DappRadar Blockchain Industry Report – July 2022
The cryptocurrency market has yet to recover from the terra crash, which impacted the entire Web 3.0 ecosystem, including DeFi, NFT, and the Metaverse. Recent US inflation figures hit their highest level in decades, coinciding with an interest rate hike of 75 basis points and a contraction of 0.9% in Q2 2022. Additionally, the United States has officially entered a recession for the second consecutive quarter, which occurred during this most recent quarter.
As a direct result, the decline in the value of cryptocurrencies is evident. In fact, dApp activity hit its lowest point this year, with just 1.68 million daily unique active wallets (UAWs) connected to blockchain dApps in the month of July. This figure shows a 4% decline month-over-month (MoM), but is still 20% higher than July 2021.
Undoubtedly, due to the direct impact of cryptocurrency prices, the DeFi blockchain segment is experiencing most of the bear market pains. Since April 2021, this is the first time that the number of UAWs connected to DeFi dApps has fallen below half a million. In percentage terms, this equates to a 22% decline from the prior month and a 31% loss from the prior year.
Few blockchains, however, stand out and buck the bearish trend. Because anyone can now deploy a smart contract on the Flow Mainnet due to the recent announcement of the deployment of permissionless smart contracts, for example, Flow saw an increase of more than 200% in daily UAW compared to the previous month. Due to the complexity of the situation, the NFT market has also shrunk. However, in this case, a number of new trends in this industry have formed, and they may be present until 2022 and even beyond.
DeFi recovers from Terra Crash – 22% increase in TVL
The DeFi business has seen an increase in its overall net worth due to the gradual but steady rebound in the crypto market. The Total Locked Value, or TVL, was used as a standard to assess the effectiveness of dApps. On December 2, 2021, TVL reached an all-time high of $253.91 billion. Throughout July, TVL grew. As of July 31, TVL was worth $82.3 billion, up 22% from the $67.3 billion it was on July 1. Seven of the top ten smart contract chains saw an increase in TVL, which could be the cause of this development.
Ethereum continued to have the highest frozen value in July. Ethereum TVL was around $46 billion on July 1 and rose to around $57.9 billion by the end of the month. BNB Chain replaced Terra as the chain with the second highest value locked after Terra failed. On July 1, BNB Chain’s TVL was worth over $5.97 billion and by the end of the month it had risen to around $6.8 billion.
Similar increases were seen across the month. TRON TVL had $3.95 billion in early July, but by July 31, it had grown to $5.9 billion. Additionally, Avalanche grew from $2.68 billion to $2.81 billion. Solana (SOL) saw its TVL rise from $2.47 billion to $3.2 billion over the same period. The TVL for Polygon and Cronos jumped by $270 million and $110 million, respectively.
Polygon continues to grow during market volatility
This month, the Polygon network received a number of significant upgrades in addition to its growing DeFi presence. A significant number of projects formerly hosted in the Terra ecosystem are now found on the Polygon network. The Terra Development Fund, a multimillion-dollar program that helped these projects relocate, is primarily responsible for this. Also, as already mentioned, given that the TVL of the sidechain has increased by 17%, this can potentially lead to DeFi activity.
In addition, Polygon has been selected to participate in the Disney Accelerator Program, which is an initiative to encourage the growth of creative businesses. This year’s Disney Accelerator class has a strong focus on augmented reality (AR), NFTs, and artificial intelligence (AI). Additionally, Polygon intends to introduce a new web3 phone with London-based tech startup Nothing, which aims to “break down the barriers between people and technology.” They want to enable NFT repositories directly on their Android phone with their new Web3 smartphone.
Crypto Contagion Lingers as Celsius Files for Bankruptcy
Due to monthly account withdrawals and uplifting debt repayments, the Celsius saga has moved on to the next phase. The centralized lending network has filed for Chapter 11 bankruptcy, which further raises the question of whether depositors’ money can be recovered. The company filed for bankruptcy, revealing significant debt. Celsius’ mining arm alone has racked up $576 million in debt after spending $750 million on mining rigs. Mining earnings were significantly impacted by the market downturn. For example, the cost of mining equipment has decreased by 50%.
The loan liquidations also caused the company $135 million in damages. While the $75 million loan from Three Arrows Capital (3AC) was liquidated with a loss of $40.6 million, the $841 million Tether loan was liquidated with a loss of $94 million. But the fascination persists. It may not be as dire as it sounds for Celsius to file for Chapter 11 bankruptcy. That doesn’t imply that a company has necessarily perished. General Motors and Marvel are examples of companies that have gone through this process and come out stronger.
More calls for crypto regulation
The Presidency of the Council and the European Parliament reached a preliminary agreement on crypto-asset markets (MiCA) at the end of June 2022. This agreement covers companies that create digital currencies and stablecoins, as well as exchanges and wallets where these assets are kept. This regulatory framework aims to protect investors, maintain financial stability, and promote innovation while enhancing the attractiveness of the crypto asset market. Since some EU members already have disparate national laws governing crypto assets, MiCA aims to increase clarity within the EU. At EU level, there was still no clear regulatory structure.
The speed at which cryptocurrencies and stablecoins are adopted by the public in the future will almost certainly correlate with the level and quality of regulation that exists in a particular country. Major economic regions, such as the United States and the European Union, are taking steps to provide initial guidance as regulatory certainty influences the behavior of economic actors.
Has the NFT bubble officially burst?
Despite the fact that the NFT market did not exceed $1 billion in transactions for the first time since June 2021, the answer may not be so simple. The current market environment is historically gloomy. Market liquidity has decreased, prices are largely influenced by the fall in the value of cryptocurrencies, and the potential profit from resale is modest. As a result, many users have opted to liquidate their assets in the NFT market, waiting for better times or moving into positions generally referred to as “holding” the trading block until the “crypto winter” has passed. .
Dollar-based trading volumes reveal the market is trending lower, with a 25% drop month over month. Additionally, the number of traders decreased by 8% month-over-month, but increased by 40% since July 2021.
The market is overwhelmingly and almost entirely dominated by the four projects owned by Yuga Labs. These projects include CryptoPunks, Bored Ape Yacht Club, Mutant Ape Yacht Club, and Otherdeed for OtherSide. In other words, Yuga Labs represents just over 20% of the entire NFT market for the total July 2022 trading volume.
Recent developments, especially market patterns, have facilitated the meteoric rise of public services, primarily Ethereum Name Service domain names, with a total trading volume of $20 million in the previous 30 days. The majority of Bored Ape Yacht Club members have started buying the four-digit Ape-related domain name they own. This number roughly matches the domain name of the brand their monkey carries. In these weak market conditions, where trading is concentrated in a single asset class, researchers see a hyper-centralization of activity as the majority of the value of prime NFT collections persists.
The path to follow
Due to price declines, layoffs, and high-profile defaults such as Terra-Celsius-3AC, “crypto winter” is approaching Bitcoin and other digital assets. The cryptocurrency market has seen three disastrous falls in less than a month, and the companies that served as the backbone of the industry have crumbled before our eyes.
It is crucial to assess the relationship between cryptocurrencies and the broader market, which has played an important role in the current crisis. While Bitcoin should, in principle, trade independently of conventional finance, it has demonstrated strong correlation with other risk-sensitive assets, such as equities and especially tech-related ones, over the past year. .
The Bitcoin price is around $23,000, down more than two-thirds from its November 2021 high of around $69,000. It has lost 50% of its value since the start of the year, compared to a drop of just under 20% for the S&P 500. In less than eight months, the market capitalization of the entire industry of cryptocurrency went from $3 trillion to $945 billion, with Ether, Solana, and Dogecoin (DOGE) faring much worse.
However, crypto, NFT and web3 remain operational and will continue to do so. This crisis can be seen as a rapid realignment of the market that eliminated “Ponzi” schemes that would not have stood the test of time. It’s time to be resilient and build. Successful projects will lay the foundation for an excellent bull run.