🤝 Not just a fad

Wake up babe, a new State of Crypto just dropped. 

No, but really, a16z’s latest report is filled with intriguing snippets covering the entire industry. 

I wrote about the takeaways yesterday, but this morning I wanted to really focus on a few data points. Namely, what the team found when they dug into stablecoins. 

“We've seen that stablecoins have found product market fit, and I think it's largely because transaction fees have come down. Stablecoins are a great product when fees are low. And so we've really kind of seen the early signs of the infrastructure improvements starting to unlock applications like that,” a16z Crypto CTO Eddy Lazzarin said.

On top of that — as we’ve previously discussed — stablecoins are helping boost the strength of the US dollar. 

And, despite only being a decade old, stablecoin issuers are climbing the global ranks of US debt holders.

Heck, they’ve even surpassed other countries, like Germany. 

For a16z data scientist Daren Matsuoka, one of the most surprising findings in the report is actually the number of monthly stablecoin-sending addresses, which you can see in the chart below.

“That is a pure, clean, linear ‘up-and-to-the right’ graph, where you can see just a consistent growth in the number of stablecoin senders,” Matsuoka said. 

“We don't have that in the report, but as for stablecoin volume — where people try to identify like payment volume and other sorts of non-spammy transfers — that graph keeps growing despite the crypto cycle, the macroeconomic cycle, changes in interest rates, which have obviously changed a ton.”

“There have been all these huge macroeconomic changes, infrastructural changes, so much going on, and that line is almost a pure clean up into the right, which tells me that people want to send stablecoins and are finding more ways to send stablecoins…”

One of the most interesting aspects in all of this is that investment in infrastructure is really revealing itself in the data collated by a16z. 

The chart above is one of those chef’s kiss moments for crypto, where you can easily show the non-crypto folks in your life a good crypto use case. 

See, mom? Crypto’s not a fad. Or a fluke.

— Katherine Ross

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• BTC and ETH have each slipped 1% in the past day to $66,900 and $2,600 apiece.

• Bitcoin dominance is at 58.8%, per TradingView, its highest since April 2021.

• Stablecoin supplies have shed over $1 billion in October, now under $169 billion, according to The Tie. ($186 billion is the record, set before Terra blew up in May 2022.)

• Solana is close to flipping Tron for TVL for the first time in over two years: currently $7.31 billion to $7.439 billion after Solana DeFi gained 22% in the past week.

• 12,622 ETH ($32.9 million at current prices) was burned in the past week, the highest ETH-denominated burn since April.

 💪 The unbreakable cycle

We’ve sliced and diced crypto market cycles in all sorts of ways already on Empire.

Here’s to one more!

You probably know this bull market has been missing an altcoin season — a period where crypto other than bitcoin really rips for a long period of time. 

Bitcoin has, however, grown much faster than the altcoin market since the cycle bottom in November 2022. 

There’s no strict definition for when altcoin seasons start or end, but perhaps they’re confirmed when altcoin growth eclipses bitcoin’s. That last happened over 1,000 days ago.

It sounds dire, but there’s an optimistic take: Crypto has, historically, always caught up to bitcoin. It’s just not overdue for a reversion as yet.

The chart below plots the market value of bitcoin — in orange — against the rest of crypto — in purple — over the past seven years. 

It encompasses three major bull markets and two bears. Bitcoin halvings are shown by the two dotted orange lines.

(The data actually goes back further, to 2014, but crypto other than bitcoin was a much smaller market around then, and it only truly caught up to bitcoin in mid-2017.)

Notice the purple shaded areas: two distinct periods in which crypto was valued higher than bitcoin, separated by a halving.

The first “crypto age” started just after bitcoin set an all-time high close to $20,000 in December 2017. Altcoins had continued to rally for another few weeks before starting their own major corrections, and for eight months “crypto” was valued higher than bitcoin.

Bitcoin would start to pull much further ahead between April 2019 and April 2021 — when arguably the strongest altcoin season on record allowed the purple line to catch up to orange.

The two were practically equal, even as of the start of this year, right up until bitcoin peaked in March. Crypto has since shed more value than bitcoin, but it has historically always returned back to meet bitcoin, and then some.

First, for the ackchyually-inclined: yes, it’s silly to look for concrete historical trends in so relatively little market data.

That shouldn’t get in the way of a good time, especially so in service of the Church of the Four-Year Halving Cycle. Amen.

— David Canellis

• Stripe’s looking to acquire Bridge, a firm focused on stablecoins, according to Bloomberg.

• Kraken’s joining the wrapped BTC club, announcing Thursday that it plans to launch its own offering called kBTC.

• Robinhood’s launching a desktop platform and added bitcoin options to its app.

• Ex-FTX executive Nishad Singh is pushing for no jail time ahead of his sentencing.

• Jump Trading is accused of a pump-and-dump scheme in a lawsuit filed by a video game developer.

Q: What would widespread active crypto usage look like?

Crypto-utopia. Everything solarpunk would come true: an end to scarcity and rise of social collectivism. Open source technologies that both bring us closer to, and protect, the nature around us. 

But really, it all depends on how you define “active usage.”

A16z found an estimated 30 to 60 million active crypto users, representing between 5% or 10% of the 617 million crypto owners that Crypto.com suggested were out there earlier this year.

Its methodology filters out non-transacting addresses, and those with a near-zero balance, from active addresses overall, leaving only addresses who really sent and received at least some crypto.

That makes sense. But at the same time, buying and holding crypto can also be “using” it. 

Bitcoin hoarders who are storing their value with BTC may not be spending it in real life, but they’re still actively using the technology.

— David Canellis

To me, it’s incorporating crypto into your everyday life in such a mundane way that you don’t even think about it. I think stablecoins are, so far, a great example of that — primarily for non-Americans. 

Both Lazzarin and Matsuoka from a16z Crypto stressed to me the importance of bringing folks onchain to drive up their engagement. I’m not sure what the answer is, if we’re being totally honest. 

A bull market? Great, we’re technically in one and yeah, we’re seeing more engagement but there’s still room to grow. Better infra? That’s growing, too. Memecoin mania? Well, that’s not going to drive a lot of normies to the space (let’s be real, it takes a certain temperament to come out on top with memecoins). 

While I’m skeptical that there’s one right or good answer, I think it’s the perfect moment to f*** around and find out. Keep experimenting and see what sticks. 

— Katherine Ross