Q1 2024 On-chain
ETFs, meme coins and Dencun drive crypto’s remarkable first quarter
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This week we wrap up the first quarter of the year. As usual, we share insights on the key stories shaping crypto, complemented with on-chain analytics and analysis on the future trajectory of the space.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
- Bitcoin fees decreased by 15% this week as network activity and ordinals speculation dropped
- Fees on Ethereum declined by 41%, with meme coin speculation slowing down significantly
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- Bitcoin saw $380M in net outflows from exchanges, slowing down from last week’s $700M+
- ETH recorded its largest weekly net inflows into CEXs ($720M) since September 2022, as regulatory FUD spread
Q1 2024 On-Chain
Crypto markets are off to a great 2024. Not only have prices rallied by 50%+ across the board, but also there have been meaningful progress with upgrades and catalysts likely to move the space forward long-term.
Today we dive into the defining events for the first quarter, exploring their impact through on-chain metrics and analyzing their long-term implications. Specifically, we look at the launch of the spot Bitcoin ETFs, the recent meme coin frenzy and the successful implementation of Ethereum’s Dencun upgrade.
Bitcoin ETFs Open the Floodgates
More than 10 years after the first application for a Bitcoin ETF, the SEC approved the launch of nine new spot Bitcoin ETFs and the conversion of GBTC into one. Through this milestone, BTC has become more accessible than ever. Institutional and retail investors alike can now easily buy crypto without having to worry about a centralized exchange going under or needing to learn how to hold their private keys.
Just months since their launch, the spot Bitcoin ETFs have already had an outsized impact on the market. Bitcoin ETFs are the new whales in town.
Over 4% of BTC — In less than three months, Bitcoin ETFs have captured more than 4% of the supply
- The amount of Bitcoin held by addresses with 1k or more (“whales”) has quickly accelerated since the launch of the ETFs
- The aggregate balance of whale addresses reached the highest levels since June 2022 as the bear market began taking down many large holders
- This year, the balance of whales has climbed by 220k BTC (~$14.2B), with 210k of these Bitcoin coming from net inflows into the ETFs
- In other words, the vast majority of the accumulation by Bitcoin whales has been driven by the spot Bitcoin ETFs
- This has led Bitcoin to new all-time highs and contributed to broader demand for crypto-assets
As we accelerates into a bull market, traders have been going further out in the risk curve in expectation of larger gains. The main beneficiary here have been meme coins.
Meme Coin Renaissance
Demand for meme coins hit the highest since 2021 this quarter. Despite interest rates remaining high and no “stimmy checks” being sent out, appetite for seemingly useless crypto-assets has been very strong. It’s unclear whether this is due to the economy getting overheated, or perhaps just growing financial nihilism, but meme coins have become the main subject in crypto over the last few months.
OG crypto-assets like Dogecoin have been joined by thousands of new meme coins, pushing the category to its highest market cap in two years.
$56B in Memes — The aggregate value of meme coins has nearly tripled in 2024
- While DOGE has doubled in price in 2024, SHIB has 2.5x and PEPE by nearly 5x
- Meme coins have thrived in lower fee ecosystems, with Solana recording multiple days with larger trading volumes than Ethereum this quarter
- More than just a dog coin, the leading meme coin in Solana, WIF boasts a dog with wif a hat and a rampant community behind its 20x yearly returns
- A flurry of new coins — based on things from animals, to politics to racist innuendos — have spun up as meme speculation has become widespread within crypto
More recently, the meme frenzy has found its way back to Ethereum, mainly on top of Coinbase’s Base layer 2 network. This has been facilitated by gas fees dropping by more than 10x since the Dencun upgrade.
Ethereum’s Dencun Accelerates On-Chain Activity
On March 13, Ethereum underwent its highly-anticipated Dencun upgrade. Amongst the many improvements integrated, Dencun implemented EIP-4844 (known as proto-danksharding), which enables lower costs through the introduction of data blobs. In doing so, data availability became an order of magnitude cheaper for rollups, translating to lower fees for end users.
32M Transactions/Week — Activity on the main optimistic rollups quickly accelerated following Ethereum’s Dencun upgrade
- Gas costs initially were as much as 100x cheaper in many L2s, but have since increased slightly as blob transactions become more common and transaction demand has grown
- Coinbase has been one of the main beneficiaries from this trend, with Base surpassing Arbitrum and Optimism in both transaction count and volume
- The meme coin DEGEN, used for tips within the Farcaster social media protocol on Base, has climbed more than 15x within a month as it falls at the intersection of the meme frenzy and post-Dencun narratives
- Although L2 transaction activity has calmed down since, it is poised to continue growing as fees are lower than ever and the amount of applications on-chain expand
Overall, the first quarter of 2024 has been a positive and eventful one. The Bitcoin halving granted the industry a stamp of approval, enabling the access to billions of dollars to flow into crypto. This has led to higher prices and greater risk tolerance, which have in part contributed to the largest meme coin frenzy since 2021. Lastly, the Ethereum Dencun upgrade has also made on-chain activity much cheaper and ripe for innovation to be flourish over the near-term.
