Analyzing the current state of Ethereum, DeFi, stablecoins, NFTs post-FTX fallout

2022 approaches year-end; it has been a historic yr for all asset lessons as a result of fast tightening of financial coverage worldwide and the power of the U.S. greenback. It had extreme implications on the crypto ecosystem, which has seen a variety of liquidations and margin calls, in addition to the collapse of FTX and Luna.

A blended yr for the Ethereum ecosystem noticed a profitable merge in September, and, consequently, ETH was internet deflationary for October. Nonetheless, the magnitude of losses from an investor perspective has been monumental within the DeFi ecosystem.

Ethereum is at present 73% off its all-time excessive, floating round $1,200; important liquidations and deleveraging have occurred in 2022 with the autumn out of Luna again in Could and FTX collapse in November.

Fuel charges are the price of conducting a transaction or executing a contract. For instance, this might see exchanging right into a stablecoin or minting an NFT.

Because the summer time of 2020, Ethereum gasoline charges have taken off primarily as a result of explosion of DeFi use on chain.

Though community exercise has tailed off considerably because the summer time of 2021, the difficulty of Ethereum being an costly chain nonetheless prevails.

Ethereum gasoline charges are priced in gwei, a unit of measure equal to one billionth of 1 ETH. Fuel prices fluctuate relying on the community’s congestion, with durations requiring larger gasoline charges throughout peak demand to push by means of a transaction.  

Stablecoins are cryptocurrencies designed to attenuate value volatility by being pegged to a reference asset. The reference asset could possibly be a commodity, cryptocurrency, or fiat cash.

The market affords numerous stablecoins, reminiscent of asset-backed, together with fiat, crypto, or valuable metallic belongings, and algorithmic, which add to or subtract from circulating token provide to peg the worth on the desired stage.

The present gasoline utilization for stablecoins is 7% which has been roughly flat for 2022; nevertheless, stablecoin mass adoption began initially of 2020, hitting a peak of virtually 20% of Ethereum gasoline utilization.

Decentralized finance (DeFi) is an rising expertise that cuts out banks and monetary establishments, linking customers immediately with monetary merchandise, sometimes lending, buying and selling, and borrowing.

DeFi adopted shortly after the stablecoin increase; from July 2020, Uniswap emerged because the main DeFi gasoline consumer, peaking round June 2021 earlier than tapering downwards. DeFi utilization has maintained a tough 12% common for 2022, above the early 2020 utilization.

Out of the trifecta, NFTs had been the final to increase on this cycle, exploding on the finish of 2021. Because of this, through the 2021 bull run, OpenSea noticed probably the most important spikes in gasoline utilization from NFT demand. Nonetheless, from June 2022, demand has cooled considerably but stays considerably elevated in comparison with earlier years.

Ethereum gasoline utilization and transaction counts are at year-to-date lows; the imply gasoline value has been considerably muted for the previous 4 months, with slight upticks as a result of latest merge and FTX collapse. Whereas transaction rely is approaching year-to-date lows, suggesting the bear market has taken its toll on customers.

Whole Worth Locked (TVL) measures the whole worth of all belongings locked into DeFi protocols. TVL is denominated in USD or ETH, whereas DeFi protocols provide lending, liquidity swimming pools, staking, and extra.

The chart beneath reveals the whole worth locked in all of DeFi, which surpassed $240bn again in the summertime of 2021, as a result of nature of DeFi protocols with the ability to receive leverage and the usage of borrowing and utilizing your crypto as collateral.

The bull of 2021 and the bear of 2022 have been unprecedented by any yr as a result of huge stimulus offered by the central banks in 2020, which noticed nearly all of leverage and borrowing get worn out in 2022.

Through the Luna sell-off, TVL went down over $160bn; admittedly, a sell-off occurred simply earlier than Luna through the peak of the bull run in Nov 2021, almost definitely traders withdrawing from the ecosystem. Moreover, the FTX collapse resulted in an additional $23bn sell-off, placing TVL at round $70bn, just like early 2021.

Ethereum’s dominance excessive 4 stablecoins has been on a downtrend since Could, with stablecoins changing into extra dominant in June — when ETH hit its lowest value for the yr.

This chart compares the Ethereum Market Cap to the mixture worth of the highest 4 stablecoins USDT, USDC, BUSD, and DAI. Observe that the provides of those stablecoins are distributed between a number of host blockchains, together with Ethereum.

In June, the ETH market cap was decrease than the highest 4 stablecoin market caps resulting from Luna, and the identical occurred through the FTX collapse; nevertheless, a a lot smaller drop for less than a quick interval.

The chart beneath reveals the whole provide issued on and held inside Ethereum good contracts. This chart reveals the mixture provide held in good contracts alongside particular person traces for the highest 4 stablecoins USDT, USDC, BUSD, and DAI.

One other noticeable development within the stablecoin ecosystem is the extreme decline within the provide of good contracts. Mixture provide throughout its peak was at $44bn; because the Luna and FTX collapse, it’s now hanging round $25bn. A major decline in all prime 4 stablecoins as effectively.

Internet realized revenue/loss is the online revenue or lack of all cash spent that day. The value at which every spent coin was final moved and the present value allows the calculation of the USD worth the proprietor realized in revenue or loss.

Over the week through the FTX collapse, Ethereum realized losses amounted to over $20bn, with $14bn approaching Nov. 17, a number of instances worse than the Luna collapse for traders.