Tuesday, 28 June 2022

Market Summary

Market Summary 28 June 2022

Bitcoin Price: US$ 20,742.56 (-1.40%)
Ethereum Price: US$ 1,192.51 (-0.44 %) 

 

Arbitrum vs Optimism, Liquidation Cascades, Lido’s stETH Depeg

  • Arbitrum and Optimism are the two leading Optimistic rollups for Ethereum.
  • Optimism initiated incentives with the $OP airdrop, which attracted users to claim their tokens. However, its daily transactions, which were ~500k during the claim period, have tapered off to around 100k daily transactions. Check if you are eligible for the $OP airdrop here. This is not the end of $OP incentives, as only 5% of supply was airdropped, with 14% more allocated to future rounds.
  • As covered in our previous daily, Arbitrum has just started its 8-week event, Arbitrum Odyssey, to attract users to protocols on Arbitrum. Accumulating 13/16 of the Arbitrum Odyssey NFTs will make you eligible for a bonus NFT at the end of the event. This week, users will need to complete tasks using Yield Protocol and GMX to be eligible for week 2’s NFTs. Keep a lookout on Arbitrum’s Twitter for the eligibility criteria.
  • The start of Arbitrum Odyssey pushed Arbitrum ahead of Optimism in daily transactions, but the fight is not over as both L2s continue to incentivize users.
  • Before we go further, it’s important to note that stETH issued is backed by an equivalent amount of ETH. When withdrawals are enabled, holders will be able to redeem at a 1:1 rate. Once this happens, stETH should realistically keep its peg at 1:1. Every time it deviates, a fairly obvious arbitrage opportunity will present itself.
  • If stETH is trading >1 ETH, users can deposit ETH into Lido and receive stETH in return, selling the stETH into the open market and capturing the spread.
  • If stETH is trading <1 ETH, users can purchase discounted stETH and then redeem it for ETH, selling the ETH into the open market and capturing the spread.
  • In the meantime, since withdrawals are not enabled yet, stETH maintains its peg to ETH through a Curve StableSwap pool. Recently this StableSwap pool has become imbalanced and stETH is trading at a ~5% discount to ETH. This post will cover how the discount has come to be in the hope of clarifying the situation.
  • Two large crypto players who have recently been struggling with solvency issues, Celsius and Three Arrows Capital, had significant stETH exposure. Given their problems, they were forced to unwind a large part of their position (hundreds of thousands of stETH), putting significant pressure on the stETH/ETH peg. This de-pegging alongside a larger market sell-off caused participants that were borrowing against their stETH on Aave to begin repaying their loans. In short, the need for immediate liquidity — something stETH cannot offer natively yet — is at the heart of the de-peg.

 

Grayscale reports 99% of SEC comment letters support spot Bitcoin ETF

  • Digital asset manager Grayscale reported overwhelming support in public comments for its application to launch a spot Bitcoin exchange-traded fund.
  • In a Monday letter to investors, Grayscale said that of the more than 11,400 letters the United States Securities and Exchange Commission, or SEC, had received in regards to its proposed Bitcoin (BTC) investment vehicle, “99.96 percent of those comment letters were supportive of Grayscale’s case” as of June 9. According to Grayscale, roughly 33% of the letters questioned the lack of a spot BTC ETF in the U.S., given the SEC had already approved investment vehicles linked to Bitcoin futures, as was the case for ProShares and Valkyrie.
  • “The SEC’s actions over the past eight months […] have signaled an increased recognition of and comfort with the maturity of the underlying Bitcoin market,” said Grayscale CEO Michael Sonnenshein. “The approval of each and every Bitcoin-linked investment product strengthens our arguments about why the U.S. market deserves a spot Bitcoin ETF.”
  • The regulatory body is currently reviewing Grayscale’s application allowing the firm to convert shares of its Bitcoin Trust (GBTC) into a physically-backed fund, which, if approved, would be the first spot BTC ETF offering in the United States. The application is nearing the end of a 240-day review process, which started in November 2021 and ends on July 6.

 

Wormhole supports Terra 2.0

  • Terra 2.0 is the 12th chain connected to the Wormhole network.
  • Terra has a vibrant community of users and builders with protocols including DEXs, analytics, NFTs, wallets, and infrastructure.
  • Adding Terra V2 to Wormhole’s networks enables developers to send xAssets to supported chains and create xApps leveraging Wormhole’s generic cross-chain messaging protocol. We are happy to support builders across the Terra ecosystem and across web3.

 

Metaverse fractional ownership to form similarly to property loans: Casper exec

  • As metaverse land assets become more expensive, ownership becomes harder for normal users. Because of this, Ralf Kubli, board member at the Casper Association, argues that fractional ownership, similar to property loans in the real world, may gain traction within the virtual space through nonfungible tokens (NFTs). 
  • Kubli told Cointelegraph that understanding fractional ownership within the metaverse is very similar to the legacy property system. As prices soar, many cannot afford to buy and own properties. This leads to people renting or leasing property, giving a form of fractional ownership. He explained that:
  • “Instead of the typical renter-buyer relationship and processes inherent to the legacy system, smart contracts and virtual assets such as NFTs are what powers this fractional ownership system.”
  • The Casper exec adds that this also applies to “leasing advertising space or issuing debt to fund new projects.” According to Kubli, smart contracts enable a “fractionalization agreement” that divides a plot of metaverse land into “sub-units,” which are leased out individually. Kubli noted that:
  • “In theory, this can be applied to any digital asset, providing that the smart contracts and associated technologies are designed for this purpose.”

 

China’s BSN chair calls Bitcoin Ponzi, stablecoins ‘fine if regulated’

  • Amid the Chinese government continuing to celebrate the massive decline of cryptocurrency markets this year, one key local blockchain expert has referred to crypto as a Ponzi scheme.
  • Yifan He, CEO of Red Date Technology — a major tech firm involved in the development of China’s major blockchain project called the Blockchain Service Network (BSN) — has penned a new article devoted to various kinds of cryptocurrencies and their supposed Ponzi-like nature.
  • Published in the local newspaper The People’s Daily on Sunday, the piece refers to private cryptocurrencies as the “biggest Ponzi scheme in human history.”
  • The author mentioned the Terra network’s collapse, with the native token Terra (LUNA) — now known as Luna Classic (LUNC) — crashing 99% and the algorithmic TerraUSD Classic (USTC) stablecoin losing its 1:1 peg value to the United States dollar in May 2022. He also criticized the increasingly popular virtual currency concept known as X-to-earn, referring to move-to-earn or play-to-earn projects, calling the model a “phishing strategy.”
  • The BSN chair also mentioned some well-known criticism of Bitcoin (BTC) by Microsoft founder Bill Gates and legendary investor Warren Buffett.
  • He is not a fan of Bitcoin or any similar cryptocurrencies himself as well. “Currently, all unregulated cryptocurrencies including Bitcoin are Ponzi schemes based on my understanding, just different risk levels based on the market caps and number of users,” He said in a statement to Cointelegraph on Monday.

 

‘Smear campaign’: Nexo responds to accusations of stealing donations, siphoning funds from charity

  • Cryptocurrency lending platform Nexo has hit back at what it called “fake news” and rumors that its founders were part of a charity embezzlement scandal, saying the claims are untrue and defamatory. It has issued a public cease and desist notice to the originator of the allegations.
  • In a blog post about the claims, Nexo stated:
  • “Several anonymous Twitter accounts are using lies and distortion in yet another smear campaign against Nexo and profiting from short positions in a distressed market.”
  • The pseudonymous Twitter account otteroooo, who call themselves “Otter,” posted a series of tweets on Saturday claiming that Nexo’s co-founders had stolen funds from the Bulgarian charity HelpKarma to buy real estate and fund “lavish personal travel.”

 

Harmony offers $1M bounty, but is it big enough?

  • The Harmony layer-1 blockchain project team has offered a bounty equal to just 1% of the $100 million in crypto stolen from the Horizon Bridge hack last week. 
  • Harmony tweeted on June 26 that the team had committed $1 million for the return of the funds that were stolen from the Horizon Bridge on Thursday. It added, “Harmony will advocate for no criminal charges when funds are returned.”
  • However, concerns have been raised that the modest bounty sum may not be enough to incentivize the attacker to return the funds.
  • The Horizon Bridge is a token bridge between the Harmony blockchain and the Ethereum network, Binance Chain, and Bitcoin. The Bitcoin bridge was not affected in this exploit.
  • Compared to other high-profile exploits this year, Harmony’s bounty offer ranks low. The $10 million offered to the Rari Fuse attacker in May was 12.5% of the total stolen. The Beanstalk Finance team offered $7.6 million which was 10% of the total exploited from the protocol in April.

 

Three Arrows Capital Notice of Default

  • Voyager Digital Ltd. (“Voyager” or the “Company”) (TSX: VOYG) (OTCQX: VYGVF) (FRA: UCD2) today announced that its operating subsidiary, Voyager Digital LLC,  has issued a notice of default to Three Arrows Capital (“3AC”) for failure to make the required payments on its previously disclosed loan of 15,250 BTC and $350 million USDC. Voyager intends to pursue recovery from 3AC and is in discussions with the Company’s advisors as to legal remedies available.
  • The platform continues to operate and fulfill customer orders and withdrawals. As of June 24, 2022, Voyager had approximately US$137 million cash and owned crypto assets on hand. The Company also has access to the previously announced US$200 million cash and USDC revolver and a 15,000 BTC revolver from Alameda Ventures Ltd.
  • The Company has accessed US$75 million of the line of credit made available by Alameda and may continue to make use of the Alameda facilities to facilitate customer orders and withdrawals, as needed. The default of 3AC does not cause a default in the agreement with Alameda.
  • “We are working diligently and expeditiously to strengthen our balance sheet and pursuing options so we can continue to meet customer liquidity demands,” said Stephen Ehrlich, Chief Executive Officer of Voyager.

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