Weekly Industry Report 【March 27th 2023】

1. Industry overview

I. Overall Market Trends

Last week, BTC showed overall volatility with a range maintained around $26,600 to $28,800, except for a sudden market movement during the night of the Fed rate hike. Given the large-scale head and shoulders pattern that has been formed, it is expected that there will be a significant amount of buying support around the neck line of $25,200, and thus the support levels in the medium term are expected to be around $25,200 and $23,900, with a trend line support around $23,600 gradually moving upward and expected to reach a resonance support near $23,900. MACD shows a death cross, indicating a possible future correction, and there is a focus on buying opportunities during the pullback. The medium-term resistance is still around $32,400. As mentioned last week, as BTC rises, its market share also increases significantly, now exceeding 45.6%, which has led to some bloodsucking behavior. With BTC's new high, if the future trend stabilizes and oscillates, other mainstream and altcoins may see opportunities for rotational growth, and there may be a small upward trend.

The four-hour trend chart of BTC shows that the upward trend line has already been passively broken during the horizontal trading process, but this symbolic significance is relatively small, indicating that the bears have not temporarily gained an advantage. What needs to be watched is the potential double top neckline around $26,600 on the four-hour level, and if it breaks, it could be a double top pattern, with the possibility of testing $25,200 and $23,900. However, if $26,600 can be held, it will continue to oscillate above. The short-term resistance is around the recent high of $28,870.

The upward trend line of ETH has already been broken, which is a passive downward behavior after the horizontal oscillation. The short-term support levels in the future are expected to be around $1,710 and $1,610. The pace is expected to be similar to that of BTC, focusing on whether BTC will form a double top pattern or continue to oscillate around the neckline, which will affect the trend of ETH.

Recently, the cryptocurrency market, including gold and stocks, has been greatly affected by macro interest rate policies. It needs time to digest these impacts before it can establish an independent trend. Last week, I mentioned that "the probability of the market expecting a 25 basis point rate hike is high, and if there is a rate hike of 25 basis points or more with hawkish comments, it will be negative news." After the announcement early Thursday morning, the market had a pullback as predicted.

As for whether the bull market will come, there are many driving factors, and they are closely related to the macro environment. For example, the bull market from 2020 to 2021 was partly due to the Fed's liquidity injections and institutional entry into the cryptocurrency market, from Grayscale to MicroStrategy, then Tesla and Musk, and later the launch of Bitcoin ETF, which brought about a big bull market. This year, we need to see if there are any new hotspots to drive the market.

Recently, there is new buying power entering the cryptocurrency market, and spot purchases are typical features of the early bull market or late bear market. Although it needs to be confirmed, the breakthrough in the 273-day interval will be proven to be sustainable. By analyzing order flow and on-chain data, the recent price increase of Bitcoin can be attributed to spot purchases by both large and small investors and traders. The recent surge in BTC prices is a hopeful sign for the cryptocurrency market.

In terms of data, the Bitcoin network has grown by nearly one million new addresses purchasing BTC in the non-zero balance category. After dropping to about 43 million around February 23, 2023, the number of non-zero balance wallets began to increase rapidly. With new retail funds pouring into BTC, wallets with less than 1 BTC lead the purchases. After evaluating the order flow and on-chain data, the price increase beyond the high range can be attributed to spot purchases by both large and small investors and traders. As of March 15, 2023, on-chain data shows that the number of non-zero balance wallets has surged to 44.778 million. As sentiment improves, this means that nearly one million new addresses have added BTC.

Driven by the US Federal Reserve's push for financial stability measures, the price of Bitcoin has risen sharply. Last week, with the influx of spot purchases, the price of Bitcoin hit a new high this year, and the number of non-zero balance wallet addresses has soared to nearly 45 million. The exponential moving average of new addresses is also showing a sustained upward trend. In the perpetual futures market of Bitcoin, the funding rate has almost not changed, indicating that derivative trading volume is staying at a normal level during the price increase, and spot purchases are supporting the market trend. The supply of Ethereum is also decreasing at an increasingly fast rate. If demand for Ethereum continues to grow, this will further increase Ethereum's gas fees and ultimately accelerate its deflation rate (which is a bullish scenario for Ethereum investors).

Bitcoin's 7-day average closing price rose by 35.8% this week, a phenomenon that has only occurred 16 days since 2015. With the rebound in prices, the monthly average number of Bitcoin weekly transactions has reached 309,500/day, the highest level since April 2021. Only less than 12.2% of trading days in history have had more trading activity than this week. In addition, the number of new entities added to the Bitcoin chain reached 122,000/day, and only 10.2% of trading days in history had a higher rate of new user adoption. Bitcoin miners have benefited from the market recovery, with mining revenue skyrocketing to $22.6 million/day, the highest level since June 2022.

Regarding interest rate policy, according to CME's "FedWatch," the probability of the Fed maintaining interest rates in May is 64.2%, while the probability of raising interest rates by 25 basis points to a range of 5.00% to 5.25% is 35.8%. The probability of a 25 basis point interest rate cut in June is 30.4%, the probability of maintaining interest rates is 51.2%, and the cumulative probability of a 25 basis point interest rate hike is 18.4%.

Considering the tightening policies and bank credit constraints so far, a Fed interest rate cut may come faster than currently expected by the market. As we continue to expect the economy to enter a recession in the fourth quarter, we still believe the Fed will begin cutting interest rates at its December meeting. Swap traders believe there is about a 50% chance the Fed will not raise interest rates again. Since deciding to raise interest rates by 25 basis points on March 16, 2022, the Fed has cumulatively raised interest rates by 475 basis points.

Fed Chair Powell stated that the Fed's efforts to significantly reduce the size of its balance sheet were sharply reversed after the collapse of Silicon Valley Bank (SVB), but this does not mean that it is using the assets it holds to provide new stimulus to the economy. Powell said at an FOMC press conference that the expansion of the balance sheet was actually a temporary borrowing from banks and did not intend to directly change the monetary policy stance. Bank borrowing surged last week, with the most noticeable being the record $153 billion in loans disbursed through the discount window, causing the Fed's overall cash and bond reserves to jump from $8.4 trillion on March 8 to $8.7 trillion a week ago. This has undermined the Fed's efforts over the past few months to reduce its impact on the bond market.

A recent research report from the US Treasury Department's Office of Financial Research suggests that financial friction could limit the potential returns of digital currencies, whether issued publicly as central bank digital currencies (CBDCs) or privately as stablecoins. In addition, when digital currencies are fully integrated, the volatility of the financial system will decrease and household welfare will improve, but the stability of the banking sector will be affected. Regarding the impact of digital currencies on the banking industry, the report states that the decline in deposit spreads is the main reason for the increased probability of crisis with the issuance of digital currencies. Fully integrated digital currencies will lower bank deposit spreads, especially during crises, which will limit banks' ability to restructure capital after losses. In addition, due to the weaker ability of banks to rebuild assets after adverse shocks, the average level of bank assets is lower and the possibility of the banking industry entering a crisis or facing difficulties will be greatly increased. The report states that digital currencies have potential benefits and risks, and further research and analysis are needed to fully understand their impact on the financial system.

On the peripheral market, Cathie Wood's ARK Fintech Innovation ETF sold $13.5 million worth of Coinbase stock, marking the first time they have sold Coinbase stock since July. ARK sold 160,887 shares of their ARK Fintech Innovation ETF, ending a buying frenzy that lasted several months since November 2022. According to some analysts, this move by Wood may be due to her lack of confidence in the future prospects of Coinbase or due to regulatory concerns in the United States.

The difference in Bitcoin's price behavior during different time periods is worth noting, as Bitcoin can be traded 24/7 globally. However, the price behavior varies within each 24-hour cycle, depending on news flows and macroeconomic data releases. Recently, news flows have been dominated by issues in the US banking sector and the resulting repricing of lower rate expectations, which explains Bitcoin's positive performance during US trading hours. Since the beginning of this year, the US trading session has been a major source of bullish pressure. BTC has risen by 66% so far this year, with Bitcoin rising by 47% during US trading hours, compared to only a 16% increase during Asian trading hours. Bitcoin has hardly gained any traction during European trading hours, only rising by 3%.

The recent bank failures in the US have exposed the core limitations of the fractional reserve banking system and strengthened the argument for investing in Bitcoin. Analysis suggests that US buyers are leading the charge for cryptocurrency safe havens. Data shows that Bitcoin has risen more than 40% in the past ten days, reaching a nine-month high of over $28,000. Since the drop on March 10, Bitcoin has risen by 44%, with 31% of the increase being driven during US trading hours, indicating that Americans are the driving force behind Bitcoin's rise.

Of course, another factor to consider is the expansion of Bitcoin use cases, such as NFT inscriptions based on the Ordinals protocol, which could stimulate MicroStrategy to purchase more assets. Some investors may note that MicroStrategy's 132,500 BTC holdings are currently nearing breakeven (with the company's average cost per Bitcoin at $30,137), and MicroStrategy has stated that it will treat Bitcoin as a long-term strategy.

 

Macro-economic data and key events in the crypto market for the week of March 27th to April 1st are as follows:

 

Monday, March 27th:

 

Polygon zkEVM will release the mainnet test version.

EOS EVM will launch the final testnet, with the mainnet beta version scheduled for release on April 14th.

Tuesday, March 28th:

 

ConsenSys will launch the public testnet for the zero-knowledge Ethereum virtual machine zkEVM.

The U.S. Senate Banking Committee will hold a hearing on the Silicon Valley Bank bankruptcy.

OpenDAO (SOS) will take a snapshot of token holders.

Wednesday, March 29th:

 

A senior regulator from the U.S. Federal Deposit Insurance Corporation will testify before the House committee on the failures of Silicon Valley Bank and Signature Bank.

OKX will delist several spot trading pairs.

U.S. Pending Home Sales for February will be released.

Thursday, March 30th:

 

Coinbase will suspend trading of RLY, YFII, MIR, OMG, LOOM, and REP.

U.S. initial jobless claims for the week ending March 25th and Q4 GDP data will be released.

Friday, March 31st:

 

European Central Bank President Lagarde will give a speech.

Eurozone CPI for March, Eurozone unemployment rate for February, and U.S. PCE price index data for February will be released.

Saturday, April 1st:

 

BlockFi customers must submit their proof of claim information by this date.

FOMC permanent voters and New York Fed President Williams will give speeches.

Undetermined date this week:

 

Optimism will announce details for the distribution of 10 million OP tokens.

Over the past week, there has been a significant increase in the value of various altcoins, with RAD and JOE rising by about 40%, and CELR and WTC increasing by around 20-30%. JOE was a recommended coin to watch last week and has risen significantly again. Established coins such as XRP, AE, and LTC have also performed well, with XRP benefiting from an impending resolution of the SEC lawsuit, and LTC being supported by positive news related to halving. The "Matthew effect" of the strong getting stronger suggests that it is still advisable to focus on coins with significant gains for potential buyback opportunities this week, as they are expected to rise again. Additionally, it is important to consider rotational effects when investing in coins, and to limit investment in weaker coins to short-term speculative trades with timely profit-taking, as these coins are unlikely to sustain gains.

Regarding LTC, there is short-term support at around $87, with the upward trend line supported at approximately $82. It is not recommended to buy at this level due to limited short-term upside potential and the possibility of a pullback. However, given the impending halving and positive expectations, those with positions may want to hold, while those without positions should consider buying on dips. The LTC halving is expected to occur in early August, so there may still be several rounds of gains before that time.

According to recent data, the top five coins by contract inflows over the past seven days are BTC, ETH, BNB, XMR, and ALGO. The seven-day price changes for each coin are as follows: BTC +14.5%; ETH +5.9%; BNB +9.9%; XMR +2.2%; and ALGO +3.8%.

Since March 21st, Arbitrum's daily transaction volume has surpassed that of Ethereum for six consecutive days. On March 23rd, when the native token ARB was launched, the daily transaction volume on Arbitrum approached 2.73 million transactions, 2.5 times that of Ethereum (1.08 million transactions) on the same day. Currently, more than 990 million ARB tokens have been claimed, accounting for 85.69% of the airdrop supply. There are 625,143 eligible addresses for the airdrop, and 531,821 addresses have claimed ARB, representing about 85.07% of the total.

Recently, the focus has been on ARB and the ZK concept. In particular, the zkSync Era has seen a remarkable increase of 46,912.7% in the past week. The mainnet Alpha is now open to all users, and the team has spent $3.8 million to ensure the security of zkSync Era's ecosystem Dapp. According to CEO Gluchowski, if the sequencer is to be decentralized, a token will be needed. He estimates that the sequencer will be decentralized in about a year, meaning that zkSync Era will release its token in a year. It is worth noting that, unlike previous coins such as APT, ARB had already been airdropped in large quantities to early participants before its launch, resulting in a more dispersed market valuation and potential selling pressure. This is just my personal opinion.

On the list of large investors' increased holdings, MIR, REN, and SNX are among the top coins, apart from stablecoins. This involves significant buying and accumulation by major investors and provides an opportunity for retail investors to follow the trend and buy before the price increases. One can then take advantage of the profits before the major investors sell their shares.

There have been significant changes in holding addresses for MC, LDOs, STG, RVN, and BIT. These are long-term coins that have consistently been on the list, and it is important to keep an eye on them. While it may be challenging to attract new users during a bear market, it is possible that the project team may be engaging in data brushing behavior that needs to be avoided.

ENS appears to be in a converging triangle pattern on the weekly chart, and such patterns typically indicate a reversal in trend towards the end. Therefore, one needs to pay close attention to it, and it may not be necessary to wait until the very end to take action.

In the UNI daily chart, the support level is around 5.4, and if it stabilizes here, it may be a good opportunity to enter the market for trend trading.

GAL had a strong trend in January-February, and it is a strong coin from the previous period. If there is speculation this year, there may be another opportunity for it to become stronger, so one should wait for the next cycle.

According to Zebec DAO's data, ZBC tokens underwent a new round of burning on March 21st, with 468,973 tokens destroyed. Prior to this, ZBC had already undergone its first round of burning, where 286,797.18 tokens were destroyed. Currently, the total amount of ZBC tokens burned is 755,770.97, and there will be ongoing burning as Zebec's ecosystem develops. Zebec Protocol, founded in 2021, is a solution based on Zk-Rollup for the flow payment public chain Zebec Chain, which highlights the main advantages of privacy protection, high scalability, and compliance, making it easier to integrate flow payment features into more Web3 ecosystem applications.

In general, burning tokens is considered a positive development, but the market usually anticipates it beforehand, and by the time the news of the token burning is announced, the expected market trends may have already played out.

The relationship between the number of TRC20-USDT holding accounts and its issuance is also interesting, with an average holding of less than 2,000 USDT per person. Fast transfer speeds and low fees are the most appealing features of TRC20-USDT. The issuance of TRC20-USDT has exceeded 42.1 billion tokens, and there are over 21.51 million holding accounts. TRC20-USDT is a stablecoin anchored to the US dollar issued by Tether on the TRON network. Its fast transfer speeds and low fees have attracted a large number of users, and it is supported by multiple exchanges. The TRC20 version of USDT will significantly enhance the existing decentralized application ecosystem of TRON and bring higher overall value storage and stronger decentralized exchange liquidity, providing more convenient blockchain access for enterprise-level partners and institutional investors.

Currently, Bitcoin's market dominance has risen to 44.87%, with a monthly increase of 4.29%. Ethereum's market dominance is 17.47%, with a monthly decrease of 0.03%. The market share of the stablecoins USDT, USDC, and BUSD is 6.37%, 2.96%, and 0.68%, respectively. The total market capitalization of all cryptocurrencies is currently reported as 1,205,092,019,073 USD. Table 1 shows the top ten projects in terms of public chains. The source of this information is fxh.

 

II. Concept ups and downs

Concept sections are represented as follows, divided by the percentage of increase or decrease. In the past seven days, the leading sectors with rising trends include encryption wallet tokens, POW, ADA ecology, and the Internet of Things.

Specifically, in the previous day, CAN had an increase of around 60%, NAOS and PPT had an increase of nearly 50%. RAD and INK had an increase of around 40%. These two were the currencies we recommended to focus on last week, belonging to the Huobi ecology chain, asset trading, and Polkadot ecological concepts. Pay attention to the rotational speculation market of the above larger increase currency sectors.

 

III. Macro Analysis Overview

Although the three major stock indexes in the United States rose together last week, the Dow, Nasdaq, and S&P 500 rose 1.2%, 2%, and 1.4% respectively for the entire week. However, the general decline of large bank stocks attracted market attention.

On Friday, the surge in Deutsche Bank CDS reignited concerns about the health of the banking industry. Bond market traders bet that the Federal Reserve will not raise interest rates in May. Fed "hawk" Brad still raised his interest rate expectations for this year to 5.625%. However, the improvement in business activities in Europe and the United States in March, coupled with the efforts of central banks and governments around the world, took turns to appease market sentiment.

Ray Dalio, the founder of Bridgewater Associates, chief investment officer mentor, and board member, said that the world is on the "dangerous edge" and may face three "earthquake-like" changes.

This week, major events in the global financial market continue. The People's Bank of China will reduce the reserve requirement ratio by 0.25 percentage points on Monday, and the weighted average deposit reserve ratio of financial institutions will be about 7.6% after the reduction. The National Bureau of Statistics will release the official manufacturing PMI for March. The Boao Forum for Asia Annual Conference will be held in Boao, Hainan. Major companies such as SMIC, Kweichow Moutai, Futu, BYD, and Kuaishou will release their 2022 annual reports. Baidu Intelligent Cloud will hold a new product launch on Monday, releasing a series of Wenyin Yiyun service and application products. Domestic refined oil will start a new round of price adjustment window this week.

Internationally, the U.S. Senate Banking Committee will hold a hearing on the Silicon Valley Bank incident, and Fed director Bahr will testify. The United States will release important economic data such as the final value of the fourth quarter PCE and the final value of the fourth quarter GDP. ECB President Lagarde will give a speech.

On Friday, the three major stock indexes in the United States opened low and rose, and most popular Chinese concept stocks fell. As of the close, the Dow rose 0.41%, the Nasdaq rose 0.31%, and the S&P rose 0.56%. The yield on the U.S. ten-year Treasury bond fell 1.515% to 3.38%, with a spread of -40 basis points compared to the two-year Treasury yield. The VIX fear index fell 3.85%, and Brent crude oil fell 0.81%. Spot gold has continued to rise since November 2022, and fell 0.75% yesterday to $1,978.25 per ounce. The US dollar index continued to fall from its high point and closed at 103.13.

The initial March Markit Manufacturing PMI for the United States recorded 49.3, the highest since October 2022. The initial March Services PMI recorded 53.8, the highest since April 2022. So far, March has shown encouraging signs of economic recovery, with business surveys showing output accelerating at the fastest pace since May of last year. The PMI data is broadly consistent with an annualized GDP growth rate of around 2%, depicting a more positive economic rebound from the second half of last year and early 2023 downturn. However, the economic recovery is uneven, driven primarily by the services sector. While manufacturing output has slightly increased, this mainly reflects improvements in the supply chain, allowing businesses to complete backlogged orders accumulated during the post-pandemic demand surge. It is evident that new orders in manufacturing have declined for six consecutive months. Unless demand improves, there seems to be little room to maintain the current level of production growth. Traders have further lowered their expectations for Fed rate hikes, with the possibility of a 25 basis point hike in May completely ruled out by Fed rate swaps.

In other news, Canada's January retail sales rate recorded 1.4%, the highest since May 2022. The March Eurozone Manufacturing PMI recorded an initial value of 47.1, the lowest since October 2022. The London Metal Exchange (LME) reduced the margin for copper from $724/tonne to $700/tonne and for tin from $3842/tonne to $3350/tonne, effective after the close of trading on March 29, 2023. Russian Deputy Prime Minister Novak stated that Russia will soon commit to cutting oil production by 500,000 barrels per day and will achieve this commitment in the coming days.

German Chancellor Scholz stated that Deutsche Bank is "profitable" and there is no need to worry. Previously, Deutsche Bank's stock price fell and CDS soared, as the market was concerned that the bank might become the next Credit Suisse. According to reports, Deutsche Bank announced that it will redeem its $1.5 billion fixed-to-fixed reset rate Tier 2 capital notes due in 2028 on May 24, 2023, at 100% of the principal amount and accrued interest up to but excluding the redemption date. The plan has received all necessary regulatory approvals, and formal redemption notices will be delivered in accordance with the terms of the notes. S&P Global Market Intelligence data shows that Deutsche Bank's five-year credit default swap (CDS) fell 7 basis points from earlier on Friday to 208 basis points, still the highest level since the end of 2018.

 

Here is a list of the major economic data and events for this week:

Monday (March 27th): Year-to-date February profits of Chinese industrial enterprises above a certain scale.

Tuesday (March 28th): January FHFA House Price Index, January S&P/CS 20-City Composite Home Price YoY for the United States.

Wednesday (March 29th): February Pending Home Sales MoM for the United States.

Thursday (March 30th): March Eurozone Industrial Confidence, preliminary CPI MoM for Germany in March, US initial jobless claims up to March 25th, and Q4 GDP data for the United States.

Friday (March 31st): Japan's March Tokyo Core CPI YoY, Japan's February seasonally adjusted retail sales MoM, China's March official PMI data, Germany's February actual retail sales YoY, import price index YoY, UK's Q4 GDP final YoY, France's March CPI MoM, Germany's March unemployment data, Eurozone's March CPI data, Eurozone's February unemployment rate, US's February PCE price index data, US's March Chicago PMI, US's March University of Michigan consumer confidence index final value, US's March one-year inflation rate expectation.

 

Central Bank news:

Tuesday (March 28): The US Senate Banking Committee held a hearing on the Silicon Valley Bank incident, Bank of England Governor Bailey gave a speech at the London School of Economics, Federal Reserve Board member Jefferson gave a speech on monetary policy, Bailey, Deputy Governor Woods, and Ramsden participated in a parliamentary special committee hearing on Silicon Valley Bank.

 

Wednesday (March 29): A senior regulatory official from the Federal Deposit Insurance Corporation testified before the House Committee on the failures of Silicon Valley Bank and Signature Bank.

 

Friday (March 31): Federal Reserve Board member Bostic attended a hearing of the US House Financial Services Committee, European Central Bank President Lagarde gave a speech.

 

Saturday (April 1): FOMC permanent voter and New York Fed President Williams gave a speech, Federal Reserve Board member Bullard gave a speech on the Phillips Curve, and Federal Reserve Board member Brainard gave a speech on the US economy and monetary policy.

 

Currency market news:

March 27 (Monday): Polygon zkEVM released its mainnet test version, EOS EVM launched its final testnet, and will release the mainnet beta version on April 14th.

 

March 28 (Tuesday): ConsenSys, the Ethereum infrastructure development company, launched the public testnet for the zero-knowledge Ethereum Virtual Machine (zkEVM), the US Senate Banking Committee held a hearing on the bankruptcy of Silicon Valley Bank.

 

OpenDAO (SOS) took a snapshot of token holders.

 

March 29 (Wednesday): A senior regulatory official from the Federal Deposit Insurance Corporation testified before the House Committee on the failures of Silicon Valley Bank and Signature Bank. Federal Reserve Board member Bostic and FDIC Chairman Goldberg will also testify. OKX will delist several spot trading pairs.

 

March 30 (Thursday): Coinbase suspended trading for Rally (RLY), DFI Money (YFII), Mirror (MIR), OMG Network (OMG), Loom Network (LOOM), and Augur (REP) on Coinbase.com, Coinbase Pro, Coinbase Exchange, and Coinbase Prime. However, users can still access their funds and withdraw at any time.

 

March 31 (Friday): Richmond Fed President Barkin, a voting member of the 2024 FOMC, gave a speech at 00:45 (UTC+8).

 

April 1 (Saturday): BlockFi customers must submit information for claim verification by 06:00 (UTC+8).

 

Undetermined date this week: Optimism will announce the distribution details for 10 million OP tokens.

 

2.Market News

Industry News

Key news this week:

 

1.zkSync Era Officially Launches Mainnet (Friday, March 24th)

zkSync, an Ethereum scaling solution, announced the launch of its Alpha Mainnet and officially went live with the Mainnet cross-chain bridge on March 24th. According to testing, the official website (portal.zksync.io/bridge) is now interactive. This is currently the first zkEVM Mainnet for Ethereum. Polygon zkEVM is also an Ethereum scaling solution and its Mainnet Beta version was originally planned to be launched on March 27th as the first zkEVM Mainnet for Ethereum with EVM equivalence and belonging to the ZK Rollup track. However, the early launch of zkSync Era caused Polygon zkEVM's plan to fall through. The current Layer2 competition is fierce, and the successful launch of zkSync Era means that ZK Rollup no longer lacks EVM compatibility, which also breaks Optimistic Rollup's biggest advantage over ZK Rollup. In future Layer2 competitions, ZK Rollup will compete head-to-head with Optimistic Rollup.

 

2.The U.S. Congress Voices Support for Bitcoin Mining: PoW Mining Benefits U.S. Energy Independence, and the U.S. Should Invest in the Digital Asset Industry (Friday, March 24th)

Recently, the U.S. House of Representatives submitted the "H.Res.238" resolution to the Energy and Commerce Committee, the Foreign Affairs Committee, the Financial Services Committee, and the Science, Space, and Technology Committee, expressing support for Bitcoin mining. According to the resolution, Proof-of-Work (PoW) mining is an important part of achieving U.S. energy goals and promoting economic growth. Digital asset Proof-of-Work (PoW) mining can promote energy development through cooperation with the energy sector, resulting in innovation breakthroughs, increasing U.S. energy independence, and creating high-paying jobs and technical training for the most needed areas. Therefore, the document believes that the U.S. should invest in the digital asset industry and promote sustainable employment growth and innovative development.

This document shows that the U.S. Congress supports the adoption of PoW mechanisms and similar blockchain projects, while many countries, regions, and celebrities in the past have expressed dissatisfaction with PoW mechanisms for wasting energy and polluting the environment. However, the mining industry is currently transitioning and upgrading to clean energy. According to a report by Cryptoslate on December 18th, 2022, 29 mining companies, accounting for 16.48% of the Bitcoin network, operate using 90-100% clean energy. This percentage also indicates that 52.2% of all Bitcoin networks use clean energy. The renewable energy usage rate of Bitcoin in 2020 has remained above 40%, but this proportion has fallen to 28.48% in 2021. However, since the beginning of 2022, the use of clean energy has been increasing. Therefore, we can see that the U.S. Congress's support for Bitcoin mining is in line with various interests, whether it is in terms of environmental protection, economic development, or providing job opportunities, Proof-of-Work (PoW) mining can bring more benefits and balance in the future.

 

3.The new trend in GameFi is On-Chain Gaming, which is a new narrative direction for the industry.

 In the past, GameFi was essentially a zero-sum game, with each player acting as an independent economic entity from start to finish. The ability of GameFi to maintain external positivity will determine whether the project can continue to operate in the long term. While the previous market was more influenced by DeFi, the focus of GameFi was more financial. However, whether it is traditional games or GameFi, gameplay is a more important factor. Therefore, in the future, gameplay will become more important, which is why we are seeing more and more discussions about On-Chain Gaming, with the entire market creating a new narrative direction for the future blockchain gaming market.

On-Chain Gaming refers to the deployment of a game's core gameplay, logic, and assets on the blockchain, providing features such as permissionlessness, interoperability, high decentralization, more transparent game mechanics, and greater openness and composability. To better explain these features, some people in the market refer to On-Chain Gaming as DeGame, which better highlights its natural decentralized features rather than seeing "financialization" as its greatest potential. Therefore, the development narrative of On-Chain Gaming is emerging, and the entire market is positioning it better.

The advantages of On-Chain Gaming include its decentralized nature. In the future, as On-Chain Gaming is deployed and run on the blockchain, its game logic will be more transparent and verifiable, and the cost of malicious behavior by project parties will be higher. Secondly, On-Chain Gaming continues the openness and composability of decentralized mechanisms. In terms of openness, as On-Chain Gaming develops in the future, open game components will provide better customization and composability capabilities for various On-Chain Gaming ecosystems. In terms of composability, since On-Chain Gaming runs on the blockchain, it can be combined with DeFi, NFT, and other components, injecting more imagination into the On-Chain Gaming ecosystem.

The disadvantages of On-Chain Gaming are that if all the business of the game is put on the chain, this imposes extremely demanding requirements on the infrastructure that provides the underlying support for On-Chain Gaming. Because every interaction of the player requires repeated calls and writes to the game's underlying database and storage units, this is a huge test for the game's underlying infrastructure. Therefore, we can only hope for the future launch of Layer 2, various scaling solutions, and even infrastructure that provides solutions for games to solve this most critical problem. Only then can the On-Chain Gaming ecosystem thrive. On-Chain Gaming teams that are currently exploring such as Dark Forest, Lattice, MatchboxDAO, Topology, etc. are worth keeping an eye on in 2023.

 

1. In early March, the ERC-4804 standard was approved by the Ethereum Foundation, becoming the first Web3-based URL access standard for Ethereum.

 The standard, which stands for Web3 URL to EVM Call Message Translation, was proposed on February 14, 2022, by Qi Zhou, the founder of ETHStorage, Ethereum researcher Sam Wilson, and Chao Pi. This standard allows users to directly access Web3 content on the blockchain, including decentralized applications (DApps) front-ends, NFTs, and music, through the latest standard web3://. Previously, users had to access Web3 DApps and NFTs through HTTP (Hypertext Transfer Protocol). However, with the implementation of the ERC-4804 standard, users can directly access Ethereum DApps and NFTs deployed based on the ERC-4804 protocol through Web3://. For example, when a user wants to use Uniswap, they can access the front-end of Uniswap directly by entering the Uniswap Web3 URL (e.g., web3://uniswap.eth) in their browser.

What are the benefits of using the ERC-4804 standard? Currently, almost all decentralized applications require the use of traditional internet access methods, and data reading usually relies on the translation of traditional internet proxies to the Web3 blockchain. This translation process is mostly completed by DApp sites/node service providers, and is not under the control of users, so it has not achieved the full decentralization that decentralized applications pursue. However, with the support of the ERC-4804 protocol, users can call Uniswap or other on-chain products' DApps through the "web3://" access method. This standard allows users to directly query the Ethereum Virtual Machine (EVM), including calling smart contracts on the Ethereum blockchain. This means that future Ethereum DApps will no longer be constrained by traditional internet access methods and can have their own Web3-native access methods, making complete decentralization possible and reducing centralized censorship risks. For users, the entire access process is also more transparent and auditable.

Currently, the web3:// access protocol has been built on http://w3link.io, supporting dozens of mainnets, including Ethereum, Arbirum One and Nova, BNB Smart Chain, Avalanche, Fantom, Polygon, Harmony, Base, and more. In the future, through the implementation of ENS + Web3:// + decentralized storage solutions, we will also be able to build truly decentralized projects in the Ethereum ecosystem.

In summary, the ERC-4804 standard provides users with a new way to directly access Web3 content, allowing decentralized applications to better achieve decentralization, reduce centralized censorship risks, and make the entire access process more transparent and auditable. The standard also provides future Ethereum DApps with more flexibility and autonomy by allowing them to have their own Web3-native access methods, and will help more centralized projects move towards decentralization and further promote the development of blockchain technology.

 

Key Investment and Financing Events:

 

1.Infrastructure platform TeleportDAO completed a $2.5 million seed funding round, led by AppWorks and DefinanceX:

TeleportDAO announced that it has completed a $2.5 million seed funding round, led by AppWorks and DefinanceX, with participation from Quantstamp, Coinlist, Candaq Fintech Group, SNZ Holding Limited, and Gate Labs. TeleportDAO is a decentralized infrastructure aimed at connecting different blockchains and helping developers build cross-chain applications. Currently, they have launched applications such as teleBTC and TeleSwap on Polygon, with the goal of becoming a secure and trustworthy cross-chain interaction infrastructure, covering multiple EVM and non-EVM chains. Despite security issues with cross-chain bridges in the past, the development and implementation of cross-chain protocols such as TeleportDAO are crucial for industry growth. Therefore, we expect TeleportDAO to prioritize security and make a contribution to industry development.

 

2.Chain game developer CCP Games completed a $40 million financing led by A16z:

Game developer CCP Games has announced that it has raised $40 million to develop a new 3A blockchain game based on the Eve Online universe. The leading investor is Andreessen Horowitz (A16z), with other participating investors including Makers Fund, Bitkraft, Kingsway Capital, Nexon, and Hashed. CCP is headquartered in Reykjavik, Iceland, with studios in London and Shanghai. CEO Hilmar Veigar said that this round of funding will allow the company to fully leverage blockchain technology and the expertise of its development team to develop the new 3A game. In the past, the chain game market has mostly adopted traditional casual and strategy game models, but in the next round of chain games, 3A games are highly anticipated. Such games require high investment, but once successfully launched, their high-quality game style and rich gameplay will bring players a stunning experience, making them highly anticipated in the new round of chain game market. Currently, Web3 3A games are still in the development stage, and the industry and players are looking forward to the arrival of this market.

In the near future, we may be able to enjoy a brand-new 3A blockchain game in the chain game world, and CCP Games' new game is just one of them. Unlike traditional casual and strategy games, this game will use high-cost development methods, focusing on gameplay and visual effects, aiming to bring players a new stunning experience. We look forward to the arrival of the Web3 3A game era, and we hope that future blockchain games can move towards a more mature and robust development path.

 

Detailed investment and financing events:

There were 27 investment and financing events in the global blockchain industry last week (3.20-3.26), an increase from the previous week. The events can be summarized as follows:

 

1.In the DeFi sector, there were 2 financing events: Megaton Finance raised $1.5 million in seed funding with TONcoin.Fund as the lead investor, and DeFi platform Ejara received strategic financing with participation from Cardano ecosystem accelerator Adaverse.

 

2.In the blockchain gaming sector, there was only 1 event, as CCP Games, a blockchain game developer, raised $40 million led by A16z.

 

3.In the NFT and metaverse sector, there were 4 financing events: LandVault, a metaverse development company, raised $37 million with SoftBank as the lead investor; Hadean, a metaverse infrastructure developer, raised $5 million; Gamitronics, a metaverse marketing platform, raised $1.5 million in strategic financing with participation from Big Viking Games; and Star Life, a metaverse game, raised $1.2 million in financing from the German Federal Ministry for Economic Affairs and Climate Action.

 

4.In the infrastructure and tools sector, there were 7 events: 608 Labs raised $22 million with angel investors from FTX and MEXC participating; Layer 1 blockchain Radix raised $10 million with support from DWF Labs; crypto custody wallet Gryfyn raised $7.5 million with participation from Animoca Ventures; crypto startup Turnkey raised $7.5 million in seed funding with participation from Sequoia Capital and Coinbase; middleware platform Particle Network raised $7 million; WebAssembly company Dylibso raised $6.6 million in seed funding with Felicis as the lead investor; and Web3 identity verification platform Aspecta raised $3.5 million in seed funding with participation from HashKey Capital.

 

5.In the centralized finance sector, there were 4 investment and financing events: multi-asset investment platform eToro raised $250 million with a valuation of $3.5 billion; German fintech investment company Raisin raised $60 million in Series E funding with participation from Catalyst; Turkish crypto exchange Metatime raised $11 million in seed funding; and digital asset trading company Crossover Markets raised $6.35 million in seed funding.

 

6.In other Web3/crypto-related projects, there were 9 events: generative AI startup Character.AI raised $150 million with a valuation of $1 billion, with A16z as the lead investor; anonymous DAO project Tomi raised $40 million with DWF Labs as the lead investor; Web3 social platform OP3N raised $28 million in Series A funding with Animoca Brands as the lead investor; Web3 fintech company Heartstocks raised $5 million with participation from Vanagon Ventures; digital real estate trading platform ALT DRX raised $3.6 million in seed funding; Web3 investment platform TradeTogether raised $2 million in seed funding with Orbit Startups as the lead investor; carbon credit tracking protocol Carbonable raised $1.2 million in seed funding with Ethereal Ventures and La Poste Ventures as the lead investors; blockchain real estate tech startup HouseAfrica raised $400,000 in funding; and Web3 music creator platform SphereTrax raised £250,000 in funding.

 

 

 

Industry Overview Author: Lao Li(Analyst)

Market News Author: Leon (Analyst)

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