Crypto exchange Bybit collaborated with blockchain analytics platform Nansen to publish yet another monthly report on the state of the crypto industry. It focused on broader market conditions, DeFi activities, and the NFT markets.
The paper viewed the infamous collapse of Terra as being fundamentally disastrous for the nascent crypto community, but beneficial to other layer-one competitors as they have attracted outflow capital derived from the fallen community.
risk-averse investors
The report attributed the significant drop in total crypto market capitalization to a risk-off mentality influenced by the “global equity route”. In the near future, the report suggested that, as the correlation between the crypto market and the Nasdaq index remains intact, volatility in the traditional market will lead to violent price swings among digital assets.
The report saw the recent launch of various crypto ETFs as a double-edged sword as they would increase selling pressure during bear markets.
Another notable observation, as the paper depicts, is an increase in the net exchange inflows of stablecoins in May, with the supply of such assets simultaneously contracting. Such scenarios have shown that as the sell-off intensifies – investors swap their riskier assets for stablecoins – there is a higher probability that they have exchanged stablecoins to hedge against the risks. .
Layer 1 blockchain status among Terra results
Amidst all the “Ethereum killers”, Avalanche has maintained significant volume despite extreme market volatility, as the network continues to facilitate an average of 800,000 transactions per day in April. NEAR Protocol’s Rainbow and Orbit Chain also saw substantial amounts, apparently outperforming other major Layer-1 (L1) competitors.
The report noted that major L1 blockchains, such as Ethereum, BSC, and Tron, have all benefited from Terra’s results, as their market shares ticked higher after the aforementioned drop.
Meanwhile, protocols with a long operating history experience lower outflow volume amid recent selloffs. Furthermore, as capital flows into large-cap protocols to avoid high-risk assets, Ethereum’s low dominance that began in early 2021 has recently reversed.
However, after analyzing the number of transactions and the total revenue generated in the L1 network, the report noted that both indicators remain at the levels seen in July 2021, meaning no apparent consolidation in Ethereum Has happened.
NFTs as a potential hedge?
NFTs also saw a significant drop during the latest capitulation event leading to the collapse of the entire Terra ecosystem. However, the growth in the number of users and trading volumes has remained stagnant during the bearish period. At the same time, well-known NFT projects, such as BAYC, CloneX, and Azuki, continue to account for over 80% of the total market share.
Nansen’s research found that the NFT-500 index is inversely correlated to the overall cryptocurrency market when denominated in ETH, leading some to consider NFTs as a hedge against their volatile crypto assets.
The report concluded that with a manifold increase in daily active NFT traders from a year ago, NFTs have successfully gained a new base of users outside DeFi and Web3, which are very close to the broader crypto market compared to other regions. Establishes low correlation. place.
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