Partnered With:

OKLink and A&T Capital: How to Find Alpha through on-chain data?

Read this article in 29 Minutes

The opportunity to capture Alpha has two dimensions: target selection and timing.

On April 19, LIANG Chen, director of operations of Oko Cloud Chain, and A&, a blockchain venture capital fund; Liam, senior research fellow at T Capital, led the question "How to Find Alpha through on-chain Data?" As the theme, it interprets the overall trend of Q1 crypto assets, and shares ETH 2.0 noteworthy applications, DeFi follow-up development direction, NFT market trends and other issues.

As the first blockchain big data listed company in the world, OUkeyunch.com aims to provide users with safe and reliable blockchain information services by using blockchain + big data technology. Its products include but are not limited to: blockchain browser, On-chain Tianyan, on-chain master.

A& T Capital has invested over $19 million in 30 projects in the past year, including Amber Group, Cobo, Nestcoin, Infstones, etc.

The following is a transcript of the online conversation

BlockBeats: Welcome two guests. Before we start the analysis of data on the chain, please tell the readers about the overall trend of crypto assets in the first quarter of this year from a macro perspective. What are the main factors? How relevant is it to traditional assets?

LIANG Chen:In Q1 of 2022, both Crypto and the traditional stock market fell first, then rose and finally closed down. The S&P 500 fell 5.5% and the Nasdaq fell 9.07% in the first quarter, while Bitcoin fell 3.3% and Ethereum dropped 12.9%. The markets were very similar.

Since the start of the bull market in 2021, bitcoin prices have shown some correlation with the performance of U.S. stocks. Q1 in 2021, Q1 in 2022 S&P 500 (S& The correlation coefficient between P500 and BTC was higher, reaching 0.96 at one time, and maintained a high correlation in most of the time.

In the first quarter of 2022, Crypto was mainly affected by two external factors: monetary policy & AMP; Geopolitics, as a result of both, sent bitcoin prices bottoming on January 24 and February 24.

Monetary policy mainly refers to the interest rate hikes and balance sheet adjustment actions of the Federal Reserve and other central banks from the end of 2021. Bitcoin Q1 bottomed out at $32,989, down 20.86% from January 1, due to negative sentiment in the market ahead of the Fed meeting (January 26). Another factor was the outbreak of military conflict between Russia and Ukraine on February 20.

BlockBeats: Now that the Fed's interest rate hike is mentioned, what impact do you think it will have on the trend of the crypto industry in the new quarter? Is there any signal from the data on the chain?

LIANG Chen:As the fed raising interest rates to fight inflation, on the one hand, the federal reserve tightened monetary policy results in a decrease of liquidity in the market, on the other hand, the rate of increase increased the investment of assets such as the currency of the investment cost, but potential returns on the decline, the data show that the main trading platform of 30 COINS accumulated in the decline of the moving average volume, It was at its lowest level since August 2021.

Over the past week, bitcoin's weekly decline was 5.80 percent, while Ethereum's was 5.62 percent, according to data collected by OKLink's on-chain master. The Approach of the Fed's May 5 meeting is like a sword hanging over the capital markets. A 50 basis point rate hike at both the May and June meetings would be negative for global financial markets.

BlockBeats: Going back to specific events in the crypto market, ETH 2.0 is a big event to look forward to in 2022. Please tell us the current status of ETH 2.0 and the applications generated around it that are worth paying attention to.

Liam:ETH2.0 is a comprehensive upgrade of The ETH mainnet, and major milestones in this process include IP-1559, The Merge, The Surge, The Verge, The Purge, and The Spluge. Ip-1559 was implemented during the Ethereum London upgrade on August 4, 2021. The main change was to change the incentive mechanism for ethereum miners so that a portion of ETH that was originally used as a miner's transaction fee was burned directly, thus helping to reduce ETH inflation.

The Merge refers to The merger of The Beacon Chain (ETH PoS beta) with The current ETH (executive layer), which went live on December 1, 2020. The merge will completely change the ETH block generation method, and PoW will be shut down and converted to PoS. It is important to note that this merger will not result in expansion, and ETH currently pledged in the beacon chain will not be unlocked. Markets expect this event to happen late this year or early next year.

Personally, I think the project that deserves the most attention is Lido, which is a protocol for PoS Staked assets to provide liquidity and composability. A user staking staking to a beacon chain with Lido gets a corresponding stETH Token, which in turn can be used in other DeFi protocols, earning staking while maintaining liquidity.

LIANG Chen:ETH2.0 is a topic that has been trending recently. Google Trends data shows that searches for "Ethereum Merge" are at an all-time high, and searches for "proof of stake (PoS)" and "Ethereum 2.0 release date" have also increased significantly recently. ETH 2.0 (now known as Consensus Layer), which revolutionized the Ethereum network, is tugging at the heart of the market.

As of March 31, ETH 2.0 had received 10,989,186 ETH, accounting for 9.30% of ethereum flux, according to OKLink. See the OKLink statistics chart.

In addition, today's news said that the fourth Goerli test net shadow fork is planned for Tuesday, and the second main net shadow fork is planned for Saturday. As for the timing of the merger, no report has been updated, but the third quarter of 2022 remains the target. Decide by April 29th how long they want to delay the difficulty bomb.

We are also keeping an eye on this, and our beacon link browser is also in development.

BlockBeats: Apart from the fact that ETH2.0 pledge volume has been on the rise, what other changes have you observed in Q1? Examples include destruction status, on-chain ecological development, and L2 status based on it.

Liam:The destruction of ETH begins with the IP-1559 protocol mentioned earlier. Ip-1559 was implemented on 4 August 2021 and has burned more than 2 million ETH for 256 days. Ip-1559 changes the confirmation mechanism of ETH transaction fee. The protocol dynamically adjusts the base fee of each specific transaction according to the degree of transaction activity. The transaction fee, originally paid to the miners, now goes directly to destruction.

Based on this, the destruction rate of ETH is positively correlated with the base fee of transactions on ETH. Q1's destruction peaked at the beginning of the year and has since declined. On January 10 this year, the destruction of ETH in a single day reached a peak of 19,424 pieces. Subsequently, due to the depression of the overall market and the decline of active transactions, the current daily destruction volume of ETH has decreased significantly, and the daily destruction volume since April is about 3-5000 pieces.

Despite the decline in destruction, the construction of ecological projects I see from the primary market is still very active, particularly with several major Layer2 solutions. I'm more optimistic about zK-Rollup Layer2, and there are some innovative projects coming out of zkSync and Starknet. Starknet is not currently available to users, but some simple interactions can already be done on zkSync. Orbiter and Zigzag, for example, are worth checking out.

LIANG Chen:Let me focus on destruction. Since EIP1559 went live in August last year, Ethereum has effectively increased deflation mechanism. OKLink reviewed the data of the past six months, and we can see that in fact, the overall destruction volume in the first quarter is decreasing, which reflects the decrease of activities on the Ethereum chain from one side. It's getting tired.

BlockBeats: Competition between Ethereum and other Layer1s is the absolute focus of this year, how is this trend in Q1? What are the public links worth watching?

Liam:The hottest Alt Layer1 in the first quarter was Terra, which hit a series of all-time highs and did so with a lot of skepticism. Rhythm has posted a good article about Terra's basics, but I won't expand on it. I can share some points that I pay close attention to, including the total market value of UST, the proportion of UST in the total amount of Anchor and the market value of Luna. For example, the market value of Luna has been falling last week, while the market value of UST is still a relatively stable linear growth. I may judge that Luna will rebound stronger than the market after the overall market stabilizes.

The rise of the new public chain did run through last year's market, with EVM Compatible's new public sprocket picking up ETH's spillover value. Personally, I'm more optimistic about Near ecology this year, especially Aurora. Aurora's TVL has nearly doubled in the last month, and there are a lot of projects that are still in the blind digging stage, and I'm personally involved in a lot of them.

BlockBeats: So what are the noteworthy changes to DeFi in Q1? It can be seen that DeFi has only achieved multi-chain deployment at present. What do you think DeFi will develop in the future?

LIANG Chen:Q1 In DeFi, we see that the old project Aave has upgraded V3, mainly focusing on improving user experience, risk management and capital efficiency, so as to consolidate Aave's leading edge.

The biggest innovations in Aave V3 are:

1) Online Portals are used to realize cross-chain interoperability. Cross-chain lending can be realized through access to third-party cross-chain Bridges, and liquidity on different chains can be easily and effectively integrated;

2) eMode efficient mode was launched to reduce mortgage rate and improve asset efficiency for assets with strong price correlation;

3) Introducing a segregated market to facilitate the launch of new collateral and realize risk isolation while lowering the entry threshold;

4) Introduce new functions for liquidation, governance, gas optimization, multi-token incentive, etc.

On top of that, last week we saw uniswap bring this vision closer to reality with the launch of a Swap Widget that gives developers one-line access to Uniswap's switching capabilities. This also allows us to imagine that the basic modules of DeFi, such as Swap, lending and Vault, may be built into a wider range of application scenarios in the form of plug-ins/portals

For example, in the NFT Marketplace, you can sell AN NFT to any asset with one click, or borrow money to buy an NFT, or in the game, add a financial portal for users to monetize their game revenues.

Liam:In the secondary market, DeFi was much quieter in Q1, but I see some more innovative new projects in the primary market that are expected to launch in Q2 and Q3.

In addition to AMM, there will be CLOB and OTC. In lending, in addition to mortgage standard assets, excess mortgage, there will also be mortgage non-standard assets and credit loans; The application scenarios for programmable cash flow in payments are also vast.

On the whole, it still develops in the direction of improving transaction efficiency, capital utilization rate and payment convenience. While most projects may not be considered innovations from 0 to 1, going from 1 to 1.5 is a significant improvement in my opinion.

BlockBeats: What are the trends in the NFT market from Q1 data this year?

LIANG Chen:According to OKLink's Q1 quarterly report data, the total NFT transaction volume of Q1 in 2022 has a significant growth, reaching 11.397 billion USD, compared with 8.143 billion USD of Q4 last year, up by nearly 40%. Compared with 505 million USD of Q1 last year, The year-on-year increase reached 2,156%.

In terms of NFT project, BYAC continues to strengthen the "Ape Universe", from the earliest airdrop of new NFT, to acquisition, launch Token, through financial means to do ecology, Azuki is also following this path.

In terms of THE NFT market, Opensea's absolute monopoly position is challenged by Looksrare\X2Y2, etc. On top of this, NFT aggregator Gem\Genie also has a good performance.

Liam:NFT is an absolute incremental market, as can be seen in the amount of ETH burned by Opensea, Genie, Gem, and Looksrare. Opensea has consistently topped the ETH burning list, burning more than 290,000 ETH.

On a macro level, NFT trading volume peaked in late January and early February this year and has been on a downward trend since then. Despite the decline in macro trading volumes, there is still a structural market at the micro level, with some NFT projects experiencing a surge in market value.

To be honest I didn't put a lot of effort into exploring NFT short term trading opportunities. I mainly have two strategies. One is to join some NFT Alpha Seeker clubs to ensure that I will not miss some big stable opportunities. For example, I always hold Lasercat'S NFT Pass. For example, I bought some Mfer last year when the floor price was 0.05-0.1. The profit and loss of such projects are relatively high, and I do not feel bad if they return to zero, but the increase may reach dozens of times.

BlockBeats: Can you tell us what on-chain data we need to focus on for retail investors to capture Alpha?

LIANG Chen:When it comes to capturing Alpha, there are two dimensions: target selection and timing.

For active analytical users, they can find new NFT and NEW LP pools through hot contract to find new opportunities, supplemented by Token allocation, large holders' positions, on-chain trading activity and other factors, as well as off-chain information.

For single tracking users, we can pay attention to the changes of some key addresses, such as the address of Whale, the address of institutions, the address of celebrities, and the address of Mart Money aggregated by multi-dimensional factors.

BlockBeats: In addition to on-chain masters, what other products do OKLink have? What are the new features and what's next for OKLink?

LIANG Chen:High-performance multi-chain browser is the foundation of OKLink. In Q1 this year, we launched BSC browser, which supports search, block, address, BEP20/721/1155 Token, and contract authentication. At the same time, the USDT browser is optimized to support aggregation search of ETH, TRX and Omni chains. More public chains will be supported in the future, including Solana, Polygon, and Terra are already in development.

At the same time, we launched a lot of practical functions, including multi-dimensional label display of address, users can understand the entity of address with one click, whether there is risk, position trading and so on, which is more convenient for users to read transactions on the chain;

In addition, we have launched Transaction Action on the ADDRESS details page of ETH browser, so that users can directly access Transaction information. You can refer to the screenshot.

Add chain /Token to MetaMask and MetaX in our ETH, OEC, BSC browser with one click;

The Token details page of ETH, OEC and BSC browsers all support the display. You can see whether the metadata of an NFT is stored in a centralized way or in a decentralized way such as IPFS\AR. We should be the first competitor to support this information display, helping users to add another layer of judgment to NFT assets.