Author: Coinbase & Glassnode
Compiled by: Felix, PANews
How has the crypto market changed in the past three months? Bitcoin’s price action has been largely range-bound, consolidating between $50,000 and $60,000 with some volatility in between. But a closer look reveals important developments unfolding behind the scenes.
First, the crypto market has experienced increased liquidity and complexity this quarter. Institutional interest in cryptocurrencies remains strong. The U.S. Bitcoin spot ETF saw $5 billion in net inflows, showing that institutions are still participating despite occasional volatility. The number of Ethereum pledges has reached a record high, reflecting that traditional finance is exploring new ways to interact with digital assets. Meanwhile, stablecoins remain one of the most widely used applications for cryptocurrencies, with a market capitalization reaching a record $170 billion and growing transaction volumes attesting to their continued utility in cross-border transactions and beyond.
This report provides a comprehensive look at the forces driving these trends. It will also estimate the possible shifts and directions that major assets, particularly Bitcoin and Ethereum, may take toward the end of the year.
The following is the full text of the report:
Polymarket is a breakthrough application in a crypto election year and an example of how blockchain technology can help increase transparency, accessibility and trust in markets and information.
Source: @rchen8 , Dune Analytics , Grayscale Investments (data as of September 30)
Among L1 blockchains, Ethereum’s fee market share rebounded from a low of 9% at the end of August to 40% at the end of September.
Source: Token Terminal, September 24
The Ethereum staking yield is more than 2 times the real (inflation-adjusted) yield on the 10-year U.S. Treasury note.
Source: CoinDesk Indices
(CESR measures the average annualized rate of return earned by validators staking ETH, consisting of consensus rewards and priority transaction fees; while ETH’s inflation rate has been negative for much of its history, it has recently turned positive , so pledgers should consider its impact on staking yield)
Many successful applications generate revenue beyond the infrastructure they run on.
Source: Token Terminal, MakerBurn, DeFiLlama, Tronscan
Annualized revenue based on trailing 90 days, Solana revenue includes base fee, priority fee and MEV tip; data as of September 25
The number of token issuances surged 13-fold last year, with Solana accounting for the lion’s share.
Source: Dune Analytics Market Overview
The dominance of both BTC and stablecoins increased in the third quarter as market participants gravitated towards the highest quality assets.
As the market matures, the volatility of BTC and ETH has shown a significant downward trend.
In the third quarter, perpetual contract funding rates traded within a narrow range, indicating a balance between buyers and sellers in the market.
U.S. spot BTC ETFs attracted more than $5 billion in net inflows in the third quarter.
U.S. spot ETH ETF flows rebounded in late Q3 after weeks of outflows.
The basis (CME futures minus spot) for both BTC and ETH declined in Q3.
Extreme swings in basis, whether positive or negative, are often associated with large swings in market sentiment
Cryptocurrencies exhibit low or negative correlations with all major asset classes.
Source: Bloomberg, Coinbase. Data from July 1 to September 30
Since 2020, Bitcoin has had an average correlation of just 0.33 with the S&P 500 and 0.13 with gold.
Stablecoins soar
Total stablecoin market capitalization hit an all-time high of nearly $170 billion in the third quarter of 2024, as new EU rules under the Markets in Cryptoassets Authority (MiCA) came into effect.
Both incidents reflect the growing mainstream adoption of stablecoins and awareness of the advantages they can offer, including speed, cost and security. Stablecoins are increasingly being used to build payment systems, facilitate remittance payments and simplify cross-border transactions.
Integrating stablecoins into existing payment systems is just one example of the increasing use of cryptocurrencies in the real economy.
Stablecoin supply reached an all-time high in the third quarter as market participants continued to use stablecoins for a variety of new and existing use cases.
Stablecoin trading volume has soared to nearly $20 trillion so far this year.
L2
As we enter the fourth quarter, the price of ETH is close to where it was at the beginning of the year. But beyond the price, one can also see a rapidly growing Ethereum ecosystem, mainly due to the new innovation L2.
As developers and end-users continue to migrate to the blockchain, the number of active users and transaction volume have increased dramatically. Meanwhile, L2 fees dropped significantly following Ethereum’s Dencun upgrade.
While it remains to be seen how activity develops between Ethereum L1 and the various L2s, L2 brings more users, more activity, and more innovation to the Ethereum world.
The Ethereum ecosystem has seen a sharp rise in daily active addresses this year, with L2 seeing the most significant increase, while Base leads the pack.
The number of daily transactions in the Ethereum ecosystem has increased 5x since the beginning of 2023 as new L2s and use cases flourish.
After Ethereum’s Dencun upgrade drastically reduced transaction fees on L2 in March 2024, total fees paid dropped significantly despite a surge in transaction activity.
Bitcoin（BTC）
The current BTC cycle is closely tied to the 2015-2018 and 2018-2022 cycles, which saw total returns approaching 2,000% and 600% respectively.
Bitcoin has gone through four cycles, each including a bull market and a bear market. In this chart you can see how the current market cycle (which starts in 2022) compares to previous cycles. (Past performance is not indicative of future results)
BTC’s performance since the fourth halving is most similar to its performance after the third halving, when prices traded sideways for a few months before rising sharply in the year following the halving.
This chart measures Bitcoin’s total returns during each halving cycle or period. Following the halving, prices tend to trade sideways, as they have for the six months since the April 2024 halving. However, within 12 months of the previous three halvings, prices increased significantly. After the first halving, the price increased by more than 1000% in the first 12 months. After the second halving, the price increased by 200% in the first 12 months. After the third halving, the price increased by more than 600% in the first 12 months. Bitcoin’s price is down 1.2% since the fourth halving on April 19, 2024 (black line).
As of the end of Q3, just nine months after launch, the U.S. spot BTC ETF had nearly $60 billion in AUM.
Crypto markets are becoming increasingly liquid. So far this year, BTC transactions have averaged $2 trillion per month, a 76% increase from the same period last year.
Open interest in Bitcoin derivatives averaged $44 billion in Q3 2024.
The Bitcoin positioning looks clearer following the massive long liquidation in early August 2024 related to the unwinding of the yen short carry trade.
Total statistics of BTC derivatives:
BTC Traditional Futures Specifications
Throughout the third quarter, the size of BTC’s liquid and illiquid supply remained fairly stable.
As markets move sideways, sentiment has shifted from greed to fear, perhaps setting the stage for the next rally.
Ethereum (ETH)
After closely tracking the 2018-2022 cycle, the current ETH cycle has begun to diverge as ETH prices retreated in Q3.
ETH has gone through two cycles, each consisting of a bull market and a bear market. In this chart you can see how the current market cycle (which starts in 2022) compares to previous cycles. In the current cycle, ETH is up more than 125% since hitting cycle lows in November 2022. (Past performance is not indicative of future results)
The U.S. spot ETH ETF launched in July and totaled $7.1 billion at the end of the third quarter.
Crypto markets are becoming increasingly liquid. ETH’s average monthly trading volume in 2024 is $930 billion.
Open interest in ETH derivatives averaged $15 billion in Q4 2023.
Immediately following the launch of a spot ETH ETF in the U.S. and the unwinding of yen short carry trades in early August, ETH long liquidations surged.
ETH derivatives total statistics
ETH Traditional Futures Specifications
Although fees rose in late Q3, ETH issuance continues to be net inflationary.
ETH staking volume hit an all-time high in Q3 as more holders looked to earn profits from their positions.
The amount of ETH locked in DeFi increased by 11% in the third quarter.
Staking has become a major drain on ETH liquidity.
As ETH prices retreat, market sentiment shifts from greed to fear, perhaps setting the stage for the next rally.
(The above content is excerpted and reprinted with the authorization of our partner PANews, original text link)
Statement: The article only represents the author's personal views and opinions, and does not represent the objective views and positions of the blockchain. All contents and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and transactions, and the author and Blockchain Client will not be held responsible for any direct or indirect losses caused by investors' transactions.
"Comprehensive analysis of Q3 encryption market changes: Bitcoin and stablecoins are increasingly dominant, and Ethereum pledges are surging." This article was first published on (Block Guest).
