Thursday, 22 September 2022

Market Summary

Market Summary 22 September 2022

Bitcoin Price: US$18,461.36 (-2.19%)
Ethereum Price: US$ 1,245.78 (-5.83%) 


GMX Traders On Arbitrum Are Down Bad This Week

  • Alameda Research is repaying a $200m loan to Voyager Digital, an insolvent crypto lender. The firm will get back $160m of collateral.
  • Draft legislation in the US bans new algorithmic stablecoins for 2 years. The bill also requires stablecoin issuers to seek regulatory approval.
  • EU finalizes the full text for crypto legislation, which requires issuers to publish whitepapers, platforms to register with authorities, and stablecoins to hold capital.
  • Binance and FTX bid roughly $50m to buy assets of Voyager Digital. Binance’s current bid is slightly higher.
  • OpenSea announces support for Arbitrum.
  • Last week, GMX traders on Arbitrum recorded the third largest seven-day rolling net loss of $8.4m on Sept 19th. During this period, open interest on GMX Arbitrum was primarily in long positions.
  • However, the market moved against these traders, with ETH declining 20%. This resulted in the third largest daily loss for GMX traders on Sept 15th.
  • On the other hand, GMX traders on Avalanche recorded the fourth largest seven-day rolling net profit of $803k on Sept 20th. During this period, open interest on GMX Avalanche was split even, but slightly more in short positions.
  • Stats for GMX Avalanche were influenced by a DeFi trader that took advantage of GMX’s zero slippage and oracle pricing to extract over $500k of profit.
  • This was done by repeatedly entering positions on GMX and manipulating the price of AVAX on centralized exchanges. Read more about these trades here.
  • GMX is a decentralized spot and futures exchange that offers low swap fees and zero slippage trades. Liquidity is supplied by a multi-asset pool called GLP that earns fees from market making, swaps, and leverage trading.
  • In 2020, we had “DeFi Summer.” In 2021, NFTs exploded into mainstream attention. In 2022, we see signs of a new narrative: DeFi products that enable the financialization of NFTs. Trend catchers should pay close attention to NFT finance.
  • We’ve identified one vertical within NFT finance that is catching on quickly – NFT lending. This refers to protocols that enable NFT owners to take out loans against their NFTs, unlocking new avenues of liquidity.
  • There are two main approaches to NFT lending. Peer-to-peer lending (via NFTfi) has been the primary model for years, but peer-to-pool lending has gained attention with the launch of BendDAO & JPEG’d.
    • In peer-to-peer lending, NFT owners obtain loans directly from other individuals. The product acts as a marketplace to match borrowers and lenders, functioning as a trustless middleman.
    • In peer-to-pool lending, NFT owners obtain loans from a liquidity pool instead. This can be governed by algorithmically-determined parameters or set by the pool owners.
  • NFTfi became the first protocol to offer NFT-backed loans via the peer-to-peer lending model starting in June 2020. It remains the most prominent protocol in this space today.
  • Monthly loan volumes on NFTfi have grown parabolically since 2021, in line with the boom in NFTs. The protocol hit a peak of almost $50m in monthly loans in April 2022, before settling between $10-$20m per month over the last few months.
  • NFTfi matches borrowers and lenders via its marketplace. Borrowers can list NFTs that they want to borrow against. Lenders place bids by offering terms – amount (wETH or DAI), duration, and interest rate.


U.S. Federal Reserve hikes interest rates by 75 basis points

  • The U.S. Federal Reserve has raised the US federal funds rate by 75 basis points and marking a 15-year high.
  • Wednesday’s decision was largely expected, with the market pricing in a rise of 75 basis points ahead of time.
  • “The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3 to 3-1/4 percent and anticipates that ongoing increases in the target range will be appropriate,” the Fed said.
  • The move is intended to fight inflation which remains hot, having risen 0.1% month-on-month from July to August and 8.3% year-on-year in August. Jerome Powell said in August that today’s decision would depend on the “totality of the incoming data and the evolving outlook.”


US Stablecoin Bill Negotiations Wrestled Over Digital Dollar Approval: Source

  • Democrats pushed for a provision directing the U.S. Federal Reserve to move forward on a digital dollar, but the negotiations concluded with a new directive for another Fed study in this year’s legislative effort to regulate stablecoins, according to a person familiar with the talks.
  • A draft of the House bill, which is now circulating among lawmakers and the industry, won’t yet represent the authorization Fed officials have said they are waiting for from Congress before they decide to issue a central-bank digital currency (CBDC). The federal government has been inching closer to such an approval, with the U.S. Treasury Department recommending in a recent report that work on a digital dollar should continue while the executive branch also comes to a decision.
  • The important – though potentially fatally timed – House legislation is also said to maintain a role for state regulators and squeezes the ability to issue algorithmic stablecoins, though it is likely past the point at which it can become law this year.


Crypto Analytics Firm Messari Raises $35M in Funding Round Led by Brevan Howard Digital

  • Cryptocurrency data and analytics firm Messari has closed a $35 million Series B funding round that was led by Brevan Howard Digital, according to a press release.
  • The round, which was first reported in August, includes investments from Morgan Creek Digital, Samsung Next, FTX Ventures, Galaxy and Coinbase Ventures.
  • Messari, which is hosting its annual Mainnet conference in New York this week, will use the capital to hire more people and develop two new products – Protocol Metrics and Data Apps.
  • “This new funding will help us grow our team, expand internationally and invest in new data offerings and tools that complete our market-leading product suite,” Messari co-founder and CEO Ryan Selkis said in the release.


Banking giant Nomura launches crypto VC unit

  • Nomura, one of Japan’s biggest investment banks, is launching a new venture capital unit to invest in the crypto space.
  • Dubbed Laser Venture Capital, the unit will invest in companies in the digital ecosystem, with a focus on decentralized finance (DeFi), centralized finance (CeFi), web3 and blockchain infrastructure, Nomura announced Wednesday.
  • Laser Venture Capital will be the first product to launch from Nomura’s new digital assets business, which has been named today as Laser Digital. The bank plans two further launches, around secondary trading and investor products.
  • Nomura first announced its plans to create a new crypto company in May. At the time, it said the unit will provide institutional clients and investors with products and services linked to cryptocurrencies, stablecoins, DeFi, NFTs and other tokens. The bank has incorporated the holding company for its crypto business, Laser Digital Holdings AG, in Switzerland.


Stablecoin Issuer Tether Ordered to Produce Documents Showing Backing of USDT

  • Tether has been ordered by a U.S. judge in New York to produce financial records relating to the backing of USDT as part of a lawsuit that alleges Tether conspired to issue the stablecoin as part of a campaign to inflate the price of bitcoin (BTC).
  • The order requires Tether to produce “general ledgers, balance sheets, income statements, cash-flow statements, and profit and loss statements” as well as records of any trades or transfers of cryptocurrency or other stablecoins by Tether including information about the timing of the trades.
  • It also orders Tether to share details about the accounts it holds at crypto exchanges Bitfinex, Poloniex and Bittrex.


Crypto Exchange FTX in Discussions for Up to $1B Capital Raise at $32B Valuation: Report

  • Crypto exchange giant FTX is in discussions with investors for up to $1 billion in fresh funding at a valuation of about $32 billion, CNBC reported Wednesday, citing sources with knowledge of the talks.
  • CoinDesk reported last week that FTX was seeking to raise money in parallel with evaluating acquisitions, adding that FTX was also looking to have itself valued at the same $32 billion valuation it won this year in an earlier funding round.


Binance CEO: Bitcoin Bear Market Is ‘Healthy’ for Crypto Industry Long Term

  • Binance CEO Changpeng “CZ” Zhao thinks the Bitcoin bear market is good for crypto.
  • In a conversation with Messari CEO Ryan Selkis at the Mainnet conference Wednesday, CZ—who connected remotely via video chat—said a four-year crypto market cycle is normal and that a bear market is healthier in the long term than a seemingly never-ending upward trend.
  • “Price corrections are actually good,” CZ said, adding that investors shouldn’t look at token prices as signs of how the crypto market is doing.

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