🟣 Never a Dull Day

The Cointelegraph intern walked so that the Matrixport analyst could run.

January 03, 2024

Jan 2

There’s never a dull day in crypto, huh? 

This morning, BTC and ETH fell 8% and 10%, respectively, in just half an hour around noon UTC. Many alts fell even further, a market-wide sell-off that caused panic amongst crypto Twitter.

What are people attributing to this move in the markets? Reports from a Matrixport analyst that they believe BTC ETFs are going to be denied by the SEC. 

If you’re in the US, I’m sure you probably had the same first thought I did: what is Matrixport? Apparently, it’s an “all-in-one crypto financial services platform where users can earn, invest, trade, loan, and buy crypto assets” with additional short-form research. 

The headline was taken from a short memo written and released yesterday saying that they “believe all applications fall short of a critical requirement that must be met before the SEC approves” but that this requirement could be met by Q2. 

Do they mention anywhere what this critical requirement is? Nope. The Cointelegraph intern walked so that the Matrixport analyst could run.

The rule of thumb for short-term traders is that when there is a market-wide sell-off, it's important to look at which tokens are showing relative strength and recovering the quickest across the market. So far, it looks as though LDO and ARB are capturing strength as part of the EIP-4844 anticipation, SEI remains strong as the narrative of “parallelized EVM” takes off, and BLUR sustains rumors of Bitcoin Ordinals trading coming soon and potentially capturing a significant share of that market. 

 - Westie

The value locked on Arbitrum One has surpassed $10B, the chain becoming the first L2 to surpass this milestone. As of today, Arbitrum’s TVL, defined as canonically bridged, externally bridged, and natively minted assets, is at ~$10.4B, of which ~$3.2B is ETH and ~$2.5B is ARB. ARB has also done relatively well recently, currently trading at $1.90, up ~70% in the past 30 days despite chopping around the $1.00 – $1.25 range throughout November. This seemed to have been a disappointment to many investors as they were expecting the Short-Term Incentive Program (“STIP”), which funded Arbitrum projects with 71.4M ARB to be given as incentives, to be a more positive price catalyst.

More recently, however, it seems Arbitrum is being brought back to the spotlight. Many are citing the potential continued network effects from the STIP, ARB staking, Arbitrum Orbit (permissionless creation of L3s, or Orbit chains), and EIP-4844 as catalysts to start a new flywheel for the L2. Arguably, the most hyped catalyst is EIP-4844, or Proto-Danksharding, which will decrease L2s’ main cost—posting transaction data back to Ethereum.

The theory is that Arbitrum’s sequencer profitability will increase notably since the profit is the difference between derived L2 fees and expenses paid to Ethereum for data availability/settling. It’s worth noting that the aforementioned theory implicitly assumes that Arbitrum continues charging the same fees as prior to the implementation of EIP-4844, and demand for Arbitrum’s blockspace is inelastic beyond a certain price reduction. Consequently, L2s would have pricing power and can increase their profitability margins.

With the modular vs. monolithic blockchains debate heating up, it’ll be interesting to follow how Ethereum-based L2s grow in the coming months as alternative scaling options are again being considered by the market.

2021 was a massive year for network activity, so naturally protocol innovation and growth followed suit. Perps found true PMF, DEXs continued to launch new primitives, and stablecoins continued to excel.

Solana is generating an increasing amount of transaction fee revenue, with various fee market dynamics and ongoing proposals that are set to further accelerate this trend.

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.