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CCData's latest Market Spotlight blog examines current crypto trends using its advanced data insights. Key topics include Bitcoin's significant monthly drop, the rise of layer 2 solutions like Polygon, the Ethereum merge, OKX's global expansion, and Bitcoin options volume on Deribit Exchange
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In July, the cryptocurrency market saw its first sustained rally since March 2022, with Bitcoin and Ethereum closing the month at $23,310 and $1,679, rising 22.0% and 62.8% respectively. The rally comes as a relief for investors after a torrid couple of months, including the largest monthly drop in June for Bitcoin and Ethereum since February 2014 and March 2018 respectively.
The U.S. inflation rate accelerated to 9.1%, in July, surpassing the consensus estimate of 8.8%. This implies market participants continue to be surprised by large inflation figures, suggesting we have not reached peak inflation. As a result, the Federal Reserve recently increased the base interest rate by 75bps, joining the European Central Bank, which announced its first interest rate hike in 11 years.
The US Government also released the GDP figures for Q2, showing a decline for the second consecutive quarter after falling 0.9% — while by historical definitions this is a recession (i.e. two consecutive quarters of negative growth), the denial from the Biden administration proves worrying, as it may lead to inappropriate responses from the government.
The market’s reaction to the announcement, however, indicates that these events may have already been priced-in, with Polygon, Ethereum, and Solana registering a daily return of 30.6%, 19.1%, and 14.0%, respectively, on the 18th of July.
In fact, a segment of the market may have been expecting a 100bps rate hike by the Fed, thereby triggering a positive market reaction to the 75bps hike. As there is no Federal Open Market Committee meeting next month, it is possible that there is room for further upside in this rally, given there is one less potentially negative event for markets.
The Ethereum Merge continues to be the leading narrative in the markets with related assets rallying heavily during the month after developers announced that the final testnet merge in Goerli is scheduled to take place in the 2nd week of August.
Ethereum miners, led by Chandler Guo, have launched a campaign to fork the Ethereum blockchain and maintain a proof-of-work version called ETHPOW, suggesting an airdrop of new ‘ETHPOW’ tokens would be possible.
In the short term, this may result in positive price action for Ethereum and other tokens in its ecosystem as users attempt to gain as much of this airdrop as possible. While it remains to be seen how protocols adapt to the existence of ETHPOW, it is expected that Proof-of-Stake Ethereum will be the leading project.
We expect ETHPOW will likely perform as other well-known forks have, such as Ethereum Classic, or Bitcoin Cash — while these communities are still active, they have been heavily overshadowed by their forked counterparts in Ethereum and Bitcoin.
Polygon has been one of the leading assets in the recent market rally, rising 93.2% in July and closing the month at $0.9288. When compared to other Layer 2 solutions, Polygon has only been outperformed by Optimism, which rose 192% in July. With its objective of providing a set of scaling solutions for the Ethereum Network, it is no surprise that the sidechain and accompanying layer 2s have been one of the beneficiaries of the hype behind the Ethereum Merge.
On July 20, Polygon announced the release of Polygon zkEVM, the first-EVM equivalent zero-knowledge Layer 2. The scaling solution increases throughput and reduces fees by transferring computation and state storage off-chain. Though zero-knowledge technology has existed for a while, an EVM-compatible zero-knowledge solution is a long-awaited development that will enable developers to easily deploy smart contracts on layer 2. Polygon’s announcement of its zero-knowledge solution was followed by its competitors, zkSync and Scroll ZKP.
Though the zkEVM announcement was well received by the crypto community, order book data suggests that price action was overshadowed by macro conditions. In the 30-minute time frame following the announcement, MATIC/USD failed to make new highs, with prices fluctuating at around $0.92. The number of asks increased by 2.48% while the number of bids fell by 6.77%, indicating the strength of bears on the day.
Polygon has also been working hard on building partnerships that could excel its growth. Earlier this month, the blockchain network was accepted into the 2022 Disney accelerator program. The number of total unique addresses in the chain surpassed 150mn in July according to Polygonscan, the chain’s block explorer. However, other on-chain metrics suggest that Polygon is yet to see an influx of activity. The number of daily transactions has fallen 52.1% since the start of the year, averaging around 5,396 in July. This is undoubtedly also due to the bear market, with market participants in crypto and DeFi generally in the decline compared to last year.
In this week’s Chart of the Week, we analyse options volume for Bitcoin products in the Deribit Exchange. Using CCData’s enhanced order book data, we find that the volume of strike prices above $24,000 per Bitcoin started to grow from mid-July, indicating the bullish stance of traders.
On the contrary, the volume of options traded with a strike price of under $20,000 per BTC saw a decline from earlier this month, signalling the move from a more bearish stance at the beginning of July to more promising price targets.
Of course, it is always important to note the volatile nature of cryptocurrency markets — while options with higher strike prices are currently being traded, this is a function of price action. Thus, if BTC’s price were to retest its lows, we would expect options with lower strike prices to increase in trading volume.
Despite the current bear market and decline in trading volume, OKX has remained one of the leading exchanges by trading volume. It is currently among the top 5 exchanges for spot trading and positions itself as the second largest derivatives exchange.
OKX, formerly known as OKEX, was launched in 2017 in China and has quickly moved across Asia and to Hongkong as HQ. Recently they have acquired many licenses to expand across the world, lately in UAE to acquire the Middle East region after seeing expansion in Europe.
Besides the spot and derivatives trading services, OKX also operates its own OKXcoin (OKB), a utility token that enables users to access special features on the OKX exchange With OKB, token holders can also participate in early token sales and get access to a variety of services that includes lending, staking for rewards, play-to-earn, and other services provided by OKX and its partners. Thus, it provides a similar value proposition to FTT and CRO, the tokens of FTX and Crypto.com respectively.
Similarly to other centralised exchange tokens, the OKB team carries out routine burns of OKB to reduce supply, thereby aiming to increase relative demand and improve price action. In the 16 token burns (most recently in May 2022) that the team have carried out, a total of 14.5% of all tokens have been burnt. A table comparing burns between OKB, BNB, and FTT has been outlined below.
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This post was created utilising CCData’s digital asset data, including its new and enhanced order-book product which features the most complete and in-depth liquidity data available on the market.
CCData’s order book product captures the full depth of exchange order books, featuring standardised mapping and post-processing, historical L2 order book data stored for all exchanges, and more. This dataset allows for the development of metrics that can be critical for market participants to assess liquidity, back-test strategies, and decide their exchange venue of choice.
Find out more about our order book offering and contact our team here for a product demo: https://developers.cryptocompare.com
Disclaimer: Please note that the content of this blog post was created prior to our company's rebranding from CryptoCompare to CCData.
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