The well-known investment company VanEck presents its crypto-report August 2023, examining in detail the Year-To-Date (YTD) performance of the crypto world.
The renowned investment management company based in New York, VanEck has announced its crypto-report August 2023, where he examines the evolution of the crypto ecosystem to date. The detailed report examines the reality of cryptocurrencies both at the Layer1 level with Bitcoin, Ethereum, Solana, Cosmos and TRON as protagonists. Moving on to Layer2, focusing on Polygon, Avalanche, Arbitrum, zkSYNC and No crew, passing through the DeFi ecosystem and examining the strength of stablecoins, as well as sectors such as the metaverse and NFTs.
The results of the report are variable, given that each sector has adjusted to the reality that currently prevails in both crypto and traditional finance. However, it leaves a clear message: Even in the current harsh conditions, the crypto sector continues to perform better than traditional finance (TradFi).
VanEck: cryptos with better performance than TradFi
In the following table displayed in the report, you can see the Year-To-Date (YTD) performance of the cryptocurrencies in relation to the rest of the global TradFi indices. Thus it can be seen that the performance of cryptocurrencies and crypto companies is far superior to the rest of traditional indices.
For example, we can see that Bitcoin and Ethereum have a YTD of 60% and 39%, which makes clear the recovery trend of these cryptocurrencies so far this year. Coinbase has also been one of the companies related to the crypto sector that has recorded the greatest growth in this analysis. With 128% in YTD, it far leaves behind the rest of the elements described in this table, including the S&P 500 and Nasdaq 100 Index.
Layers 1 are maintained, Solana shines among them all
From VanEck they report that the month of August was a typical month in the stormy snowball of digital assets, as a storm of volatility and uncertainty swirled around crypto markets.
Citing regulatory decisions, smart contract bugs and hacks, solvency rumors and possible liquidation fears contributed to a substantial drop in overall cryptocurrency prices. All this is reflected in the overall poor performance of smart contract platforms (Smart Contracts Platforms or SCP), which was -10,7%.
The poor performance in this case is explained by a series of events that affected confidence in this sector, among which stand out:
- The liquidation of a $200 million position by a BNB hacker on BNB DEX Venus.
- Hacks of Ethereum, Balance and Curve DeFi applications.
- Concerns that the Curve hack could lead to the liquidation of Michael Egorov's $168 million CRV position, which represents 34% of the entire CRV supply.
- Outflows totaling $260 million from crypto ETPs in August.
Despite all this, events such as Ripple's partial victory against the United States Securities and Exchange Commission (SEC), and the possible advent of Bitcoin ETFs and Ethereum futures ETFs, improved overall market expectations and have strengthened the overall position of cryptocurrencies.
However, it was Solana who came out of this whole situation the best. Firstly, the successful launch of Solana Pay on Shopify has brought one million retailers of this e-commerce platform closer to the crypto world, and more precisely to the USDC token. Although this has not had an explosive impact on the value of Solana, it has been an interesting and solidifying movement of the community around Solana. A situation that can improve even more in the future with the increasingly stable releases of Solang, and its ability to port DApps written in Solidity (Ethereum, Polygon and compatible) to Solana.
Layers 2 continue to grow rapidly
Likewise, the report makes it clear that one of the sectors with the greatest growth has been Layers 2, around Ethereum and Bitcoin. First of all, Ethereum and its extensive Layers 2 ecosystem, including Polygon, zkSync, Arbitrum and Optimism, continues to grow. In fact, its most recent addition is the Layer2 Base created by Coinbase, forming part of Optimism's OP Stack ecosystem.
The main reason for the growth of Layers 2 in Ethereum is the eternal scalability problem of this network, which despite the promises of Ethereum 2.0, still maintains a processing capacity of only 14 transactions per second (14 TPS), requiring Layers 2 to be able to scale. This is fertile ground for projects like Polygon, Arbitrum and Optimism to grow, and they have not wasted any time taking advantage of this unique opportunity. In fact, each of these projects has embarked on creating unique solutions for all types of needs, and becoming modularized, to be easier to implement and use.
In any case, the winning player at the moment in this sector is Optimism, which thanks to the boost of Worldcoin, has been able to gain more than 600 thousand new users, now having more than 14 million registered addresses, an average of 360 thousand daily transactions and more than 2.8 billion TVL within the network.
DeFi, volume and TVL fall slightly
A curious point noted by VanEck is that the DeFi ecosystem has suffered a severe setback in trading volume and its overall TVL. VanEck highlights that the MarketVector Decentralized Finance Leaders Index underperformed BTC and ETH, falling 21% in August as on-chain economic activity declined.
The report highlights that the poor performance was exacerbated by the UNI token, which represents ~30% of the index, falling 33,5% as investors sold tokens to capture profits from its excellent performance in July. Other major components of this index fared slightly better: MKR, AAVE and LDO returned -6%, -14% and -15%, respectively.
Meanwhile, total value locked (TVL) in DeFi fell 8% in August, from $40.800 billion to $37.500 billion, slightly outpacing Ethereum's 10% decline. Decentralized exchange volume saw a more severe drop to $52,8 billion in August, down 15,5% from July.
While DeFi tokens had a lackluster performance in August, many of the core DeFi protocols saw positive developments. Uniswap Labs won the class action lawsuit against them. While Maker and Curve saw TVL growth on their stablecoins. These events to some extent are what have maintained the lateral movement of the overall TVL of the DeFi ecosystem. Thus, basically everyone in DeFi is in savings and low-risk mode, trying to gain strength that will take them to the range of 50 billion in TVL before the end of 2023.
Surprisingly, the player with the highest growth in the sector has been Justlend deployed on the TRON blockchain. This DeFi lending protocol has grown more than 32% in the month of August alone and has managed to position itself as the 4 largest DeFi protocol in the sector.
Conclusions
VanEck's report gives us a very complete look at how the crypto ecosystem has evolved so far. Although the bear market has been strong, the reality is that most large projects have been able to overcome it in a good way and recover spaces. In addition to this, the general volatility of the crypto space has been significantly reduced, which has caught the attention of large players who now see the sector with better eyes and greater understanding of it.
Despite everything, VanEck highlights that the two spaces most affected by the bear market have been NFTs and metaverses, which have been significantly diluted, despite the efforts of certain communities to remain in the sector. The situation may change, if projects such as Sony's tokenization platform and mobile game developer Zynga's Web3 Gaming are successful in their respective sectors by 2024.
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