Over the last few months, the crypto industry faced numerous headwinds. These included the death spiral of the Terra ecosystem, the insolvency of over-leveraged hedge fund Three Arrows Capital, and major crypto lending platforms – like Celsius, BlockFi, Voyager and Vauld – taking drastic measures to accommodate “extreme market conditions.”
Due to these developments, market participants have been forced to deleverage, contributing to downward market pressures since May. That trend broke in late July as cryptoassets rebounded, but August brought a pullback once again as the macroeconomic environment remained difficult.
Between the challenging crypto market and the difficult macroeconomic environment, it’s tough to anticipate what lies ahead. However, on-chain data can help identify the signal amid the noise by providing evidence of trends in network usage and demand. In Kraken Intelligence’s latest on-chain digest, Mixed Signals, the team investigates what went down in August.
Dominance shift
ETH fell -7.4% in August despite The Merge serving as a notable tailwind for the crypto space as macroeconomic concerns continued to weigh heavily on the industry. BTC suffered even greater losses, declining -14%.
Though BTC led in year-to-date (YTD) dominance growth through July, it became the cohort’s second-worst-performing cryptoasset YTD in August. Notably, ETH dominance was the worst performer YTD as of last month. However, its +0.5% rise month-over-month (MoM) has caused ETH to outperform BTC and SOL with a YTD loss of -0.7%.
On-chain fundamentals
Our findings suggest that BTC’s on-chain demand and usage fell as YTD and MoM volume and fees declined. On the other hand, ETH outperformed this month, as Merge anticipation helped it post MoM growth in dominance, on-chain volume and fees in August. ALGO continued to perform poorly across the board on a monthly and YTD basis, except in daily active addresses, which rose +69% in August.
A lot has happened so far in 2022 and on-chain data suggests mixed demand and usage activity across cryptoassets. However, this month, overall activity trended negative. Still, the emerging pattern indicates ETH demand could continue to rise throughout 2022 if all goes well with The Merge.
Want to learn more about on-chain activity in August and what’s ahead? Read the Kraken Intelligence report, Mixed Signals, in which the team explores the crypto fundamentals and on-chain data that shaped the market in August.
These materials are for general information purposes only and are not investment advice or a recommendation or solicitation to buy, sell or hold any digital asset or to engage in any specific trading strategy. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to loss of funds. Tax may be payable on any return and/or on any increase in the value of your cryptoassets and you should seek independent advice on your taxation position.
