Dear Bankless Nation,
It was a bizarre June for crypto. A regulator onslaught led to market panic, but just as quickly as the market dropped, it recovered. Now ETH is trading just where it was last month while BTC is way up – trading above $30k.
This month, our analyst team dug into a number of hot native tokens powering Layer-2 networks, which we're sharing below (among others)! View everything in the Bankless Token Hub available exclusive to our paying members 📊
- Bankless team
Token Hub | July 2023 Update
In the Bankless Token Hub, our analyst team has amassed coverage of dozens of noteworthy crypto assets, analyzing on-chain and off-chain data to assess whether we're bullish, bearish or neutral on the token's future performance.
If you dig into Token Hub, you can also see where we're placing our bets via Bankless Bags, our internal investment club that provides skin in the game for our calls by taking long positions in what we feel are the highest upside “Bullish” tokens.
Token Hub is updated throughout the month, meaning that Bankless premium subscribers get access to coverage initiations and ratings changes in real time.
Without further ado... the token ratings!
🔴 Optimism (OP)
- Type: Ratings Upgrade
- Risk Rating: Low
- Sector: L2
- Current FDV: $5.1B
Catalyst Overview:
OP is being upgraded to bullish due to the continued growth of the Optimism ecosystem.
The Optimism ecosystem has scored multiple big wins over the past several months. The OP Stack has emerged as the leading framework for building custom rollups, with Coinbase choosing to use it as the tech stack for their L2, Base. Optimism has also managed to attract Worldcoin’s World ID app to deploy on OP Mainnet.
Optimism has also managed to attract more liquidity into its DeFi ecosystem over the past several months. The network’s share of DeFi TVL has grown from 1.3% to 1.9% YTD, placing it sixth among all L1s and L2s.
Price Impact:
The growth of the Optimism ecosystem should contribute to an increase in demand for its blockspace. In the medium-term, this should lead to an increase in revenues generated by Optimism’s sequencer, which accrues to the Optimism Collective and can be allocated by OP holders. This, along with broader investor interest in Layer 2s, should help contribute to OP outperforming over the coming months.
💥 Render (RNDR)
- Type: Coverage Initiation
- Risk Rating: High
- Sector: AI/Infrastructure
- Current FDV: $1.0B
Catalyst Overview:
Coverage of RNDR is being initiated with a rating of bearish.
Render Network has received renewed attention with AI becoming a dominant investment narrative in TradFi markets. Speculators are now dreaming up “new” use cases for Render Network. For example, one of the unfounded rumors currently circulating is that Apple may outsource graphics rendering of Vision Pro to Render Network?
Such outlandish visions are unlikely to come to fruition and we doubt that Apple will give priority access over control of key product functions to a decentralized network. Additionally, while the project is certainly a cool experimentation in decentralizing compute, the performance offered by the network is inadequate for many of the most cutting edge and promising AI applications.
Price Impact:
RNDR is one of the only clear routes to gain exposure to a real AI-related product in crypto, making the token a magnet for blind capital inflows throughout 2023.
While RNDR has outperformed ETH throughout 2023, we question how much longer this will continue and believe the RNDR trade may be oversaturated, especially considering how outlandish the circulating narratives appear. Additionally, altcoins face a hostile US regulatory environment; this will serve as an additional headwind against RNDR’s continued outperformance. For these reasons, we anticipate that RNDR/ETH will continue to trend lower, as it has since late May.
❎ Immutable X (IMX)
- Type: Coverage Initiation
- Risk Rating: Low
- Sector: Gaming
- Current FDV: $1.4B
Catalyst Overview:
Coverage of IMX is being initiated with a rating of neutral.
The Immutable ecosystem is continuing to grow. Games such as Cross the Ages are seeing significant traction, with the mobile TCG ranking 1st, 2nd, and 20th among free iOS apps in Australia, France, and Japan respectively. Other titles such as Illuvium and Ember Sword, are gearing up for their public launches, while another TCG, Gods Unchained is slated for a mobile launch of its own later this year.
Immutable is currently in the throes of its insider vesting schedule. The circulating supply of IMX will inflate by 23.1% over the next six months, with 240M tokens (worth $194.4M) set to vest over this period as a part of private sale, project development, and ecosystem development allocations.
Price Impact:
The success of its games should help lead to an increase in demand for Immutable X blockspace, and in turn IMX tokens, as they are used to pay a portion of gas fees on the network. Despite this, and an upcoming launch of their own Polygon-based zkEVM, IMX may be weighed down in part by the sell-pressure as a result of the significant unlocks it will face over the next several months.
⬡ Arbitrum (ARB)
- Type: Ratings Reiteration
- Risk Rating: Low
- Sector: L2
- Current FDV: $10.7B
Catalyst Overview:
ARB remains bullish due to the continued growth of the Arbitrum ecosystem.
Arbitrum’s strong momentum has continued following the launch of its token. The L2 has maintained its place as the fourth largest network by TVL with $2.2B, and has grown its share of TVL from 4.6% to 4.8% since the beginning of Q2 2023.
Price Impact:
Arbitrum’s strong DeFi ecosystem should help strengthen the rollups network effects and attract more users, developers, and liquidity onto the L2.
This, coupled with a lack of sell pressure from insider unlocks for another 9 months, should help ARB outperform over the coming months.
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👽 Solana (SOL)
- Type: Ratings Upgrade
- Risk Rating: Low
- Sector: L1
- Current FDV: $10.8B
Catalyst Overview:
Solana is being upgraded from bearish to neutral due to the strength of its NFT ecosystem and the upcoming launch of the Firedancer client.
Solana’s NFT ecosystem has remained one of the largest in crypto. The L1 has facilitated more than $40M in NFT trading volumes over the past year, the third highest of any chain behind Ethereum and Bitcoin.
A new client is also coming to Solana in the form of Firedancer. Developed by Jump Crypto, Firedancer could dramatically improve the blockchain’s scalability by enabling it to process more than 1 million transactions per second (TPS).
Price Impact:
Solana’s NFT strength, as well as the adoption of new technologies like the xNFT standard and Firedancer, should help maintain and grow demand for the network's blockspace, in turn driving demand for SOL.
While uncertainty surrounding its status as a security in light of the recent SEC suits against Coinbase and Binance may weigh on the token, the above factors should help SOL at least perform in-line with the broader market.
🦄 Uniswap (UNI)
- Type: Ratings Reiteration
- Risk Rating: Low
- Sector: DeFi
- Current FDV: $5.3B
Catalyst Overview:
Uniswap remains neutral due to the upcoming release of Uniswap V4.
On June 13, Uniswap Labs announced and released the whitepaper for Uniswap V4, the next iteration of the protocol. V4 brings with it several new features to the protocol, the most significant of which are hooks, which enable the ability to create custom pools with features like dynamic fee-tiers, limit orders, TWAP orders, as well as those that re-deposit out-of-range liquidity into other protocols. Another major feature is the singleton, a single contract which contains all pools in V4 in order to significantly reduce gas costs.
Price Impact:
The launch of V4 represents a positive catalyst for UNI, as the aforementioned features of the new protocol are likely to help Uniswap retain its market share and position as DeFi’s leading DEX. However, given the difficulty to date in turning on the fee-switch, a mechanism that will carry over to this latest version of Uniswap, V4 is unlikely to translate to meaningful outperformance for the UNI token over the medium-to long-term.
🦋 Redacted (BTRFLY)
- Type: Ratings Reiteration
- Risk Rating: Medium
- Sector: DeFi
- Current FDV: $41.3M
Catalyst Overview:
BTRFLY remains bullish due to the continued growth of the liquid-staking derivative (LSD) sector.
Redacted is poised to be one of the prime beneficiaries of the continued growth of LSDs, as they operate Hidden Hand, a marketplace for governance bribes. Hidden Hand supports protocols like Balancer, Aura Finance, Bunni Finance, Frax, and others which DAOs such as Lido and Rocket Pool use to incentivize liquidity for their respective LSDs.
Price Impact:
The growth of the LSD sector should increase the revenues Redacted earns from Hidden Hand, as issuing DAOs will likely need to ramp up their bribes to maintain liquidity in an increasingly competitive sector.
This, in turn, should increase the yield earned by BTRFLY holders who lock their tokens for rlBTRFLY, as they receive a 50% share of the revenue generated from Redacted’s suite of products (Hidden Hand included).
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