A Q3 report from DappRadar citing on-chain metrics suggests that cryptocurrency markets are showing signs of recovery from current bear market conditions.
A number of factors played their part in a very active Q3 2022, with the Ethereum merger marking a successful move to proof-of-stake notably influencing layer 2 activity ahead of the event. The report also highlights a slight recovery in the overall cryptocurrency market capitalization, which is still hovering below the $1 trillion mark.
The third quarter data reflects an 8.5% increase in the total cryptocurrency market capitalization from July to the end of September 2022. The decentralized finance space also showed signs of consolidation, with total value locked (TVL) in the space rising 2.9% in Q3 to $69 billion.. Ethereum continues to account for the largest share of the TVL, with $48 billion locked in smart contracts.
DappRadar also highlights a 12% increase in unique active wallets across the crypto ecosystem quarter over quarter, totaling 1.8 million. The blockchain gaming sector contributed significantly, with unique wallet addresses up 8% from August to September.
ImmutableX saw its unique active wallets grow by 30% over the same time frame and posted 87% growth in non-fungible token (NFT) trading volume from the previous quarter, while Polygon followed a similar trajectory, seeing how their unique active wallets increased by 17% to 148,000.
The number of non-fungible token (NFT) trades increased by 11% over Q2 2022, while Ethereum’s NFT trading volume fell by a wide 76%. NFT trading volume totaled $2.71 billion during Q3, still marking a significant 67% drop from Q2 2022.
Yuga Labs-owned NFT projects dominated the market in September, with Otherside, Bored Ape Yacht Club, Mutant Ape Yacht Club, and CryptoPunks accounting for 46.21% of the entire NFT market cap.
Cryptocurrency asset theft was also highlighted once again, with blockchain bridges still in the spotlight. DappRadar listed the $190 million Nomad exploit in August as a significant contributor to the $461 million in stolen crypto assets in Q3.. Algorithmic market maker Wintermute also succumbed to a $160 million exploit during the same period.
The DappRadar report also highlights the effect of broader macroeconomic factors on the global economy. Central banks try to manage inflation to avoid the effects of the recession by raising interest rates:
“Current macroeconomic conditions are significantly influencing the cryptocurrency market, making it impossible to envision a global cryptocurrency expansion without a general recovery in mainstream financial markets.”
This slightly gloomy picture was offset by a series of positive developments during the third quarter of 2022. The approval by the European Union of the regulation plan for cryptoactive markets (MiCA) indicates that governments want to manage the sector carefully.
Similarly, the White House published in September 2022 the “First Comprehensive Framework for the Responsible Development of Digital Assets” in an attempt to protect investors indicating that cryptocurrencies have become a fully established industry.
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