TokenInsight Rating Quarterly Review

It’s been 3 months since TokenInsight Rating v2 went live in November. Let’s take a look at what has changed in these 3 months and what trends can be seen through the rating results.

Rating Overview

As of February 6, 2023, TokenInsight has rated a total of 292 projects across public chains, DeFi, exchange tokens, stablecoins, NFT, and more. The ratings are presented in letters AAA-D, with AAA representing our highest rating of a project’s credentials with very low-risk level, and D representing that we consider the project to be extremely risky.

Among all projects, the largest number of projects are at BB, accounting for about 25% of the total rated projects. As the rating results improve/decline on both sides, the number of projects corresponding to the rating results gradually decreases, basically showing the characteristics of a Normal distribution.

On November 1, 2022, we had only completed ratings for 143 projects. Of these projects, about 15% have improved their rating scores in the past 3 months, with Optimism and GMX being the most significant.

The rating score is an objective score used to determine the rating result, and each rating result corresponds to a certain score range. When a project’s qualification or risk changes, it is first reflected in the score, but the rating result does not necessarily change. The rating score provides a more detailed picture of dynamic changes.

About 31% of the projects have seen their rating scores drop, with the most severe declines including FTX Token, Serum, and Solana, all of which are closely related to the FTX bankruptcy. Cronos, Binance USD, and Huobi Token also appear in the list of declines. The remaining approximately 54% of the projects’ rating scores are unchanged from 3 months ago.

As we can see, the current market environment is slightly less favorable than it was before the FTX bankruptcy. While the FTX bankruptcy was a devastating blow to the Crypto industry, it has also given rise to more opportunities, with more latecomers emerging and new technologies and projects taking shape.

Of the 149 projects that were newly rated, we found that most of them included the keywords Infrastructure, Public Chain, and Layer-1. Even in a bear market, the development of infrastructure does not stop.

Ethereum, Optimism, and Cosmos are the most frequently seen ecosystems in that these projects were built, while the once-hot BNB Chain, Polygon, and Solana are nowhere to be found.

These projects are in a variety of industries, with DeFi still firmly in the top spot, followed by derivatives, liquid staking, social, storage, and more. Perhaps we are approaching the peak of the explosion of these industries. DEX and algorithmic stablecoins, which were once the most popular, seem to have receded from the history books.

The global market cap of Crypto market has returned to the level it was at the beginning of November, before FTX went bankrupt. The Top 10 ratings have not changed much, with FTX Token unsurprisingly dropping out of the Top 10 list and being replaced by Cosmos.

Market Trends

The average score of Bitcoin and Ethereum quickly returned to their previous levels after a brief drop in the FTX bankruptcy, indicating that the long-term outlook for the Crypto market as a whole remains positive.

The average score of DeFi tokens rose 3%, making it the only type to close with a higher score. Public chain and exchange tokens stabilized after declines of 6% and 12%, respectively. Most public chains as well as exchanges have been affected by the panic exodus, and in the face of the crisis, only Bitcoin and Ethereum are the only places where people feel safe.

The average score of stablecoins fell by more than 15% due to the $USDD de-peg and Binance USD reserve scandal, as well as the fact that stablecoins have been in a net outflow for the past 3 months.

We describe the future trend of a project’s rating by its outlook. Generally, we believe that projects with positive outlooks have the opportunity to upgrade their ratings in the next 3-6 months. Conversely, a project with a negative outlook has the potential to be downgraded in the future.

Please note that our project ratings only evaluate the qualification and risk level of a project and cannot be used as investment advice.

TVL of all public chains was down about 10%, with Ethereum and BNB Chain in line with the overall public chain decline. Solana was the hardest hit by FTX bankruptcy, with a 72% drop in TVL.

Optimism TVL closed down 21% while Arbitrum closed up 29%, with the two most popular Layer-2s showing opposite TVL trends.

It is also worth noting that Aptos, although not among the TVL Top 10, had the highest TVL increase among all public chains at 71%.

Among decentralized derivatives exchanges, dYdX remains firmly in the driver’s seat, with its average daily trading volume in January up 37% compared to November. GMX, on the other hand, while more and more projects are starting to build GLP-based revenue strategies, its perpetual contract trading volume is on a downward trend, with its average daily volume in January down 41% compared to November last year – is this a bad sign?

In addition, Gains Network has become the biggest dark horse, with its average daily volume up 1x compared to November last year and already in the Top 3.

The total staked $ETH on Beacon Chain has grown by about 11% in the last 3 months, with Lido Finance still holding nearly 90% of the liquidity staking market share, growing at the same rate as the overall market.

Frax Finance is the best performer. With its liquidity staking service having gone live less than a month ago, its staked $ETH amount has risen more than 16 times, and its market share has already surpassed that of StakeWise into the Top 3.

Rating Update

For a number of well-known reasons, the rating of FTX Token has plummeted from AAA to D in a short time.

The rating of Solana has been downgraded from AA to BB.

In any ecosystem, developers are always the most important. Active developers can constantly bring innovative projects to harvest more users. However, the developer activities of Solana keep declining during the bear market, which was even worse after the FTX collapse.
As mentioned above, Solana TVL dropped by 72%
Its native coin, $SOL, once was $260 in the bull market (November 7, 2021), but fell nearly 90% in the bear market. It even fell all the way below $10 due to FTX bankruptcy.
In light of the damage to the reputation of FTX and Alameda (Solana’s major backers), we had re-evaluate the performance of Solana’s Investors.

Huobi Token’s rating was downgraded from A to BBB due to a series of operational issues that came to light after Huobi was acquired by Justin Sun, as well as a decline in overall trading volume.