Enjoy the Empire newsletter on Blockworks.co today. Get news delivered straight to your inbox tomorrow. Subscribe to the Empire newsletter.
Cooking with Flywheels
Cryptocurrency prices don’t always make sense. DePIN could eventually change that.
Take Bitcoin. It’s tempting to think that its price could rise or fall depending on how many people use the network.
Sometimes this is true — both the 2017 and 2021 bull runs were preceded by huge increases in the number of active wallets. And the number of transaction addresses often falls almost in tandem with the price of Bitcoin, usually after a market peak.
But Bitcoin’s active addresses have been rising for much of 2022, deep into the last bear market, even as prices have fallen. There’s an obvious, simple explanation: Some of those active addresses have been selling aggressively, pushing prices down.
All this makes predicting the price of bitcoins with on-chain activity quite shaky. You never know whether that “active wallet” is positioning itself to buy or sell on a crypto exchange.
DePIN is showing early signs of more robust metrics, at least on the surface. For example, Helium pays users in cryptocurrency to install mobile and IoT hotspots around the world. Almost 42,000 Helium devices have been deployed over the past year or so.
It just so happens that the rate of deployment of new Helium APs almost exactly matches the price of HNT.
DIMO is another one, which pays vehicle owners a steady stream of tokens in exchange for their vehicle-related data.
Since December 2022, nearly 5,000 unique owners have joined DIMO, reaching nearly 300 new owners per week since the markets peaked earlier this year.
Since then, the number of new registrations has declined, as has the price of DIMO.
GEODNET, a Real-Time Kinematics project aimed at improving geolocation accuracy using cryptocurrency incentives, follows a similar trend.
Over the past two years, the project has installed about 7,400 “sky miners” — small satellites mounted on rooftops and other elevated locations that collect space weather data in real time.
Aside from a significant spike in Q2 2023 when GEOD’s price bottomed out, the price of its native token has risen in line with the number of new satellite miners coming online.
Part of this correlation can be explained by the fact that the company spent 80% of its revenue on buying back GEOD and burning it, resulting in about $500,000 (~2% of the current market cap) being removed from circulation to date.
Modeling DePIN token prices based on how many users build the infrastructure looks promising, but unfortunately it’s a chicken or egg problem.
Did the price increases force users to add devices to their networks? Were new signups discouraged when the markets corrected? We may never know.
The correlation suggests that “number growth” may still be the main driver of infrastructure growth in DePIN, as it traditionally is in cryptocurrency.
DePIN’s connections to the physical world may be limited for now.
— David Kanellis
Data center
- Weekly Helium Income has leveled off after falling for much of this year and is currently around $32,000.
- The total value of DePIN tokens is currently $26.6 billionaccording to CoinMarketCap, down from $40 billion in March.
- BTC And Ethereum remained flat on the day and have risen 2% over the past seven days, now standing at $62,700 and $3,450, respectively.
- Global stablecoin supply has increased more than 1 billion dollars rose month-on-month to $161.7 billion, but lost about $300 million over the past week.
- Explosion more than 25% of all processed Derivatives DEX volumeLast week, it processed $11.24 billion in its airdrop. Its volumes have since normalized, but are still ahead of Arbitrum.
Going back
We previously discussed the phased launch of Markets in Crypto Assets (MiCA) in Europe. Part 1 is out now, and it focuses on stablecoins.
In case you missed the hype leading up to MiCA’s rollout or Circle’s big announcement yesterday, the stablecoin issuer seems excited about the new regulations.
CEO Jeremy Allaire said at a press conference on Monday that the entity would legalize stablecoins, meaning the stablecoin issuer can now issue both USDC and EURC in the EU.
In a press release accompanying Circle’s announcement that it was the first stablecoin to be regulated by the EU under the new rules, Allaire added that the rules unlock “the enormous potential of digital assets to transform finance and commerce.”
According to Chainalysis, onchain transaction volume reached $10 trillion last year. Stablecoins accounted for 60% of that volume. Obviously, that’s a significant amount, and it shows how widely stablecoins are used and accepted. To put that number into context, Bitcoin only accounted for 10% of onchain volume in 2023.
(I want to point out right away that I am focusing on big (Stablecoin issuers, but other European issuers have also become MiCA compliant.)
With that said, let’s look at Tether. CEO Paolo Ardoino seems a little more hesitant about the new regulations, at least compared to Allaire. However, there’s no doubt that such regulations do indeed stimulate growth, he noted.
“Tether praises EU regulators for their efforts to create a framework for crypto assets. While the effects of these new rules will take time to manifest, there are important regulatory aspects that we still believe could make it extremely difficult for a stablecoin issuer to operate, as well as make EU-licensed stablecoins vulnerable and riskier to operate,” Ardoino told me.
However, his point is valid. Chainalysis emphasized that the regulation highlights the need for issuers to really pay attention to onchain analytics so they can better understand the use cases of their stablecoins.
“This kind of data can provide information about holders, balances, and transaction behavior, providing a degree of transparency into the use of specific tokens both overall and at the transaction level,” the company writes.
“This allows issuers to have real-time visibility into the active wallets where their tokens are stored, including holder behavior (e.g. exchange or personal wallets, storage duration), total transaction volume across multiple blockchains, and alerts for transactions involving sanctioned entities or jurisdictions.”
Ardoino said further discussions were needed to better understand and implement the technical aspects of the regulation.
“While Tether is optimistic about the long-term implementation of MiCA, it remains critical that the regulatory policies adopted for stablecoins are balanced, protect consumers, and promote the growth of our emerging industry,” he said.
Change is not easy, but we hope that MiCA can unite regulators across the EU. And perhaps the US could learn a lesson or two.
– Katherine Ross
Works
- bitcoin miner Northern data is considering an IPO for its artificial intelligence and data center business, Bloomberg reports.
- Binance.US “confident” in its legal battle with the SEC, the company said on X.
- The Bahamas is preparing rules requiring commercial banks to provide access to their CBDCs, Reuters reports.
- SEC Sues FTX-Related (Now Defunct) Company, Settles Silvergate Bank.
- The German government According to Arkham, it continues to send millions of bitcoins to exchanges.
Reef
Q: Are stablecoins still the “killer app” of cryptocurrencies?
Probably.
I’m not one of those who can say definitely one way or another, because there are So There are a lot of unknowns in this world (can I say I’ve been to Vegas and not spent a dime gambling?), but I think the use cases for stablecoins are strong. I mean, just scroll up and look at the Chainalysis data I mentioned above.
There will always be something more compelling and unique about crypto that people will hail as the next killer app, but if we only look at utility and general use, I think stablecoins have blocked that race.
– Katherine Ross
The suppressed maxi inside me would say that Bitcoin is the best crypto app: uncensorable digital money.
I can’t say the same about Tether and USDC. Their issuers can freeze any balances they want, which they regularly do when asked by law enforcement.
Luckily, cryptocurrencies have DAI, which doesn’t have this problem. This also makes them uncensorable digital money. So yes, stablecoins are the killer app of cryptocurrencies… except for the original.
— David Kanellis
