3 March 2023

The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram

here

.

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Hello!

Yes, we know, you are looking at the BTC tank below $22.5K USD as we write this Friday morning and wondering, “when will we EVER see a strong rally?”

“Not anytime soon,” is perhaps the safest and most logical answer anyone can give right now, and that is ours too. We just need to keep a close watch and wait. Or find the little corners of the crypto world to find some (risky) excitement – more on this in our lead piece below.

Before that, here are Top-5 stories for the issue.

1

Silvergate is facing a bank run

after it announced impending US government inquiries and investigations into its financials. Stocks

plunged

soon after the announcement.

Not good.

2

Say hello to the beta version of BICASSO

, Binance’s AI-driven automatic NFT generator. It had a limit of 10K mints,

.

3

Reuters

reported

that Visa and Mastercard are pausing their crypto push amidst the meltdown. Visa’s head of crypto has

the report.

4

Ethereum

rolled out

a key feature which will enable you to recover cryptos even if you lose the private keys to an online wallet. 

And Polygon

launched

a new ZK-based product allowing users to verify their identities or credentials without revealing sensitive information. This is important progress for the proliferation of ZK-based scaling, which is already pretty hot right now.

5

Former FTX director and SBF groupie Nishad Singh pled guilty to criminal charges.

 WEEKLY MACROS

Total crypto market cap: $1.12 trillion - 

 0.8%

Bitcoin market cap: $451.9 billion -

 1.7%

The dollar index (DXY): 104.8 -

 0.2%

Bitcoin Dominance: 40.39% - 

0.5%

Crypto Fear and Greed Index:

50

- The market is in neutral condition as crypto market participants are cautiously pessimistic as the macro conditions are still in disarray with S&P 500 showing weakness.

 WEEKLY PRICE TRACKER

Price movements from last Friday

BTC Watch

 6.7% as major exchanges across the world severed ties with crypto banking giant Silvergate citing regulatory pressures. BTC could revisit the $19000-$20000 if macro risks like Mount Gox BTC unlock etc. prevails.

ETH Watch

 4.8% as Shanghai upgrade will unlock more than 16 million ETH that was previously staked by validators.

Altcoins Watch

MATIC

:

 13% with Polygonscan, the largest block explorer for Polygon, undergoing issues causing nodes desynchronisation.

SHIB

:

 13% as meme coins were unable to hold support due to weak fundamentals.

LDO

: 

 1% with Liquid Staking Derivatives narrative gaining momentum again amid much anticipated Shanghai upgrade

 WHAT'S HOT

  Coins to watch out for

SingularityNET (AGIX)

is a blockchain-powered platform that allows anybody to easily create, share, and monetize AI services, thanks to its globally-accessible AI marketplace. SingularityNET is the first platform that makes it easy for developers to sell their AI tools and libraries and enables buyers to test any AI service provided on the marketplace to see if it meets their needs before making payment. With the current AI narrative, AGIX has gained more than 30% in the last week. 

Binance USD (BUSD)

is a 1:1 USD-backed stable coin issued by Binance (in partnership with Paxos). Despite exponential growth in terms of market cap, U.S. Securities and Exchange Commission (SEC) has hinted a potential lawsuit might be on its way to Paxos. This has caused massive disruption in supply since last month and Coinbase delisting BUSD from its platform has been a major blow to the crypto space in general. It will be important to track BUSD in general and how it is going to affect the space in the near future with regulations coming in hot.

Project to watch out for

LiquidDriver

is the first liquidity mining dApp providing liquidity-as-a-service in the Fantom ecosystem. They aim to bring its users more utility, rewards, and long-term benefits through our native token, LQDR, and ultimately become the leading liquidity-on-demand platform for dApps on the Fantom Opera Mainnet. Worth keeping an eye on the platform.

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 THE HOT TAKE

Ethereum Layer 2s are gaining traction, could be an opportunity for you

If you are one of those who have not understood Layer 2 protocols yet, here’s a quick primer: Blockchains have an inherent limit in terms of processing transactions. If there are too many transactions, it slows down the entire network. This is where Layer 2 (L2) protocols come in. You can think of them as “sub-blockchains” which are specifically designed to solve scalability issues in the main blockchain.

L2 blockchains are built on top of layer 1 blockchains like Ethereum, Solana or Avalanche, in an effort to reduce bottlenecks, constraints and other network-clogging effects. 

Today, we track key trends on Layer 2s specific to Ethereum (Polygon (MATIC)), Arbitrum and Optimism (OP) to give you an idea of what to expect in the upcoming years.

1. Polygon is established; Arbitrum and Optimism are growing rapidly

In terms of number of users, Polygon has a monthly active user base of 300-400,000. It was the first scaling solution of prominence and has built a strong product over the years. It is operating as a blockchain by itself though being an Ethereum Layer 2 is still its strong use case.

In the last six months, Arbitrum and Optimism have gained considerably in terms of new user base.

Source: Tokenterminal

2. Arbitrum has surpassed Ethereum in number of transactions with negligible fees.

Thanks to a growing ecosystem on Arbitrum including GMX (a DEX), more transactions were processed on Arbitrum last week compared to Ethereum. And it cost users just 2.3% of fees compared to that of Ethereum.

Surprising? This is an intended outcome with Layer 2s over time. Ethereum, the base layer, will provide security while scaling solutions will process most of the transactions.

3. Ethereum’s upgrade will likely scale L2s even more

L2s are here to stay. In spite of major upgrades to Ethereum (Shanghai upcoming), it by itself will not be capable of transactions at scale and low cost in the future. If Ethereum scales by 10x in throughput, transactions from Layer 2s will likely scale even more – and also allow room for multiple winners in the space.

Optimism has an upcoming upgrade

termed ‘Bedrock’ that will make it competitive compared to Arbitrum.

Polygon’s zkEVM beta launch in March is also an exciting development.

4. Layer 2s are evolving, new winners will emerge

The function and role of L2s are likely to evolve in the future. As more use cases of blockchains emerge, some of them may entirely be done on a L2 solution given restrictions in size or volume or fees.

As the technology behind the functioning of blockchains is evolving too, new launches and upgrades will continue to dictate who rules this ecosystem. Polygon, Arbitrum, and Optimism seem to have an early lead, though it’s still too early. 

Investment thesis: L2s have higher beta than L1s – high risk, high rewards

If you are convinced of layer 2s, we get to the key takeaway that matters: Investment. By definition, layer 2s have a higher beta than its base layer. (what’s a

beta

?)

When the market is good, L2s can outgrow ETH and when the market is bad, ETH will be more stable than L2 based tokens. We always advise that you park most of your crypto portfolio in BTC and ETH – say 80%. The remaining 20% can be used for strategic bets including on Layer 2s. 

Today, MATIC and OP are considerable investments to research on given Arbitrum is yet to release a token. 

MATIC has been one of the strongest altcoins this bear market, even outperforming BTC in some months.

OP token may see a near-term spike as its Bedrock upgrade nears. Engaging on Arbitrum platform as an user might also lead to an airdrop in the future. 

The other notable layer 2s on Ethereum currently are: ImmutableX (IMX) and Loopring (LRC). They are yet to gain prominence in the ecosystem. 

Note: Growth in all of the above are dependent on ETH doing well in the market.

That’s it for this issue, see you next week.

If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

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