Research Roundup Newsletter [March 2024]

Welcome to the Crypto.com Monthly Research Roundup Newsletter!

1. Market Index

For March, the monthly price, volume, and volatility indices were all positive at +11.80%, +83.62%, and +19.13%, respectively.

2. Charts of the Month

BTC monthly price increased for 7 months straight (based on month-end prices), increasing more than 270% from 30 August 2023 to 31 March 2024, showing clear signs of a bull market. This is longer than the previous 6-month streak during the 2020/2021 bull market when the BTC price increased 540% from 30 September 2020 to 31 March 2021. 

In the current cycle, it took BTC approximately 25 months (January 2022 to February 2024) to transition from a bear to a bull market. This is shorter than the 2020/2021 cycle when it took approximately 34 months for the bear-bull transition (February 2018 to November 2020).

Ethereum Layer-2s have been seeing an increase in transactions following the successful activation of the Dencun upgrade on 13 March.

With this highly-anticipated upgrade is EIP-4844 which introduced ‘data blobs’. These blobs bypass the traditional ‘call data’ process to publish information on the Ethereum mainnet, enabling lower transaction fees in L2s. The reported jump in transactions can be attributed to the vast reduction in fees following the update. Average transaction fees on these L2s have experienced a significant reduction, with some platforms reporting up to a 99% drop.

Bitcoin took the spotlight in the NFT market as its NFT sales volume surged by 70% from US$302 million in February to $514 million in March. In contrast, Ethereum experienced a 12% decline in NFT sales during the same period.

3. Visa Card Consumer Spending Insights 2023

The Crypto.com Visa Card is one of the most popular crypto debit cards. Every year, the Crypto.com Research & Insights Team takes a deep dive into how our users spend their crypto, where they spend, and what they spend on.

Here’s a brief summary of the report:

• In 2023, the Crypto.com Visa Card spending index surged 29% year-over-year.
• Grocery remains the main spending category, accounting for 62% of spending volume in 2023. This is much higher than 36% in 2022.
• Online spending continually dominated the overall expenditure, garnering 55% of the total share.

4. Monthly Feature Articles

Monthly Feature Article | Landscape of Staking Providers

Staking providers play a crucial role in the cryptocurrency ecosystem, serving as the backbone of staking in Proof of Stake (PoS) blockchains. They offer considerable benefits to users, such as simplifying the staking process, providing slashing protection, and offering potentially greater rewards. 

The staking provider market has evolved significantly, especially after Ethereum’s transition from Proof of Work (PoW) to PoS, and its landscape has vastly expanded. 

This report examines the current landscape of staking service providers and the state of the market.  It also delves deeper into different staking categories and PoS networks.

Key takeaways include:

• Cryptocurrency staking has evolved and gained popularity since Ethereum’s transition to a Proof of Stake (PoS) chain, especially with the high demand for liquid staking. Currently, the types of staking include solo staking, staking-as-a-service (STaaS), pooled staking, and centralised exchange staking.
• The main tasks of staking service providers include:
  • Providing the staking infrastructure and facilitating the staking process on behalf of users and entities.
  • Enabling individuals to participate in staking and engage as validators without having to deal with the technical complexities of the staking process.
  • Running high-quality validators to maximise staking rewards.
• In liquid staking, node operators are responsible for managing validators, providing the staking infrastructure, and maintaining the overall stability of the blockchain. STaaS providers serve as node operators that run validator nodes on behalf of liquid staking protocols; they can curate their validator sets and run as many validators as they want. 
• The staking service provider market is diversified, and the top 11 players accounted for approximately 70% of the market share in assets under management (AuM).
• For  Ethereum, Figment and Kiln comprise the majority: Together, they take up over half (34% and 27%, respectively) of the market share in terms of the total ETH amount staked on these service providers. Additionally, Figment is also one of the most notable staking providers in the Solana and Cosmos ecosystems.
• With the development of Layer-1s and Layer-2s and the rising narrative in restaking, the staking service provider market could continue to develop and reach a new level.

Monthly Feature Article | Bitcoin Ordinals Development and Introduction to Runes

The Ordinals protocol represents a significant innovation in the Bitcoin ecosystem, expanding the use cases of the Bitcoin network. The protocol has undergone major developments since it first launched in January 2023, allowing for the emergence of innovations such as the BRC-20 token standard. However, with the popularity of BRC-20 tokens, concerns have also risen regarding network congestion and the centralisation of indexers.

The Runes protocol, a UTXO-based fungible token protocol which allows the issuance and management of tokens on the Bitcoin network, was developed following the controversies of BRC-20. By aligning itself with Bitcoin’s UTXO model, Runes is expected to be an improvement over the existing BRC-20 standard, promoting better user experience and efficiency. It boasts the potential to trigger a new wave of innovation in Bitcoin.

In this report, we explore key developments in the Ordinals protocol in detail, as well as its significance and controversies. We also put the spotlight on the Runes protocol, its features and mechanisms, and how it compares with other related protocols.

Key takeaways:

• Ordinals are a way to attach information like pictures, text, or videos to a Satoshi, the smallest  unit of Bitcoin. They enable the creation of Bitcoin NFTs originally.
• Ordinals have garnered significant market attention since the launch of the protocol in January 2023. At the time of writing, 63 million inscriptions have been minted on the Bitcoin network, generating ~6,370 bitcoin-worth (~US$430 million) of fees. Some notable developments of Bitcoin Ordinals are:
  • Inscriptions were mostly image-based in the early days to create NFTs. Text-based inscriptions became dominant since the launch of BRC-20.
  • BRC-20 is a token standard to enable fungible token transfers on the Bitcoin network via inscribing JSON data (text structure) to Satoshis through the Ordinals protocol. BRC-20 tokens reached a market cap of US$2.6 billion (at the time of writing), representing a significant development on Bitcoin, but also received criticisms around network congestion. 
  • Subsequent improvements have been introduced, including recursive inscriptions, Atomicals (separate from Ordinals), and the Jubilee upgrade. 
  • Ordinals have sparked debates amongst the community. Supporters believe the protocol has expanded the use cases of Bitcoin. Yet, it also made Bitcoin deviate from its original purpose as a peer-to-peer system of money transfer. 
• Due to BRC-20’s existing shortcomings, Casey Rodarmor (the creator of Ordinals protocol), proposed Runes in September 2023. It aims to be a UTXO-based fungible token protocol.
  • By being UTXO-based, Runes is more compatible with Bitcoin’s native model and expected to reduce ‘junk’ UTXO creation, reduce the on-chain footprint, and promote better user experience. 
  • Runes is scheduled to launch during the upcoming Bitcoin halving in April 2024. There are already protocols and NFT projects launched that leverage Runes’ potential. While Runes has created certain excitement in the community, its adoption currently remains uncertain.

Monthly Feature Article | Decentralised Compute for AI Development

The artificial intelligence sector has made leaps and bounds in terms of its AI models’ capabilities. The accelerated growth of large AI models has resulted in an exponential demand for computing resources and GPUs — which greatly raises the cost of training in AI. Arguably, the need for scalable computing power is crucial for the continued development of AI. Decentralised compute networks provide a potentially sustainable solution to the key challenges mentioned above.

Decentralised compute networks are systems that leverage blockchain technology to deliver computing services in a decentralised and secure manner. In this report, we explore the subsectors of decentralised compute networks and the corresponding representatives, and how they contribute to the further development of AI.

Key takeaways:

• Decentralised compute networks are systems that leverage blockchain technology to deliver computing services in a decentralised and secure manner. They can be categorised into decentralised compute, decentralised machine learning training, Zero-Knowledge machine learning (ZKML), and ZK coprocessor.
• Decentralised compute provides unused computational resources like GPU and creates open computational marketplaces. 
  • Render Network is a platform that consists of 5,600 GPU provider nodes and utilises over 50,000 GPUs worldwide. It operates by pooling dormant GPU power and establishing a marketplace where individuals and entities can leverage this untapped resource. 
  • Akash Network enables users to lease high-performance GPUs for artificial intelligence (AI) training and inferences, primarily targeting AI developers in need of GPU spot instances.
• Decentralised machine learning (ML) training is derived from general decentralised compute and focuses on the training process in ML. 
  • Bittensor is a decentralised protocol that facilitates collaboration in ML and incentivises the production of machine intelligence. It introduced subnets, which are specialised networks dedicated to specific ML use cases or resource provision.
  • Gensyn is a decentralised and incentivised market for ML compute, addressing the challenge of verifying completed ML work in decentralised compute networks.
• ZKML is a combination of ML and AI techniques with Zero-Knowledge (ZK) proofs, enabling the verification of complex ML models and algorithms without exposing their details or the underlying training data.
  • ZKML is used in Worldcoin to securely store biometrics on mobile devices. Users can generate iris codes using an ML model and create a ZK proof locally to validate the iris code’s creation.
• ZK coprocessors work by enabling smart contracts to trustlessly delegate historic on-chain data access and compute over them using ZK proofs, with projects like Axiom at the forefront. 
• By harnessing the power of distributed networks, decentralised compute networks empower developers to unlock additional GPUs, access more cost-efficient alternatives, and tap new computational resources, which they can use to build their own AI models and applications.

Monthly Feature Article | Ethereum L2s’ Activities Post-Dencun Upgrade

Ethereum’s Dencun upgrade was completed on 13 March and it introduced a new data storage mechanism on Ethereum, with EIP-4844 (’Proto-Danksharding’) serving as its key aspect. This innovation provides a dedicated space, termed ‘blobs’, on Ethereum for storing temporary data at a significantly reduced cost.

EIP-4844 is poised to facilitate a widespread transition to rollups and is expected to positively impact the Ethereum ecosystem thanks to the immediate network fee reduction and more efficient storage for Layer-2 (L2) protocols. 

This report provides an introduction to Dencun’s features, L2 rollups, and L2 fee structures for transactions using blobs. Moreover, it also assesses the performance of the main L2s post-Dencun.

Key takeaways:

• The Ethereum Dencun upgrade has brought significant scalability improvements on Layer-2 (L2) rollups in Ethereum’s ecosystem:
  • Dencun upgrade introduced Binary Large Objects (‘blobs’), storing data temporarily in the consensus layer rather than permanently in Ethereum’s calldata. This offers immediate fee reduction for L2 transactions.
  • Declining transaction fees have the potential to bolster innovations on L2s like Account Abstraction.
• There are some findings on L2 rollups after the Dencun upgrade:
  • Optimistic rollups like Arbitrum and Optimism still dominated the L2 market with over 80% market share in terms of total value locked (TVL). 
  • As the leading L2s have utilised ‘blob’ data, there was a sharp drop in the median transaction fees. Additionally, Base, Linear, and Scroll were the top chains in the L2 fee market, commanding 52%, 24%, and 17%, respectively, of the L2 transaction fee market share.
• Although EIP-4844 provides blobs for L2s to store data, L2s haven’t fully adopted the blob transactions, considering the potential risks of this newly launched feature. Hence, the L2 fee market hasn’t matured yet.
• Data indicates that activities on L2 rollups are more vibrant than those on Ethereum after the Dencun upgrade. This showcases the potential of L2s to accommodate the escalating demands of Ethereum’s ecosystem.
• Ethereum’s ongoing infrastructure improvements like Danksharding signal a promising future for L2 scaling solutions beyond the Dencun upgrade.

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5. Alpha Navigator

This institutional-focused report dives into macro trends, market-neutral pairs, style-factor screens, and events. Read the full Alpha Navigator report here.

• Asset classes were up in March, with crypto outperforming significantly.

• BTC correlations with equities dropped in the past 1 month. Correlation with Gold increased in the past month (was negative in February).

6. Crypto Conference & Economic Calendar from Market Pulse

Crypto Conferences Calendar

Economic Calendar

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Research & Insights Team