What's Driving Token Prices? June 21, 2023

Katie Talati
Jun 21, 2023

Join Katie Talati, Arca’s Head of Research, weekly on Wednesday at 4PM EST / 1PM PST as she shares notable token activity over the past week and her insights on what market events drove these token price movements.

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  • BNB (+1.7%) -BNB Chain announced a big scalability initiative for its chain this week by using a fork of  OP Stack to develop its own rollup. BNB Chain already has some of the lowest fees of any L1 but this new rollup will lower fees even further. Also this week, Binance also announced the discontinuation of servicing users in the Netherlands and the UK as the regulatory noose seems to tighten around the company.

  • ETH (+8.9%) - A developer proposal unearthed this week includes changes to Ethereum’s maximum validator balance from 32 ETH to 2,048 ETH. The objective of increasing the maximum balance is to lower the number of validators in order to speed up finalization and reduce messages between validators. The proposal is currently being heavily debated because a large number of staking pool providers that dominate the space (e.g. Lido, Coinbase, Rocketpool) are essentially operated by the same entity but each validator has to act independently on the network despite this. There is therefore an inherent tradeoff between speed (less validators) and decentralization (more validators).

  • OSMO (+10%) - Decentralized exchange, Osmosis, passed 3 major tokenomic upgrades through governance. The upgrades included: a 67% reduction in token inflation amounting to an inflation rate of 11%  annually, the launch of concentrated liquidity pools, and a 0.15% taker fee for the protocol. Although these are all very positive changes for Osmosis in the long-term, the overall DEX market has struggled to outperform in a meaningful way.

  • FXS (+22%) - Decentralized finance project Frax had two major announcements which caused it to outperform the broader market this week. First, the project announced its future plans to launch Fraxchain, a hybrid rollup. The layer-2 solution will likely pay out transaction fees to FXS stakers and is expected to launch at the end of this year. The project also initiated a $2m buyback of FXS tokens over the next 5 months with another proposal in discussion for a buyback based on price instead of time. Although the team stated that this would not create a floor value for FXS, the buybacks will seek to purchase tokens below $5.

DISCLAIMER: This commentary is not intended to be investment advice, investment research, or a recommendation. Please consult your investment professional for your own circumstances."


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Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, legal advice, tax advice, a research report, or a recommendation. Any decision to invest or take any other action with respect to any investments discussed in this commentary may involve risks not discussed, and therefore, such decisions should not be based solely on the information contained in this document. Please consult your own financial/legal/tax professional.

Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed are those of the author, and are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca disclaims any obligation to update or revise any statements or views expressed herein. Past performance is not a guarantee of future results and there can be no assurance that any future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which is believed to be accurate, but has not been independently verified. Arca and/or certain of its affiliates and/or clients may now, or in the future, hold a financial interest in investments that are the same as or substantially similar to the investments discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Arca and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities, or a solicitation to provide investment advisory services.

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