Despite the FTX meltdown, the gaming dapps seem immune, with over 800K dUAW over the past two weeks.
The unexpected collapse of the FTX exchange and all of its affiliated entities sent shockwaves across the cryptocurrency markets, Web3 and the dapp industry. It took less than a week to go from normal operations to bankruptcy and fraud investigations! This event had an impact on the whole Web3 industry.
The rapid decline of FTX and its associated coins, once valued at $32 billion, shocked the Web3 industry.
During less than a week in November 2022, the FTX exchange platform experienced speculations about a lack of finances, a bank run on their stored assets, a withdrawal freeze, a prospective takeover proposal from Binance, which was shortly withdrawn, investigations by the SEC, suspicious transfers of a huge number of tokens of the exchange, the hack and a global bankruptcy declaration for FTX and all affiliated parties.
This story has not yet reached its conclusion. However, it has already had a significant effect on the markets. And is likely the major driver of the current decline in cryptocurrency market prices. Cryptocurrency users are worried about a cascading wave of bankruptcy, prompting exchanges to verify they retained adequate liquid assets to repay customer deposits. Despite this, several exchanges experienced a huge outflow of cash as users anticipated a cascade of insolvencies.
Despite this event, in the past two weeks, the Web3 industry seems resilient. The activity decreased by 11.67% but still managed to reach an average of 1.9 million daily Unique Active Wallets (UAW) and over 25 million transactions. DeFi UAW peaked on November 9 and 10, hitting approximately half a million UAW on both days; DeFi activity is now returning to levels from the previous month (400K dUAW). The gaming dapps seem immune to the FTX collapse, with 814,305 dUAW over the past two weeks.
The total value locked of DeFi projects has decreased by 20.60 % to $65 billion. Solana blockchain has experienced the greatest decline in TVL, falling from $1.65 billion to $585 million, representing 64.66% in USD, but just 18% in SOL.
The NFT market is far from dead, and its current slowdown is due to socioeconomic factors rather than a decline in interest. The NFT sales count decreased only by 24.50% and the NFT trading volume by 68.60%. On average, the daily NFT trading volume was $11.94 million, and 93,925 was the daily sales count.
In the following report, we will analyze the impact of the FTX collapse on the dapp industry.
- On November 8, the FTX and Alameda Research wallets had $1.7 billion and $177.3 million, respectively. At writing, the net worth of both wallets has decreased by 94% and 69%, respectively.
- DeFi UAW peaked on November 9 and 10, reaching almost 500,000 UAW on both days; DeFi activity is now back to last month’s levels (400K dUAW).
- Gaming dapps and gaming chains as EOS, Hive, Wax, Ronin and IMX seem mostly unaffected by the FTX meltdown; gaming UAW peaked on November 10 with almost 900,000 UAW.
- Since November 1, the DeFi TVL has dropped 20.60%, from $83 billion to $65 billion.
- Solana decreased its dUAW by 6.53% (46K) and the transactions count by 10.42% (1.5M) since October 31; its activity peaked on November 8 with 65K UAW. Solana lost 18% in TVL measured in SOL and 66% in TVL USD.
- Since November 1, Solana’s NFT trading volume increased by 380% and the NFT sales count increased by 396%. DeGods had a decrease in the floor price in SOL of 24.01% and 69.11% in USD; additionally, the number of NFTs listed has increased by 58.04%.
- After rumor of Crypto.com potentially being insolvent on November 13, the activity in Cronos has reached 15,000 dUAW and 25k in transactions count. Its TVL has decreased by 19% in USD, but gained 45% in CRO.
- The overall NFT trading volume since November 1 decreased by 68.60%, and the sales count dropped by 24.50%. The blue-chips collections have maintained their value, as they decreased on average by 9.78% in ETH value or 30% in USD value.
- The dapp industry keeps going strong despite the FTX drama – 1.92M dUAW connected in the last 7 days
- Decentralized finance is essential for the future of our industry
- The appetite for NFT collections is still high
- Games are proving once again their resilience with 814K dUAW over the past two weeks
- FTX and Alameda wallets have 72.9% and 84.8%, respectively, of their balances in stablecoins
- Closing words
The dapp industry keeps going strong despite the FTX drama – 1.92M dUAW connected in the last 7 days
Since October 31, the unique active wallets (UAW) in the industry have decreased by 11.67%, reaching an average of 1.9 million dUAW in November. In contrast, the total number of transactions decreased by only 0.28% (26M).
DeFi UAW peaked on November 9 and 10, reaching nearly 500,000 UAW on both days, but DeFi activity is now back to its levels from the previous month (400K dUAW). The FTX meltdown appears to have had little effect on gaming dapps, as the UAW peaked on November 10 with nearly 900,000 UAW.
The activity in Arbitrum increased over the past two weeks by 26.36%, reaching on average 24,443 dUAW. Polygon, in the same time frame, increased its activity by 7.11% with an average of 148,752 dUAW.
Looking at the transactions count over the past two weeks, we notice that Arbitrum increased the transactions count by 22.84% (35K), Hedera by 38.96% (900K), Hive by 33.78% (2.1M), Polygon by 17.91% (623K), Optimism by 6.60% (90K) and Tezos by 17.89% (35K).
In contrast, Ethereum remains on the same downward trend it was in before. In these two weeks the number of unique active wallets decreased by 51.65%, and Ethereum now has a daily average UAW of 71,075. In addition to Ethereum, Flow and BNB Chain decreased their UAW count. Flow dropped 17.24% and now has a 36,859 daily average UAW, while BNB Chain saw a 24.72% decrease, reaching a 636,857 daily average UAW.
Decentralized finance is essential for the future of our industry
Total value locked (TVL) quantifies the total value of all assets that are locked by DeFi protocols. As TVL rises, more coins are deposited within the DeFi protocols, indicating bullish sentiment, whereas a falling TVL indicates investors are withdrawing funds from the ecosystem.
The total value locked in DeFi platforms has dropped 20.60%, from $83 billion to $65 billion, since November 1.
Ethereum, the leading blockchain, has decreased in TVL from $51 billion on November 1 to $41 billion on November 13, translating into a 14% decrease. On Lido, the largest Ethereum liquid staking service provider, the ETH staking yields have increased by over 10.16%, the highest ever recorded. The stETH lost its peg to Ether and currently is 0.9883.
In addition, BNB’s TVL is also down 14%, reaching $7.3 billion. Tron’s TVL decreased from $6.1 billion to $4.6 billion, a 25.05% drop. On the same trend, Avalanche, Polygon, and Arbitrum had their TVL decrease by 25.06%, 8.76%, and 10.26%, respectively.
On November 13, following rumors that Crypto.com may be insolvent, Cronos‘s activity reached 15,000 dUAW and 25,000 transactions. In the past two weeks, its TVL has decreased by 19% in USD, but increased by 45% in CRO.
Solana blockchain has seen the biggest loss in TVL. From $1.65 billion, it reached $585 million, translating into a 64.66% decrease in USD, but just an 18% decrease measured in SOL.
Among the top DeFi projects on Solana, lending platform Solend lost 87% of its TVL over the past two weeks and currently has roughly $60 million locked in the protocol compared to $456 million on November 1.
Marinade Finance lost 58.79% of its TVL and currently has $102 million, becoming the top DeFi project on Solana. The decentralized exchanges Raydium, Serum and Orca have lost 56.71%, 99.44% and 33.33% of their TVL over the past two weeks, respectively.
The fall of Serum has been a tough one, as it is a cornerstone of Solana’s DeFi infrastructure; it is the trading ecosystem’s major central limit order book, which is a more efficient alternative to the “automatic market maker” configuration prevalent on DeFi exchanges. It has handled over $32 billion in volume this year, with the assistance of large market makers such as Jump and Alameda.
Solana’s token SOL has also dropped heavily compared to its competitors, with the price falling 59.36% to $13.25 over the last two weeks.
The token had briefly risen after news that Binance might end up acquiring FTX, but dropped after Binance backed out of the deal, citing allegations of consumer funds being mishandled and an investigation from regulators.
Despite the recent challenges facing SOL, co-founder of Solana Labs Anatoly Yakovenko has reiterated in a tweet his bullish stance on the network despite recent losses.
If you want to know more about the impact of FTX on DeFi dapps, read this article.
The appetite for NFT Collections is still high
The NFT market is far from dead, and its current decline in trading volume is due to socioeconomic factors rather than a decline in collector interest, as the sales count decreased only by 24.50% in these two weeks.
Observing the data from 1 November, we see that the NFT trading volume in most chains has decreased. Ethereum’s daily NFT trading volume fell from $17 million to $4.4 million, a decrease of 73.75%. Following, Flow began the month with a daily NFT trading volume of $307,830, and by November 13, it had decreased by 67% to $101,375. During the same time frame as Flow, the daily volume of NFT trading for Polygon was $235,794, but it has since dropped to $114,465.
Ronin and Wax, the two well-known blockchains for in-game NFTs, did not appear to experience significant fluctuations in the volume of NFT trading. Since the beginning of the month, WAX has increased by 71.29%, while Ronin has decreased by 7.66%.
Since November 1, Solana’s NFT trading volume has increased by 380%, and the NFT sales count increased by 396%. Notably, the floor price of the leading NFT collection DeGods has decreased by 24.01% in SOL and 69.11% in USD since November 1. Furthermore, the number of listed NFTs has increased by 58.04%.
As the Yuga Labs collections dominate the NFT market, we wanted to see if there’s any correlation between the impact of Terra and FTX collapses. We considered the price of May 1 and May 14, and November 1 and November 14.
As we see in the table below, Terra’s collapse impacted the blue-chips collection more than FTX did. Looking at the data, on average, the decrease in ETH floor price of the collections has been 18.24% post-Terra, and just 15% post-FTX. On the same trend, the average decrease in USD has been 41.99% post-Terra and just 33.60% post-FTX.
It is worth noting that despite the tough market situation, Yuga Labs keeps building, and on November 14, they announced the acquisition of the NFT startup WENEW and their 10KTF Web3 fashion brand, co-founded by famed artist Mike “Beeple” Winkelmann.
Michael Figge, co-founder and CEO of WENEW, will serve as the new Chief Content Officer. Beeple, best known for selling a single piece of NFT artwork at auction in March 2021 for $69.3 million, will serve as an advisor to Yuga Labs.
Many NFT collections saw price crashes during all of this. But much of that is related to the drop in the value of the related blockchain tokens.
Games are proving once again their resilience with 814K dUAW over the past two weeks
The FTX collapse does not seem to affect the blockchain gaming industry. On average, in these two weeks, there have been 814,305 daily unique active wallets, and on November 10 the numbers peaked at almost 900K.
The dominance in the activity of this sector has decreased since last month, and currently is 41.95%, due to the rise in the DeFi activity.
The collapse of FTX has had a massive impact on the Solana blockchain gaming projects, with the value of many gaming-related tokens decreasing. Some of the most popular titles that have been impacted include Aurory, TapFantasy, Star Atlas, and Mini Royale Nations.
If you want more in-depth information about how the gaming sector was affected, read this article.
FTX and Alameda wallets have 72.9% and 84.8%, respectively, of their balances in stablecoins
According to Dune Analytics, as of November 8, the wallets belonging to FTX and Alameda Research had a respective total of $1.75 billion and $177.3 million. On November 14, the net worth of both wallets had significantly reduced, falling by 94% and 69%, respectively.
On November 14, the entire balance of the FTX wallet was $100.1 million in tokens, with 72.9% of that amount being held in stablecoins and 27.1% in altcoins. It would appear that there are no NFT assets in the FTX wallet.
In the Alameda Research wallet, there is a total of $54.9 million worth of tokens, of which 84.8% are held in stablecoins and 15.2% are held in altcoins. Of their non-fungible token holdings, 76.5% are held in Sandbox LAND, 15.5% are held in MAYC, 5.9% are held in Otherdeed, and 1.16% are held in MFER. It is worth noting that the 81 Sandbox LANDs make up only 0.04% of the overall supply of LAND.
In contrast to traditional financial institutions and exchanges, where investors’ and depositors’ funds are insured, crypto exchanges are significantly riskier. Due to the nature of cryptocurrencies, exchange users have to transfer ownership of their holdings in order for a trade to occur (meaning they are no longer depositors, but creditors).
Because of this, crypto traders should avoid storing their assets on a centralized exchange. As a result of the volatility of cryptocurrencies, investors may be unable to liquidate their holdings on an exchange if the price of a cryptocurrency drops dramatically. This might make it difficult for consumers to retrieve their crypto assets.
Nevertheless, there is some positive news associated with FTX’s downfall: the realization that cryptocurrencies may not be the “golden egg” for novice investors is a market-positive trend. In market microstructure, these investors are referred to as “irrational traders,” who are typically exploited by traders with more knowledge.
In the past, irrational traders have excessively influenced pricing, which is undesirable for the functioning of an efficient market. Once they are no longer present, the market will reflect the true value of crypto assets.
Bitcoin, the most prominent cryptocurrency, lacks a business model; as a result, its price (and worth) is subjective and constantly set by the intersection of supply and demand. However, the remainder (including Ether, Cardano, and Solana) should be viewed as utility tokens rather than coins. In this sense, they permit decentralized finance (DeFi) transactions, give value to non-fungible tokens (NFTs), and ultimately serve as the currency of future metaverse services.
The good news is that these tokens could be viewed as value generators rather than coins in the conventional sense. To give a useful example, we are currently in a similar position as we were immediately after the internet bubble burst in 2001, when the actual internet-based business models could finally emerge.
Despite the failure of FTX, blockchain technology remains robust and is the foundation of other innovative projects altering our financial system and economies. The technology didn’t flinch, kept providing services, and allowed every user to send and receive assets.
There are many potential uses for this technology, including applications in financial markets with digital assets, blockchain solutions to price carbon emissions, and utility tokens that disrupt traditional internet platforms.