A Quick Look At The Crypto Market

Morning Markets: As stocks recover and venture rides high, a look at the crypto world.

Cryptos are selling off this morning after recovering from lows. The value of crypto assets, per CoinMarketCap, is $122 billion as of the time of writing. That’s an improvement from December, when the same figure was barely over $100 billion, down from $145 billion, give or take, around Christmas.

But what we haven’t done recently is look at other vital signs in the crypto world. What’s going on with transaction volume? Fees? Mining?

So, in honor of the stock market recovering and thus becoming boring, the government shutdown freezing IPOs, and the year being so new that there isn’t trendy stuff to enjoy, let’s take a peek at crypto.

Vital Signs

There are three things for us to examine today: transactions per day in bitcoin, decentralized app usage, and bitcoin mining revenue.

Bitcoin transactions per day will give us a look at how the most popular and most valuable blockchain project is recovering from a usage decline that followed its price collapse; decentralized app (Dapp) usage will give us a look into the popularity of projects built on the second most popular blockchain to get a fuller look at the market; and bitcoin mining revenue will help us understand if fees are starting to pay for its network, or if mining rewards in the form of new coins are still paying the power bill.

Transactions

After a late 2017 spike that saw average transaction volume spike past 400,000 per day, bitcoin sees just over 275,000 transactions daily at the moment. A decline, yes, but volume fell low as 175,000 per day (again, average volume) in early 2018 before steadily recovering.

Indeed, the linear recovery in bitcoin transaction volume is bullish, if measured in its pace.

Dapp Usage

Decentralized apps are most famously run on the Ethereum blockchain. And luckily for us, DappRadar keeps running tally of how many folks are actually using those applications. The answer isn’t very many. Dapp usage is down from October-November 2018 highs, which were lower than summer 2018 highs, which were lower than spring 2018 highs.

According to DappRadar, there is a single Dapp with more than 10,000 users in the last 24 hours. There is one other with more than 5,000. Less than two dozen in total have over 1,000. It’s thin out there.

Slowing Dapp usage, lack of a positive trend, and chronically mild usage are bearish.

Mining

For our last data point about mining revenue, we’ll need to think about two things at once: what is bitcoin mining revenue today and how much in the way of fees has bitcoin generated recently? The gap between the two is what bitcoin is spending to run itself that likely isn’t sustainable in the long-term. Fees need to make up for a growing percentage of bitcoin’s total miner revenue as time passes, as the income derived from new blocks may decrease as the reward rate falls over time.

If fees, the money paid by bitcoin users to miners for confirming their transactions, don’t rise over time, miner revenue may fall. That’s because the amount of bitcoin that miners receive for their work decreases over time. That’s how bitcoin was built. If the price of bitcoin was to rise greatly, then the reduced number of bitcoins given to miners over time for their efforts could square. But a healthy sign would be to see monies paid by bitcoin users—fees—rise as a percentage of miner revenue. That would defang future decreases in bitcoin rewards that currently allow miners to finance their operations that power bitcoin.

That isn’t happening, much. Bitcoin mining revenue has been about $7 million per day over the last few days. Transaction fees have generated between $50,000 and $70,000 per day. That means that usage of bitcoin is generating about a percent of the total revenue currently paid out to miners who do all the hard computational work to power bitcoin. That’s bearish.

That’s all the time we have this morning, but we’ll check back in on crypto the next time it does something dramatic.