Heading Into Triple Halvening

2 August 2021

Market Recap

Ethereum’s on-chain activity is heating up ahead of London upgrade on Wednesday. Following market crash in May, on-chain activity cooled down (Chart 1) as demand for dog-themed tokens and yield-generating opportunities diminished.

Chart 1: Ethereum Daily Transactions, from Source: Etherscan

NFT boom, led by explosive growth in Axie Infinity ($AXS) usage and revenue, and new NFT collections such as ‘Stoner Cats’, ‘The Vogu Collective’ and ‘Animetas’, is now leading Ethereum’s on-chain activities (Chart 2).

Chart 2: Top Gas Consumer Entities (7 Days), from Source: Nansen

Satori has turned bullish ether last week going into London upgrade, and the NFT boom further reinforces our belief — we believe that higher level of on-chain activities and fees going into EIP-1559 would cement the narrative of ether transitioning into a less inflationary / deflationary token. BTC has stalled at $40k resistance level, and we are hearing of market participants going long GBTC, in lieu of BTC, to express a view on compression of GBTC/BTC discount. Barring the pumpamental (downward trendline in ETHBTC), fundamentals (EIP-1559) and flows (outsized shorts in ETHBTC, and selling BTC in lieu of GBTC according to dealers) appear in favour of higher ETHBTC.

We also have quite a few headlines on the regulatory front, as regulators try to protect their turd. Binance has become a clear favourite — Malaysian Securities Commission ordered Binance last Friday to disable the website and mobile apps. Binance has been trying hard to not follow BitMEX’s footsteps by quickly showing its willingness to play by the rule; CEO CZ is looking for someone with strong regulatory background to step in as his replacement, and Binance reduced daily non-KYC accounts’ withdrawal limit and futures trading leverage (125x to 25x), and removed futures and derivatives access to users based in select European countries. $BNB has been holding well despite the concerted attack, especially against $FTT (non-Chinese, SBF 2nd-largest donor to Biden’s presidential campaign,etc), as it continues to roll out trendy products and offer attractive initial exchange offerings (IEO). We do not know when the inflection point for the change of guards would be, but odds for higher FTT/BNB seem attractive.

Chart 3: Performance of MSTR, BTC and NASDAQ since MSTR’s First Bitcoin Purchase, from Source: Ecoinometrics

On the macro side, a slew of big tech earnings (87% of the S&P 500 companies have exceeded estimates by an average of 18%, with mega-cap companies doubling earnings from last year on average), economic data (GDP QoQ 6.5% vs. Est. 5.9%; June PCE Price Index 0.5% vs. Est. 0.4%), a Fed meeting, and sell-off in Chinese equities made a busy week. A balance of risk-on and risk-off headlines saw equities whipsaw — major indices saw small losses for the week, but remained near record-highs, and mid- and small-cap broke a string of underperformance and recorded gains. Treasury yields remained unchanged for the week.

(Aug 02, 2021, Top 5 Crypto KPI)

What is Happening?

MicroStrategy plans to buy more bitcoin. Q2 report of Microstrategy (NASDAQ: MSTR) stated that the company is pleased with the results of the implementation of their digital asset strategy, and intends to continue to deploy additional capital into the strategy. Since the start of their bitcoin treasury programme, Microstrategy shares rose by over 400% (Chart 3), outperforming both bitcoin (+227%) and NASDAQ (+39%). Other crypto-related takeaways from this earnings season were: Tesla (NASDAQ: TSLA) did not sell additional bitcoin following its sale in Q1, and Paypal’s (NASDAQ: PYPL) ambitions into building open finance and infrastructure for central bank digital currencies by utilizing smart contract and DeFi applications.

White House says crypto tax enforcement will help pay for bipartisan infrastructure deal. Coindesk also separately reported that the bill would raise $28bn for the infrastructure bill, as any broker that transfers any digital assets would need to file a return. The definition of ‘broker’ remains yet to be seen, but there is some fear that certain actors, such as decentralised exchanges, miners, and node operators, could be included, thus squeezing out economic actors in the US crypto industry.


With impressive rally in bitcoin for the last 10 days and first daily close above $41,000 since May 18th, market is bullish and certain pockets of NFTs (especially in the collection-space) do seem bubbly. Nonetheless, bubble can always double (and more), and NFT collections remain a rather niche part ofcryptocurrencies, but its ripple effects on ethereum can trigger a virtuous cycle of price gains.

Good Luck!



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