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Top 10 Weekly Fundamentals
by Nick Marinoff
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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.
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Investor takeaway: The price (black line) jumped another $2K to $24K this week, suggesting traders' fears regarding the latest SEC crackdowns are beginning to subside. Active addresses (green line) also remain steady at 910K.
The number of bitcoin that have become "dormant" and haven't moved in the past six months, however, has reached a new all-time high. This could be because traders are again focusing on long-term gains. Thus, they're less eager to exit the market like they were during last year's bear run.
This could heighten competition in the BTC arena down the line, so savvy investors may still wish to buy now.
2. Ethereum Daily Active Addresses
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Investor takeaway: The Ethereum price (black line) is back in the $1,600 range following last week's instability, though active addresses (green line) have dropped to about 474K, a near 20K fall from our previous edition.
The good news is that some analysts don't see the upcoming $1,700 mark as a serious resistance level now that the currency is a few weeks shy of its next planned upgrade. The Shanghai update is set to improve ETH's stakeability and let stakers cash out as needed. With the upgrade this close, investors can likely expect heavier growth in the not-so-distant future.
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.
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Investor takeaway: We suggest buying and holding shares (or tokens) in crypto's biggest moneymakers. The chart above shows the top revenue projects as:
- Ethereum (the top blockchain network)
- Uniswap (the top decentralized exchange)
- OpenSea (the top NFT marketplace)
- Lido Finance (the top staking service)
OpenSea has been struggling a bit behind its closest rival Uniswap, though that could change with the introduction of Ordinals NFTs, which are slated to be inscribed on the bitcoin blockchain. This is a big change given most non-fungible tokens occur on the ETH network.
As the NFT space continues to gain steam, we may see OpenSea's position on this list become stronger. Already, the distance between it and Uniswap has fallen by $2 million after the latter experienced a 3% drop in its native token this week. In crypto investing, anything's possible.
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.
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Investor takeaway: Newcomer GMX has retained its 4th place position after pushing PancakeSwap aside last week, suggesting the move was not a fluke. Filling out the top three are (as usual) Ethereum, OpenSea, and dYdX.
Revenue is up slightly for our #4, #3, and #2 placers, though Ethereum puts its competitors to shame following a whopping $30 million surge. At this pace, we expect ETH to strike half a billion in protocol revenue next month. ETH continues to outshine all other firms on this list, so it remains our #1 pick.
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.
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Investor takeaway: Lido Finance is back in top form, extending its lead over #2 placer MakerDAO to $1.4 billion. That's an increase of $500 million in the past seven days. The news is positive in that as an ETH staking service, Lido hasn't attracted the attention of the SEC the way enterprises like Kraken have, though it's unclear if this could change.
In the meantime, the platform has rolled out its new staking protocol Optimism, which aims to boost liquidity for Lido's staked ETH. This could account for its sudden boost in TVL. It's also possible we'll see MakerDAO's position on this list strengthen thanks to the yield it's set to garner through Yearn Finance following a recent vote from its governance community.
As usual, Curve and Aave round out the top four, though both platforms are neck and neck and are separated by only $100 million. This is a huge boost for Aave, which saw greater space between itself and Curve last week.
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.
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Investor takeaway: Uniswap has surpassed the $7 billion mark, thus giving newfound credit to DEXs. Curve has retained its lead over PancakeSwap after the two switched places last week and has even boosted its lead to $800 million. The distance between PancakeSwap and #4 placer dYdX is now just over $3 billion, meaning our next few editions are anyone's game.
Curve's boost can likely be attributed to growing interest in stablecoins. The platform's native stable asset CRV has shot up by more than 11% in the past few days as investors seek more tokens tied to fiat currencies like USD.
No doubt Uniswap, a top DeFi exchange, shines like a new penny in this arena. This is not to say we see centralized exchanges (CEXs) as unworthy. Far from it (see our Tuesday newsletter for more on this), nor are we suggesting that DEXs have all your trust (our Wednesday newsletter talks about why).
However, as regulatory concerns grow, keeping your funds in multiple platforms and in cold wallets may not be a bad idea.
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.
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Investor takeaway: Aave remains at #1 with a market cap exceeding $1.4 billion, more than $700 million above its nearest competitor MakerDao (#2). Compound comes in at #3, while Abracadabra.money is back in 4th place.
Aave has eliminated a bad debt via the purchase of 2.7 million units of CRV, the stablecoin discussed above. It seems everyone's got stablecurrency fever these days, from individuals to institutions.
Unfortunately, the crypto lending industry remains as vulnerable as ever to SEC regulations following the collapse of many digital lending protocols during the past six months including BlockFi and Genesis.
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.
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Investor takeaway: Ethereum remains the top network after bitcoin, while BNB Chain is still in 3rd place. However, the network experienced some backlash this week after several phony ChatGPT tokens were issued via BNB.
This should remind investors to be careful, do their due diligence, and not just trust a coin because it's available on a trusted chain.
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.
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Investor takeaway: Chainlink remains at #1 and is on the verge of hitting $8 billion. This week, it increased its lead over #2 placer Uniswap to a whopping $800 million. BitDAO again rounds out the top three.
Traders should expect Chainlink to grow further soon given its native token LINK is poised for a 20% gain per a recent technical analysis.
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.
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Investor takeaway: In a repeat of last week, MAYC is again #1. BAYC has moved to 3rd place (up three places from our previous edition), while Moonbirds fills out the #2 spot.
Pixelated art may be coming back with the introduction of new series such as Ordinals (mentioned above). If you still enjoy these kinds of tokens, explore our NFT Guide and our Top NFT Projects for 2023 to see the NFTs that might be worth your while.
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ICYMI
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