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<h2>Key Takeaways</h2><ul><li>DeFi’s most prominent platforms, dYdX and Uniswap, took two divergent paths to drive token value accrual.</li><li>The Uniswap DAO has resisted community pressure to turn on the fee switch, whereas dYdX Chain distributes all fee revenue to validators and stakers.</li><li>Uniswap Labs’ protocol fee switch and dYdX total fees paid show the potential for serious revenue, especially in bull markets.</li><li>It will be crucial to monitor their performance, as it may influence how the rest of the DeFi sector approaches distributing protocol revenue.</li><li>The biggest blocker remains regulatory uncertainty. If it comes, will Uniswap finally assign more productive power to UNI?</li></ul><h2>dYdX vs Uniswap: Why This Deserves Your Attention</h2>The last month was defined by two polarising DeFi platforms, dYdX and Uniswap, taking vastly different approaches to how their native tokens accrue value.dYdX&nbsp;is the largest decentralised derivatives exchange, with roughly 50% market share. All fees go to dYdX Chain validators and stakers (i.e. DYDX holders that stake to dYdX Chain validators).Uniswap&nbsp;is the largest DEX with over 65% market share. All of the protocol fees go to liquidity providers (LPs). Additionally, Uniswap Labs, a privately owned entity based in the U.S., charges 0.15% on certain swaps on their apps.Given that dYdX and Uniswap are arguably the two most widely used DeFi protocols, it will be crucial in 2024 to monitor their performance, as it may influence how the rest of the DeFi sector approaches token value accrual.<h4>Definitions</h4>I’ll be using Token Terminals’ definition of ‘protocol revenue’—the fees kept by the protocol and/or distributed to token holders.You may also see this called the ‘fee switch’. Overall, there are two main ways the protocol can distribute revenue and its native token:<ul><li>Activating a ‘fee switch’ for using the protocol, which is sent to the protocol’s treasury</li><li>	For example—Lido captures a 5% fee on staking rewards; however, LIDO or LIDO holders do not directly receive these fees.</li><li>Allowing token holders to stake the token to get a share of protocol fees</li><li>	For example—GMX has a “fee switch”, and stakers can earn 30% of the protocol fees.</li></ul><h2>Uniswap Approach: No Fee Switch (Yet)</h2>It’s no secret that Uniswap’s native token,&nbsp;<a href="https://collectiveshift.io/UNI/" rel="noopener noreferrer" target="_blank">UNI</a>, has been struggling. It’s 86% below its 2021 highs, mainly due to its lack of utility and value accrual.It is currently used for broad “governance” purposes. Still, for years, the community have hoped the “fee switch” will be turned on—allowing the Uniswap protocol to capture revenue for its usage.There has been a controversial push for the Uniswap protocol to turn on the fee switch. So far, no trials have taken place.But in October, this pressure on Uniswap and UNI only grew, with Uniswap Labs&nbsp;<a href="https://blockworks.co/news/uniswap-labs-fee-yield" rel="noopener noreferrer" target="_blank">turning on</a>&nbsp;the fee switch, but not the type most expected. Uniswap Labs introduced a fee on their official Uniswap front-ends, with a small 0.15% fee on over 11 different reading pairs.The result was impressive, with over $1.5M in revenue since the fees were introduced on Oct. 17. In annual terms, this should bring in $5M–$20M in revenue.The problem?&nbsp;This money goes to the private Uniswap Labs company, not to UNI holders.<img src="https://collectiveshift.io/wp-content/uploads/2023/12/image-1024x343.png" alt="uniswap labs revenue">Projections of annualised fees going to Uniswap Labs (Source:&nbsp;<a href="https://flipsidecrypto.xyz/jackguy/uniswap-0-15-frontend-fees-uniswap-0.15-frontend-fees-pjPWjV" rel="noopener noreferrer" target="_blank">Flipside via @jackguy</a>)<h2>dYdX&nbsp;Approach: Fees Distributed</h2>A few weeks after Uniswap Labs implemented its 0.15% fees, dYdX’s new appchain, dYdX Chain, launched.On dYdX Chain, 100% of transaction fees go to validators and stakers. (Transaction fees include USDC-denominated trading fees and USDC- and DYDX-denominated gas fees from transactions.)<img src="https://collectiveshift.io/wp-content/uploads/2023/12/Rewards-1024x512.png" alt="dYdX chain rewards">dYdX Chain rewards (Source:&nbsp;<a href="https://www.dydx.foundation/blog/understanding-rewards-and-fees-on-the-dydx-chain" rel="noopener noreferrer" target="_blank">dYdX Foundation</a>)Given the significant volumes it attracts, there is excitement over dYdX’s revenue-earning potential. This year, dYdX&nbsp;<a href="https://dydx.exchange/blog/1trillion-trading-volume" rel="noopener noreferrer" target="_blank">surpassed</a>&nbsp;$1 trillion in cumulative trading volume, which generated over $400M in fee revenue for dYdX Trading Inc. (Now that the dYdX Chain is live, the dYdX Foundation has stopped generating protocol revenue. As stated above, 100% of this revenue now goes to dYdX Chain validators and stakers.)<h2>Should The Protocol Share Revenue?</h2>Earlier this year, Matt created a conclusive post on the debate around whether to share protocol revenue with token holders.He drew the analogy to how traditional companies approach dividend policies. Essentially, young companies are highly unlikely to redistribute excess profits, opting instead to invest in business growth. Click below for Matt’s post.Read:&nbsp;<a href="https://collectiveshift.io/investing/when-will-token-holders-start-getting-a-share-of-protocol-revenue/" rel="noopener noreferrer" target="_blank">When Will Token Holders Start Getting a Share of Protocol Revenue?</a>Matt and I agree that it may be too early in their life cycle to justify distributing revenue to token holders.Very few DeFi platforms generate meaningful protocol revenue (i.e. fees paid directly to the protocol for usage). (Protocol revenue differs from supply-side revenue, which is paid to liquidity providers.)If you take one thing away from this article, it is to zoom out. DeFi protocols can generate significant revenue in bull markets, even if most is supply-side revenue.<h4>Growing Pressure To Share Fees</h4>More DeFi platforms will likely follow dYdX’s lead—we have already seen DeFi platforms such as Curve, PancakeSwap, Trader Joe, and previously Sushi distribute protocol fees to stakers.Given the revenue potential that would only spike in a bull market, this creates more pressure for Uniswap to turn on the fee switch.This could force Uniswap’s hand—many hold UNI for the perceived value driver that the Uniswap protocol and treasury will generate revenue through activating the fee switch.<h2>Is Regulation Holding Uniswap Back?</h2>A significant consideration is whether most crypto protocols are holding off on the fee switch or distributing protocol revenue due to potential regulatory uncertainty. But unlike other protocols, Uniswap has not exited the U.S. market.In 2021, Uniswap Labs drew attention from the SEC, with token holders activating the fee switch without proper legal consideration could present complexities. One primary&nbsp;<a href="https://uniswapfoundation.mirror.xyz/H-6W3RJ8IyZSixtBEZaLmSHUlAupLDh9eCZ_t6UUPo8" rel="noopener noreferrer" target="_blank">concern</a>&nbsp;is that directing Uniswap fees to token holders might raise questions regarding securities law.For example, a proposed Uniswap fee pilot passed a&nbsp;<a href="https://snapshot.org/#/uniswap/proposal/0xe9f8e5dd7ec26f7c0e7dd9e19bb8d57497d27d4a74be01cd3cad159cf3901b7f" rel="noopener noreferrer" target="_blank">temperature</a>&nbsp;and&nbsp;<a href="https://snapshot.org/#/uniswap/proposal/0xe9f8e5dd7ec26f7c0e7dd9e19bb8d57497d27d4a74be01cd3cad159cf3901b7f" rel="noopener noreferrer" target="_blank">consensus</a>&nbsp;check on Snapshot last year yet failed to eventuate into anything. And then, in June, another proposal to pilot fees on some pools&nbsp;<a href="https://snapshot.org/#/uniswapgovernance.eth/proposal/0xb471984c1daef6742be4d4983339af7ad140c3dfcfc883508fd975f5abe0e8c9" rel="noopener noreferrer" target="_blank">failed</a>&nbsp;to pass a community vote mainly due to regulatory uncertainty.Although legislation has been introduced to address the issue, it has not passed Congress or been signed into law…Following a holistic analysis, we do not feel comfortable recommending the creation of a traditional legal entity structure, if the proposal were to be approved right now.Devin Walsh, Executive Director of Uniswap FoundationAnd it’s not just Uniswap feeling the pressure. dYdX Foundation&nbsp;<a href="https://help.dydx.exchange/en/articles/4798063-location-restrictions" rel="noopener noreferrer" target="_blank">restricts</a>&nbsp;U.S. citizens from using or validating the dYdX Chain.<h2>Recap</h2>Uniswap has yet to activate its protocol level fee switch, in part due to a legal concern. It is facing more pressure to change this, with the launch of dYdX Chain and a host of other DeFi protocols either activating protocol fees and or sharing it with token holders.But DeFi platforms, and even Uniswap Labs’ private fee switch, show how much revenue could be captured, especially in bull markets.A big theme I’m watching into 2024 is how Uniswap responds to this pressure to turn on the fee switch. If we see greater regulation and teams not afraid to assign value accrual to their cryptocurrencies, will Uniswap eventually redistribute value back to UNI?

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DYDX vs Uniswap: The Battle For Fees & Token Value Accrual

<h2>Key Takeaways</h2><ul><li>Celestia is a new take on blockchains, known as a ‘modular approach’.</li><li>It launched in an experimental capacity with 100 validators and limited features.</li><li>Its value is proving data availability (publishing)—a growing issue for applications and blockchains.</li><li>Celestia aims to be a critical low-cost infrastructure to help guarantee data assurances for blockchains or ‘rollups’ to operate.</li><li>Despite the positives, questions remain in the short term about its large launch valuation. </li></ul><h2>Celestia’s Launch &amp; Fundamentals</h2>The long-awaited Celestia blockchain officially launched on mainnet in an experimental capacity. Rollups and other modular blockchains can now use Celestia as a data-availability layer.This initial version of Celestia is far from feature-complete. Moving forward, the community will decide on which features and improvements to add to Celestia. In the launch&nbsp;<a href="https://blog.celestia.org/celestia-is-ready-to-launch/" rel="noopener noreferrer" target="_blank">announcement</a>, the core team shared potential ways to improve Celestia.<h2>Celestia Explained: A New Type of Blockchain</h2>Celestia is a blockchain but designed differently. It takes a modular approach to build a scalable data availability layer to service data-hungry blockchains.Rather than having one blockchain do everything or perform all roles (called ‘monolithic’, such as Solana), Celestia offers a different solution by splitting up core functions (called ‘modular’).Instead of handling all the duties of a blockchain, such as Solana’s approach, Celestia only handles a select few, outsourcing the rest.<ul><li>Example&nbsp;&nbsp;Ethereum outsources most of its user activity to ‘L2s’ so users can have faster transactions and cheaper fees.</li></ul><img src="https://collectiveshift.io/wp-content/uploads/2023/10/image-32-1024x441.png" alt="monolithic vs modular">Monolithic vs. modular blockchains (Source:&nbsp;<a href="https://docs.celestia.org/learn/how-celestia-works/monolithic-vs-modular" rel="noopener noreferrer" target="_blank">Celestia docs</a>)<h3>What does it provide?</h3>Celestia provides data availability (DA) as a service to other blockchains or apps. You can also think of this data publishing.Its job is to ensure the data is (or was) there and verify that data (the transaction details) have been published to the world.To do this job, Celestia uses something called ‘data availability sampling (DAS)’ to ensure data is available without doing a bunch of extra work. Simply, it takes a sample of some data to know that the rest is valid. It’s like taking a small piece of pie and being able to reconstruct the pie’s size and the ingredients in it.<h2>Celestia: Solving The Growing Need For Data Availability</h2>The need for data availability is fast-growing.As blockchains grow, so too does its data history. Over time, it gets more expensive to verify and hold this data. Celestia ensures that anyone can inspect and verify a blockchain’s data.The growing problem = new networks called ‘rollups’ must house vast amounts of data.Demand is growing fast for the service that Celestia offers—that is, the provision of cheap and accessible data-publishing guarantees.The biggest potential users of Celestia’s data availability network are Ethereum L2s and rollups. These scaling solutions have exploded in usage, with a trend to outsource activity to these other layers. Making it an opportune time for Celestia to capitalise on this fast-growing and essential need for data-publishing guarantees.Likewise, any blockchain looking to use a “modular” approach and outsource data availability are potential users.Going deeper: Why Ethereum’s next upgrade likely won’t threaten Celestia<h2>Celestia’s Ecosystem Is Growing</h2>Celestia has already developed a vibrant ecosystem, with developers and projects choosing to build with its technology.For example, multiple projects, such as&nbsp;<a href="https://docs.celestia.org/developers/intro-to-op-stack" rel="noopener noreferrer" target="_blank">OP Stack</a>&nbsp;or&nbsp;<a href="https://www.theblock.co/post/259460/arbitrum-to-integrate-its-orbit-stack-with-celestia-for-data-availability" rel="noopener noreferrer" target="_blank">Arbitrum Orbit</a>, have supported Celestia, while a handful of projects, such as Eclipse, have committed to using Celestia for data availability.<img src="https://collectiveshift.io/wp-content/uploads/2023/10/cropped-celestia-ecosystem-1024x662.png" alt="celestia ecosystem">Celestia ecosystem as of Jul. 20, 2023 (Source:&nbsp;<a href="https://celestia.org/ecosystem/" rel="noopener noreferrer" target="_blank">Celestia.org</a>)<h2>History &amp; Team</h2>Celestia remains one to watch due to the team’s history.Celestia isn’t new and has been developing since the idea was put forth in 2019. The first iteration of what is now Celestia appeared in an&nbsp;<a href="https://arxiv.org/abs/1905.09274" rel="noopener noreferrer" target="_blank">academic paper</a>&nbsp;in 2019 by Mustafa Al-Bassam. John Adler (creator of Optimistic Rollups) and Ismail Khoffi&nbsp;<a href="https://blog.celestia.org/celestia-closes-1-5m-seed-fundraise-from-interchain-foundation-binance-labs-maven-11-capital-kr1-and-others/" rel="noopener noreferrer" target="_blank">partnered</a>&nbsp;as co-founders with Al-Bassam.Celestia Labs (formerly LazyLedger Labs) is building out Celestia. It&nbsp;<a href="https://www.theblock.co/linked/97021/blockchain-project-lazyledger-raises-1-5-million-seed-funding" rel="noopener noreferrer" target="_blank">raised</a>&nbsp;a $1.5M seed round in Mar. 2021,&nbsp;<a href="https://blog.celestia.org/celestia-raises-55m-to-launch-modular-blockchain-network/" rel="noopener noreferrer" target="_blank">followed by</a>&nbsp;a joint Series A and B round worth $55M in October 2022.Celestia boasts a strong team and advisors from established backgrounds in web2 companies or web3 native blockchains from Tendermint, Interchain Foundation, Cosmos and Harmony.<img src="https://collectiveshift.io/wp-content/uploads/2023/10/image-48.png" alt="team members as of october 26 2023">Eight members of the team at Celestia Labs (Source:&nbsp;<a href="https://celestia.org/team/" rel="noopener noreferrer" target="_blank">Celestia.org</a>)<h2>TIA Tokenomics</h2>Details about the TIA token were&nbsp;<a href="https://collectiveshift.io/airdrop/celestia-new-tia-token-how-to-get-the-airdrop/" rel="noopener noreferrer" target="_blank">announced</a>&nbsp;earlier this month. I briefly share my pros and cons below. For a more in-depth analysis of TIA, click below to visit our new TIA asset page.<a href="https://collectiveshift.io/tia" rel="noopener noreferrer" target="_blank">TIA Asset Page</a>What?<ul><li>Total supply: 1 billion TIA.</li><li>Inflation schedule: 8% in the first year, decreasing 10% per year until reaching an inflation floor of 1.5% per year.</li></ul>The good:&nbsp;TIA has real utility and productive power.<ul><li>With Celestia being a PoS blockchain, TIA is essential to delegating stake and maintaining security.</li><li>TIA has governance power to help decentralisation and impact real decisions, such as network parameters or what to do with the community pool.</li><li>TIA is used to pay for transaction fees.</li><li>TIA can be used to bootstrap other Cosmos-based chains.</li></ul>The bad:&nbsp;TIA launched with a massive ~$2.4B fully diluted validation (FDV), with only 14% of tokens released into the market. Likewise, over 50% of the token went towards early investors and contributors.<img src="https://collectiveshift.io/wp-content/uploads/2023/11/image-1024x588.png" alt="distribution">As per market intelligence firm Messari, to justify the valuation, Celestia will need to capture 2x the rollup adoption of Ethereum.One has to question whether this high value at launch is very high in the short term, given Celestia has yet to capture many projects using its services.<h2>Competitors</h2>Celestia is not the only one to have recognised the fast-growing market need for data availability. Its closest competitors are EigenDA and Avail, which have yet to launch.<a href="https://www.blog.eigenlayer.xyz/intro-to-eigenda-hyperscale-data-availability-for-rollups/" rel="noopener noreferrer" target="_blank">EigenDA</a>&nbsp;is a data-availability network targeted at L2 networks on Ethereum. It is being built by EigenLabs—the team behind the restaking protocol, EigenLayer—and is expected to launch on testnet by year-end.<a href="https://www.availproject.org/" rel="noopener noreferrer" target="_blank">Avail</a>&nbsp;is another data-availability network that has been developing for a long time. The project&nbsp;<a href="https://polygon.technology/blog/polygon-labs-doubles-down-on-ethereum-data-availability-roadmap-spins-off-avail" rel="noopener noreferrer" target="_blank">spun out</a>&nbsp;of Polygon Labs earlier this year and&nbsp;<a href="https://blog.availproject.org/news-kate-testnet/" rel="noopener noreferrer" target="_blank">launched</a>&nbsp;on testnet in June. Details about an incentivised testnet should be shared this month, according to an&nbsp;<a href="https://blog.availproject.org/road-to-mainnet-september-2023/" rel="noopener noreferrer" target="_blank">Oct. 3 blog post</a>.Celestia has a first-mover advantage. Its mainnet has launched, while EigenDA is yet to launch a testnet, and Avail remains in the very early stages of its testnet.Ethereum&nbsp;also has plans to launch its own Celestia-style DA solution in the coming years (referred to as&nbsp;<a href="https://ethereum.org/nl/roadmap/danksharding/" rel="noopener noreferrer" target="_blank">Danksharding</a>), although this remains multiple years away.<h2>Risks</h2>Celestia’s main risks and challenges are threefold.1. Hefty valuation at launch:&nbsp;As explained, Celestia will need to capture a significant market share to justify its high launch FDV.2. Failing to guarantee correct data publishing:&nbsp;If this happens, confidence will reduce, and the project will likely fail.3. Long-term viability:&nbsp;If Ethereum successfully ships its own Celestia-style DA solution in the coming years, it’s unclear where Celestia fits in and whether other blockchains will recreate their own DA layer. If this happens, it will represent an existential threat to Celestia.

Celestia Launches: Why It Could Fill A Serious Need

<h2>Key Takeaways</h2><ul><li>Solana has bounced back&nbsp;after a near-fatal 2022 threatened its very survival.</li><li>Solana continues to impress, showcasing many technical developments, increasing network durability and legitimate partnerships or integrations (Visa &amp; Shopify).</li><li>Institutional investors are feeling the positives, with&nbsp;SOL posting 27 weeks of net inflows this year,&nbsp;compared to only four weeks of sell-offs.</li><li>Despite the positive signs,&nbsp;onchain activity remains yet to catch up with other fundamentals.&nbsp;A focus will now be on whether these positives translate into sustained usage. </li></ul><h3>A Year Of Positives</h3>Solana has bounced back this year after a horror 2022, filled with network downtime and an exodus following the collapse of FTX. Solana shows a wide range of positives that cannot be underestimated, such as:<ol><li>High-profile profile legitimate partnership adoption</li><li>A new infrastructure upgrade</li><li>Increasing network uptime</li><li>Mobile development</li><li>Cheap “compressed” NFTs</li></ol><h2>Record investment inflows</h2>The positives are translating into institutional interest. While the rest of the crypto ecosystem struggles, SOL has 27 weeks of net inflows this year, compared to only four weeks of sell-offs.<h2>Visa &amp; Shopify Adoption</h2>Visa: Global payments giant Visa announced in early September it would expand its USDC stablecoin settlement program to Solana.Shopify: In late August, Solana Pay was&nbsp;<a href="https://solana.com/news/solana-pay-shopify" rel="noopener noreferrer" target="_blank">integrated</a>&nbsp;as a plugin option inside Shopify, allowing merchants and users to harness Solana as a low-cost way to settle payments.<h2>FireDancer Upgrade</h2>Solana’s yearly conference,&nbsp;<a href="https://solana.com/breakpoint" rel="noopener noreferrer" target="_blank">Breakpoint (Oct. 30–Nov. 3)</a>, is fast approaching, with several announcements likely, most notably,&nbsp;<a href="https://jumpcrypto.com/firedancer/" rel="noopener noreferrer" target="_blank">Firedancer</a>. It is a client for Solana critical to improving Solana’s infrastructure. Firedancer promises to:<ul><li>make Solana more durable and secure;</li><li>help scale the network through faster and more concurrent transactions;</li><li>lower the cost of running a validator node, and</li><li>help decentralise the network.</li></ul>In a&nbsp;<a href="https://youtu.be/RiIb1Z1pEtU?t=4648" rel="noopener noreferrer" target="_blank">recent interview</a>&nbsp;with Solana Labs co-founder and CEO Anatoly Yakovenkoy, he expects the team to “get something out by Breakpoint,” but it won’t be a full release.<h2>Growing Network Strength &amp; Decentralisation</h2>The reliability of Solana improved noticeably this year.Since Feb. 25, Solana has experienced 100% uptime. (For those unaware, in 2021 and 2022, Solana suffered multiple well-documented instances of network downtime and severe performance degradation.)This is particularly positive, given Solana implemented multiple upgrades to ensure users do not experience high gas fees when a single application demands high resources.It shows the substantial upgrades in the last 12 months have proven effective.<img src="https://collectiveshift.io/wp-content/uploads/2023/10/image-11.png" alt="solana uptime">Solana network uptime (Source:&nbsp;<a href="https://status.solana.com/uptime?page=1" rel="noopener noreferrer" target="_blank">Solana Status</a>)Solana has also progressed from a single to a multi-client network—making the network more resilient &amp; secure—and continues to rank highly for the number of validators and nodes.<h2>Compressed NFTs</h2>NFT minting volume has taken off due to “compressed NFTs”, allowing users to mint 1 million NFTs for&nbsp;~$110.<img src="https://collectiveshift.io/wp-content/uploads/2023/10/image-7.png" alt="compressed nfts">For more, see&nbsp;<a href="https://collectiveshift.io/daily-update/5-reasons-why-sol-could-remain-in-the-top-10/" rel="noopener noreferrer" target="_blank">5 Reasons Why SOL Has Staying Power</a><h2>Mobile Development</h2>Finally, the Solana mobile experience remains in its infancy, with Solana Labs shipping The Solana Saga smartphone in May.However, it is yet to see any real adoption, with only ~2K minters of its Genesis NFT mint available to early buyers. The high price point and low sales forced Solana Labs to&nbsp;<a href="https://blockworks.co/news/solana-saga-phone-price-cut" rel="noopener noreferrer" target="_blank">cut</a>&nbsp;the cost of the phone by 40% only 4 months after launch.Despite the slow start, it remains a legitimate catalyst impacting how crypto-specific mobile apps are used and the development of mobile dApps via the Solana Mobile SDK, which other mobile providers could use.<img src="https://collectiveshift.io/wp-content/uploads/2023/10/image-8.png" alt="mints">Number of Saga Genesis Mints (Source:&nbsp;<a href="https://blockworks.co/news/solana-saga-phone-price-cut" rel="noopener noreferrer" target="_blank">Blockworks</a>&nbsp;via&nbsp;<a href="https://flipsidecrypto.xyz/kiryl_sol/solana-saga-dashboard-tEc979" rel="noopener noreferrer" target="_blank">Flipside Crypto</a>)<h3>Yet To Translate To OnChain Activity</h3>The final puzzle piece is onchain activity, which has yet to return despite this year’s positive advances<h3>The Bad</h3>Despite improved network performance and a few notable protocols migrating to Solana, onchain activity has yet to benefit materially.<ul><li><a href="https://www.theblock.co/data/on-chain-metrics/solana/number-of-active-addresses-on-the-solana-network-daily-7dma" rel="noopener noreferrer" target="_blank">Number of active addresses</a>&nbsp;(7DMA): Remains near all-time lows of 238K.</li><li><a href="https://www.theblock.co/data/on-chain-metrics/solana/solana-value-moved-on-chain-daily-7dma" rel="noopener noreferrer" target="_blank">The value moved onchain</a>:&nbsp;Plummeted from a peak of $200B in 2021 to only $2B in September.</li></ul><h3>Mixed</h3><ul><li><a href="https://defillama.com/chain/Solana" rel="noopener noreferrer" target="_blank">Total value locked</a>&nbsp;(TVL)&nbsp;remains near all-time lows, down 97% from its peak. However, it has almost doubled to 30.95M SOL this year.</li><li><a href="https://www.theblock.co/data/on-chain-metrics/solana" rel="noopener noreferrer" target="_blank">Non-vote transactions</a>: A superior reflection of true network activity, trends lower, hitting 12-month lows. Overall transaction count has also come down from a peak of ~26M in April 2023 to ~15.4M in September 2023.</li></ul><h3>The&nbsp;Good</h3><ul><li>Not just Solana: The rest of the cryptocurrency industry experienced significant drawdowns on onchain activity.</li><li><a href="https://app.artemis.xyz/comparables?tab=chains" rel="noopener noreferrer" target="_blank">Stablecoin volume</a>:&nbsp;Stablecoin volumes have remained consistent at ~$1.5B—indicating confidence to keep sizeable value on the network.</li></ul><img src="https://collectiveshift.io/wp-content/uploads/2023/10/image-10.png" alt="stables">

Why Solana Continues To Impress

<h2>Key Takeaways</h2><ul><li>SEC’s Recent Move:&nbsp;The SEC postponed the ETF applications to January 10, 2024. However, record pressure is being applied by the courts and politicians.</li><li>Short-Term Projections:&nbsp;Objectively, a restrained rally post-approval seems probable, but let’s not forget these things tend to follow a “buy the rumour, sell the news” dynamic. The most probable could be a combination of both followed by gradual accumulation.</li><li>Long-Term Implications:&nbsp;The Bitcoin ETF is not just a passing trend, and the hype appears legitimate for several reasons:</li></ul><ol><li>	. Simplifies the process for mainstream exposure.</li><li>	. Allows exposure via traditional players</li><li>	. Positions ETFs as crucial players through consistent and new capital inflows.</li><li>	. Underscores Bitcoin’s status as a recognised asset class.</li></ol> <h2>Rewind: Delayed But Inevitable?</h2>The market got very excited by the entry of BlackRock in the Bitcoin spot ETF race in June.However, we remain in limbo as the SEC continues to push back a decision, this time with a new deadline of January 10, 2024.READ:&nbsp;<a href="https://collectiveshift.io/bitcoin/blackrocks-proposed-bitcoin-etf-why-investors-need-to-know-about-it/" rel="noopener noreferrer" target="_blank">BlackRock’s Proposed Bitcoin ETF &amp; Why Investors Need To Know About It</a><img src="https://collectiveshift.io/wp-content/uploads/2023/10/ETFs-timeline-1-1024x541.png" alt="etf timeline">Spot Bitcoin ETF deadlinesDespite the delays, there’s growing optimism. Odds of a Bitcoin spot ETF in the U.S. remain very high.<ul><li>Two Bloomberg ETF analysts&nbsp;<a href="https://cointelegraph.com/news/spot-bitcoin-etf-chance-raised-after-grayscale-victory-bloomberg" rel="noopener noreferrer" target="_blank">expect</a>&nbsp;a 70% chance this year that a spot ETF will be approved and a 95% chance by 2024.</li><li>U.S. politicians&nbsp;<a href="https://www.coindesk.com/policy/2023/09/26/us-house-lawmakers-push-secs-gensler-to-approve-spot-bitcoin-etf-immediately/" rel="noopener noreferrer" target="_blank">strongly advised</a>&nbsp;the SEC to approve the product “Immediately”.</li><li>An ex-BlackRock Director&nbsp;<a href="https://decrypt.co/200129/ex-blackrock-director-says-sec-will-approve-bitcoin-etf-3-6-months" rel="noopener noreferrer" target="_blank">said</a>&nbsp;it could come in the next “3 to 6 months”.</li></ul><h2>How Could It Play Out In The Short-Term?</h2>One of the most pressing questions remains ‘what could happen in the lead-up to an approval?’.Although I do not possess a crystal ball, it’s always fun to speculate on a few short-term scenarios on how it could play out.Senorio 1: Approval leads to a short-term rally&nbsp;|&nbsp;Highly likelyIt would mean big asset managers like BlackRock getting approval and Graysclae, the creators of the largest Bitcoin Trust (holding ~3% of all Bitcoin), could be converted into an ETF.It’s difficult not to see this triggering an initial price rally—Bitcoin will be all over the news, and large asset managers will be doing national TV interviews.It’s worth noting that previous price pumps (Ripple vs. SEC ruling, BlackRock ETF application announcement) saw their rally short-lived as buyer apathy took hold.Scenario 2:&nbsp;Sell-off on listing date&nbsp;|&nbsp;LikelyWe could see the approval being positive on price; however, there is a scenario of a “sell-the-news”, when the ETF goes live.Historically, this has been the case, for example, if we look at the muted Ethereum Futures ETFs, which went live this week.Scenario 3: It’s all a sell-the-news event&nbsp;|&nbsp;Less LikelyDue to the widespread expectation of approval, it could&nbsp;all&nbsp;be a sell-the-news event.Scenario 4: Limited impact on price but gradual accumulation, ETFs become massive net accumulators of Bitcoin&nbsp;|&nbsp;Most likelyMy post probable scenario is the real price impacts on Bitcoin not being revealed until months after the ETFs have gone live.We could see a rally on approval, but as a growing majority believe approval is evitable, one has to wonder how much is priced in and will move the market on launch.&nbsp;Large amounts of BTC could be scoped up by ETF issuers, and combined with halving, it could impact Bitcoin price later on.Scenario 5: No ETFs approved&nbsp;|Least likelyOf course, we must consider all the possibilities, one being that the ETF never comes. A failure to get an ETF could be a massive hit to legitimacy.<h2>Impact In The Long-Term: Why The Hype Is Justified</h2>The most important question remains the long-term impacts.&nbsp;I believe the hype is justified for a few reasons.#1 Makes it easy for anyone to get exposureBitcoin is not easy to hold. Easily getting Bitcoin exposure via a traditional ETF removes store risks, trusting dubious exchanges and knowing how to use it.A 2021 Grayscale survey found 77% of U.S. investors would be more likely to invest in Bitcoin if an ETF existed.#2 Allows exposure via traditional playersMany will only trust traditional ETF products or issuers such as BlackRock or Fidelity.&nbsp;The ETF is the formay in which the boomers and the financial advisors prefer their investments delivered in. And this matters because financial advisors manage about $30 trillion in assets.Bloomberg ETF analyst Eric Balchunas via&nbsp;<a href="https://cointelegraph.com/news/blackrock-bitcoin-etf-could-unlock-30-trillion-worth-of-wealth-bloomberg-analyst-says" rel="noopener noreferrer" target="_blank">CoinTelegraph</a>#3 Net accumulators &amp; bringing in new moneyWe could see ETF issuers being the largest holders of Bitcoin, increasing the high 3.5% of all BTC held in exchange-like traded products (Of which Grayscale holds ~3%).Take it with a grain of salt, but estimations expect spot ETFs to bring substantial new money.&nbsp;#4 SymbolicMany forget Bitcoin was only a fringe concept that is now getting accepted as an alternative asset by the world’s payment leaders, investment firms and companies. The spot ETF puts a flag in the ground as a milestone for its acceptance—it’s easy to forget it was only six years ago BlackRock CEO Larry Fink called Bitcoin an “index of money laundering”.

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