The Key Takeaways Crypto State of the Union: ETF Flows & DeFi Activity

On Thursday, July 11th, Patrick Doyle (Amberdata Director of Product Mgt), Ryan Rasmussen (Bitwise Head of Research), and Chris Martin (Amberdata Director of Research) joined Blockworks moderator Bennett Holloway to showcase how they leveraged Amberlens to gain insights into the current market cycle. The discussion included an analysis of recent Bitcoin ETF activity, Spot Trading, DeFi Lending activity, Network (Bitcoin and Ethereum) overviews, and Real-World Asset tokenization.

Key Takeaways

ETF Activity

The group acknowledged that net flows for Bitcoin ETFs cooled in Q2 with almost the same number of days with net outflows as the number of days with net inflows. June saw far more days of net outflow, signaling some weakness in the market as BTC prices declined over the month.

Interestingly though, over the course of Q2, Blackrock and Fidelity were key beneficiaries having seen several large positive inflows in April, May, and June. Given that no issuers saw equivalent net outflows during these days, it’s safe to say that these positive inflows are new funds entering the market. 

Spot Trading 

Bitcoin spot trading blossomed during Q1 2024 and withered in Q2. Daily trading volume through the quarter peaked around $20 billion, but averaged around $10 billion. Despite peak trading far from previous quarters, Q2’s average daily trading volumes were generally higher than early Q1 which saw around $7 billion daily.

The speakers noted that spot trading volumes for ETH have generally kept pace with the prior quarter. Unlike BTC, whose ETF approval came quickly, ETH’s ETF approval process is full of anticipation and rumor. Many expected the ETF to be approved immediately after BTC – which of course did not happen. However, the memecoin craze, which occurred mostly on Base and Solana, brought waves of ETH trading in March and May in line with the news of the ETH ETF progression.

DeFi Lending Activity

Overall DeFi Lending TVL recovered from a drop in April as lenders rotated out of protocols and moved elsewhere for a short period of time. An interesting finding here was that some of the recovery occurred on Ethereum – by far the dominant chain for lending – but Arbitrum picked up a not-insignificant amount of value locked. It’s likely that we’ll see this trend expand over time, with users migrating to L2s for lower transaction fees and faster confirmation times. In addition, L2s may offer more appealing incentives and APYs for lenders given the disparity of funds on these networks.

Network (Bitcoin and Ethereum) Overviews

Bitcoin’s mainstream moment in Q1 2024 brought huge shifts in transfer values as several ETF providers and centralized exchanges reshuffled their positions (for example, a massive transfer of holdings from Grayscale to other ETF providers). The following quarter saw a general settling as transfer values returned to their 2023 levels. It’s yet to be seen whether network usage will expand as traditional finance onboards into the digital asset space, or if they prefer to rely on centralized exchange counterparts.

Meanwhile, Ethereum and Litecoin saw a period of growth in average transfer values despite the underlying token prices decreasing over the time period.

Real-World Asset Tokenization

Real World Assets (RWAs) are shaping up as a major category in digital assets. On Ethereum, RWAs have reached over $1 billion in market capitalization, almost tripling in the last three months. The major catalyst is Blackrocks’ BUIDL fund, though Superstate’s USTB fund has also grown quickly in a short amount of time.

This was truly an interesting session leveraging AmberLens Digital Asset Market Intelligence.

AmberLens uses the deepest, most granular digital asset data to deliver comprehensive market intelligence. As the only publicly available hub of institutional-grade digital asset metrics, AmberLens gives you the edge with a trusted and unified lens into the entire cryptoeconomy for managing your portfolio, and for back offices to make informed decisions, mitigate risk, and properly account for assets.

A recording of the full discussion is available here.

Thank you to everyone who came to the webinar - we hope to see you at the next ones!