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Summary
In this edition, we cover:
How sustained buy interest is being met with dwindling availability of supply on exchanges
How Alts are winning in this environment
Valuations being supported by sector growth like stablecoins and active user bases
A Lot of Demand Not Enough Supply
November has been yet another positive month for the digital asset markets. Over the month, the global digital asset market has outperformed NASDAQ by 39% and SPX by 38%.
BTC Set the Agenda
For BTC, $100k has been reached for the first time as risk-on money continues to gobble up the available supply on exchanges.
A lower exchange balance for BTC doesn’t necessarily lead to higher prices. You also need demand.
Over 2024, BTC units on exchanges have been declining by a rate of ~30k per week to new lows. Fewer BTC units are becoming available for buyers.
One key demand driver has been the spot ETFs, where net inflows continue to be ~$300m+ on most days since October.
What’s interesting is that the rolling 7d net inflows for BTC are often at the average 30k BTC unit supply decline on exchanges.
In other words, ETF buying has been a core driver of BTC illiquidity, which has amplified price action as time has gone on.
The Implications of Market Inflows are Deeper and Broader
“We see a trend in crypto markets where Bitcoin initially drives price action, but the rising tide lifts all boats,” said Caroline Bowler, chief executive officer of BTC Markets Pty.
The Market Environment Where Alts Win More
She argued that activity isn’t close to peaking, based on the flow of investor money onto digital-asset exchanges.
Rising tides are lifting boats. But some more than others. BTC’s break to new highs is leading alts to outperform well in this type of environment and phase of the bull cycle - something we’ve alluded to for some time.
When we zoom out across cycles, we see a pattern emerge. The magnitude of the move higher for alts is largest when BTC breaks its previous cycle highs convincingly (red dots).
And during these moves, altcoins outperform the broader market. This is what we see happening today.
Altcoin dominance (white) has broken out to the upside as it should if history were to rhyme. This comes as BTC's dominance declined 3% (nominal) to 57%.
These valuation re-rates higher are reflecting continued growth across numerous sector KPIs. Take stablecoins where supply is making new all-time-highs at $174B.
Valuations are still playing ‘catch up’ to the continued growing active user base. From a Metcalfe’s law perspective, this makes sense - as valuations are proportionate to the number of active participants in an ecosystem.
New vaults go live on Euler and Starknet
Re7 Labs has recently expanded curator activities to Starknet as the first curator on Vesu.
Vesu is a modular lending protocol similar to Morpho and Euler. The first curated pools will be focused on STRK liquid staking tokens that went live last week. DeFi spring rewards from Starknet will soon go live for STRK suppliers.
In partnership with Reserve, a new cluster on Euler -- Reserve Prime -- is now live.
Users can supply and borrow with Reserve protocol assets like eUSD and ETH+. Incentives from the Reserve are matched with rEUL from Euler for juicy yields on both the lending and borrowing side.
Morpho token is now transferable, which means realized yields on our Morpho vaults are fully liquid.
Stay tuned for some new Morpho vaults and partnerships going live over the next few weeks. In the meantime, if you are a MORPHO holder, you can delegate your voting power to Re7 Labs.
Disclaimers
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