Bitcoin
The BTC price remained close to the $60,000 mark as Q1 2021 drew to a close. So, let’s quickly revisit some of the catalysts that got us here. Over the course of 2020-21, high net worth individuals added Bitcoin to their portfolios. The list includes Paul Tudor Jones and his “Great Monetary Inflation (GMI) quote, hedge fund founder Stanley Druckenmiller, value investor Bill Miller, and even Howard Marks and Ray Dalio have changed their minds and turned bullish on/open to BTC.
BTC vs other macro assets. Image credit: CoinDesk
Beyond individuals, corporate treasuries have been investing in Bitcoin. Last year, Microstrategy (MSTR), a publicly-traded company announced a purchase of over $1 billion in BTC. Since that initial purchase, MSTR has been steadily adding to that position. All told, Microstrategy owns $5B+ of BTC. In February 2021, Saylor held an online convention teaching 1000+ companies how to purchase and store BTC within their own companies in a legal, compliant, and tax-advantaged way.
In October 2020, Square published a Bitcoin Investment Whitepaper, open sourcing the process behind their purchase of 4,709 bitcoins at an aggregate price of $50 million. Then in December 2020, Mass Mutual, one of the world’s oldest insurance firms purchased $100 million worth of Bitcoin.
In early February 2021, Tesla announced a $1.5B purchase of BTC. Tesla followed up that announcement by sharing that they will also accept BTC as payment and operate their own Bitcoin nodes.
Notable BTC treasury purchases. Image credit: CoinDesk
Additionally, legacy finance in getting involved. In the month of March, both Morgan Stanley and Goldman Sachs said they will start offering direct bitcoin exposure to their wealthy clients. Aside from banks, new crypto investment vehicles are regularly being announced. Six Bitcoin ETFs have been submitted to the SEC with the latest being from Fidelity and their trillions under management. And although the first US BTC ETF has yet to be approved, several have already launched in Canada.
Ethereum
EIP-1559 Gets Scheduled for London Hardfork
The Ethereum community has agreed to include EIP-1159 in the upcoming London hard fork upgrade, scheduled to occur in summer 2021. EIP-1559 replaces Ethereum's current auction fee model with a “base fee plus tip” model that is more flexible. The goal is to create a more efficient and simple gas payment process. EIP-1559 also will introduce burning the base fee to help keep network inflation low, security high, and ETH more valuable.
Once EIP-1559 is implemented a portion of every transaction fee will be burned, permanently removing it from circulation. EIP1559 is a mechanism that enables Ethereum to reduce the net issuance of Ether as a function of the demand to transact on the network. As over Q1 2021, ~40% of ETH miners’ revenue is now being earned from transaction fees.
ETH Fees at Record Levels
At the peak of the 2017 bull run, the average ETH transaction fee topped out near ~$5.75. During this bull run, ETH average transaction fees have exceeded $5.75 every day since mid-January 2021!
ETH fees over time. Image credit: CoinMetrics
Gas prices tend to fluctuate with ETH prices and are dependent on demand for block space. Each block can only include a limited number of transactions due to the maximum block size. ETh blocks have consistently been ~95% full or more since Summer 2020. In March 2021, blocks were 97%-98% full on average. ETH gas fees are paid to Ethereum miners and with ETH fees surging, 50% of Ethereum miner revenue now comes from transaction fees.
Visa Announces Pilot Program with Intent to Use Ethereum as Settlement Layer
In March 2021, Visa announced that it will be using Ethereum to settle payments using USDC. Fear not the high fees, though! Thousands upon thousands of individual transactions can happen internally on the Visa network, and then the whole can be batched together into a single transaction onto the Ethereum mainchain. This single transaction can update all the balances while providing the security and assurances of the Ethereum base layer. In the announcement, Visa states,
“[Visa], which moves billions of dollars each day in 200 markets, today announced it accepted the first settlement payment in U.S. Dollar Coin (USDC), a cryptocurrency pegged to U.S. dollar in a 1:1 ratio, from its global crypto wallet partner Crypto.com over the Ethereum blockchain. This marks the launch of a pilot which would allow Crypto.com to settle a portion of its obligations for the Crypto.com Visa card program in USDC.”
- Nina Bambysheva, Forbes Staff
NFT Boom and Ethereum
The NFT sector continues to explode, having had its best month in March 2021. The Top 3 NFT marketplaces are NBA Top Shot, OpenSea, and CryptoPunks. These were good for a combined trading volume of $200+ million.
Additionally, Ethereum development hub, ConsenSys, announced this month Palm, an NFT scaling solution. Palm will be a sidechain to Ethereum which will allow it to support settlement times and lower fees.
NFT sales exploded in Q1 2021. Image credit: CryptoArt.io
DeFi Performance
A quick look at some top DeFi performers during Q1 2021. Along with NFTs, DeFi, primarily on Ethereum, remains one of the crypto’s best performing sectors with Uniswap (UNI) leading the way.
DeFi Q1 2021 performance. Image credit: CoinMetrics
Cardano Progress
In March, Cardano continued along with its roadmap with the launch of the Mary protocol. The upgrade allows users to create new tokens that run on Cardano, similar to ERC-20 tokens on Ethereum. This opens the door for users to create their own unique tokens like NFTs and governance tokens. Users can transact with tokens without the need for smart contracts, meaning that sending a token on Cardano will be less expensive than sending its native token ADA.
Tether’s Attempt at Transparency
Tether Holdings Limited, the company behind the world’s largest crypto-dollar USDT, has released an assurance opinion to confirm that Tether tokens are fully backed by its reserves. The report, dated February 28, 2021, contains an assurance opinion by Moore Cayman that Tether’s consolidated assets exceeded its consolidated liabilities. In it, the report claims Tether’s consolidated liabilities amount to $35.2 billion, while consolidated total assets amount to ‘at least’ $35.3 billion. This assurance opinion combined with Tether’s settlement with the New York Attorney General last month should help quell some of the USDT concerns moving forward. Over Q1, all stablecoins including USDT saw impressive growth (figure below).
USDT remains the stablecoin market leader. Image credit: CoinDesk
