About the editor: Spencer Noon is Co-founder & General Partner at Variant Fund.

Job Alert: We are hiring a Data Scientist to join our investment team at Variant, click here to apply for the role.

Network Coverage
Coverage on ETH & BTC and stETH.

• One way to assess a network's profitability is to check the unique transactions that were done at prices higher than the current one. During a bull market, the UTXO in profit percentage trends towards 100%, indicating there may be more sell pressure. For Bitcoin, the ratio is currently at 72% - the lowest it has been since June 2020. Historically this ratio has bottomed at around 45%: a sign that there may be more pain to come before things get better.

• One of the things that make it hard to call a bottom here is the fact that half of the unspent transaction output (UTXO) on Bitcoin are currently in profit, and half are in losses as of now. Historically, during the bear market of 2019, roughly 57% of the network's UTXOs had slid into losses.

• Much like Bitcoin - the supply of Ethereum in profit and losses is roughly 50-50. Old holders may not wish to sell at these price points. During the bear market of 2018-2019, only about 25% of the supply was in profit, so there may be more profit taking here from recent entrants as they capitulate.

• The price of ‘liquid staking’ token stETH, which users receive at 1:1 stETH:ETH ratio for depositing ether on Lido, fell more than 6% below the price of ETH this week and lost liquidity, hurting the recently embattled Celsius and 3AC. The unofficial 1:1 ‘peg’ is widely viewed as the stETH price benchmark, while others see the price difference as a discount for risks as well as for stETH not being ‘unstakable’ for at least several more months, after the Ethereum Merge.

• Leading to stETH price unmooring is a widening imbalance in key stETH-ETH liquidity pool on Curve Finance. Far from the 50/50 ratio, the pool saw panic-driven flight of liquid ETH following the May Terra shakeup. The current 80/20 composition (i.e. mostly stETH) threatens future stETH withdrawals.

• In a self-reinforcing spiral, price pessimism and a liquidity squeeze led to stETH selloffs, with transfer volumes up and whale holdings down, in turn further undermining stETH price. Big market players’ (Celsius, 3AC) holdings of liquidity-pinched stETH may affect their solvency in the near term.