Research Summary
The report analyzes the shifting capital flows in the digital asset market, particularly towards altcoins. It explores the performance of Bitcoin, Ethereum, Solana, Polkadot, and Cosmos ecosystems, and the trading volumes on decentralized exchanges (DEXs) like Uniswap.
Key Takeaways
Bitcoin’s Dominance and Ethereum’s Rising Performance
- Bitcoin’s Market Dominance: Bitcoin continues to lead the digital asset market with over 52% market share. However, Ethereum, accounting for 17%, has started to outperform Bitcoin following the approval of the Bitcoin ETF.
- Ethereum’s Rising Performance: Ethereum’s year-to-date (YTD) gains stand at +18.2%, slightly higher than Bitcoin’s +17.6%. This is a significant change from Ethereum’s relative underperformance throughout 2023.
Capital Inflows and Altcoin Market
- Capital Inflows: Bitcoin is leading in capital inflows with almost $20B per month. Ethereum inflows tend to lag behind Bitcoin, suggesting investors look for confirmation that digital asset markets are growing before investing in Ethereum.
- Altcoin Market Performance: The aggregate Altcoin market cap has not experienced the same performance as Bitcoin and Ethereum, with YTD growth being less than half of the two majors.
Emerging Ecosystems and Investor Interest
- New Layer-1 Ecosystems: Several new Layer-1 ecosystems have emerged over the last cycle, competing with Ethereum for market share. Solana has seen the strongest returns over the last year, but there is also some movement within the Polkadot and Cosmos ecosystems.
- Investor Interest: By examining the top five tokens of select ecosystems, the report assesses which are attracting the most investor interest. Solana has exhibited relatively high volatility with standout upside performance.
Uniswap Trading and Liquidity Provision
- Uniswap Trading: Altcoin trading accounts for nearly 12% of Uniswap trade volume, approaching the 17.4% peak seen during the last bull run. Trading for WBTC and WETH makes up 47% and Stablecoins 40% of trade volume.
- Liquidity Provision: Liquidity providers on Uniswap have increased liquidity for the Top 10 (5.14%) and Top 20 (10.9%) tokens, while liquidity has been removed for tokens ranked 20 to 50. This suggests that the market appetite for long-tail assets has not yet picked up meaningfully.
Actionable Insights
- Monitor Altcoin Market: Given the positive momentum signaled by the Altcoin Indicator, it may be beneficial to keep a close eye on the altcoin market, particularly higher market cap assets.
- Assess Emerging Ecosystems: With new Layer-1 ecosystems like Solana, Polkadot, and Cosmos showing promising returns and investor interest, it could be worthwhile to assess these ecosystems for potential growth.
- Track Uniswap Trading and Liquidity Trends: As Uniswap trading and liquidity provision patterns can serve as a proxy for trends in Altcoin trading, tracking these trends could provide valuable insights into the digital asset market.
