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Ethereum Exchange, Beacon Chain, and Smart Contract Supplies

November 04, 2022

Read Time 10+ MIN

In October, crypto asset prices traded in a tight range, with Ethereum outperforming major stock indices, bonds & most commodities (except heating oil & gasoline).

Crypto asset prices traded in a tight range in October, with Ethereum especially outperforming major stock indices, bonds & most commodities (except heating oil & gasoline), even as value stocks beat growth stocks for the month. The most likely reasons for digital assets’ positive performance were 1) the U.S. dollar DXY index fell in October for only the second month in the last ten months; 2) Elevated short interest and a strong equity market prompted more than $2b in leveraged short ETH & BTC positions to be liquidated on major exchanges during a three day period mid-month, including the largest daily sum since July 2021; 3) Republicans’ odds to control the Senate rose sharply in October, implying a lower chance of the US congress passing harmful regulation after the midterms; and 4) UK lawmakers voted in favor of adding crypto to the scope of activities to be regulated via a proposed Financial Services and Markets Bill, the first legislative attempt by new, purportedly pro-crypto prime minister Rishi Sunak.

For the month, ETH rose 14%, Nasdaq +4%, the MVIS Smart Contract Leaders Index +4%, and Bitcoin +4.5%.

Staying on the prospects of further dollar weakness, Saudi Arabia and China have reportedly discussed pricing some oil sales in RMB, according to the WSJ. Russia’s Secretary of State told a legal forum on October 20th that Russia would “bypass” the EU’s crypto-related sanctions and would “provide businesses with the ability to carry out cross-border settlements” making use of “cryptocurrencies, the digital ruble, or a hybrid.” And even as Egypt devalued its pound and sought IMF protection, new central bank governor Hassan Abdalla touted a new currency indicator (including gold but not the USD) meant to wean people off the U.S. dollar: “America is not my major trading partner,” he lamented. “I don’t know why people are always fixated on the dollar.” Vietnam, Nigeria, Argentina, Lebanon and China all devalued in October; all of them but Lebanon rank in the top 20 for crypto adoption, according to Chainalysis’ recently updated global crypto adoption index.

Since 2009 and especially post-2020, governments, not corporate or households, have driven most of the growth in global debt. Thus, we continue to believe that government (and thus FX) failures will mark this cycle, highlighting Bitcoin’s appeal as a neutral, supply-constrained reserve asset that can be used as both a stranded energy sink and a geopolitical negotiating tool by frontier states with unique domestic politics. We will be speaking on this topic at the “Adopting Bitcoin” conference in El Salvador later this month, with the aim of putting some specific probabilities on countries’ likelihood of adopting Bitcoin as legal tender. (For those still making the argument that digital assets are a Ponzi scheme compared to military-backed Fiat, we note that long-term inflation-linked gilts are now down 79% from their peak, exceeding the peak-to-trough decline in the Bitcoin price. Fourteen major currencies have declined more than 20% vs. the dollar this year.)

Meanwhile, amidst the tailwinds of the weaker dollar in October, we noticed some meaningful examples of mainstream adoption of crypto payment rails in the month.

  • Cash App users can send and receive payments in BTC via the Lightning Network. Previously, the app could only send on-chain BTC payments. (Currently, the feature is available across the U.S., except for New York State.)
  • Visa filed several crypto-related trademarks, including one on October 22nd, that would clear the way for Visa’s distinctive character mark to be used in software “to view, store, monitor, trade, send, receive, transmit and exchange” crypto assets and NFTs.
  • Google introduced its new ‘blockchain node engine’ business, which will offer a “fully managed node-hosting service,” starting with Ethereum; Coinbase was announced as the first major customer in a deal that will see Google accept crypto for some of its cloud computing clients.
  • Western Union filed three trademark applications with the US Patent & Trademark Office for cryptocurrency and digital-asset related activities, including management and maintenance of digital currency and electronic wallets, exchange operations, and issuance of “tokens of value.” A recent IMF report highlighted that the highest remittance fees are paid by the world’s poorest citizens.
  • Fidelity said it would hire 100 more people in its digital assets division, bringing the total headcount in the group to more than 500 by the end of Q1.
  • Nubank, a Brazilian neo-bank listed in New York with a $23B market cap and Berkshire Hathaway as its 5th largest shareholder, announced plans to launch its own cryptocurrency early in 2023. “Nucoin” will be used as a “new way to recognize customer loyalty and encourage engagement with Nubank products.” Holders will receive discounts and other perks.
  • MetaMask, the leading self-custody wallet with 30 million monthly users as of April 2022, added instant bank transfers according to its key backer ConsenSys. “Instant ACH allows orders to complete in minutes instead of days like a standard ACH order and works on holidays, unlike regular ACH,” ConsenSys said in introducing the new method. “Instant ACH is more likely to work as paying with cards may be declined in 50% of purchases,” according to the company.
  • BNY Mellon, the nation’s oldest bank, said it would begin receiving clients’ cryptocurrencies in October, becoming the first large US bank to safeguard digital assets alongside traditional investments on the same platform. The bank is using software developed with Fireblocks.
Digital Asset Market Cap 7 Days 30 days 90 days 365 days
Bitcoin $396.1B 1.9% 4.5% -10.3% -66.4%
Ethereum $195.3B 8.0% 14.2% -2.4% -63.5%
Digital Asset Index Market Cap 7 Days 30 Days 90 Days 365 Days
MVIS® CryptoCompare Decentralized Finance Leaders $8.7B 3.44% 6.00% -26.81% -78.10%
MarketVector™ Centralized Exchanges $57B 13.40% 13.20% 5.40% -40.53%
MVIS® CryptoCompare Infrastructure Application Leaders $17.9B 1.06% 8.00% -0.45% -74.98%
MVIS® CryptoCompare Media & Entertainment Leaders $6.1B 6.20% -9.70% -27.20% -86.25%
MVIS® CryptoCompare Smart Contract Leaders $253.7B 7.24% 4.20% -12.83% -77.14%

Source: Bloomberg, Messari, CryptoCompare, MVIS, VanEck research as of 10/31/2022.

Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.

Smart Contract Platforms:

The MVIS Smart Contract Leaders index rose 4% this month, with most of the gains happening in the last week. Ethereum led the sector, up 14%, largely due to short covering, as noted with the liquidation data above. As for fundamentals, despite continued lackluster volumes on-chain (demand), ETH supply has grown only +0.16% since the September migration to proof-of-stake, with negative supply growth in October. This compares to Bitcoin supply +1.7% and a 3.6% ETH inflation rate under the old proof-of-work algorithm. Defi (30%), NFTs (23%), MEV applications (2%), and layer 2s (2%) comprise the largest sources of the ~56,000 ($~84M) ETH gas fees burned in October. Interestingly, since the September merge, an increasing proportion of Ethereum outstanding has either been locked in smart contracts (DeFi, +$3b since the merge) or staked to the Beacon chain (+$1.3B). Ethereum available for sale on exchanges, conversely, has fallen by more than 1%, or $2.5B. In aggregate, Ethereum captured more than 75% of total fees paid for all space on all open-source blockchains in October, and has gained market share since the merge.

Ethereum Supply

Ethereum Supply

Source: Glassnode, as of 11/1/2022.

Among competing layer 1 protocols, October saw the launch of Aptos (APT), the latest high-profile attempt to build a monolithic blockchain promising a better mix of speed & cost than Ethereum. Founded by Avery Ching and Mo Shaik, who worked on Meta’s Diem project. Aptos differentiates itself from competitors by using “parallel execution” and the Move language. Parallel execution allows for multiple, simultaneous transactions to execute at the same time, allowing—theoretically—for faster speed overall. However, there are some tradeoffs to this approach, notably seen in the performance of the similarly parallelized Solana blockchain, which has had several outages this year. One difference is that Aptos smart contracts are natively written in Move, a Rust-based language initially designed for the Diem project. Move prioritizes security and scalability and consistently ranks among developers’ favorite programming languages.

On the general topic of Layer 1 blockchains and whether the ‘fat protocol thesis’ is still intact: despite the poor price performance this year of most crypto assets, developers continue to release meaningful upgrades to the open-source code of layer 1 protocols. This developer activity, which can be tracked using public github repositories, has increased year-to-date for every smart contract leader aside from Solana. Indeed, the ratio of developers working on these smart contract leaders, relative to those working on open-source blockchain protocols overall, has recently reached an all-time high, as seen in the below chart. We see this as an indication of consolidation amidst the crypto winter.

Smart Contract Leaders are Taking Developer Mindshare

Smart Contract Leaders are Taking Developer Mindshare

Source: Artemis, Santiment as of 9/25/22. Past performance is not indicative of future results.

Smart Contract Activity Scores and Weekly Developers

  Dev Activity Score YTD Growth Average Weekly Devs YTD Growth
Ethereum 328 289.98% 244 9.09%
Polkadot 410 222.72% 320 34.15%
Cosmos 355 1193.23% 180 50.00%
Cardano 769 864.16% 329 45.02%
Near 173 480.77% 135 38.14%
Tron 21 329.41% 19 318.18%
Avalanche 138 557.82% 56 52.94%
Solana 183 -58.09% 130 -82.15%
Algorand 80 14.96% 70 3.37%
Fantom 6 114.29% 8 -57.14%

Sources: Santiment, VanEck Research as of 10/30/2022. Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.

  Marketcap 30 days 365 days
Cosmos $3.99B 17.30% -38.04%
Ethereum $195.26B 14.3% -63.21%
Avalanche $5.45B 12.92% -85.63%
Waves $0.39B -8.82% -88.59%
Internet Computer $1.44B -12.26% -75.40%
NEAR Protocol $2.54B -13.16% -89.17%

Source: Bloomberg, Messari, CryptoCompare, MVIS, VanEck research as of 10/31/2022.

Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.

Infrastructure Applications:

The MV Infrastructure Applications Leaders Index rose 10% in October, led by continued relative strength from Quant Network (+26%) and Polygon’s MATIC token (+15%).

Polygon launched its zkEVM (zero knowledge, Ethereum Virtual Machine) testnet on October 10th. ZkEVMs are a key part of Ethereum’s scaling roadmap that improve throughput by transferring computation and state storage off-chain. ZK rollups submit transaction data to Ethereum along with zero-knowledge proofs, which verify the validity of off-chain transaction batches. Early ZK-rollups lacked the ability to execute smart contracts and were constrained to simple token swaps and payments. But, with the introduction of EVM-compatible zero-knowledge virtual machines, ZK-rollups are starting to support Ethereum dApps. Polygon’s zkEVM testnet comes amidst heavy competition but few available token options. ZkSync, another contender in the zkEVM race, launched an updated version of their scaling solution that is EVM compatible, and has been promoted as the first-ever “product-ready” rollup with a zkEVM. However, public access will be limited until the end of the year, and there is no token yet.

Polygon also benefited from its partnership with Reddit, which introduced the second generation of its NFT avatars in October. Reddit whitelisted independent artists from within the Reddit community to create the avatars and paid a share of all primary and secondary sales to creators. The avatars can be used as profile pictures on the platform and give users access to new profile animations. Reddit’s first generation of avatars was released in July and took a few weeks to sell out. Their second collection launched on October 21st and all 40k avatars were sold on the first day. The ability to own an avatar in a password-protected “vault” rather than a crypto wallet and not marketing the avatars as NFTs are two factors that led to the success of the collections. At the TechCrunch disrupt conference, Reddit chief product officer Pali Bhat revealed that users created more than 3 million Polygon-based Reddit Vault wallets to store their NFTs. The combined market cap of Reddit Avatars now exceeds $100M.

Infrastructure Application Performance

  Marketcap 30 days 365 days
Quant Network $2.04B 25.78% -40.73%
Polygon $7.94B 14.53% -54.02%
Arweave $0.52B 12.62% -80.83%
Loopring $0.37B -6.65% -74.10%
The Graph $0.60B -14.36% -77.75%
Helium $0.53B -18.46% -86.13%

Source: Bloomberg, Messari, CryptoCompare, MVIS, VanEck research as of 10/31/2022.

Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.

DeFi:

The MV Decentralized Finance Leaders index rose 5.6% in October, with makerDao’s MKR (+17%) Uniswap’s UNI (+14%) and Aave (+16%) leading gains.

MakerDAO is the largest defi protocol by TVL ($8.15 billion) and issuer of the DAI stablecoin, which has a $6.2 billion market cap. In October, MakerDAO members voted in favor of an “endgame” proposal by founder Rune Christensen, who wants to make the protocol more decentralized and resistant to censorship, such as the Tornado Cash sanctions. While the voting process itself was criticized for a lack of decentralization, as Christensen influenced 63% of the votes backing his proposal, it appears likely that MakerDao will vote to split into a number of MetaDAO clusters, each with its own governance token. The “endgame” also proposes that MakerDao begin to buy staked Ethereum (stETH) in order to build a balance sheet that can serve as collateral for a non-dollar-backed algorithmic stablecoin in the future. Note that the Endgame is a long-term gambit; in the short-term, MakerDao delegates recently voted to move $500M worth of DAI tokens into short-term US treasuries and corporate bonds, custodied by Swiss digital asset bank Sygnum, which will issue the funds into a portfolio of BlackRock ETFs. MakerDAO also voted in October to custody $1.6B with of the DAO’s USDC coins with Coinbase in return for an annual 1.5% reward, another example of lines blurring between DeFi and real world assets.

In other DeFi news, Aave Companies, one of the contributors developing the Aave protocol, has released a technical paper on Aave’s upcoming GHO stablecoin, along with the results of its first security audit. GHO is a decentralized, over-collateralized stablecoin that was proposed in July. Aave plans to stabilize GHO via algorithm and on-chain governance, depending on the different “facilitators” minting GHO and on the collateral pledged by borrowers, to set an appropriate rate. Facilitators refer to protocols or entities whitelisted by AAVE governance to mint and burn GHO tokens. Since Aave will employ an overcollateralization strategy, it will rely on arbitrage and monetary policy to stabilize GHO. When GHO is below $1, borrowers will be incentivized to purchase GHO at a discounted price and repay/liquidate, profiting on the difference. Conversely, when GHO is above $1, users are incentivized to borrow GHO and sell it on the market, repaying their loan once GHO stabilizes and profiting from the difference. Because GHO is minted via borrowing on the protocol, GHO cannot be used as an asset on the supply (lending) side. Also, the borrow interest rate will not dynamically adjust by the usual supply and demand mechanics. Instead, Aave Governance will set the GHO interest rate, adjusting the borrow interest rate and the discount rate depending on the collateral pledged in order to expand or contract the GHO supply. GHO is designed to accrue interest when supplied to a liquidity protocol.

GHO will have a lot of ground to cover in order to gain market share over its established competitors like Dai. However, Aave’s position as the largest DeFi protocol could help accelerate the growth of GHO’s demand and turbocharge the security and decentralization of AAVE since stkAave holders can mint GHO at a reduced interest rate. GHO’s first facilitator, the Aave Protocol, will initially allow users to mint GHO using deposited assets on its lending market. This may limit the amount of GHO that can be minted due to overcollateralization requirements. But, once GHO has shown to be stable and having sufficient demand, minting could potentially be carried out using delta neutral positions, real-world assets (RWAs), or automated market operations (AMOs), whether by the Aave Protocol itself or by another facilitator. We look forward to talking with Aave founder Stani Kuchelov at a VanEck event in London on November 9th.

Lastly, in DeFi, Mango Markets (MNGO), a decentralized finance platform hosted on the Solana blockchain, was exploited for over $100 million by DeFi trader Avraham Eisenberg, who called the attack “a highly profitable trading strategy.” The gambit was enabled by Eisenberg’s manipulating the price of the native MNGO token threefold higher on an illiquid venue and then taking out a $116M loan, leaving Mango’s treasury with a negative balance. Eisenberg later negotiated a settlement with Mango leadership which enabled depositors to be made whole while Eisenberg kept $47M. The attack raises legal and ethical questions about whether market participants need to consider the intentions of the code-writers and not just the code itself. Blockchain analytics firm Peckshield estimated 44 exploits grabbed $760M in ‘stolen funds’ in October, a record, bringing the YTD total to $3B, double last year’s sumIn a poll on Twitter, podcaster Laura Shin asked, “Is code law?”: 44% of the respondents voted “hell yeah” vs. 56%, “hell no.” In the wake of the Mango Markets attack, Solana’s TVL dropped 23% to $997 million from $1.32 billion.

  Marketcap 30 days 365 days
Maker $0.89B 16.62% -64.04%
Aave $1.19B 15.95% -73.97%
Uniswap $5.21B 13.98% -72.19%
Curve $0.51B 3.68% -80.11%
PancakeSwap $0.68B 0.61% -75.06%
Compound $0.35B -18.77% -86.67%

Source: Bloomberg, Messari, CryptoCompare, MVIS, VanEck research as of 10/31/2022.

Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.

Metaverse:

October metaverse land sales reversed lower after a positive September. Aggregate land value fell 8% in October, with APE’s Otherside continuing to command the highest average sale price of 3.5 ETH, down from the 4.5 ETH it averaged at the start of the month. Decentraland and NFT Worlds were the only metaverses that saw increases in volume (11.6% and 4.8%, respectively) over the past 30 days. Recent news articles have highlighted the lack of users in Decentraland specifically, something the platform hopes to turn around in November with their Metaverse Music Festival from the 10th-13th. These platforms continue to explore product market fit with regard to curated experiences.

NFT trading volume across major blockchains was mixed this month, with only ImmutableX, Polygon, and Avalanche seeing increases in trading volume of 107%, 44%, and 30%, respectively. NFT trading on ImmutableX was mainly driven by their genesis game, Gods Unchained, which accounted for over 90% of the $21.4 million of volume. ImmutableX also announced mid-month that they would reward NFT traders up to 100k IMX tokens per day to incentivize activity on the network. The increase of NFT volume on Polygon was largely a result of the popularity of Reddit’s Collectible Avatar NFTs discussed above. Avalanche’s NFT trading growth was supported by OpenSea integrating Avalanche NFTs in its marketplace and the launch of an NFT farming game, Chikn Farm. Despite these developments, the NFT volume on Avalanche was still less than 1% of the total NFT volume over the last 30 days. Solana experienced the largest decline, with NFT trading volume falling by 39%.

Blockchain Share of Monthly NFT Volume

Blockchain Share of Monthly NFT Volume

Source: Cryptoslam, VanEck as of 10/31/2022. Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.

  Marketcap 30 days 365 days
Sandbox $1.31B 5.98% -59.12%
Chilliz $1.21B 5.03% -49.82%
Audius $0.19B 1.88% -90.78%
Basic Attention Token $0.45B 1.34% -71.11%
Decentraland $1.25B -4.49% -78.60%
Axie Infinity $0.96B -24.88% -93.34%

Source: Bloomberg, Messari, CryptoCompare, MVIS, VanEck research as of 10/31/2022.

Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.

Centralized Exchanges:

Centralized exchange tokens continue to perform well, up 6% in October, with low volatility thanks to FTX and BNB’s continued market share gains and attractive buy-back-and-burn tokenomics. In September, Coinbase spot trading volumes fell 18% to the lowest levels since January 2021, while competitors OKX, Binance, and FTX saw their spot volumes rise 24%, 8%, and 5%, respectively.

Meanwhile Huobi token (HT) paced sector gains +106% in October after HK-based About Capital announced plans to buy a majority stake in the 8th largest exchange globally. While the transaction of an undisclosed amount crowns About Capital as Huobi’s new controlling shareholder, the exchange stated that core operations and the existing management team would remain unchanged. Justin Sun, the Tron co-founder and reportedly a major investor in About Capital, also announced he would be joining Huobi’s global advisory board, prompting the Sun’s Tron (TRX) token to outperform most layer 1s in the month.

  Marketcap 30 days 365 days
Huobi Token $1.39B 105.81% -7.73%
KuCoin $0.97B 10.22% -42.63%
OKB $0.96B 4.32% -33.69%
BNB $45.92B 4.17% -39.83%
FTX Token $3.27B 1.19% -60.96%
Cronos $2.82B -3.56% -45.10%

Source: Bloomberg, Messari, CryptoCompare, MVIS, VanEck research as of 10/31/2022.

Past performance is not indicative of future results. Not a recommendation to buy or sell any of the names mentioned herein.

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DISCLOSURES

Sources: Bloomberg, Wall Street Journal, Coinglass, PredictIt, IMF, company reports, ultrasound.money, Santiment, Aptos.dev, MakerDao, Aave Companies, DappRadar, Mango Markets, CryptoSlam.io, OneLand, Dune Analytics, Messari, Delphi Digital, Coindesk, Decrypt, TheTie, Glassnode, VanEck research.

Index Definitions

Index returns assume reinvestment of all income and do not reflect any management fees or brokerage expenses associated with fund returns. Returns for actual fund investors may differ from what is shown because of differences in timing, the amount invested and fees and expenses. You cannot invest directly in an index.

MVIS CryptoCompare Smart Contract Leaders Index: designed to track the performance of the largest and most liquid smart contract assets, and is an investable subset of MVIS CryptoCompare Smart Contract Index.

MVIS CryptoCompare Infrastructure Application Leaders Index: Designed to track the performance of the largest and most liquid infrastructure application assets, and is an investable subset of MVIS CryptoCompare Infrastructure Application Index.

MVIS CryptoCompare Decentralized Finance Leaders Index: Designed to track the performance of the largest and most liquid decentralized finance assets, and is an investable subset of MVIS CryptoCompare Decentralized Finance Index.

MVIS CryptoCompare Media & Entertainment Leaders Index: designed to track the performance of the largest and most liquid media & entertainment assets, and is an investable subset of MVIS CryptoCompare Media & Entertainment Index.

The MarketVector™ Centralized Exchanges Index: designed to track the performance of assets classified as 'Centralized Exchanges'.

Nasdaq Composite Index: measures all Nasdaq domestic and international based common type stocks listed on The Nasdaq Stock Market.

The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities.

Token Definitions

Bitcoin (BTC) is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on the peer-to-peer bitcoin network without the need for intermediaries.

Ethereum (ETH) is a decentralized, open-source blockchain with smart contract functionality. Ether is the native cryptocurrency of the platform. Amongst cryptocurrencies, Ether is second only to Bitcoin in market capitalization.

Decred (DCR) is a cryptocurrency that uses two consensus mechanisms, proof-of-work and proof-of-stake. It was created to address the problems some believe are inherent to these consensus algorithms and redirect the centralization cryptocurrency has experienced.

Ergo (ERG) is a programmable blockchain that uses advanced technological features to design decentralized apps (dApps). According to the whitepaper, Ergo's goal is to make financial contracts more efficient, safe, and simple to implement.

Secret (SCRT) is a privacy-oriented blockchain built on Cosmos.

Tornado Cash (TORN) Tornado Cash aims to solve a number of the privacy and anonymity issues in the crypto world, particularly surrounding traceability of transactions.

Cosmos (ATOM) is a cryptocurrency that powers an ecosystem of blockchains designed to scale and interoperate with each other.

EOS (EOS) is an open-source blockchain platform that prioritizes high performance, flexibility, security, and developer experience.

Flow (FLOW) is a fast, decentralized, and developer-friendly blockchain, designed as the foundation for a new generation of games, apps, and the digital assets that power them.

NEAR Protocol (NEAR) is a decentralized development platform that uses a Proof-of-Stake (PoS) consensus mechanism and will eventually feature a sharded architecture to scale transaction throughput.

Uniswap (UNI) is a popular decentralized trading protocol, known for its role in facilitating automated trading of decentralized finance (DeFi) tokens.

Maker (MKR) is the governance token of the MakerDAO and Maker Protocol — respectively a decentralized organization and a software platform, both based on the Ethereum blockchain — that allows users to issue and manage the DAI stablecoin.

Agoric (BLD) is a smart contract platform built on the Cosmos SDK that uses Tendermint Proof-of-Stake (PoS) and a native token to secure the network. The Agoric chain enables developers to create decentralized applications (dApps) using composable JavaScript smart contracts.

Internet Computer (ICP) is the world's first blockchain that runs at web speed and serves content on the web, with unbounded capacity.

Waves (WAVES) is a public blockchain network that enables users to create and access decentralized applications. It features on-chain governance, Formal Verification for smart contracts, and a variation of Proof-of-Stake (PoS) called Leased PoS to ensure network consensus.

Solana (SOL) is a public blockchain platform. It is open-source and decentralized, with consensus achieved using proof of stake and proof of history. Its internal cryptocurrency is SOL.

Chiliz (CHZ) is a digital currency for sports and entertainment, powering the world’s first blockchain-based fan engagement & rewards platform Socios.com.

Ronin (RON) Ronin is an Ethereum sidechain built specifically for gaming. Ronin is operated by validators which are appointed by Sky Mavis, the core developers of Axie Infinity.

Gala (GALA) is a play-to-earn game development company building a robust gaming ecosystem that leverages the power of blockchain technology to empower its users.

Basic Attention Token (BAT) is a blockchain-based digital advertising and rewards platform powered by BAT, an ERC-20 token, and Brave, a new internet browser.

Axie Infinity (AXS) is a "play-to-earn" pet training game and virtual world built on the Ethereum blockchain.

Decentraland (MANA) is building a decentralized, blockchain-based virtual world for users to create, experience and monetize content and applications.

The Sandbox (SAND) is a virtual world where players can build, own, and monetize their gaming experiences using non-fungible tokens (NFTs) and $SAND, the platform’s utility token.

Kyber Network (KNC) is an Ethereum based decentralized exchange focused on rapid onchain execution of transactions.

Avalanche (AVAX) is an open-source platform for launching decentralized finance applications and enterprise blockchain deployments in one interoperable, scalable ecosystem.

GMX (GMX) is a decentralized spot- and perpetual-trading crypto exchange which offers low swap fees and zero price impact trades.

dYdX (DYDX) is a decentralized exchange built on the Ethereum network delivering key financial instruments to users such as perpetuals, margin and spot trading, as well as lending and borrowing.

Frax (FRAX) is a fractional-algorithmic stablecoin protocol that uses both collateralization and algorithmic processes to create its decentralized stablecoin, FRAX.

Tether (USDT) is a stablecoin (stable-value cryptocurrency) that mirrors the price of the U.S. dollar, issued by a Hong Kong-based company Tether.

USD Coin (USDC) is a stablecoin that is pegged to the U.S. dollar on a 1:1 basis.

Dai (DAI) is an Ethereum-based stablecoin (stable-price cryptocurrency) whose issuance and development is managed by the Maker Protocol and the MakerDAO decentralized autonomous organization.

PanCake Swap (CAKE) is an automated market maker (AMM) — a decentralized finance (DeFi) application that allows users to exchange tokens, providing liquidity via farming and earning fees in return.

Aave (AAVE) is an open-source and non-custodial protocol to earn interest on deposits and borrow assets with a variable or stable interest rate.

THORchain (RUNE) is an independent blockchain built using the Cosmos SDK that will serve as a cross-chain decentralized exchange (DEX).

FTX Token (FTT) is the native token designed for the cryptocurrency derivatives exchange FTX. It has numerous uses designed to benefit its users and increase network effects around the platform.

Huobi Token (HT) is an ecosystem token launched by Huobi Global, offering benefits such as trading fee and margin discounts and access to certain trading events.

Binance Coin (BNB) is digital asset native to the Binance blockchain and launched by the Binance online exchange.

Kucoin Token (KCS) is a cryptoasset exchange platform aiming to offer low-cost trading for users. Ultimately, the platform plans to transition to a decentralized exchange platform.

OKB (OKB) is the native exchange token of OKEx that provides discounts on trading fees, access to the OK Jumpstart initial exchange offering (IEO) platform, and voting rights for tokens to be listed on the exchange.

Cronos (CRO) is the native cryptocurrency token of Cronos Chain — a decentralized, open-source blockchain developed by the Crypto.com payment, trading and financial services company.

Cardano (ADA) Cardano is an open-source, smart-contract platform that aims to provide multiple features through layered design.

Polkadot (DOT) is a sharded heterogeneous multi-chain architecture which enables external networks as well as customized layer one "parachains" to communicate, creating an interconnected internet of blockchains.

Tron (TRX) is a multi-purpose smart contract platform that enables the creation and deployment of decentralized applications.

Polygon (MATIC) is the first well-structured, easy-to-use platform for Ethereum scaling and infrastructure development. Its core component is Polygon SDK, a modular, flexible framework that supports building multiple types of applications.

Tezos (XTZ) is a decentralized, open-source proof of stake blockchain network that can execute peer-to-peer transactions and serve as a platform for deploying smart contracts.

Elrond (EGLD) is a blockchain protocol that seeks to offer extremely fast transaction speeds by using sharding.

The Graph (GRT) is a protocol for indexing and querying data from blockchains, starting with Ethereum.

Celo (CELO) Celo is a blockchain ecosystem focused on increasing cryptocurrency adoption among smartphone users.

Lido DAO (LDO) is a liquid staking solution for Ethereum and other proof of stake chains. This allows users to stake their tokens without having to lock assets or maintain staking infrastructure.

An investment in the strategy is subject to risks which include, among others, regulatory, general investment and trading, opaque spot market, digital assets, digital asset exchanges, investing through DEXes, stablecoin, OTC transactions, valuation and liquidity, cryptocurrencies lending, digital asset lending and borrowing, DeFi lending of digital assets, digital asset lending programs offered by certain CeFi and DeFi exchanges, rebasing of digital assets, credit, credit market illiquidity, third party wallet providers, loss of private key, volatility and speculative nature of digital assets trading, digital asset network protocols and software, digital asset network malicious actors, forks and airdrops, digital asset miners ceasing operations, cybersecurity, computer malware and viruses, data loss, incorrect transfer of digital assets, initial coin/pre-sale initial coin offering, synthetic investments, options, futures, forwards, lack of blockchain company operating history, blockchain company failure, short selling, leverage, limited diversification, non-U.S. securities, and counterparty risks.

The views and opinions expressed are those of VanEck. Fund manager commentaries are general in nature and should not be construed as investment advice. Opinions are subject to change with market conditions. Any discussion of specific securities mentioned in the commentaries is neither an offer to sell nor a solicitation to buy these securities.

Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not generally backed or supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies. The value of cryptocurrency may be derived from the continued willingness of market participants to exchange fiat currency for cryptocurrency, which may result in the potential for permanent and total loss of value of a particular cryptocurrency should the market for that cryptocurrency disappear. Cryptocurrencies are not covered by either FDIC or SIPC insurance. Legislative and regulatory changes or actions at the state, federal, or international level may adversely affect the use, transfer, exchange, and value of cryptocurrency.

Investing in cryptocurrencies comes with a number of risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. There is no assurance that a person who accepts a cryptocurrency as payment today will continue to do so in the future.

Investors should conduct extensive research into the legitimacy of each individual cryptocurrency, including its platform, before investing. The features, functions, characteristics, operation, use and other properties of the specific cryptocurrency may be complex, technical, or difficult to understand or evaluate. The cryptocurrency may be vulnerable to attacks on the security, integrity or operation, including attacks using computing power sufficient to overwhelm the normal operation of the cryptocurrency’s blockchain or other underlying technology. Some cryptocurrency transactions will be deemed to be made when recorded on a public ledger, which is not necessarily the date or time that a transaction may have been initiated.

  • Investors must have the financial ability, sophistication and willingness to bear the risks of an investment and a potential total loss of their entire investment in cryptocurrency.
  • An investment in cryptocurrency is not suitable or desirable for all investors.
  • Cryptocurrency has limited operating history or performance.
  • Fees and expenses associated with a cryptocurrency investment may be substantial.

VANECK ABSOLUTE RETURN ADVISERS CORPORATION (‘VEARA”), THE INVESTMENT MANAGER OF THE STRATEGY, IS A MEMBER OF NFA AND IS SUBJECT TO NFA'S REGULATORY OVERSIGHT AND EXAMINATIONS. VEARA HAS ENGAGED OR MAY ENGAGE IN UNDERLYING OR SPOT VIRTUAL CURRENCY TRANSACTIONS IN THE STRATEGY. ALTHOUGH NFA HAS JURISDICTION OVER VEARA, YOU SHOULD BE AWARE THAT NFA DOES NOT HAVE REGULATORY OVERSIGHT AUTHORITY FOR UNDERLYING OR SPOT MARKET VIRTUAL CURRENCY PRODUCTS OR TRANSACTIONS OR VIRTUAL CURRENCY EXCHANGES, CUSTODIANS OR MARKETS. YOU SHOULD ALSO BE AWARE THAT GIVEN CERTAIN MATERIAL CHARACTERISTICS OF THESE PRODUCTS, INCLUDING LACK OF A CENTRALIZED PRICING SOURCE AND THE OPAQUE NATURE OF THE VIRTUAL CURRENCY MARKET, THERE CURRENTLY IS NO SOUND OR ACCEPTABLE PRACTICE FOR NFA TO ADEQUATELY VERIFY THE OWNERSHIP AND CONTROL OF A VIRTUAL CURRENCY OR THE VALUATION ATTRIBUTED TO A VIRTUAL CURRENCY BY VEARA.

There may be risks posed by the lack of regulation for cryptocurrencies and any future regulatory developments could affect the viability and expansion of the use of cryptocurrencies. Investors should conduct extensive research before investing in cryptocurrencies.

Information provided by Van Eck is not intended to be, nor should it be construed as financial, tax or legal advice. It is not a recommendation to buy or sell an interest in cryptocurrencies.

NFTs are not an investment. Rather, NFTs are digital memorabilia intended solely for entertainment purposes. As entertainment memorabilia given to you as a gift, NFTs have no value and are not intended by VanEck to ever have any value. Neither VanEck nor anyone else will take or not take any current or future action that is designed in any way to maintain the value of the NFTs, or to cause their value to grow or increase. You must not attempt to obtain an NFT from VanEck if you view it as an investment.

© Van Eck Securities Corporation, Distributor, a wholly owned subsidiary of Van Eck Associates Corporation.

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