Why crypto is buzzing about Farcaster
Farcaster is a decentralized social media platform that has grown rapidly in the last two weeks. [Image via Farcaster]
There’s never a dull moment on the blockchain. Here’s what you need to know this week:
BTC continued to hover north of $42K. Meanwhile, stock and crypto markets are trying to gauge when the Fed may begin cutting interest rates.
A look at Farcaster, crypto’s buzziest community. The decentralized social media platform is growing like crazy.
This week in numbers. Bitcoin’s massive onchain transaction volume in January, the amount of users that joined crypto in 2023, and more stats to know.
MARKET UPDATE
Low volatility returns as BTC hovers above $42,000 for second week
For much of 2023, crypto prices ticked steadily upward as traders anticipated the arrival of spot BTC exchange-traded funds that would bring a wave of new capital into the space. When the ETFs finally arrived last month, BTC prices spiked and then dipped — with many traders seemingly taking a “buy the rumor, sell the news” approach.
But after a brief down cycle, BTC prices bounced back by January 27, and have hovered above $42,000 since. What’s driving the current low-volatility market, and where might things be headed next? Here’s what you need to know.
Fed chief signals interest-rate cuts might take a while.
One anticipated potential catalyst for crypto prices this year is for the U.S. Federal Reserve to finally cut interest rates.
Seeking to tame inflation without sending the economy into a recession, the central bank steadily increased rates to two-decade highs. Continued positive economic data (like last week’s jobs report) seems to suggest that the strategy is working — but it also makes it less likely that prices will cool any time soon.
Speaking to “60 Minutes” last week, Fed Chair Jerome Powell indicated that cuts are likely coming in 2024, but probably not as soon as March, as many market watchers had hoped.
“With the economy strong like that, we feel like we can approach the question of when to begin to reduce interest rates carefully,” he said. “Our confidence is rising. We just want some more confidence before we take that very important step of beginning to cut interest rates.”
More than $7 billion has flowed into spot BTC ETFs.
CoinShares reports that more than $700 million poured into the 11 funds that make up the new asset class last week — with a total of $7.7 billion in inflows since the ETFs launched on January 11.
Importantly, that number now significantly exceeds the $6 billion in outflows Grayscale’s GBTC ETF has seen in the same timeframe. Grayscale’s ETF remains a special case, given that it had $30 billion under management before it converted into an ETF, and a big chunk of the outflows were related to FTX’s ongoing liquidation.
As a class, the ETFs are widely considered to be a big hit — they’ve had a “monster start,” as the Wall Street Journal put it. Even though they didn’t begin trading until well into the month, the two biggest (from BlackRock and Fidelity) were among the Top Ten ETFs with the most inflows in January.
Current ETF inflows are likely just the beginning.
Wealth managers — who control access to $48 trillion in assets — have yet to offer the ETFs to clients in a significant way.
“Advisor networks tend to require months of trading and due diligence before adding an ETF to their platform,” notes Barron’s. “Big traders also generally want to see assets and volumes reach a level at which they aren’t going to move prices themselves when they dive into any one fund.”
Independent advisors who aren’t affiliated with a major firm are also likely taking some time watching and learning before they start offering the ETFs to clients in big numbers. According to the head of the Digital Assets Council of Financial Professionals, independent financial advisors could direct $150 billion into the funds over the next two years.
The bottom line…
As many analysts have noted, a unique set of potential catalysts have lined up that could impact prices in 2024.
Interest rate cuts will likely arrive later this year; BTC’s next halving is set for April (and historically halvings have been associated with rallies); and crypto ETFs are off to a strong start even though their target audience hasn’t even started trading them yet. But how will these developments affect the famously unpredictable crypto market in reality? Only time will tell.
SOCIAL STUDIES
Crypto is buzzing about Farcaster. Here’s what you need to know.
Social media drove the web2 revolution, but can it do the same for web3? So far this year, the buzziest name in web3 is a social media protocol called Farcaster.
In less than two weeks, the number of daily users of the platform — which was founded in 2020 by a pair of former Coinbase employees — jumped more than 900% as the protocol showed its potential to reshape the relationship people have with their own data. Let’s dive in.
What is decentralized social media, anyway?
Decentralized social protocols like Farcaster and Friend.tech aim to bring the benefits of web3 to social media, while also eliminating some of the “walled gardens” and pitfalls that come with centralized giants like Facebook and X.
In practice, that means giving users greater control over their data, the ability to build custom experiences, and a deeper level of censorship resistance. The recent success of Farcaster, which saw its seven-day trailing average of daily active users grow from 2,200 to more than 20,000 in about two weeks, highlights a growing interest in social media alternatives.
How does Farcaster work?
“Farcaster is a social media protocol built on Optimism, the Ethereum scaling network,” writes Decrypt. “On top of the public and decentralized Farcaster ecosystem, users can create (and have created) a slew of integrated apps that perform various social media functions.”
As a result, Farcaster already offers access to a large collection of applications, including Warpcast (which is similar to X and currently accounts for around half of all sign ups), Farcord (similar to Discord), and Tiles (similar to the image-sharing app VSCO).
You can switch from one app to another with a single login and your social connections migrate with you. As part of the protocol’s efforts to discourage spambots, new accounts require either a phone number or cost $5.
Why did Farcaster suddenly enter the crypto conversation?
Activity on Farcaster exploded after a late-January upgrade introduced a new feature called “Frames,” which allows users to easily build interactive experiences within a post.
Frames make Farcaster apps hugely flexible — allowing users to mint NFTs, play video games, sign up for subscription services, and more – all without ever leaving their feed.
Paragraph, a decentralized newsletter platform, built a Frame that allows followers to subscribe to newsletters and receive them directly in their wallets. Other popular Frames offer features that range from a playable version of the 1993 first-person shooter game “Doom” to ordering Girl Scout cookies. Right now, the majority of developer activity for Frames is happening on Base, the Coinbase-incubated Ethereum layer 2 blockchain.
The bottom line…
Farcaster’s rapidly-growing user base qualifies it as a hit in the still burgeoning space of decentralized social media, but it’s not exactly a household name. Instead, it offers a glimpse into what social media could look like if it weren’t controlled by a handful of corporations.
NUMBERS TO KNOW
$1.21 trillion
Bitcoin’s onchain transaction volume for January, the highest monthly total since September 2022, according to the Block. January marked the fourth straight month of increases, with more than triple the volume in September, when the uptrend began.
$1 billion
Amount of revenue that Meta’s Reality Labs reported in its most recent earnings announcement, up from $727 million for the same period last year. At the same time, the metaverse-focused part of the business saw $4.6 billion in losses, which the company anticipated to grow due to “ongoing product development efforts in augmented reality/virtual reality.”
62.1 million
Number of new crypto users in 2023, according to a recent report from onchain analytics platform Flipside Crypto. As the Defiant notes, Ethereum attracted the most new users at 15.4 million, Polygon followed closely with 15.2 million, and Bitcoin acquired 10.7 million.
60,000
Number of preorders for the “Solana Mobile Chapter 2,” the successor to Solana’s crypto-enabled Saga phone (which sold out last December as the price of a Solana token included on the phone called BONK soared at the end of 2023). The Chapter 2, which includes features like self-custody, and easy access to dapps, is expected to launch in 2025 with a $450 price tag.
TOKEN TRIVIA
Which of the following is not a stablecoin?
A
LINK
B
USDC
C
DAI
D
USDT
Find the answer below.
Trivia Answer
A
LINK
