Monthly on-chain August

What happened in August?

The lack of green candles was indeed a harbinger of red candles, as we pointed out in our last month’s report. On Thursday, August 17, there was a major cryptocurrency market crash: Bitcoin has touched 25k at one moment, Ethereum has reached 1550, and many altcoins have returned to yearly lows. The volume of liquidations reached a billion dollars.

The drop was comparable to the drop after the FTX collapse; however, there was no clear trigger for it, which is the best evidence of market weakness. There was a slight pump last week driven by the Grayscale victory over the SEC, but the prices completely retraced to previous levels after a bunch of ETFs were delayed on September 1st.

Bitcoin failed to break the 30–32k resistance and is doomed to face a 20k area retest unless there is an ETF approval on the table. Right now, the entire crypto market is waiting for an ETF decision to move somewhere.

TVL growth and decline leaders

This time we decided to show two infographics so that you can evaluate the strongest and weakest of the last month for yourself, but frankly, there is nothing much happening on-chain. We expected the growth of Ethereum Layer 2 chains to continue, and that’s happened due to the fact that most active on-chain users were busy constantly stacking transactions on Ethereum rollups hoping for a token drop. Other than that, there’s not much to do.

In evidence, we can see Polygon zkEVM as the clear underdog. The reason for this is the lack of marketing activities and users’ understanding that there will be no token drop here. This raises the question of how many users really need all those rollups rather than token drop. We’ll check back in two years. For now, organic growth and a really lively user base can only be observed on Arbitrum.

This phase of the crypto market is called depression. And this is usually the last phase of a bear market before a bull market begins. The question is how long this phase lasts.

Blockchain of the month

Base chain has remained number one during the entire month, growing in TVL every week. Furthermore, Base became the most profitable L2 in August, surpassing Arbitrum, Optimism and zkSync Era. This growth rate is unmatched, and it is not driven by the token expectation like on the rest of the rollups, but rather organic. Most likely, this meteoric rise is also related to the liquidity outflow from Optimism. In the middle of the month., the chain became the cradle of new SocialFi narrative due to friends.tech protocol launching there.

Thoughts on September

Seasonality is not a determining factor, but it cannot be overlooked. Historically, September is one of the worst months for crypto and markets in general. Given the state of the crypto market, this September will be no exception. Unless there is positive news related to ETF, prices are going to nuke again.

But it is unlikely there will be any ETF approvals in the coming months, which means we will at best see a slow TVL bleeding across chains and, at worst, a few more major collapses. Ethereum and some of its rollups (most likely Arbitrum, zkSync and Base) will be the most resilient to fall, even though all major L2 players have already launched Mainnets and completed a bunch of quest campaigns, and there’s nothing much interesting left to offer. However, other chains have even less interesting things to offer.

So, the market is already oversaturated and, frankly, tired. The lack of strong narratives and Bitcoin’s weakness will lead to further liquidity drains.