Market Musings: Majors Flat, SOL Rising

Market Musings: Majors Flat, SOL Rising

Key Points:

• XRP was the “rising tide that lifted all boats” this week. It pumped quite a bit in the past 7D on a (somewhat) favorable ruling for Ripple in its case against the SEC.
• BTC rallied over past 7D. “Wen ETF?” remains the big question for BTC.
• Coins on the SEC’s “naughty list” rallied this week. SOL is up on a YTD basis. The Milk Man did some “SOL searching” this week.

“A risingBTC XRP tide lifts all boats”. Well, that was the case this week at least. Following the mixed judgment surrounding Ripple Labs’ case against the SEC, XRP rallied and finished the past 7D significantly in the green.

And it brought many other coins along with it. The biggest winners this week? Alternative Layer-1s.

But first, let’s talk “the majors”.

Bitcoin (BTC) was flat to down most of the week, but rallied following the XRP news and finished up.

“Wen ETF?” remains the top question in BTC land. The SEC still has until mid August to approve/deny/extend the recent wave of TradFi BTC ETF applications. The filing from Ark Invest/21Shares is first in line. 🍿

Ethereum (ETH)also rallied on the XRP news and finished up over the past 7D.

There were also some developments in ETH staking and L2 land.

Earlier this week a new milestone was reached: ~20% of all ETH are now staked. That equates to ~24M ETH worth ~$45B. Oh how far the ETH staking ecosystem has come in the past ~2.5 years. Thanks, ETH devs🙏.

On the L2 front, Consensys (Ethereum development studio), launched the alpha mainnet of its new zkEVM L2 network this week, Linea. The project’s testnet phase saw an estimated ~5.2M unique wallets test out the network over 3 months. Good on ya, airdrop farmers ;).

Why is Linea worth keeping an eye on?

1. Consensys’s crypto wallet, Metamask, has ~30M active users. Even if Consensys manages to get a tiny fraction of them to try out Linea, that could be a whole lotta new users for L2s.
2. Linea could give an early look at what to expect for Coinbase’s much anticipated “Base” L2 network.

Coinbase is in the beginning stages of a “legal battle royale” with the SEC. But it’s still working to bring Base to mainnet “soon”. Woot woot, Coinbase. Coinbase has ~9M active users and ~100M registered users. A successful Base launch would bring even more users on L2s.

Alternative Layer-1s:XRP may have stolen the show this week with a 73% gain, but other layer-1s put on a big sideshow.

Those on the SEC’s “naughty list” of unregistered securities were some of the biggest gainers over the past 7D:

• Solana (SOL) rallied 24%
• Cardano (ADA) rallied 20%
• Polygon (MATIC) rallied 24%
• Binance Coin (BNB) rallied 6%
• Tron (TRX) rallied 49%.

This got the Milk Man thinking: “Could XRP’s rally still have some legs?” Maybe. But XRP is already sitting at ~$40B market cap. And higher market caps (generally) imply less (potential) upside for cryptos. Think about it this way - In order for XRP to achieve a 5x return from current levels, it would need to reach a new all time high and flippen ETH’s current market cap. Crazy things happen in crypto all the time. But that would be insanity in the Milk Man’s book.

The good news? Many of the other coins on the SEC’s “naughty list” are at much lower market caps. Smaller market caps -> more (potential) upside -> attractive altcoin bets.

Wen Altseason?

With BTC and ETH rallying this year, “Wen altseason” has been the top of mind for investors and degens, alike. Altcoins come in different shapes and sizes (e.g., layer-1s, DeFi tokens, memecoins, etc.). But many have been waiting for alternative layer-1s, in particular, to “do something”.

Why alternative layer-1s? Following BTC’s run up from ~$7K to ~$30K in 2020 they had, let’s just say, “a good 2021”.

Four standouts of last altseason were Polygon (MATIC), Solana (SOL), Avalanche (AVAX), and Cardano (ADA).

• The worst performer in the cohort (ADA), had an ~800% return in 2021. That’s what we call a 7X in crypto land.
• The best performer (MATIC) had a ~14,200% return over that period. That’s what we call a 141X in crypto land.

Does another alt L1 season of that magnitude seem likely? Probably not. But even a “mini alt L1” season could result in some pretty eye popping returns. Collectively, alternative layer-1’s are ~TK% off their all time highs. Even if they inch back some of the way towards their prior highs, that would translate to some pretty high returns.

One of them has made some progress this year: Solana.

What’s Driving The SOL Rally?

Fundamentals and expectations of future profits. More people are (probably) starting to think along these lines:

“Some altcoin projects are going to survive and thrive when “crypto winter” comes to an end. Solana is probably one of them.”

There is a lot to unpack as it relates to Solana. Here’s what’s top of mind for the Milk Man.

TheGood AndBad Of Solana

Let’s start with the bad.

1) There is some risk that SOL gets delisted from more exchanges.The SEC placed SOL on its “naughty list“ when it alleged SOL was an unregistered security in June. Robinhood delisted SOL in response to the allegations. Coinbase has said that “it does not intend” to delist it. Seeing as Coinbase recently stated that it will re-list XRP (which was delisted for ~2.5 years), the chances of a SOL delisting are low.

2) Ownership of SOL is still relatively concentrated. Alameda Research liquidators hold claims to ~13% of all SOL in circulation. They won’t be able to dump SOL en-masse anytime soon thanks to lock ups which extend through 2028. But one entity holding upwards of 10% of a decentralizednetwork’s token is not good.

3) Its ecosystem is still in recovery mode. Total value locked in Solana dApps peaked at ~$10B in November 2021 and currently stands at $300M. NFT trading volumes on Solana are way down. They peaked at ~$200M per week in 2021. They’ve been stuck in double and single digit millions all year. And it’s still shaking off the major reputational blow of having crypto’s biggest villain, SBF, be its “poster child”.

The good news?

1) The “days of downtime” for Solana appear to be ending. Its blockchain has had 1 instance of downtime this year. Last year it had 14. Yikes. Less downtime means less risk associated with transacting on Solana.That’s good.

2) It’s taking a different approach to blockchain scaling. Ethereum and other layer-1s have embraced the multi-chain L2 scaling approach. But Solana has remained focused on building one high speed chain. It has worked out pretty well so far. Despite its downtime, Solana has outperformed all major chains on a scalability (i.e. transactions per second) basis. The fee for a user to submit a transaction is a fraction of a penny. Even if few people are using Solana today, it could (in its current form) support a lot more apps and users.

3) Its culture is centered around trying new things. Last year Solana Labs launched the first Web3 mobile phone. Jump Crypto is working on “leveling up” Solana infrastructure with a new software client, Firedancer. It also started exploring how the network can integrate with AI.

• Solana launched a Solana ChatGPT plugin that can be used to buy/list NFTs, transfer tokens, and interpret data.
• It also launched a $10M grant program to accelerate development at the AI<>crypto crossroads on Solana this year.

Will all of these endeavors be a success? No. But Solana actually trying new thingsis a good sign that it has a better chance at being around in the long haul.

Wrapping it up

Given its rally this year, the entry point for SOL today (~$25) is worse than it was at the start of the year (~$9). And the days of $3 SOL don’t seem to be coming back anytime soon. :(

Yes, SBF actually tweeted that. And yes, it’s still up on the bird app.

But it's also worth zooming out.

Even after rallying this year, SOL is still significantly below its all-time-high. Funny how 5th grade math can still be confusing, innit?

Let’s keep an eye on SOL, frens.