Market Summary

Bitcoin Price: US$ 38,230.33 (+3.30%)
Ethereum Price: US$ 2,636.29 (+2.66%)

UNI Market Share Shines, Stablecoin Wars, & Fresh Farms

• Despite fervent competition amongst Ethereum-native DEXes over the last year, Uniswap has grown its market share against the top five spot DEXes by over 30%. The AMM now accounts for roughly 80% of the total volume share across all Ethereum spot DEXes.
• Uniswap had several headwinds over 2021, coming in the form of the Uniswap v3 upgrade. But the most pertinent of which, in this context, was the introduction of variable fee tiers. Uniswap offers swap fees as low as 0.01% or 0.05% on high liquidity pairs (ETH-USD) and low volatility pairs (USDC-USDT). With Uniswap boasting arguably the lowest swap fees on the market, it’s been able to capture a larger share of the overall trading volume.
• Stablecoins exploded in 2021, surpassing $150B in combined market capitalization. This surge is a testament to great product-market fit as one of crypto’s “killer apps,” with assets like USDC and USDT becoming almost ubiquitous across the entire crypto ecosystem. We strongly believe this trend will continue on the back of a few major catalysts that have paved their success thus far:
• Decentralized Stablecoins: We have written extensively about LUNA and UST and if you believe in truly decentralized finance then there needs to be a decentralized stablecoin to support it. This can take the form of either an algorithmic stable (UST, FRAX) or an overcollateralized one (DAI, MIM).
• If a regulatory crackdown begins on stablecoins, this could push marginal users and builders to use decentralized alternatives.
• Curve (CRV) As Critical Infrastructure: It’s very difficult to talk about stablecoins, especially decentralized ones, without mentioning the “kingmaker” of stablecoins — Curve. Through gauge weights, Curve governance can direct CRV issuance to pools, directly resulting in higher liquidity mining rewards and thus increased TVL. Since liquidity for stablecoins is crucial, this makes Curve the most important piece of infrastructure for stablecoins. As we wrote about in our report on Convex, Convex controls roughly half of all Curve governance allowing it to vote in or be bribed to create the most liquid stablecoin pools in all of DeFi.
• Convex’s (CVX) Governance Black Hole: Major stablecoin projects have realized Curve’s weekly gauge weight allocation is critical to keeping their liquidity high. Losing that vote means LPs’ yields drop, and capital may move elsewhere. Now, a so-called “war” has ensued, with various protocols openly bribing votes and rewarding veCRV holders with their native tokens. In April 2021, Convex pioneered this bribing game with a 1% airdrop in exchange for support from veCRV holders. Now, it has grown to have great sway on Curve’s valuable governance vote: 85% of Curve TVL is now routed and staked via Convex. And nearly half of all veCRV supply is owned by Convex. In short, Convex is a new model for protocol-controlled value (PCV), trailblazing the accumulation of power through governance.

Luna Foundation Guard raises $1B to form UST reserve denominated in Bitcoin

• The nonprofit organization focused on the open-source stablecoin network behind Terra USD, Luna Foundation Guard, has closed on a $1 billion raise through the sale of LUNA tokens.
• In a Tuesday tweet, Terra said Jump Crypto and Three Arrows Capital led the $1 billion round with participation from DeFiance Capital, Republic Capital, GSR, Tribe Capital and others. The platform said proceeds from the sale — $1 billion — would “go towards establishing a Bitcoin-denominated Forex Reserve for UST,” a stablecoin in the Terra ecosystem.

Grayscale launches campaign to encourage public comments on Bitcoin ETF application

• As the U.S. Securities and Exchange Commission is considering whether to approve or deny asset manager Grayscale’s application for a Bitcoin spot exchange-traded fund (ETF), the firm has called on American investors to submit comments to the regulator.
• In a Tuesday Twitter thread, Grayscale CEO Michael Sonnenshein announced the launch of an advocacy campaign for U.S.-based investors to speak their minds to the SEC before any final decision is reached on the Bitcoin (BTC) investment vehicle. Since the NYSE Arca filed with the regulatory body on Oct. 19 to list shares of Grayscale’s Bitcoin ETF under the ticker GBTC, the commission has delayed its decision on Dec. 15 and again on Feb. 4.
• “This campaign aims to educate and inspire the investment community to take action and make their voices heard on this historic decision,” said Sonnenshein.
• According to Grayscale’s chief legal officer Craig Salm, the firm has already received more than 200 letters in support of the SEC allowing the firm to convert its Bitcoin Trust into a physically-backed fund. Salm said some of the common themes from the feedback included calling a crypto ETF “in the public’s best interest,” allowing the United States to stay competitive with innovative investment vehicles, and calling out the SEC’s “nonsensical” approach in approving ETFs linked to Bitcoin futures but not BTC spot ETFs.

Kazakh ministry halts illegal crypto mining operations

• The Ministry of Energy of the Republic of Kazakhstan announced that it had discovered and terminated 13 cryptocurrency mining operations. The government executed the shutdown as part of its efforts to regulate the Bitcoin (BTC) mining sector, which has grown increasingly popular in recent years.
• As per the official statement, the miners were using a lot of energy, with a total power consumption of 202 megawatts. According to the Kazakh government, efforts to identify and disconnect mining farms from the electrical networks will continue. Following the discovery of illicit mining operations, authorized bodies will take operational and investigatory actions.

On-chain metrics hint at a bearish outlook for Bitcoin

• Blockchain analytics provider Glassnode has depicted a bearish scenario for Bitcoin (BTC) as on-chain metrics suggest increased selling pressure is imminent.
• In its weekly analytics report on Monday, Glassnode said that Bitcoin bulls “face a number of headwinds,” referring to increasingly bearish network data.
• The researchers pointed at the general weakness in mainstream markets alongside wider geopolitical issues as the reason for the current risk-off sentiment for crypto assets:
• “Weakness in both Bitcoin, and traditional markets, reflects the persistent risk and uncertainty associated with Fed rate hikes expected in March, fears of conflict in Ukraine, as well as growing civil unrest in Canada and elsewhere.”
• It added that as the downtrend deepens, “the probability of a more sustained bear market can also be expected to increase.” Bitcoin is currently trading down 47% from its November all-time high and has been down-trending for the past 15 weeks.

Manchester City to build Etihad Stadium in the metaverse

• Premier League champions Manchester City and its new partner Sony have begun building a virtual replica of the Etihad Stadium, which will be the team’s central hub in the metaverse.
• Etihad Stadium is the home of Manchester City, England’s top soccer team at the moment. On Friday, the team announced that it had signed a three-year agreement with Sony, which will provide virtual reality to experts to use image analysis and skeletal-tracking technology from subsidiary Hawk-Eye.
• Manchester City hopes fans will enjoy all the benefits of having a virtual stadium. Although COVID restrictions are still hampering travel options for some, the ability to watch games in an immersive metaverse setting could be a relief to fans itching to get a taste of a game setting again.