Amberdata Quarterly Report: Q1 2024

Explore the exhilarating rollercoaster of Q1 2024 in the cryptocurrency world, from soaring highs with the long-awaited Bitcoin ETFs to the emergence of Ethereum ETF rumors and the wild ride of memecoins. Dive into the details of major upgrades like Ethereum's EIP-4844, regulatory challenges faced by the SEC, and the rise of Real World Assets (RWA). Witness global shifts in digital asset adoption, from regulatory approvals in Hong Kong to Nigeria's extreme measures. Dive into token prices, trading volumes, price indicators, ETF flows, and network metrics for Bitcoin and Ethereum, capturing the dynamic landscape of crypto in the first quarter of 2024.

Key Takeaways

Memes have been getting out of control! The first quarter of 2024 started with a bang. The long-awaited Bitcoin ETFs finally got their blessing and took BTC to all-time highs, followed quickly by rumors of Ethereum ETFs which led to several rallies on ETH and altcoins and ended with several memecoins bringing huge gains and losses to traders. We’ve also seen:

• A major upgrade on Ethereum through EIP-4844 (Proto-Danksharding) introduced “blobs” to the network, which brings temporary data storage to the network. This update aims to reduce network fees, especially on L2s as these networks can rely on temporary data for scale at the expense of short-lived datasets which are pruned every 2 weeks or so.

• The SEC found itself in murky waters as several ongoing cases (such as their case against Coinbase) began pushing to obtain a ruling on digital assets as investment contracts, while being sanctioned for a “gross abuse of power” in their case against DEBT Box. SEC Commissioner Hester Peirce has long supported regulatory clarity, saying at the 2024 ETHDenver conference in February:“If you really want to sort the bad behavior from the good behavior, having rules that are clear to people who want to follow them is a much better approach.”

• Real World Assets (RWA) have taken center stage with several protocols such as Backed and Superstate quickly growing in user count during Q1 and Blackrock’s $BUIDL fund reaching over $600m market cap. This continues to be a fast-growing area of interest.

• Globally, digital assets have achieved great heights in adoption. Places like Hong Kong and Singapore have led efforts to positively regulate tokens including Hong Kong’s approval of Bitcoin and Ethereum ETFs at the start of April 2024. On the opposite side of the spectrum, some countries have taken extreme measures, such as Nigeria’s detainment of Binance employees Tigran Gambarya (head of Binance’s financial crimes compliance team) and Nadeem Anjarwalla (regional manager for Africa) in February. Gambarya has since been moved to a Nigerian prison known for holding Islamic extremists like Boko Haram, even though he has not been convicted of any crimes. Anjarwalla, meanwhile, is rumored to have escaped to Kenya where he holds dual citizenship but may be extradited.

Recap - Q1 2024 at a Glance

Token Prices

Almost all of the top ten tokens by market cap returned hefty profits over the quarter. DOGE was the clear standout and returned over 120% since January 1, 2024, while XRP was the only token to suffer a loss, declining 0.955%.

Cumulative returns for key tokens in Q1 2024

XRP’s poor performance in Q1 2024 might be surprising given the many headlines that Ripple was featured in last year. The primarily payments-driven network emerged victorious from a major case with the SEC and has since announced plans to launch a stablecoin. The network also made technical improvements with integrations with the Flare Network for interoperability improvements and support for smart contracts.

DOGE has been flying high along with the memecoin craze that took over in the second half of Q1. Several memecoins across Solana, Base, and Ethereum brought huge returns with tokens named after politicians, celebrities, or business leaders. The memecoin wave quickly shifted to more established tokens such as DOGE and SHIB, while the quarter also rising tides on network tokens such as SOL, BNB, and ETH.

Circulating Supply

Circulating supply on fixed inflation networks like Bitcoin continued as expected but the Bitcoin halving in Q2 brought about a decrease as network rewards dropped to 3.125 in April 2024. Bitcoin supply curve until the last mined Bitcoin

As we mentioned in the Q4 2023 report, the most interesting tokens to follow are those where supply is dictated by market dynamics such as stablecoins and dynamic networks like Ethereum.

Circulating supply for key tokens in Q1 2024

In the case of Ethereum, circulating supply has continued to decline since the Merge, with more tokens burned than minted. Major stablecoins USDC and USDT both saw a supply increase, reversing the trend for USDC which has been continuously declining since the start of 2023. Stablecoins are an important pillar of crypto, and the growth of USDC is an important sign as it provides diversification from the often controversial USDT.

Bitcoin

Spot Trading

Bitcoin trading volume on centralized exchanges in Q1 2024

Despite a new Bitcoin ETF, the recovery was short-lived as trading volumes across exchanges rarely broke $10 billion through mid-January and February. However, March brought about a turn in fortunes with BTC trading volume hitting over $40 billion in a single day.

Bitcoin trading volume market share across centralized exchanges in Q1 2024

Binance had the majority of trading volume in Q1, though a few days stood out for Bithumb as the South Korean centralized exchange took large portions in January and two days in February. The centralized exchange pledged to support access to US Bitcoin ETFs while announcing in November 2023 that the exchange planned an IPO on the South Korean public markets.

Price Indicators

Bitcoin price and moving averages (50-day, 200-day, and 200-week moving average)

Multiple price indicators end the quarter bullish or positive despite the price run. At the end of March, the 50-day moving average crossed the price, but the 200-day and 200-week moving averages still lagged far below the end-of-quarter BTC price. An interpretation of these moving averages is that when the long-term indicators (200-day or 200-week moving average) cross the short-term indicator (50-day moving average), a shift in the price cycle is about to take place (from bullish to bearish, or bearish to bullish).

Bitcoin Yardstick from 2023 to the end of Q1 2024

The Bitcoin Yardstick, the perceived value of the network (market cap) over the value of energy used to maintain it (hash rate) has also halted its quick march towards “Expensive” territory, having escaped “cheap” around this time last year.

Bitcoin Pi Cycle from 2023 to the end of Q1 2024

The Bitcoin Pi Cycle, 111-day moving average (111DMA), and a 2x multiple of the 350-day moving average (350DMA x2), interestingly indicated a possible price reversal in March 2024. When the market price crosses beyond the 2x multiple of the 350-day moving average the Pi Cycle, it indicates that prices will potentially shift away from the positive run. As seen in the Pi Cycle graph above, this indicator successfully showed this trend reversal, though the market price still has room to go before it crosses the 111-day moving average or the Pi Cycle again.

Bitcoin NUPL from 2023 to the end of Q1 2024

Overall, network participants ended the quarter in an “Optimistic” sentiment, where the network was profitable according to Net Unrealized Profit/Loss (NUPL).

Bitcoin address counts holding various amounts of BTC

User activity was also enlightening in Q1 2024, as the network has added almost 5 million new addresses with a balance since the start of 2023. As we can see through these addresses’ balances, the biggest change is an accumulation of tokens on the lower end: 0.01 BTC or lower. This signal is likely indicative of new retail addresses joining the network rather than institutions that often hold large amounts of BTC at any time.

Bitcoin Puell Multiple

Miners also are now holding more profitable positions than this time last year – a multiple higher than 1 indicates profitability. As the multiple moves higher, BTC continues to hit higher peaks, which was true last quarter as BTC hit new all-time highs. There’s still a long way to go before the Puell Multiple hits a “high” value greater than 4, so this indicator shares a bullish sentiment for miners as the quarter ends.

Network Metrics

Bitcoin daily average transaction counts by block

The Bitcoin network ended the quarter with a slightly cooler transaction count than it started, processing an average of approximately 2,200 transactions per block vs the over 4,000 transactions per block in January.

Bitcoin daily average transaction fees

This transaction stability has also benefited users with lower average transaction fees, which are still higher than the second half of 2023, but far lower than January. We’re likely to see these fees drop post-halving, however with Bitcoin Runes (fungible assets akin to Ordinals) showing early signs of demand it’ll be an interesting space to watch.

ETFs

Bitcoin ETF Net Flows

Bitcoin ETFs, the major headline for Q1 2024, unsurprisingly had net inflows across the entire quarter. As issuers began to accumulate BTC for investors the expectation was always a net positive inflow. However, there were two major surprises. The first was a net outflow at the end of January – this can be mostly attributed to a reallocation from Grayscale to other issuers likely due to their high fees. The second surprise was the scale of inflows into the ETF. Many in the industry had clamored for an ETF, but the power of the event in opening doors for a whole new class of investors is simply remarkable.

Bitcoin ETF Flows by Issuer

As previously mentioned, the reallocation from Grayscale to other funds is highly evident looking at Net Flows by Issuer. Grayscale had no positive days in Q1 with more funds moving out than in. The main beneficiaries were Fidelity and BlackRock, two traditional finance behemoths. It is remarkable to see these two entities embrace blockchain technology, and the ETFs proved to have high support.

Ethereum

Spot Trading

Ethereum trading volume on centralized exchanges in Q1 2024

Ethereum trading volume on centralized exchanges nearly broke $20 billion in a single day during the March boom across several tokens. The Layer 1 network token struggled like most cryptocurrencies throughout 2023’s bear cycle but started to turn around in Q4 2023 with the hype and expectations around a Bitcoin ETF. Early 2024’s approval of the ETFs led ETH volumes to spike while igniting rumors of an Ethereum ETF sometime in 2024 – while several applications have been submitted, none have been approved as of April 2024.

Ethereum trading volume market share across centralized exchanges in Q1 2024

A majority of Ethereum trading volume occurred on Binance, with the centralized exchange taking as much as 60% of the daily market share, but after the exchange’s regulatory turns in 2023, Bybit stepped in to fill the gap. Since then, Binance has fully recovered and is pushing over 55% of ETH trading volume market share.

Price Indicators

Ethereum price and moving averages history

Ethereum’s price indicators show bullish signs with the 200-day and 200-week moving averages lagging the 50-day moving average by a decent margin – historically, the 200 DMA lagging the 50 DMA has shown bullish price rises while a 200 DMA leading (higher than) the 50 DMA has signaled a reversal in trends.

Ethereum market cap and realized cap throughout history

Similarly, the network Realized Cap of the network showed a decent runway for the current cycle, validating comparisons to the 2021 bull.

Ethereum price, Pi Cycle (350 DMA x2), and 111 DMA

Supporting the cycle is yet another indicator using long-term and shorter-term moving averages,  the Ethereum Pi Cycle. Similar to the Bitcoin Pi Cycle, the Ethereum Pi Cycle uses a 2x multiple of the 350-day moving average and compares this long-term trend line with a shorter-term 111-day moving average.

Ethereum net unrealized profit/loss (NUPL) and price

The Ethereum NUPL also follows the Bitcoin NUPL methodology. In this case, the market sentiment indicated is in a state of “Belief”, which is two stages behind Bitcoin’s “Optimistic” levels. This may be a bullish indicator as previously Ethereum’s NUPL has generally bounced upwards (and thus the network is in higher profits due to rising prices) when entering this stage.

Ethereum daily address activity

Daily addresses have also started to grow since the lows of 2023’s bear cycle. Daily active and passive addresses alike have grown in number with the network seeing more activity. Interestingly, March saw a large increase in daily passive address (addresses receiving funds) activity possibly indicating airdrops, reallocations between wallets, or “topping up” with new funds from centralized exchanges.

Ethereum new address momentum

New addresses are also coming on board in droves. Q1 2024 has seen a noticeable increase in new addresses generated on Ethereum, which supports a bullish cycle in play.

Ethereum balance buckets by address count

Yet another important metric to follow is the number of addresses holding balances, which has been increasing in almost every bucket. As the number of addresses in lower tiers such as those with <1 ETH increases, signs point to new retail addresses. As the number of addresses in higher tiers such as those with >1000 ETH grows, signs point to new institutions or new flows of funds onto the network. In this case, Ethereum seems to be generating a lot of interest from both groups simultaneously.

Network Metrics

Ethereum supply and market cap post-merge

Despite the light decline in Ethereum supply, the token’s market cap continued to march forward on price appreciation. Post-merge Ethereum led to an overall reduction in supply with overall gas being burned. This has usually been seen as a positive sign of network use and given the rise in market cap, the network appears to be in a healthy state.

Ethereum active validators, deposits, and withdraws since 2023

Validators also grew in number, giving credence to the post-merge success and sustainability of the network. Daily deposits still tended to outweigh withdrawals, but in Q1 2024 withdrawal activity began to increase in volume. This led to only a slight increase in validator deposits daily.

Ethereum successful and failed transactions since 2018

Network transactions have stabilized in number since 2021, with network activity roughly double what it was from 2018-2019. The network added significant volume since then and an even larger address growth, so stability in transaction counts is likely a positive sign that the network has been able to successfully navigate high growth. With Layer 2s also growing in size and significance, Ethereum usage has not decreased significantly, though this could shift if network fees become a sticky issue.

Ethereum failed transaction counts since April 2023

The network has also seen a major reduction in failed transactions over the last year, giving credence to network stability.

Ethereum gas price trend between January 2024 and March 2024

Gas over the quarter trended upwards at the end of February as network activity grew, but has since been reduced to roughly where it began at the start of the quarter. With the introduction of EIP-4844 and temporary storage space (blobs) cutting some of the costs for network participants, the expectation is a further reduction in gas prices on the Layer 1 network which will also significantly decrease gas costs on Layer 2 networks.

Download the full report here as this is just the subset of the report which also includes Stablecoins - Ethereum Supply, Spot Trading, DEX Trading, DeFi Lending, Real World Assets (RWAs), CEX Spot Trading, Top Tokens Trading Volumes, and much more!