Cryptocurrency Market Update: Analysis and Insights - November 29, 2023

Cryptocurrency markets are up this week, still riding a bull trend. The Bitcoin price reached a new high on Binance last Friday at 38,414 USDT. It is still quoting above 38,000 this morning looking for new heights. The Bitcoin price in US dollars is up 4.4% this week.

The price of Ether in US dollars is als up 3.14%. The main double-digit performance in the top 20 is recorded by the Uniswap price up 18.46% at 6.28 us dollars. The only negative performance is recorded by Binance BNB, down 1.20%. Among the best performers, we have Solana climbing another 8%, and Dogecoin up almost 9%.

Explaining the UNISWAP performance

Given that Uniswap is the best performer, let’s have a look at DEX volumes this week. DeFi volumes did hit an 8-month high 2 weeks ago. But this week, DEX volumes are down almost 23%. They’re also down 23% on Uniswap. So clearly this doesn’t seem to support UNI’s great price performance.

The positive break actually happened on Wednesday last week. If we compare the UNI price dynamics against the price dynamics of competitors this month, we could just conclude that the UNI price is merely trying to catch up to the performance of other competitors like SUSHI. But it’s worth looking a bit deeper at fundamentals.

Uniswap’s latest feature, called Uniswap X, which was released in July reached a cumulative trading volume of 1 billion US dollars this week. In other words, cumulative volumes reached 1 billion in 4 months, which is ok.

First of all, for those of us who are not yet familiar with Uniswap X, the users can swap their tokens without having to pay fees in the blockchain’s native currency. So normally if we transact or swap on Ethereum, we should pay a transaction fee, a gas fee in ETH. If we transact or swap on Solana, we should pay a transaction fee in SOL.

Well, Uniswap X introduced the concept of gas-free swapping. The swapper doesn't pay the fee, instead the filler, meaning the liquidity provider, will pay the gas fee, and of course, this filler would adjust his market prices to take this fee into account. So, they would propose a higher ask price, and lower bid price to take this fee into account.

Is Uniswap X the reason behind the UNI token price pump? Volumes are very promising, but not impressive.

There might be another reason: and it turns out that Uniswap is reviewing its governance mechanics because the governance participation of UNI holders has been low and decreasing.

A UNI holder can delegate their UNIs by voting themselves as a delegate or entrusting another delegate with their vote. You have here the full list of delegates: there are 193 million delegated tokens, and their total value is north of 1.1 billion US dollars. There is some concentration, but the UNI delegates are not voting as often as they should.

So Uniswap is looking to diversify voting power by distributing up to 10 million UNI to 7 active delegates. The proposal was voted on November 17th, and 4 main delegates were determined last Wednesday to receive up to 2.5 million UNI each.

So 7 delegates, candidates for the extra UNI voting power distribution, were competing for votes to be in the top 4, and it is very likely that some candidates increased their UNI holdings to secure their chance to end up in the top 4.

We now have serious participants among the top 4 like Wintermute. Wintermute is one of two market makers that are involved in Uniswap X and contributed to boost volumes for this new protocol. So gaining more voting power, up to 2.5 million UNI, which represents up to 15 million dollars worth of voting power, can turn out to be a very wise tactical move.

The cryptocurrency market flow

The 4.3 billion dollar settlement agreement between Binance and US authorities certainly reassured the crypto markets this week: the bulk of uncertainty is behind us.

We have another impressive week of inflows into digital asset investment products: 346 million dollars worth have been invested in total. Among which 112 million US dollars have been invested in Canadian ETFs. We can see that Bitcoin-linked products are getting the lion share, where 311.5 million US dollars were invested.

We’ve had net inflows for 9 consecutive weeks, and this week’s inflows are the best seen in over a year and a half according to Coinshares.

We mentioned that Ether is also up this week. The supply of Ether actually has turned deflationary since November 9th. A net amount of 7,000 Ether was burnt this week, and 27,000 Ether were burnt in total this month.

Ether turned deflationary because there is more activity on the blockchain, and there are more validators exiting the beacon chain. These graphs here are produced by Glassnode.

We can see on the bottom left graph that staked ETH withdrawals are accelerating, and the largest stakers that are withdrawing are centralised exchanges: it is the blue portion of the bar. Glassnode points out several potential reasons for the withdrawals: stakers might be opting for more liquid alternatives: liquid staking solutions like LIDO, or simply turning to traditional markets where rates are still higher.

Sentiment

To conclude this report, despite lower trading volumes this week, markets appear to be still bullish, and Bitcoin is still aiming for the 40,000 US dollar level despite recent technical corrections. ETF anticipations are still high. Bitcoin is already up 130% this year, and optimistic analysts, namely at Standard Chartered, are still aiming for Bitcoin at $100,000 before the end of the year as reported by the press.

To explain their prediction, Standard Chartered points out that miners are already anticipating the next Bitcoin price rally and holding their Bitcoin inventory. The low supply should favour a potential bull run.

*This is not financial advice. Not intended for UK customers