Cryptoassets of the Month: January 2023

Every month, our research team will present the cryptoassets of the month that increased or dropped in value by more than 15%. With a data-driven approach, we highlight the most important developments and events causing price movements.

Figure 1 – 30-Day Performance: Cryptoassets of the Month vs. Traditional Asset Classes

Data Source: 21Shares, CoinMarketCap, and Yahoo Finance, from 31-Dec-2022 to 31-Jan-2023 (Close Price)

Fantom (FTM)

Fantom's native token FTM rose 169.45% over the past month as efforts concentrated on increasing developer traction. On January 19, Fantom released a decentralized funding system to finance new projects, dubbed the "Ecosystem Vault," which will accrue 10% of all transaction fees on the blockchain. Projects can apply for funding by submitting a governance proposal, which has to receive at least 55% approval via an on-chain vote. In the last 30 days, the Fantom blockchain has generated $158.78k in transaction fees, which translates to ~$1.9 million annually. Assuming revenue remains the same, projects building on the Fantom network could receive ~$190k in funding during the coming year.

Decentraland (MANA)

Decentraland (MANA) rose 152.76% in the past month as the number of brands with a footprint on the user-owned metaverse continues to increase. Pet food maker Pedigree, a subsidiary of the American group Mars, launched the "FOSTERVERSE" program on Decentraland on January 24. The initiative will enable real-life rescue dogs to find shelter through donations in the metaverse. In exchange, donors will receive a donation receipt in the form of a virtual dog representing the rescued dogs, in line with the brand's ambition to end pet homelessness. On another note, about 6,000 unique active wallets interacted with Decentraland throughout January, roughly the same activity level seen in December.

Solana (SOL)

Solana (SOL) rallied 140.46% in January. In our December issue, after SOL closed the month below $10, we argued that "despite recent challenges, Solana has retained a loyal base of developers committed to its long-term success." According to Electric Capital's Developer Report – of the ecosystems with more than 1,000 monthly active developers as of December 2022 – Solana was the fastest-growing, registering a 74% increase over the previous year. This trend is incredibly bullish for Solana's ecosystem, as developer engagement is an early and leading indicator of potential value creation. In retrospect, SOL's capitulation in December 2022 is likely to be remembered similarly to ETH's $80 moment in December 2018.

The Sandbox (SAND)

The Sandbox (SAND) rallied 90.84% in the past month, outperforming the broad crypto market. Despite the upward trend in price, activity in the decentralized virtual world continues to drop significantly. About 6,800 unique wallet addresses interacted with The Sandbox throughout January, down 19% and 35% from December and November 2022, respectively. On a more positive note, The Sandbox’s Lunar New Year Event kicked off on January 18 and will end on February 28. Users will enjoy new experiences, including access to a reward pool of 200,000 SAND (~$146k) and in-game NFT prizes.

Avalanche (AVAX)

Avalanche's native token AVAX rose 82.02% over the past month. On January 11, Ava Labs – core developers of Avalanche – partnered with Amazon Web Services (AWS) to host entrepreneur and developer-focused events to accelerate enterprise and government use cases on the network. In addition, the number of BTC bridged from the Bitcoin blockchain to Avalanche reached 5,700 BTC (~$133 million) on January 17, surpassing the Lightning Network's BTC capacity. On a less optimistic note, Electric Capital's Developer Report revealed that Avalanche experienced a 28% decrease in monthly active developers in 2022.

Aave (AAVE)

Aave (AAVE) rallied 59.72% over the past month. On January 27, Aave Protocol V3 was deployed on the Ethereum mainnet. Aave V3 offers innovative risk mitigation features like "Isolation Mode," improved capital efficiency via "E-Mode," and a 25% reduction in transaction costs. Aave V3 was first deployed in March 2022 across six networks, including Polygon, Arbitrum, and Optimism. Regarding ecosystem traction, Lemon – a mobile wallet with more than 1.7 million users in Argentina and Brazil – integrated Aave's smart contracts on January 24, allowing users to deposit their tokens into the protocol and earn seamlessly on their wallet interface.

Cardano (ADA)

Cardano's native token ADA rose 58.58% over the past month. On January 13, Cardano developer IOG deployed a toolkit for building custom sidechains similar to Polkadot's parachains, allowing developers to create app-specific blockchains independent of Cardano but connected to it by a two-way bridge. Furthermore, the Cardano network experienced a brief outage that took down ~50% of nodes on January 23 but was fixed within minutes. A week later, IOG released a new node version to tackle the outage's root cause. Finally, the two largest decentralized exchanges (DEXs) on Cardano listed the Djed stablecoin, which launched on January 31.

Tezos (XTZ)

Tezos' native token XTZ rose 47.76% in the past month. The total value locked (TVL) on Tezos as of January 31 sits around $40 million, with synthetic asset protocol Youves representing ~75% of the market share. Although the source code for Tezos was released in 2016, the smart contract platform has only managed to attract 147 full-time developers as of December 2022, six years later. Tezos' inability to attract new talent may be worrisome as developer engagement is an early and leading indicator of value creation in emerging platforms. For reference, younger networks like Solana, Polygon, Kusama, NEAR, and BNB Chain grew to 150 full-time developers in less than four years.

Polygon (MATIC)

Polygon's native token MATIC rose 46.34% in the past month as the platform keeps showing signs of ecosystem strength. In January, Polygon averaged 378k daily active users (DAU), surpassing Ethereum's 343k. In addition, National Geographic launched its first NFT collection titled "GM: Daybreak Around the World" on the Polygon network "due to its commitment to sustainability." The collection features sixteen photographs taken at dawn in different parts of the world. Finally, Hamilton Lane’s $2.1 billion “Equity Opportunities Fund V” opened its doors to individual investors by leveraging the Securitize’s tokenization platform on the Polygon network.

Polkadot (DOT)

Polkadot's native token DOT increased by 45.24% over the past month. In terms of developer engagement, Polkadot has grown more than 16x since 2018 to more than 750 full-time developers. Regarding ecosystem developments, Aleph Zero won Polkadot's 38th parachain auction on January 30. The newest parachain is an enterprise-focused and privacy-enhancing platform leveraging zero-knowledge technology. Today, the transparency of blockchains is a double-edged sword – for the system as a whole, it's excellent, as users can gauge the financial health of protocols. Still, it's a disadvantage for individuals, especially institutions, as everyone can always see their on-chain position. Zero-knowledge technologies have the potential to scale institutional usage orders of magnitude from where it is today.

Cosmos (ATOM)

The Cosmos Hub's native token ATOM rose 43.10% in the past month. Like Polkadot, Cosmos has grown more than 16x since 2018 to more than 500 full-time developers. In this regard, a grant program dubbed "ATOM Accelerator DAO" was proposed in Cosmos' governance forum on January 12. The Grant Committee proposal requests 588,000 ATOM (~$7.86 million) from the Cosmos Hub to encourage bright new developers to build on the Hub and re-establish its importance in the broader Cosmos ecosystem. On another front, the Canto network, an EVM-compatible blockchain built using the Cosmos SDK, doubled its total value locked (TVL) in January to $139 million, becoming the fourth-largest Cosmos-based network.

Algorand (ALGO)

Algorand's native token ALGO rose 40.16% over the past month. The National Australia Bank (NAB) announced it would launch an Australian-dollar-pegged stablecoin called AUDN in the middle of 2023 on the Ethereum and Algorand blockchains. In addition, the Algorand Foundation hired former WhatsApp and Nike executive Jessica Tsai Chin on January 24 to lead its marketing efforts. Chin mentioned that sports will remain a key theme of Algorand's marketing exposure but that they will increase efforts in highlighting its DeFi ecosystem and social impact projects.

Bitcoin (BTC)

Bitcoin traded up 39.84% over the past month in a spot-driven rally that lifted crypto's total market cap above $1 trillion. BTC dominance rose to 41%, up from ~38% in December and reaching its highest level since July last year. On January 13, BTC broke above the 200-day moving average (MA) for the first time in 381 days. In the previous bear market in 2019, it took BTC 386 days to trade above the 200-day MA, after which it soared by ~165% from ~$4.9k on April 2 to ~$13k on June 26. Coincidentally, BTC's market value to realized value (MVRV) ratio also broke above the "1" mark on January 13. The last time this happened was in March 2020, marking the beginning of the previous cycle's meteoric bull run.

Bitcoin Cash (BCH)

Bitcoin Cash (BCH) traded up 37.43% over the past month, in line with the broader crypto market. Bitcoin Cash is a hard fork of Bitcoin that occurred on August 1, 2017, as the result of a long debate over Bitcoin's scalability issues. Paytaca, the company behind one of BCH's most popular wallets, released its POS (point of sale) app on January 15. The new app, which is free and open source, allows businesses to receive BCH payments in their establishments by scanning a QR code.

Ethereum (ETH)

Ethereum traded up 32.57% over the past month. ETH's net issuance since the Merge turned negative for the second time on January 15 (122 days after the switch to PoS), alongside an increase in the amount of ETH burned, a sign that the cryptoasset's prospects as a deflationary asset depend heavily on network usage. In addition, the amount of ETH deposited for staking surpassed 16 million on January 12. Lido, a liquid staking protocol, had the largest share with ~29% of total staked ETH and almost 120k unique depositors as of January 31. Finally, Ethereum still has the most vibrant developer ecosystem, with more than 5,700 monthly active developers as of December 2022, a ~5x increase from 2018.

Stellar (XLM)

Stellar's native token XLM traded up 27.55% over the past month. In December, the Stellar Development Foundation launched Stellar Aid Assist, a new aid disbursement system leveraging the Stellar blockchain in collaboration with Circle and MoneyGram. The system is now being used in pilot programs by the United Nations High Commissioner for Refugees (UNHCR) and the International Rescue Committee (IRC) to deliver cash assistance to internally displaced persons in Ukraine.

Uniswap (UNI)

Uniswap (UNI) rose 27.33% over the past month. On January 5, Nethermind submitted a proposal to obtain a Uniswap v3 business source license (BSL) exemption to deploy Uniswap v3 onto StarkNet, a scaling solution compatible with Ethereum. The Uniswap protocol generated ~$36.7 million in fees in January, about a third of Ethereum's. In this regard, a proposal was put forward in December to implement a "fee switch" on the DAI-ETH, ETH-USDT, and USDC-ETH pairs. If implemented, UNI token holders would accrue a portion of these pools' fees. However, an updated proposal is expected in February as the vote on the fee switch was delayed due to community feedback pointing out unaddressed risks.

Binance Coin (BNB)

BNB traded up 26.80% over the past month. On January 23, 0xPlasma Labs' proposal to deploy Uniswap v3 on BNB Chain passed an early temperature check from the Uniswap DAO. Regarding developer engagement, BNB Chain had 546 monthly active developers as of December 2022, a 23% decrease over the previous year. On a more positive note, the BNB network remains the most prominent blockchain in terms of daily active users (DAU), averaging ~790k DAUs in January.

Chainlink (LINK)

Chainlink (LINK) rose 24.78% over the past month. As of December 31, 2022, over 1,600 protocols were using Chainlink oracle services for secure off-chain data, proof-of-reserves, automation, and more. In addition, on January 25, Chainlink surpassed $7 trillion in transaction value enabled (TVE) – a measure of the aggregate USD value of on-chain transactions facilitated by Chainlink oracles across 12 blockchains since the start of 2022. On a less optimistic note, Electric Capital's Developer Report revealed that Chainlink had 89 monthly active developers as of December 2022, a 10% decrease from the previous year.

XRP Ledger (XRP)

XRP traded up 19.56% over the past month. After a two-year wait, on January 10, more than 4.28 billion of Flare's FLR tokens were finally distributed to XRP holders who held at least one token during a snapshot in December 2020. The airdrop was conducted on a 1:1 basis, meaning that users received one FLR for every XRP held. According to a statement by the Flare team, the airdrop represents 15% of the project's total supply, while the remaining 85% will be distributed over the next three years. At its inception, Flare aimed to create a DeFi ecosystem on Ripple, which is why the airdrop was linked to XRP. However, the project was delayed and has turned into an EVM-compatible Layer 1 blockchain.

Strategies of the Month: January 2023

Every month, our research team will also present the ten best-performing strategies of the month in our product suite. With a data-driven approach, we highlight the most important developments and events causing price movements.

Figure 2: 30-Day Performance: Strategies of the Month vs. Traditional Asset Classes

Data Source: 21Shares Index Management Console and Yahoo Finance, from 30-Dec-2022 to 30-Jan-2023 (Close Price)

MOON

The Sygnum Platform Winners Index ETP (MOON) rose 43.58% over the past month. MOON seeks to track the investment results of an index composed of the native tokens of the most prominent blockchain protocols, including only the largest network in a family of forks. MOON's weighting methodology goes beyond backward-looking metrics like market cap and liquidity. It also includes early and leading indicators of value creation in the underlying ecosystems, such as developer engagement and public interest via social media.

HODL

The 21Shares Crypto Basket Index ETP (HODL) traded up 40.85% over the past month. HODL seeks to track the investment results of an index of the top 5 cryptoassets ranked by the 2050 market capitalization. The 2050 market capitalization is calculated using a projected 2050 supply number and current prices. Bitcoin and Ethereum's weights are currently around 50% and 28%, while Polkadot is the third-largest constituent with a weight of ~14%. Smart contract platforms, like Ethereum and Solana, operate in isolation. In contrast, Polkadot works at a level below (interoperability), supporting a growing ecosystem of specialized blockchains called parachains.

LAY1

The 21Shares Layer 1 ETP (LAY1) traded up 39.33% over the past month. LAY1 seeks to track an index comprising the largest smart contract platforms. The weights are proportional to market capitalization, capped at 30% per asset to promote diversification. Ethereum and BNB are currently the largest constituents of the index, each with a weight of ~30%. Regarding Ethereum, ETH's net issuance since the Merge turned negative for the second time on January 15 (122 days after the switch to PoS), alongside an increase in the amount of ETH burned, a sign that the cryptoasset's prospects as a deflationary asset depend heavily on network usage.

KEYS

The 21Shares Bitwise Select 10 Large Cap Crypto ETP (KEYS) rose 39.17% over the past month. KEYS seeks to track the investment results of an index composed of the top 10 cryptoassets ranked by inflation-adjusted market capitalization. Because Bitcoin and Ethereum's weights in the index represent about 91%, the index’s performance tends to be highly-correlated with both assets, as was the case over this period.

HODLX

The 21Shares Crypto Basket 10 ETP (HODLX) traded up 37.40% over the past month. HODLX seeks to track the investment results of an index composed of the top 10 largest cryptoassets based on market capitalization. Because Bitcoin and Ethereum currently represent ~59% of the global crypto market capitalization and ~85% of the index, the index's performance can be somewhat correlated with both assets, as was the case over this period.

ABBA

The 21Shares Bitcoin Suisse Index ETP (ABBA) rallied 37.09% over the past month. ABBA seeks to track the investment results of an index composed of Bitcoin and Ethereum based on market capitalizations. Investors should understand that Bitcoin and Ethereum serve different use cases and can complement each other in a portfolio, with the former positioning as a non-sovereign form of money while the latter promises to be the foundational infrastructure for the new iteration of internet services.

ALTS

The 21Shares Crypto Mid-Market Index ETP (ALTS) appreciated 36.12% over the past month. ALTS seeks to track the investment results of an index capturing the mid-cap portion of the cryptoasset market. BNB and XRP are the largest constituents of the index with weights of 39% and ~19%, respectively. The BNB network remains the most prominent blockchain in terms of daily active users (DAU), achieving an average of [790k DAUs](https://tokenterminal.com/terminal/projects/binance-smart-chain) in January.

DEFII

The 21Shares DeFi 10 Infrastructure ETP (DEFII) traded up 33.86% over the past month. DEFII tracks the investment results of an index of decentralized applications (dApps) and their underlying infrastructure. The index's best-performing dApp was Aave, which appreciated 59.72% over the same period. On January 27, Aave Protocol V3 was deployed on the Ethereum mainnet, offering innovative risk mitigation features like "Isolation Mode," improved capital efficiency via "E-Mode," and a 25% reduction in gas costs.

HODLV

The 21Shares Crypto Basket Equal Weight ETP (HODLV) appreciated 33.67% over the past month. HODLV tracks the investment results of an equally-weighted index composed of the top 5 largest cryptoassets based on market capitalization. The index’s best-performing asset was Cardano, which appreciated 58.58% over the same period. The two largest decentralized exchanges (DEXs) on Cardano listed the Djed stablecoin, which launched on January 31.

SPBTC

The 21Shares S&P Risk Controlled Bitcoin Index ETP (SPBTC) traded up 32.96% over the past month. Over the same period, Bitcoin increased by 39.84%. Although BTC achieved a higher return, more risk-averse investors could be wary of the fact that Bitcoin’s implied annual volatility has consistently been above 70%. SPBTC’s value proposition arises from its rebalancing algorithm, which allows investors to get exposure to Bitcoin while limiting the asset’s volatility to a target level of 40%, by adjusting the exposure to the underlying and allocating to U.S. dollars.