Crypto Market Maintains Stability, Says Andreessen Horowitz
The latest report from a16z crypto, the crypto arm of venture capital powerhouse Andreessen Horowitz, suggests that despite the bear market and withdrawals from crypto funds, the overall situation is not as grim as it might appear.
Andreessen Horowitz consistently delivers multifaceted analytics on various segments of the cryptocurrency market. Many investors track the movements of venture capital behemoths like a16z crypto to ensure their investment strategies are well-informed. The latest State of Crypto Index report explores several crucial metrics that shed light on the prevailing sentiments in the market.
4. The demand for NFTs has significantly decreased. From March 2024, when the market had 1.24 million buyers, it has fallen by nearly 20% to 995K buyers. This reduction may reflect a decrease in hype and a growing awareness among investors who prefer more valuable assets.
Despite a current crypto index of -3.78%, this marks an improvement from last month’s -8.7%. This suggests that the downturn in the crypto market is decelerating. Cautious optimism leads analysts to predict that by autumn, the market correction phase will conclude and trading charts will once again show green, as seen in the spring.
Key Positive Trends from the Report
1. There's been a notable increase in the number of unique users on various blockchains. The metric for active network addresses has reached a new high of 53.14 million, a testament to the broad adoption of cryptocurrencies.
Active User Addresses. Source: a16zcrypto.com
2. Mobile apps are currently the most favored method for storing cryptocurrencies, having increased to 28.37 million users. While this method may not offer the highest security, its convenience for quick transactions is a significant draw. The preference for mobile wallets by over half of all users suggests a substantial influx of newcomers into the market.
Number of Hot Wallet Users. Source: a16zcrypto.com
3. The interest in crypto-related jobs continues to be strong, with an average of 1.6 applicants per vacancy. This is an improvement from November 2023, when there was one candidate per vacancy, though it is still below the record high in December 2021, when each vacancy attracted three applicants.
4. The demand for NFTs has significantly decreased. From March 2024, when the market had 1.24 million buyers, it has fallen by nearly 20% to 995K buyers. This reduction may reflect a decrease in hype and a growing awareness among investors who prefer more valuable assets.
Number of NFT Buyers. Source: a16zcrypto.com
What Indicators Are Raising Concerns?
- There's been a noticeable decrease in the overall number of transactions across blockchains. In March 2024, transactions reached a historic high of 2.7 billion per month, but they have now fallen to 2.1 billion. This decline may stem from market uncertainty, where it seems everyone is waiting for the outcome of the Mt. Gox saga, and the altcoin season has yet to accelerate.
Total Blockchain Transactions. Source: a16zcrypto.com
2. The amount of transaction fees on crypto platforms has risen by nearly 5% compared to last month. Given the reduced number of transactions, it suggests that platforms are increasing their fees to maintain profitability.
3. The trading volume on decentralized exchanges (DEX) has also decreased, now totaling just $153.6 billion. This significant drop from the 2021 peak of $292.2 billion may largely be due to cybersecurity issues.
Trading Volumes on DEXs. Source: a16zcrypto.com
What Fuels a16z crypto’s Positive Outlook?
Analysts at a16z crypto derive their optimism from the overall crypto index, calculated by considering all aspects of the market. In addition to the indicators we have mentioned, the calculation also includes a range of other factors:
- The number of active developers;
- The number of deployed smart contracts;
- The volume of stablecoin issuance;
- Academic research contributions, and more.
Despite a current crypto index of -3.78%, this marks an improvement from last month’s -8.7%. This suggests that the downturn in the crypto market is decelerating. Cautious optimism leads analysts to predict that by autumn, the market correction phase will conclude and trading charts will once again show green, as seen in the spring.
Crypto Index Outlook. Source: a16zcrypto.com
Furthermore, analysts at Andreessen Horowitz highlight that not all metrics are equally significant. The most critical factors in their calculations are those related to innovations and adoption, which predominantly influence market cycles. In this case, these critical indicators do not cause concern among the researchers.
