We’re opening up this single with a producer tag: this is Colton from Hedgehog, the app that helps you buy baskets of cryptocurrency and automate your digital asset exposure wherever you custody funds.

We are so back, baby, as ETH briefly peaked above $3,000 this week and the on-chain usage metrics are rising in concert:

C-notes to G-notes

As we talked about last week, ETH is disappearing off exchanges, yet Coinbase quarterly earnings report showed that retail traffic on the exchange was up 164% in Q4 ‘23 versus the previous quarter, even though it only made up 19% of all volume on the exchange. Meanwhile, on-chain monthly transaction volume on Ethereum has more than doubled since the beginning of that quarter and Metamask is posting record user growth. This level of block demand is triggering EIP-1559, which burns a percentage of the transaction fees when block costs get too high, causing upward price pressure on the remaining supply and hopefully convincing speculators to let go of some of the blockspace that they’re hogging by sitting on tokens.

Since the implementation of this proposal, over 362,000 ETH have been burned, and the total supply is at an all time low. There’s a lot of speculation as to why demand is so high, whether that’s the impending ETH ETFs, the upcoming Dencun upgrade, increased activity on L2’s like Starknet, Polygon, and Avalanche, or increased mainstream exposure through retail partnerships like the one between Pudgy Penguins and Walmart, but in the end it all adds up to higher volumes, higher burn rates, and higher prices.

Please don’t stop the music

Circle is shutting down support for USDC minting on Tron, the largest chain globally by stablecoin volume. Circle cites concerns over compliance risk, which is no surprise given the alleged shady activities of Tron founder, Justin Sun, and the general level of craftsmanship with his associated products.

This is unfortunately big business for Circle, so you know they must think it’s an existential risk to be associated with Sun at this point. However it leaves a gaping hole for alternatives like Tether in the ecosystem, or perhaps other reliable real-world assets (RWAs) that might grow to replace the dominance of USDC altogether.

For example, this week’s Money Stuff from Matt Levine talks about the new Boxx Treasury Bill ETF and the tax-efficiency of the structure, which gives it several advantages over holding US Government Treasury Bills directly. OpenEden’s new TBILL product, now available through Hedgehog (contact us for more details!), offers similar advantages, but it’s also transferrable and redeemable at a moment’s notice, 24/7, on-chain; all while giving you reliable yield absent any restaking features, unlike USDC. We believe it’s very likely such instruments will grow to replace stablecoins, or even more complex tokens that split the yield and the principal into separate derivatives.

Weekly feature

This week we’re featuring the brand spanking new STRK token, the official token of Starknet. Starknet has been around for some time, with the creator of ZK-STARKs, Eli Ben-Sasson, at the helm, but they only just recently airdropped their STRK token in one of the most controversial airdrops we’ve seen in awhile. The foundation decided to reward developers more than speculators, and there was a major outcry in response.

Starknet is cool because it’s one of the first and most broadly used networks composed entirely of Zero-Knowledge Scalable Transparent ARguments of Knowledge in an end-to-end fashion. They have their own special language, Cairo, which basically assembles your code into math that continues to math without any party knowing anything about the inputs, the outputs, or even the function that was used to turn an input into an output.

This is a token to keep an eye on, as I expect it will become one of the most widely used zero knowledge L2s,  and it is currently trading below its launch price. While there’s not enough history here to make any definitive statements about its price performance, it could be interesting to include it in a broader Ethereum L2 strategy alongside MATIC, ARB, OP, and AVAX, which tend to have moderately positive correlations in the 0.3 - 0.6 range.

Are any of you gonna be in Denver next week? We’ll be stirring up business at ETHDenver, and we’d love to say hi if you’ll be in the neighborhood.

Keep hedging,
— Colton

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