KuCoin Research's Monthly Report: Early-Stage Series A Financing Soars 142%, TON Ecosystem Achieves 80% TVL Growth Despite Market Downturn
The cryptocurrency market in June was shaped by various factors, including macroeconomic uncertainty and technological innovations. Despite potential delays in U.S. interest rate cuts and a drop in BTC prices due to strong non-farm payroll data, interest in AI themes boosted NVIDIA's market value, making it the highest-valued company globally. The stablecoin sector saw stable issuance volumes for USDT and USDC, indicating cautious market sentiment.
In the ETH Layer 2 sector, Base outperformed Optimism in TVL rankings, while Linea and Scroll attracted attention and capital for their token issuance and restaking innovations. The Solana Foundation's new tools, "Actions" and "Blinks," aim to simplify on-chain transactions and enhance user interaction within Web3 applications. Despite controversies and underwhelming market performances by ZKsync and Blast, Base's TVL saw significant growth, marking a shift in market dynamics.
Investment activity remained robust, with a notable increase in early-stage investments and a total financing volume close to $900 million. Series A funding surged from 7.77% to 18.84%, showing a jump of 142%, this has indicated a strong interest in emerging projects. Despite market volatility, the sector draws significant capital, particularly for innovative projects. Regulatory developments, including the approval process for Spot Ethereum ETFs and legal decisions affecting Binance, continue to influence the market's outlook.
Market Cools as Rate Cut Hopes Fade, Solana ETF Offers Hope
In June, revised U.S. economic data postponed expected rate cuts from September to November. Early confidence in the AI theme, driven by NVIDIA's brief status as the highest-valued company globally, faded by late June, leading to a decline in NVIDIA's stock price. The approval of the Spot Ethereum ETF was short-lived as strong Nonfarm Payrolls data dampened market optimism, causing significant drops in crypto prices. BTC fell below $60,000, momentarily reaching $58,000, with overall sentiment remaining subdued.
The AUM of the U.S. Bitcoin spot ETF, which peaked at $62.56 billion on June 5, declined alongside Bitcoin prices. BTC futures open interest rose to March 2024 levels, but options growth was cautious, reflecting investor wariness. A historic low in BTC volatility at 24.53% on June 23 highlights market pessimism. However, low volatility suggests potential new opportunities. Approval of the ETH ETF in July could spark significant upward movement, though renewed rate cut pressures or ETF changes may pose risks.
Stablecoin Issuance Faces Stagnation
In June, the total issuance volume of six traditional stablecoins remained around 154 billion USD, fluctuating within a narrow range for two consecutive months, according to SoSoValue data. USDT saw minor growth, USDC's issuance was stable, while FDUSD declined rapidly. These opposing trends resulted in a stable overall volume, indicating that funds have not significantly entered or exited the crypto market through stablecoins. This reflects the market's current hesitancy and a wait-and-see attitude from potential incremental funds. For the market to break out of its current state and reach new highs, an increase in stablecoin issuance will be a critical indicator to watch.
Decline in FDUSD Issuance and Slower USDe Growth
FDUSD's issuance continued its downward trend, dropping from 2.9 billion at the start of June to 2.07 billion by month's end, briefly rebounding during the Binance Launchpool campaign for IO. This decline is attributed to Binance's strategic adjustments, reducing Launchpool frequency and lowering FDUSD's expected yield. Meanwhile, USDe's issuance grew from over 3 billion to around 3.6 billion, then stabilized as its yield dropped from 30%+ APY to around 8% due to weakening market sentiment. Despite the decline in yield, USDe remains the fourth-largest stablecoin by market cap.
ETH Declines and Records Low On-Chain Activity
In June, Ethereum's price fell over 15%, dropping below $3,200, amid delayed interest rate cuts in the U.S. The on-chain activity for ETH hit record lows, with gas prices nearing all-time lows and driving down Ethereum's burn rate, making it slightly inflationary. The Layer 2 TVL, measured in ETH, showed minimal change, oscillating around 12.6 million, while the USD-measured TVL declined by over 10% to around $43 billion due to the market downturn.
Base Surpasses Optimism, Controversies in Airdrop Distribution
Base achieved significant growth, surpassing Optimism to become the second-largest Layer 2 network in ETH, driven by social platforms, DeFi protocols, and popular MEME Coins. In contrast, ZKsync and Blast saw token price declines post-airdrop distribution, with controversies around airdrop rules leading to noticeable fund withdrawals. Linea and Scroll attracted substantial market capital inflows, anticipating token issuance and restaking innovations, indicating the potential for continued growth in these Layer 2 ecosystems.
TON's Gaming Projects Drive Ecosystem Growth
TON's ecosystem thrived against downward market trends, achieving over 80% growth in TVL, mainly due to its gaming projects' popularity and Telegram's vast user base. Hamster Kombat rapidly grew to over 150 million users, and Catizen, another game on TON, surpassed 20 million users, highlighting the immense potential of integrating Telegram with cryptocurrency. This rapid inflow of capital into the TON chain indicates a robust and thriving ecosystem, poised for significant development.
Solana Foundation's "Actions" and "Blinks" Transform On-Chain Transactions
The Solana Foundation has introduced two innovative tools, "Actions" and "Blinks," designed to simplify on-chain transactions via websites and social media platforms. "Actions" enables users to perform blockchain transactions effortlessly, while "Blinks" allows these actions to be shared as links, making any URL a gateway to the Solana blockchain. This innovation streamlines user interactions with blockchain activities such as buying NFTs, voting in DAOs, or executing token transactions, removing the need for traditional steps like wallet configuration and parameter settings. Despite potential challenges like phishing attacks and transaction inflexibility, these tools promise to enhance user experience and broaden blockchain adoption.
Mt. Gox BTC and BCH Repayments Begin, Market Braces for Potential Selling Pressure
The Mt. Gox Rehabilitation Trustee, Attorney-at-law Nobuaki Kobayashi, announced that repayments in Bitcoin (BTC) and Bitcoin Cash (BCH) will commence in early July 2024. Historical data reveals that approximately 141,868 bitcoins were recovered and held in trust following the exchange's collapse. While initial repayments have mostly been in fiat currency, the upcoming distribution of BTC and BCH raises concerns about potential selling pressure as creditors might sell the repaid bitcoins to secure profits. This could pose significant stress on the market in the short to medium term, impacting existing investors.
Decline in Interest for BTC Inscriptions and Runes, BTC Derivatives Face Challenges
At the end of May and beginning of June, despite a brief surge in attention from the BTC20 project PIZZA during the Pizza Festival airdrop, the project's volume and value quickly contracted. There have been no new popular concepts in BRC20, leading to a significant loss of developers and traders, with Ordinals NFTs also experiencing overall weakness. Runes, including cat and dog-themed runes, saw their market value significantly shrink in June. As other chains like BASE and Solana offer lower transaction fees and better usability, Runes face challenges in retaining users and developers. The future of Bitcoin Network native assets may hinge on technological updates, new narratives, or liquidity injections, necessitating long-term observation and exploration.
BTC Outflows from CEXs Spark New Opportunities for On-Chain Utilization
Since June 2022, the proportion of BTC held by centralized exchanges (CEXs) has declined from a peak of about 17.5% in 2021-2022 to 15%, a level last seen at the end of 2018. This shift is attributed to the launch of Bitcoin spot ETFs and increased BTC accumulation by retail investors, high-net-worth individuals, and corporations. However, since June 13th, the drop in BTC prices has led to an increase in BTC held by CEXs, indicating potential selling pressure from external wallets. On the positive side, effectively utilizing the large amounts of BTC transferred to and settled on the blockchain has become a hot topic for startups, with emerging entrepreneurial directions in re-staking BTC, BTC scaling, related asset issuance, DeFi, and cross-chain infrastructure and applications.
Investment and Financing Dip in June 2024, Larger Deals Increase
In June 2024, the cryptocurrency market saw a slight decline in investment and financing events, with 116 disclosed events, down 40 from the previous month. The total financing amount approached $900 million, reflecting a 10% decrease from May. Despite this, the data remains high for Q2. Projects with financing amounts of $10 million accounted for 15.6% of the total, up from less than 10% in May, showing an increase in larger financing deals.
Surge in Early-Stage Series A Financing and Mergers & Acquisitions
The proportion of early-stage projects securing Series A financing rose significantly from 7.77% to 18.84% in June, showing a remarkable increase of 142%. Additionally, the market continues to witness a number of project exits through mergers and acquisitions, with over 9 projects being acquired in the month, indicating ongoing consolidation in the industry.
Animoca Brands Dominates Investment, Focus on Modular, CeFi, and Derivatives
Animoca Brands led the primary market with the highest number of investments, backing a total of 10 projects in June. This surpasses other institutions, which invested in single-digit numbers of projects each. The most popular investment tracks in June were Modular, CeFi (Centralized Finance), and Derivatives, with Eastern capital showing more proactivity compared to Western capital.
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