Wednesday, 16 February 2022

Market Summary

Market Summary 16 February 2022

Bitcoin Price: US$ 44,544.86 (+4.72%)
Ethereum Price: US$ 3,183.52 (+8.66%)


Cheap Gas, DAO Updates, & DeFi Perps Plunge

  • Gas prices have significantly decreased from their peak last month of 218 Gwei to just around 60 Gwei today, which translates to a 72% reduction.
  • At the beginning of 2022, gas prices jumped due to surging volume for NFTs. However, as mentioned in yesterday’s Daily, NFT activity has been cooling off in the past week. Opensea is one of Ethereum’s biggest gas guzzlers, and an acute slowdown in NFT volume (and thus transactions) can largely impact the price of gas.
  • When it comes to decentralized perpetuals (“perps”), dYdX is still the dominant exchange, boasting ~78% market share. Meanwhile, its native token (DYDX) is down more than 70% from its all-time high and has struggled amid broader market weakness.
  • The reason for dYdX’s poor performance is in part attributable to the lack of value accrual mechanisms, since trading fees are collected by a centralized entity. However, this is set to change with the launch of dYdX V4 by EOY 2022, which could drive more value for DYDX holders (and maybe even some relief to its price action).
  • GMX is now the second-largest decentralized perpetuals exchange to offer spot swaps. Its launch on Avalanche has nearly doubled GMX’s volume, helping drive down its valuation relative to average “earnings” (note: P/E is far from perfect when it comes to analyzing protocol valuations but it does provide additional context on the amount of fee’s generated relative to a protocol’s current market value).
  • GMX differs from many of the other perpetual protocols due to its strong earnings and value accrual mechanisms, which directly benefit token holders; GMX returns 30% of all fees to stakers.


Yield Insights – Primitive on Arbitrum, Airdrops, Stablecoin Farms & Yearn Assets

  • There will be a $FPI airdrop to the Convex Finance and Frax Finance community. The snapshot date is Feb 20th, 4PM PST. Balances holding veFXS, staked FRAX-FXS LP, tFXS in Tokemak and cvxFXS are eligible.
  • Vesta Finance is a Layer 2-first lending protocol that allows users to obtain maximum liquidity against their collateral without paying interest. Vesta’s V1 is based on Liquity, a collateralized debt platform. Users can lock up collateral and issue Vesta’s stablecoin VST to their own Ethereum address, and subsequently transfer those tokens to any other Ethereum address.
  • Drachma is a decentralized non-custodial automated market maker (AMM) which features “Curve style” hyper-efficient low-slippage swaps for both pegged and unpegged assets. Drachma will be a fair launch with no VCs, private or team allocations. 100% of the tokens will be used to incentivize liquidity for the pools on Drachma as well as the Drachma token itself.
  • PanicSwap is an AMM that is aiming to build liquidity between Yearn Finance’s single asset yield-bearing tokens or ‘Y-tokens’. At its core, it is a fork of the audited Solidly code-base from Andre Cronje. This AMM supports both stable pairs, non-stable pairs and also multi-hop swaps, even those that include stable and non-stable pairs mixed routes. 


Marshall Islands officially recognizes DAOs as legal entities

  • The Republic of the Marshall Islands has moved to formally recognize decentralized autonomous organizations, better known as DAOs, as legal entities — a move that gives collectively owned and managed blockchain projects formal recognition on the global stage. 
  • DAOs, which are blockchain-based entities governed by self-organizing communities, have attained legal recognition in the Marshall Islands after the country passed the amended Non-Profit Entities Act 2021. The amendment allowed cryptocurrency trading infrastructure platform Shipyard Software to incorporate the island country’s first DAO, Admiralty LLC. The incorporation was aided by MIDAO Directory Services Inc., a domestic organization that was established to help DAOs register within the Marshall Islands.
  • As it currently stands, the new legislation allows any DAO to register and establish operations in the Marshall Islands.


Warren Buffett invests $1B in Bitcoin-friendly neobank, dumps Visa and Mastercard stocks

  • Warren Buffett’s Berkshire Hathaway dumped a portion of its Visa and Mastercard holdings and increased exposure in Nubank, the largest fintech bank in Brazil that’s also popular among the country’s Bitcoin investors.
  • In a securities filing late Feb. 14, the industrial conglomerate disclosed that it had purchased $1 billion worth of Nubank Class A stock in Q4/2021. On the other hand, it sold $1.8 billion and $1.3 billion worth of Visa and Mastercard stock, respectively, signaling a shift away from credit companies to gain exposure in their fintech rivals.
  • Buffett, the so-called “Oracle of Omaha,” is popular for his cautious approach to investing, particularly in the market’s hottest sectors such as fintech. The veteran investor had also downplayed emerging decentralized finance solutions like Bitcoin (BTC), ridiculing it as an asset that “does not create anything.”


US lawmaker introduces bill for government-backed insurance of ‘qualified’ stablecoins

  • House Financial Services Committee member and New Jersey Representative Josh Gottheimer has introduced legislation that would have the Federal Deposit Insurance Corporation back stablecoins in a  manner similar to fiat deposits.
  • In a draft of the Stablecoin Innovation and Protection Act of 2022 released on Tuesday, Gottheimer proposed labeling stablecoins issued by insured depository institutions or certain nonbank issuers as “qualified.” Under this definition, the bill suggests “qualified stablecoins” are neither securities or commodities under U.S. law, and redeemable on demand from the issuer.
  • In cases of nonbank issuers, the legislation would require the Federal Deposit Insurance Corporation, or FDIC, to set up a Qualified Stablecoin Insurance Fund to insure qualified stablecoin holders can exchange their tokens for U.S. dollars on demand. According to Gottheimer, the bill is aimed at protecting holders from “systemic risk, fraud and illicit financing.”
  • “The expansion of cryptocurrency offers tremendous potential value for our economy,” said Gottheimer. “But for cryptocurrency to grow and thrive here in the United States, instead of overseas, we must provide more direction and certainty to the marketplace to help boost innovation and protect consumers.”


LooksRare team cashes out $30M in WETH, faces community backlash

  • LooksRare, a nonfungible token (NFT) marketplace touted to be the OpenSea killer, became the talk of the NFT world after the team behind the project cashed out millions in Ether (ETH).
  • The NFT marketplace confirmed that the core team has cashed out 10,500 WETH estimated to be worth $30 million from the unattributed staked native token LOOKS. The native token was used for paying fees on the platform and was also awarded to users when they sold their NFT on the platform. The unattributed LOOKS tokens were cashed out for Ether on the popular crypto mixing tool Tornado Cash.
  • The team received heavy backlash from the community on Twitter when the news became public and the price of the native token LOOKS also tumbled by nearly 15% in the aftermath. However, one of the team members took to Twitter to defend the withdrawal and claimed that the team earning rewards in wrapped Ethereum was never a secret.


Digital ruble trial goes live as Bank of Russia insists on Bitcoin ban

  • Amid more reports on the Bank of Russia rejecting the Finance Ministry’s proposal of cryptocurrency regulation, the central bank has kicked off trials of its own digital currency.
  • The Russian central bank has officially launched the digital ruble trial, successfully completing the first central bank digital currency (CBDC) transfers among citizens, the Bank of Russia announced Tuesday. The launch aligns with the bank’s plans to debut the first digital ruble transactions in early 2022.
  • Three banks out of 12 financial institutions in the digital ruble pilot group have already integrated the CBDC platform, with two of them completing a “full cycle of digital ruble transfers between clients using mobile banking applications,” the bank said.


Binance Smart Chain and Binance Chain become BNB Chain

  • Decentralized blockchain ecosystem Binance Smart Chain (BSC) announced on Tuesday that the Binance Chain and Binance Smart Chain are uniting under a new name, BNB Chain, in a bid to reflect their connection with the native token of the ecosystem Binance Coin (BNB).
  • According to a press release provided to Cointelegraph, BNB now stands for “Build and Build” instead of short for Binance Coin. Powered by BNB, the BNB Chain will introduce advanced capabilities and focus on building Web3 infrastructure.
  • Under the freshly named BNB Chain umbrella, the chain governance part, the Binance Chain, where staking and voting happens, has become BNB Beacon Chain. Meanwhile, the Ethereum Virtual Machine-compatible, multichain-supporting Binance Smart Chain is simply named BNB Smart Chain, still shortened as BSC.
  • The BNB Chain will bring all its Web3 development under the umbrella of MetaFi that will bring together developers and projects from the metaverse along with GameFi and SocialFi. The BNB Chain will bring large-scale applications and developer tools while expanding the validator set from 21 to 41 with a focus on scalability.


Bitcoin hits $44K after Canada emergency powers accompany 6% BTC price increase

  • Plans to include crypto in enhanced surveillance by the Canadian government have the unintended knock-on effect of fuelling “unstoppable money.”
  • The uptick appeared to have an external trigger. As part of the ongoing events in Canada’s Freedom Convoy protests, the government announced that it would expand Anti-Money Laundering surveillance to cover crypto transactions.
  • “These changes cover all forms of transactions including digital assets and cryptocurrencies,” Canadian Deputy Prime Minister Chrystia Freeland said at a press conference.
  • The protests had long been a topic of heated debate in Bitcoin and crypto circles in light of the highly controversial actions by crowdfunding platform GoFundMe and the subsequent hack of GiveSendGo, the alternative used to send donations to protest participants.


Crypto investors hedging out risks ahead of March rate hike

  • On-chain data analysis from Glassnode shows that Bitcoin (BTC) investors are hedging out risks in order to stay protected against United States Federal Reserve interest rate hikes in March.
  • Glassnode’s “The Week On-Chain” newsletter from Monday indicates that the most significant trend in Bitcoin right now is the flat futures term structure through March. This is strongly attributed to “investor uncertainty regarding the wider economic impact of a tighter US dollar.”
  • The rate hike is already priced into spot markets, according to Cointelegraph contributor Michaël van de Poppe, but the longer-term effect it will have is still unclear. As a result, Glassnode observed that investors are taking steps to protect themselves from the potentially low downside risk.
  • “It appears that investors are deleveraging and utilizing derivatives markets to hedge out risk, and buy downside protection, with a keen eye on the Fed rate hikes expected in March.”

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