January 2022 in Numbers: NFT Boom Despite Crypto Slump, Fantom Strengthens and FTX’s Rally to $32 Billion

Stocks of crypto-linked companies (as of 31.01)

Mining company stock dynamics (as of 31.01)

• Bearish sentiment dominated the month. On 8 January, the Fear & Greed Index hit a local low (10) — a level last seen in July 2021 when Bitcoin traded under $30,000.
• The spike in the index was driven by news of the Fed’s rate-hike plans to tighten policy sooner and faster than expected.

• Bitcoin’s correlation with US tech stocks and the Nasdaq hit a fresh high (0.66 on 25 January, averaged over the prior 40 days).
• Price movements of Bitcoin and the S&P 500 and Dow Jones remained broadly in sync. Correlation with the first hovered around 0.4, with the second around 0.33.
• Statistical linkage between Ethereum and these indexes was more pronounced (SPX 0.48; Dow 0.41).
• Bitcoin’s correlation with gold remained weak (0.07). Ethereum’s correlation with gold was higher (0.1).

• In January, Bitcoin’s historical volatility hovered between 2.35% and 3.4%. The average was 2.83%, below December’s 3.57% and well under the 2021 average of 4.12%.
• The Sharpe ratio for Bitcoin (using two-year US Treasuries as the risk-free proxy) remains a reminder of relative risk of crypto investments. In January, Bitcoin again outperformed gold ETFs and the Dow Jones on this metric.

• Share of assets held by short-term Bitcoin holders in late January stood above 18%. More than 90% of coins were purchased above the current price.
• Throughout January, the aSOPR indicator remained below 1, signalling deteriorating market sentiment and that most investors were realizing losses.

• January 21 saw net realized losses of $2.5 billion. Only in May and June 2021 did the market see comparable levels.
• The share of long-term holders rose above 80%, nearing multi-year highs. Only 6% of coins were in loss for their holders.

• Value of Bitcoin transactions above $1m as a share of on-chain value rose to about 65%. The ‘whale’ trend began in October 2020, when prices hovered around $10k-$11k.
• In January, Bitcoin transactions on-chain above $1m accounted for 65% of on-chain value.

• Since the activation of EIP-1559 in August 2021, the Ethereum burn process surpassed 1.72 million ETH (~$4.7 billion at the time of writing). In January, more than 392,000 ETH were burned. On the 10th, the network posted an all-time high for this metric (19,424.89 ETH). The burn rate tracks the asset price.
• The month’s largest burn (65,697 ETH) came from NFT marketplaces OpenSea operations. The reason is rising platform trading volume.
• The share of ETH locked in DeFi protocols remains high — 27.48% in January.
• In the first half of January, centralized exchanges reduced balances; however, against ETH’s fall below $3,000, the local trend was broken. By month-end, ETH supply on CEXs was virtually unchanged.

• Since activation of EIP-1559, the deposit contract has added almost 5% more ETH, surpassing $9.27 million worth of ETH (about $25.37 billion).
• The number of validators on the Beacon Chain neared 290,000. Over the month, active participants in the Ethereum 2.0 ecosystem rose by 4.73%.
• As of 31 January, addresses with balance ≥ 32 ETH stood at 107,543, after a month of net change.

• Nodes and channels on the Bitcoin Lightning Network continued to grow: by month-end, nodes were up 6% and channels up 3%. December’s pace was slower — 2.31% and 2.26%, respectively.
• In December 2021 LN capacity slipped slightly, but January saw a rebound — capacity rose 2.5% to 3388 BTC.

• Despite the downtrend, Bitcoin hash rate rose 5.33% in January (7-day moving average).
• Mid-January saw the total network hashrate approach a historical high, close to 200 EH/s.

• Foundry, a US-based pool, led hash-rate share.
• Mining difficulty rose by 9.77% in January.
• The rise in hash rate and difficulty points to expanding global mining capacity and a full rebound from China’s ‘Great Migration’ of miners, as well as market participants’ confidence in Bitcoin’s long-term prospects.

• Bitcoin miners’ revenues continued to fall: January receipts dropped 15% to $1.21 billion.
• The share of mining revenues from fees dropped to a record low — 1.15% or $13.9 million.
• Ethereum miners earned $2.62 billion in January (down 7% versus December).
• Ethereum miner fees exceeded revenue from mined blocks — $1.33 billion vs $1.28 billion. This underscores the ongoing scalability concerns for Ethereum.

• In January, Ethereum gas costs rose again — on 10 January, the average fee crossed $50.
• The corresponding BTC fee in January did not exceed $3. Such low fees reflect low on-chain activity amid a falling market and the Taproot upgrade activated in November.

• January’s total spot trading volume stood at $986 billion.
• Binance led with $495 billion, OKX with $128 billion, and Coinbase with $118 billion.
• The Huobi share fell by almost 40% after Chinese investors exited. Meanwhile, KuCoin’s volumes surpassed $50 billion for the second straight month, well above last year’s averages by roughly 500%.

• Overall futures trading volume for Bitcoin remained flat at around $1.51 trillion. For Ethereum, activity has been softer for several months (around $0.76 trillion, a post-summer low).
• The first major blockbuster of liquidations occurred on 5 January when Bitcoin tested a local low near $42,000. The record came on 21 January when price briefly fell below $33,000 and total liquidations exceeded $1 billion.
• Bitcoin options trading volume reached $21.8 billion in January, reflecting investor interest in this derivative.
• Ethereum options traded $15.8 billion.

• In January, total TVL in DeFi fell 22% to $188.61 billion.
• The Ethereum ecosystem remains dominant. 27 January saw a sharp ETH-denominated TVL peak — 43.42 million ETH. However, the dollar TVL fell 24% to $118.51 billion as prices declined.
• Among the largest ecosystems, Fantom bucked the trend with a 76% rise to $9.36 billion.
• Fantoms around 1) stimulus program of 370 million FTM (~$777 million); 2) numerous integrations; and 3) growing interest in Solidly (announced by Andre Cronje and the Abracadabra founder Daniele Sestagalli) contributed to the rise. Projects can win Fantom Grants if their TVL stays above $1 million for two months; grant size tied to locked liquidity.

• The DeFi sector’s tokens lagged the market; all top-20 assets traded red for the month.
• The Abracadabra Spell Token (SPELL) suffered the steepest decline amid the Wonderland controversy—down more than 70%.
• The incident also weighed on Terra’s LUNA and SushiSwap’s SUSHI. The latter fell by about 52% as the DEX’s governance entity Frog Nation is part of Wonderland.

• In January, the lending-focused sector continued to dominate the Ethereum ecosystem — lending protocols accounted for 45% of total TVL.
• For the month, the combined market cap of ‘BTC on Ethereum’ tokens stood at $12.96 billion. Over the last 30 days, the figure fell by 18%.
• WBTC remained the undisputed leader of the segment with a market cap of $10.31 billion (dominance index of about 80%).

• Average daily transactions in Polygon and Ethereum networks barely changed from December 2021. In Binance Smart Chain activity slowed more — up to 41% monthly drop (from 8,760,298 to 6,196,672).
• Average operations on Avalanche rose by 12.5% (from 673,223 to 769,164). Notably, 1inch Network’s integration helped lift activity.

• The popularity of Ethereum-based DEXes remains, with DEX activity not falling as fast as spot-market volumes.
• The aggregate TVL across protocols surpassed $100 billion. Uniswap remains the leader with $71.8 billion, followed by SushiSwap ($9.88bn) and Curve ($8bn).

• There is notable demand for Ethereum L2 solutions; TVL across these protocols surpassed 2 million ETH for the first time, with users locking in 514,208 ETH (25% of total liquidity) for the month.
• Due to the ETH price correction in USD terms, the TVL change was roughly flat at about $5.59 billion.
• The leader in the segment is Arbitrum, accounting for over 51% of TVL ($2.88 billion). Second is dYdX with $961 million.
• A newcomer to the rankings is Metis Andromeda. TVL rose 33% during the month to $395 million, helped by rising METIS token and multiple integrations; Beefy Finance and Pickle recently added support to the new network.

28 January media also reported that Deputy Prime Minister Dmitry Chernyshenko approved a roadmap for crypto market regulation by end-2022 in line with FATF standards. The government document envisages:

• defining market participants’ status and the rules governing their activities, and appointing a regulator;
• developing a mechanism for registering and reporting organisations that handle virtual assets in Russia;
• introducing administrative or criminal liability for crimes involving crypto, including illegal turnover and non-declaration of operations;
• creating a mechanism to verify the accuracy of information about crypto ownership;
• mandatory registration of crypto platforms in Russia similar to online businesses.

1 February brought news that Chernyshenko instructed to include in the regulation roadmap questions related to the legal status of mining.