The cryptocurrency and blockchain industry faced headwinds in recent months as May’s collapse of the Terra ecosystem took its toll on many other market participants.
In June and July of this year, major crypto lending platforms (including Celsius, BlockFi, Voyager and Vauld) took drastic measures in the wake of “extreme market conditions,” the team at Kraken noted in an update.
They added that June’s leverage-related fallout for crypto lenders “continued into July but did not extend to cryptocurrencies, which rallied.”
ETH led the way, “spurred by news that The Merge, Ethereum’s switch from proof-of-work to proof-of-stake, is set to take place at the end of this quarter.” On July 15, Ethereum developers “announced the long-awaited Merge could occur as soon as September 19, 2022.”
The macroeconomic environment “remained challenging as worldwide inflation continued to rise in June,” the team at Kraken noted while adding that the U.S. Federal Reserve “instituted another 75-basis-point hike while signaling their intention to keep raising rates in the months ahead.”
Kraken also mentioned that the U.S. economy’s two consecutive quarters of negative real GDP growth “satisfies one popular definition of a country that has entered a recession. Russian military occupation of Ukraine continued.”
A rebounding crypto market “within a challenging macroeconomic environment could make it difficult to forecast what lies ahead.”
Kraken pointed out that on-chain data “can help separate the signal from the noise by providing evidence of trends in network usage and demand.” In Kraken Intelligence’s latest on-chain digest, All Eyes on ETH, the team “recaps what went down in July.”
Dominance shift
BTC rose by 16.9% month-over-month, “from $19,950 at the end of June to $23,321 at the end of July.” But ETH took the cake “with a 57.1% rise from $1,070 to $1,681 over that same timeframe.”
Despite trending lower YTD, total crypto market capitalization “increased by around $210 billion in July.”
BTC dominance has “increased by 1 percentage point (pp) in 2022 as altcoin market dominance fell across the board. ETH dominance remained the year’s worst performer (-1.3 pp), followed by SOL (-1 pp), AVAX (-0.6 pp), ADA (-0.3 pp), ALGO (-0.3 pp) and DOGE (-0.2 pp).”
On-chain fundamentals
Transaction fees “represent the cost crypto users are willing to pay to include a transaction on a protocol’s ledger; it is a proxy for network demand.” ETH fees have “taken the biggest hit YTD (-93%), followed by DOGE (-65%) and BTC (-55%), as network demand has slowed.”
The report added:
“While the sharp drop in ETH fees YTD indicated dwindling network demand, other on-chain metrics signaled increased interest this month as the asset led the cohort with a 28% rise in daily active addresses in July 2022. This was followed by a month-over-month increase in daily active addresses for ADA (+8%), BTC (+0.7%) and AVAX (+0.5%). On the other hand, SOL dropped from first place to third in terms of total active addresses (though it has since regained second place behind BTC).”
The update also mentioned:
“Though overall on-chain metrics were mixed, they leaned positive this month. Catalysts for rising demand over coming months include increased ADA development activity, ETH’s upcoming Merge and total market capitalization finding a new support level last month. On-chain demand and usage may continue to increase in August.”
For more details on this update, check here.