The third quarter industry report from DappRadar, citing on-chain metrics, indicates that the cryptocurrency markets are showing signs of recovery from the ongoing bear market conditions.
A number of factors played into the busy third quarter of 2022, as the Ethereum merger was a successful proof-of-stake turnaround that had a noticeable impact on Layer 2 activity ahead of the event. The report also highlights a slight improvement in the total market capitalization of cryptocurrencies, which remains below a trillion dollars.
The third quarter data reflected an 8.5% increase in total cryptocurrency market capitalization from July to the end of September 2022. The decentralized finance space also showed signs of consolidation, with total closed value (TVL) in the space increasing by 2.9 % in the third quarter to 69 billion dollars. Ethereum is still responsible for the bulk of TVL, with $48 billion locked up in smart contracts.
DappRadar also highlights a 12% increase in unique active wallets across the cryptocurrency ecosystem on a quarterly basis, adding up to 1.8 million. The blockchain gaming sector contributed significantly, with unique wallet addresses increasing by 8% from August to September.
ImmutableX saw its unique active portfolios grow by 30% in the same time period and recorded an 87% growth in non-fungible tokenNFT trading volume from the previous quarter, while Polygon followed a similar trajectory, seeing its unique active portfolios increase 17% to 148,000.
The number of non-fungible trades (NFT) is up 11% from Q2 2022, while Ethereum NFT trade volume is down a whopping 76%. NFT’s total trading volume reached $2.71 billion during Q3, which is still a significant drop of 67% from Q2 2022.
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Yuga Labs-owned NFT ventures dominated the market in September, with Otherside, Bored Ape Yacht Club, Mutant Ape Yacht Club, and CryptoPunks accounting for 46.21% of the total NFT market capitalization.
Crypto asset theft has also been highlighted once again, with blockchain bridges still being targeted. DappRadar listed a $190 million Nomad exploit in August as a significant contributor to $461 million worth of stolen crypto assets in the third quarter. And Wintermott, the algorithmic market maker, also succumbed to leverage of $160 million in the same period.
The DappRadar report also highlights the impact of wider macroeconomic factors on the global economy. As central banks look to manage inflation to stave off the effects of recession by raising interest rates:
The current macroeconomic conditions have a significant impact on the cryptocurrency market, making it impossible to foresee a global expansion of cryptocurrencies without a general improvement in the traditional financial markets.
This somewhat gloomy outlook was offset by a series of positive events during the third quarter of 2022. The EU’s approval of the regulatory framework for cryptoasset markets indicates that governments are looking to closely manage the industry.
Similarly, the White House published its “First Comprehensive Framework for Responsible Development of Digital Assets” in September 2022 in an effort to protect investors, indicating that cryptocurrency has become a fully entrenched industry.