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March 23, 2023
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Top 10 Weekly Fundamentals
by Nick Marinoff
1. Bitcoin Daily Active Addresses

Our thesis: Cryptocurrencies are like companies and active addresses are like customers, similar to active users of Facebook or active subscribers of Netflix.

We can measure the price (black line) relative to the active addresses (green line) to see if bitcoin is currently underpriced or overpriced.
(courtesy IntoTheBlock)

Investor takeaway: The price (black line) has shot up another $3K since our last edition and is now above $28K, meaning BTC is at a nine-month high. Active addresses (green line) have also surpassed one million for the first time in what feels like an eternity.

Major banks are having difficulties, and this appears to have played right into BTC's hands. Last week saw headlines of another financial institution (Credit Suisse) slipping and sliding before being rescued by UBS, which agreed to buy the enterprise for more than $3 billion and thus prevent another collapse. It was upon this news that bitcoin rose to its current price, suggesting (like in 2008) that a weakened monetary system can empower the world's #1 cryptocurrency.

The problems surrounding the country's banks are getting so heavy they're causing some industry heads, like former Coinbase chief tech officer Balaji Srinivasan, to predict a $1 million BTC price within the next 90 days.

While this may seem a tad outlandish, we can't deny that BTC is consistently spiking, and our advice to investors remains the same. Buying now while the asset is still low (and not at $1 million) may be the route to consider.

2. Ethereum Daily Active Addresses
(courtesy IntoTheBlock)

Investor takeaway: Ethereum is also lightly benefiting from current market changes. The price (black line) has expanded into the high $1,700 range and is now just a few dollars shy of $1,800. However, active addresses (green line) have taken a hit and dropped by about 60K since last week.

This could soon change, however, and ETH's standing may be set to rise now that scaling solution Arbitrum is airdropping its new ARB token. This will permit holders to vote in upcoming protocol measures and push the network closer towards decentralized autonomous organization (DAO) territory. Arbitrum reduces fees on the ETH blockchain and allows transactions to move faster.

With its new (native) token added to the mix, the platform's growing power could expand to ETH and help it get back on track.

3. Top Crypto "Companies" by Total Revenue

Our thesis: Crypto revenue like transaction fees is how a crypto "business" makes money. Smart investors look for the projects generating the most cash.
(courtesy Token Terminal)

Investor takeaway: We suggest buying and holding shares (or tokens) in crypto's biggest moneymakers. The chart above shows the top revenue producers as:

  • Ethereum (the top smart contract platform)
  • Uniswap (the top decentralized exchange)
  • Tron (the #2 smart contract platform)
  • Lido Finance (the top staking service)

Last week saw a new addition to this list in Tron, which shoved NFT king OpenSea to the side and took over its #3 position. Since then, nothing's really changed as Tron has retained its spot in this sector.

Uniswap is still #2, yet despite its recent version 3 launch on BNB Chain, its native token UNI has been caught in a bear attack, thus forcing the asset lower into the $5 range. Tron, by contrast, was probably shoved onto this list after several traders rushed to its side following the newfound instability of assets like USDC, which temporarily lost its peg during the collapse of Silicon Valley Bank.

Still, an upcoming SEC judgment could weigh heavily on the success of Tron, so we'll have to wait and see if its position here can last.

4. Top Crypto Companies by Protocol Revenue

Protocol revenue is money paid back to token holders or company treasuries (vs. being paid out to liquidity providers as with Uniswap, or NFT holders as with OpenSea). You might roughly think of this like stock dividends.
(courtesy Token Terminal)

Investor takeaway: Ethereum is still #1 and has expanded its market cap yet again. Tron, which took over the #2 spot last week, also hasn't budged, while OpenSea remains at #3. dYdX rounds out the top four.

OpenSea's sudden dip in fame may just be the result of lowered confidence in the NFT market. Solana NFT platform Formfunction, which garnered financial support from enterprises like OpenSea, is shutting down just one year after opening its doors. OpenSea's biggest competitor Blur is also facing accusations of market manipulation and wash trading.

5. Total Value Locked

TVL represents how much is held or "locked" in a company's smart contracts. It is roughly equivalent to the deposits held by a bank and can signal a crypto company's strength.
(courtesy Token Terminal)

Investor takeaway: Lido Finance is still at #1. Its closest competitor, #2 placer MakerDAO, has seen its TVL drop by more than $1 billion in the last seven days, giving Lido a $2 billion+ lead. Aave remains at #3 after jumping ahead last week, though its previous $500 million advantage over Curve has fallen to $100 million, so this section's 3rd and 4th place spots are still up for grabs.

Lido's staking rewards have become so solid that some analysts believe it could outperform ETH in 2023. Meanwhile, MakerDAO's sudden dip in value over the week could be attributed to a 150% boost in its US Treasury bond holdings. Bonds do well when the economy is steady; when things are weak, they don't always hold up. At the time of writing, banks are wobbly and interest rates are enduring further hikes, suggesting Maker may have been off in its decision to expand its support for bonds.

Still, the company has rejected a $100 million loan proposal for Cogent Bank. Clearly, it's worried about the present state of financial institutions in America and it's unwilling to take too many chances.

6. Top Crypto Exchanges

Our thesis: Crypto exchanges, both centralized and decentralized, are arguably the most important applications in blockchain. Savvy investors look for which will be the #1 and #2 exchanges over the long term.
(courtesy Token Terminal)

Investor takeaway: Uniswap is still in 1st place and has stepped back over the $6 billion line, a huge improvement from last week. Curve sits at #2 and PancakeSwap is 3rd. Newcomer 1inch has, well, inched its way into 4th place.

On its website, 1inch boasts "never-ending liquidity," a native DeFi wallet system, and something called 1inch Fusion, which is an upgrade that makes "swaps on 1inch yet more efficient and secure."

Crypto exchanges may be changing like never before. Companies like Coinbase are seeing their stock shares reach new heights even as a case surrounding the famed trading platform is being looked at by the U.S. Supreme Court. The defendant is a man who is alleged to have given a crypto scammer remote access to his account, thus costing him more than $30K.

This marks the first time such a high-ranking court has ever looked at a crypto case. Perhaps it can be taken as a sign that regulation (as mentioned in Tuesday's newsletter) is not that far off, and higher degrees of safety are making their way (albeit slowly) into the industry.

Sadly, the SEC appears to be taking a full guns-and-tanks-a-blazin' approach to crypto supervision given how swiftly it wants to move. Earlier in the week, the agency issued a Wells notice to Coinbase, suggesting the trading platform will soon be added onto the agency's investigatory victims list which presently includes Kraken and (as mentioned above) Tron.

7. Top Lending Protocols

Our thesis: Lending and borrowing is another proven use case of blockchain. Savvy investors look for the companies that will dominate the lending market long term.
(courtesy Token Terminal)

Investor takeaway: Aave remains at #1. Compound, which took over the #2 spot last week, has stayed in this position, while Venus is #3 (up one ranking from our previous newsletter).

Surprisingly, next in line would be newbie Morpho, which boasts a capitalization of more than $250 million. The lending platform states the following on its website: "Morpho users can withdraw or borrow the billions of liquidity that are available in lending pools." Our approach: wait and see.

8. Top Smart Contract Platforms

Our thesis: Smart contract platforms are like the operating systems for Web3. We predict there will be two or three big winners that will go on to dominate the internet of tomorrow.
(courtesy Token Terminal)

Investor takeaway: BTC is the #1 blockchain. It's followed by Ethereum at #2 and BNB Chain at #3.

The bond between BNB and Uniswap (briefly discussed above) doesn't appear to be benefiting either party as of this writing. Not only has Uniswap's token taken a dive, but BNB's market cap has also fallen from last week. Perhaps both enterprises need to work out a few kinks before the partnership can lead to positive (and hopefully lasting) results.

9. Top DeFi Protocols

Our thesis: DeFi companies are the future giants of fintech, disrupting or replacing all the legacy payment and banking systems of today.
(courtesy Defi Llama)

Defi Llama shows the top three DeFi protocols as (#1) Ethereum, which accounts for nearly 60% of the industry; (#2) Tron, which makes up just over 10%; and (#3) BSC, which comes close to 10%. The rest of the space is composed of smaller chains like Polygon and Avalanche.

The latter two shouldn't feel inhibited by being "smaller," however, as it's these platforms that sometimes make the biggest differences. One such example comes in the form of DeFi ecosystem Tokerr, which is now developing new products designed to alleviate some of the largest problems in the industry.

One such product is Tokerr Developer, which is built to enable new or even non-experienced blockchain developers to create their own tokens from scratch.

10. Top NFT Collections

Our thesis: NFTs are a specialized niche of crypto. They're only appropriate if you really love collecting. Even then, they should not compose more than 1% of your portfolio.
(courtesy CoinMarketCap)

Investor takeaway: Wrapped Cryptopunks, last week's #1, has retained its position (an impressive feat given how volatile the NFT space is). BAYC is still in 4th place, while Azuki and HV-MTL take up the 2nd and 3rd place spots.

As mentioned above, the NFT market has been declining, so read our NFT Guide and our Top NFT Projects for 2023 to see which pixelated art tokens should be taken seriously.
ICYMI
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The financial (r)evolution has begun.

Your top ten weekly fundamentals. (Premium members)
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