The crypto industry is riding out of the bear market, DappRadar’s new industry report for the third quarter shows
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DappRadarthe global app store for decentralized applications, the new Q3 Industry Report finds hopeful signs of recovery in the crypto economy despite a persistent bear market, with the market cap of cryptocurrencies still below $1 trillion.
Summary
While the impact of global interest rate hikes and inflation continue to affect crypto after the Terra crash, this report shows preliminary signs of recovery with an 8.5% ($981 million) increase in cryptocurrency market capitalization in Q3, with DeFi’s TVL increasing by 2 .9% ($69B), despite UAWs down 25% from Q2. The key crypto incident in Q3, Ethereum’s merger, but a technical success, saw a 36% drop in Layer-2 transactions and a 27% drop in Layer-2 UAWs after the event. With Yuga Labs projects dominating the NFT market, NFT demand remains high with 21.9 million trades in Q3. The GameFi dynamic continues to grow, with an increase of 912K UAWs compared to August.
The impact of the broader economy on crypto
The rising inflation and inflation rates in the global economy have negatively affected the crypto markets despite a good start to the 3rd quarter for crypto, when the total market capitalization reached over $1 trillion. “Current macroeconomic conditions significantly affect the crypto market, making it impossible to foresee a worldwide expansion of cryptocurrencies without a general recovery in conventional financial markets,” the report concludes.
On a positive note, the EU’s approval of the Markets in Crypto-Assets (MiCA) regulation shows that governments are taking crypto seriously. In the US, the White House published the “First-Ever Comprehensive Framework for Responsible Development of Digital Assets” in September, another sign that crypto has become a more mature industry.
The Merge meets reality
While Ethereum’s merger, which moved to a proof of stake system, went as planned from a technical standpoint, it failed to overcome a ten-month decline, actually falling 15.75% compared to last month. ETHW, the original asset of the Proof of Work chain that split from Ethereum in the merger, continues to suffer as holders sell their coins in large quantities with a 76% drop in September. While Layer-2 activity, which rose before the merger, fell 36% in transactions and 27% in UAWs afterwards. However, Optimism and Arbitrum have reached $1 billion in TVL, a significant increase from the previous quarter. Optimism is up 263%, while Arbitrum is up 35.555%, both powered by The Merge.
DeFi is showing signs of improvement
DeFi as a whole showed signs of improvement with a 2.9% growth in TVL from Q2. Ethereum remains the most dominant chain with its dominance increasing to 69% with $48 billion, a 3.17% growth from the second quarter. BNB is once again second with $6.6 billion in TVL, a growth of 10.89% from the second quarter. Its dominance also grew, from 8% from the previous quarter, to almost 10%. Tron’s TVL increased by more than 46% compared to the previous quarter, reaching $5.7 billion, making it one of the strongest quarters ever.
Compared to Q2, TVL for Polygon, Solana and Avalanche have decreased by 9.24%, 20.36% and 28.78% respectively. The reduction in Solana was caused by the August hack, where over $6 million was taken from 8,000 affected wallets.
Crypto gains and losses in the 3rd quarter
Crypto suffered losses of $428,718,083 during the third quarter of 2022, most of which were stolen from Nomad Bridge, a cross-chain used to exchange tokens, which saw $190 million drained from the bridge contracts. Additionally, an attack on Wintermute’s contracts resulted in the theft of $160 million. Combined, these malicious events represent 79.85% of losses in the third quarter. “On a positive note, these numbers indicate a 62.9% decrease compared to the third quarter of 2021, when hackers and fraudsters stole $1,155,334,775,” the report added.
Demand for NFTs remains high
Mirroring the crypto market, Q3 NFT market results had similarly mixed news, with $2.71 trading volume down 67% from Q2, while sales volume was up 8.3% from Q2. “The increase in sales indicates that the NFT business continues to be in demand, while the drop in trading volume can generally be attributed to the decline in cryptocurrency values,” the report suggests.
While Ethereum’s NFT trade volume is down 76% from Q2, the number of NFT trades increased by 11%; Solana’s NFT trading volume is up 96% from last month, but still down 63% from Q2. Solana growth was fueled by the launch of the y00ts collection, which resulted in over $14.7 million in secondary sales. During the bear market, the top projects Yuga Labs: OtherSide, Bored Ape Yacht Club, Mutant Ape Yacht Club and CryptoPunks account for more than 46.21% of the entire NFT’s market capitalization.
The GameFi sector continues to grow
Blockchain-based games continue to be profitable with UAWs increasing by 8% (912K) compared to last month, indicating an upward trend. In August, The Sandbox Alpha Season 3 was launched, and to date over four million users have registered with a wallet and more than 200,000 active users. Gameta was the top performer in gaming, climbing the ranks in September, with over 1.9 million players.
Final thoughts
Although crypto is likely to be in a bear market for some time, the third quarter of 2022 was significantly better than the second, as the market had one of its biggest losses ever. It is also worth noting the steady trend of governments passing cryptocurrency laws, especially the efforts made to legalize stablecoins. “Undoubtedly, another bull run will happen, and it may be much stronger than the last one. Every time the market has difficulties, it gradually gets stronger and the quality of the measures increases”, the report concludes.
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Contact information
Dan Edelstein
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