance proposal here, and if you want to play around with the cool charts below to derive your own insights, check out Artemis’ Lending dashboard.
Detailed dashboard for people who love more numbers in smaller font:
Note: Revenue represents fees that go to the protocol’s treasury or are returned to tokenholders via a burn mechanism. Weekly commits and weekly dev activity as of 4/13/24.
The content is for informational purposes. None of the content is meant to be investment advice. Use your own discretion and independent decision regarding investments.
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