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July 26, 2022

Ember Nuggets #39 | NFT Market Trends & More 👀

Hope you have all had a solid weekend and that your Monday wasn't too bad! We're back with some fresh Ember Nuggets for you to ponder about through the rest of the week.

Before we dive in, a quick update: our new Originals portfolio was off to a killer start, assisted by ETH's very strong run-up this month - it's currently up +12% in the last month, even after the pullback we've seen in the last few days. We're hoping that both blue chips continue to pump!

Nugget #1: ETH Merge on the Horizon

ETH Merge is getting closer as more successful tests are completed. The team working on Ethereum says that the Merge could happen as soon as September. They need to successfully do the test on Ropsten testnet, which will let them prepare for the official launch. With recent developments, we have seen ETH volumes decline on exchanges and some positive price action take place. But let’s not forget, ETH Merge is just phase one – there is a lot that needs to be done to get where ETH needs to go.

The Merge will decrease ETH’s energy consumption by over 99% and shift the network from Proof of Work to Proof of Stake – where 32 staked ETH will allow a node to operate, support the network, and earn fees (another reason why users have started stockpiling ETH). Vitalik (founder of ETH) has created a rhyme with his planned ETH phases.

  • Merge - upcoming.

  • Surge - refers to “sharding” which is a scaling solution that should increase the efficiency of the network by improving throughput and lowering costs. Ideally, pushing ETH from completing 15-20 transactions per second today to 100K transactions in the future.

  • Verge - will promote decentralization of data, pushing forward a concept called “Verkle Trees,” a mathematical proof that would allow users to support and validate the network without the need to store ridiculous amounts of information on their systems.

  • Purge - simplifying the protocol and lowering the burden needed to store historical data on nodes, optimizing and cleaning the data.

  • Splurge - all the “other fun stuff” according to Vitalik.

Takeaway: Merge is just the beginning.

Nugget #2: Stablecoin Bill WIP in Congress

The House Financial Services Committee has been working on a bill to regulate stablecoins in the United States. Early signs point to a bill that will be less restrictive than what regulators would have preferred. Regulators want to limit stablecoins to banks only, but the draft proposal will likely create a license for stablecoin issuers and managers and allow non-banks to operate. The focus will be on creating a framework for government-approved coins to be issued and managed, according to Jim Himes (D-Conn).

The bill will likely get revealed in the coming weeks. It is too soon to comment on the next steps and ramifications, let alone if it passes the Senate, but it is progress on the heals with some of the largest stablecoins imploding and peak fear on how regulators could respond. This will be very favorable for crypto.

Nugget #3: NFT volume trends lowers

The NFT market peaked in January 2022 with over $16.5B in volume and has steadily declined since June 2022 logging just over $1B in volume and MTD for July at $370M. The bear market has slowed transaction volumes across all exchanges. We have seen blue-chip floors hold up relatively well and retain a large share of current transaction volumes while smaller projects have begun to fade. There has also been a shift in mints, with many opting for a free mint to build hype and monetize on secondary royalties.

The key will be to see which teams have the resilience and planning to get through the bear market, continue building, and find a way to cement their brand in Web3 and likely expand to Web2. I do want to mention, that we have seen Web2 brands enter the space – last week Nickelodeon minted out and another collection by Bill Murray. We may see a shift towards Web2 expanding in Web3 – especially when reputation and brand matter more than hype in a bear market.

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