Tuesday, 1 February 2022

Market Summary

Market Summary 1 February 2022

Bitcoin Price: US$ 38,466.90 (+1.54%)
Ethereum Price: US$ 2,686.94 (+3.28%)


MIM’s Inflection Point & A Glimpse Into Real NFT Activity

  • MIM, the native stablecoin of Abracadabra, has been weathering a storm as of late. If you’re on crypto Twitter, this should come as no surprise for you. Last week it was revealed that 0xSifu, a close affiliate of Abracabadra founder Daniele Sesta, was the founder of the now defunct Quadriga exchange. Quadriga made headlines in 2019 following the controversial demise of its CEO who was alleged to have been funding his BitMEX addiction with customer funds.
  • Naturally, this didn’t go down well with the community, and people began to lose confidence in the project. MIM briefly broke its peg but recovered quite quickly. However, the stablecoin’s main source of liquidity is Curve’s MIM-3CRV pool, which is now composed of 90.51% MIM and 9.49% 3CRV — hardly a healthy ratio. On Jan. 28, nearly $1.4B of MIM changed hands over Curve, most of which seems to have been holders selling into the Curve pool. Although MIM is an overcollateralized stablecoin, this next epoch will be important for MIM to prove it can hold its peg and restore confidence.
  • One of the main strategies within Abracadabra is called “Degenbox.” This strategy allows users to lever up on Anchor yields by depositing UST into Anchor, withdrawing aUST and using that as collateral to borrow MIM, selling MIM for UST and repeating the process. Degenbox allows UST depositors to generate a 100%+ APY, which has attracted nearly $1B of UST to Abracadabra. Last weeks fear around MIM and Degenbox unwinding sparked discussion across Twitter of a potential UST depeg. But is this warranted?
  • Over the initial period of contagion, UST’s price never dropped below $0.995. If you look at the price history, the amplitude of price has decreased greatly in H2 2021, indicating a much stickier peg. UST may not be all that liquid on Ethereum (Curve, mainly) but it is on Terra’s native pools and CEXes like Binance and KuCoin. The point is UST has deep liquidity and lively arbitrageurs who can ensure the peg remains sticky, within reason.
  • The real risk is if all of the farmers in Abracadabra offload their UST in a very short period, as it’s unlikely UST can withstand 1B of selling without putting pressure on the peg. Estimating how many will sell their UST is tough, but it’s unlikely we see all users dump as Degenbox is still providing high APYs to UST depositors. Having said that, we don’t believe this is the best way to generate sustainable demand for UST and acknowledge there are risks surrounding these strategies in the short to medium-term.
  • LooksRare has a roughly 70% volume share versus OpenSea. However, it has far fewer users, with OpenSea accounting for 97% of daily active addresses between the two. Between the launch of its native token and extreme liquidity mining rewards that favor wash trading, LooksRare has built an incentive mechanism that promotes artificial volumes to prop up its numbers.
  • All in all, LooksRare is taking advantage of OpenSea’s unwillingness to truly embrace crypto and incentive mechanisms. But when the music stops, LOOKS token holders could be caught off guard by the lack of organic activity on the platform. LOOKS’ price has fallen ~33% from its peak less than two weeks ago.


PowerPool introduces first yield harvesting StableSwap pool built using Balancer v2 and Liquity

  • Hypothetical LUSD-staBAL StableSwap built on top of Balancer v2/Liquity/PowerPool generated ~12% APY without any additional rewards allocated to it;
  • Such a result was achieved by depositing LUSD into Liquity Stability Pool and harvesting ETH/LQTY proceeds in the AMM pool. LUSD was used for swaps and contributing to Liquity system stability at the same time;
  • StableSwap pools with asset managers potentially could solve secondary market liquidity issue for some other stablecoins independently from Curve/other DEX protocol incentives;


Report: Bitcoin mining network accounts for 0.08% of world’s CO2 production

  • In a new report published by CoinShares on Monday, the firm estimated that the Bitcoin (BTC) mining network emitted 42 megatons, or Mt, (1Mt = 1 million tons) of carbon dioxide, or CO2, in 2021. In context, the number amounts to less than 0.08% of the world’s total emissions of 49,360 Mts of CO2 in the same year. CoinShares came to such figures using a variety of estimates regarding the efficiency of the Bitcoin network, its energy use, hardware, etc., on a global scale. As a result, it may not reflect the actual CO2 emission of the network. But the report’s estimate of worldwide CO2 emission is mainly in-line with industry figures.
  • In addition, the report estimates the total electricity consumption of the Bitcoin network at 89 terawatt-hours (TWh), which is far lower than that of estimates put forth by an institution such as the University of Cambridge. It is especially the case, given that the Bitcoin network’s hash rate has reached new all-time highs. That said, electricity consumption alone is not a true contextual measure of the Bitcoin network’s environmental impact. This is because global CO2 emissions come from many aspects, such as private automobiles, for starters.


Is the bottom in? Institutional crypto funds record second week of inflows

  • After recording heavy outflows at the start of 2022, cryptocurrency investment funds have seen a gradual uptick in investor demand over the past two weeks, offering cautious optimism that the worst of the market downturn had passed.
  • Digital asset investment products saw $19 million worth of cumulative inflows last week, according to CoinShares. Bitcoin (BTC) and multi-asset funds led the gains with $22 million and $32 million worth of inflows, respectively.
  • The news wasn’t all positive, as Ether (ETH) continued to suffer from negative sentiment with outflows totaling $27 million. That marked eight consecutive weekly outflows for ETH-focused funds. Solana (SOL), Polkadot (DOT) and Cardano (ADA) products also registered outflows for the week.
  • Digital asset products have seen heavy outflows since December, as institutional investors took profits and reduced their positions amid extreme selloffs in the market. So far this year, Bitcoin funds have seen a net $131.8 million worth of outflows, according to CoinShares data. Ether ) funds have seen $111.2 million worth of drawdowns.


VanEck launches its first multi-token cryptocurrency fund

  • On Monday, VanEck, a financial institution with close to $82 billion in assets under management with exchange-traded funds, or ETFs, mutual funds and institutional accounts, announced the launch of its first cryptocurrency fund. The fund is listed as an exchange-traded note, or ETN, on the Deutsche Borse Xetra and SIX Swiss exchanges with exposure to Bitcoin (BTC), Ethereum (ETH), Polkadot (DOT), Solana (SOL), Tron (TRX), Avalanche (AVAX) and Polygon (MATIC).
  • Gijs Koning, co-head of VanEck Europe, elaborated on why it was important for the firm to facilitate investment in digital currencies:
  • “In early 2017, we determined that digital assets could provide a store of value alternative to currencies and gold, as well as a host of technology solutions that could bring down costs in the payments and investing industries.”
  • While VanEck’s cryptocurrency financial products are gaining traction in Europe, they face regulatory hurdles in the U.S. There, the firm’s offerings are limited to private digital currency funds for institutional investors and only stock-based ETFs comprised of companies utilizing blockchain technology.


Litecoin is finally launching its major Mimblewimble upgrade

  • After two years of development, Litecoin (LTC) has finally launched its highly anticipated Mimblewimble upgrade, opening the door to more privacy-oriented transactions on the network. 
  • Mimblewimble’s integration into Litecoin came by way of the Mimblewimble Extension Block, also known as MWEB, which allows the network’s users to opt-in to confidential transactions. MWEB lead developer David Burkett, who has been sponsored by the Litecoin Foundation, said the upgrade improves Litecoin’s viability as a fungible currency that can be used for everyday transactions, pay employee salaries and even purchase real estate.
  • Mimblewimble is a privacy-focused decentralized protocol that derives its name from a tongue-tying spell that was first made famous in the Harry Potter book series. The protocol has a confidentiality feature that allows users to conceal transaction information. It also provides a framework for other blockchains to enhance the usability of their cryptocurrency. 


WEF’s blockchain head will lead the Crypto Council for Innovation

  • Sheila Warren, the head of blockchain and distributed ledger technology at the World Economic Forum, will be assuming the position of CEO of the Crypto Council for Innovation, or CCI, starting in February.
  • In a Monday announcement, the CCI said that beginning on Wednesday, Warren would lead the alliance of crypto-friendly firms aimed at supporting lawmakers on crypto and blockchain regulation. CCI board member and Coinbase co-founder Fred Ehrsam cited the WEF executive’s “in-depth knowledge of crypto” in addition to her experience working with governments across the globe.
  • “The crypto ecosystem is poised to deliver large-scale economic growth, empower communities and improve lives all over the world,” said Warren. “I am excited to drive CCI’s mission of realizing the transformative potential of crypto through education and advocacy for a responsible, forward-thinking global policy environment that will ensure that crypto’s benefits are accessible to all people, regardless of their current economic privilege.”


FTX exchange breaks $32B valuation despite crypto winter fears

  • Despite growing fears over a potential cryptocurrency market downturn, major industry firms like FTX keep gaining momentum by securing hundreds of millions in fresh funding.
  • FTX Trading, the owner and operator of Sam Bankman-Fried’s crypto exchange FTX, officially announced Monday that it closed a $400 million Series C funding round, bringing the firm to a $32 billion in valuation.
  • The new fundraise comes several days after FTX’s United States-based sister firm FTX US also raised $400 million in a Series A round on Wednesday, reaching an $8 billion valuation.
  • According to the announcement, the latest fundraise saw participation from Singaporean state investor Temasek, digital asset investment firm Paradigm, Canada’s Ontario Teachers’ Pension Plan Board, Tiger Global, SoftBank Vision Fund 2 and others. All the firms participated in the aforementioned FTX US funding round simultaneously.


Solana ecosystem wallet Phantom raises $109M

  • Software wallet and browser extension Phantom has raised $109 million in Series B financing to continue expanding its cross-platform capabilities beyond Solana. 
  • The funding round was led by Paradigm, an investment firm focused on cryptocurrency and Web3 companies. Other venture firms to have supported Phantom in prior funding deals include Andreessen Horowitz, Jump Capital and Variant Fund.
  • According to Phantom, the funding will help to enhance the wallet’s technical capabilities, such as better app discovery, as well as allowing the company to hire additional employees.
  • In addition to its funding round, Phantom also announced Monday that its mobile app is now available for iOS devices.

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