Friday, 3 December 2021

Market Summary

Market Summary 3 December 2021

Bitcoin Price: $56,480.34 (-1.23%)
Ethereum Price: $4,511.21 (-1.57%)


Relief for DAI, Multi-Chain Competition, and Exchange Balances

  • DAI and MakerDAO have gotten a lot of backlash in the past few months for having 60% of its collateral backed by USDC. As a decentralized stablecoin, it’s obviously not ideal for DAI to have a majority of its asset backing in a centralized asset. Having a large portion of the total collateral as USDC brings incremental risk to Maker. If regulators asked CENTRE — the consortium that runs USDC — to blacklist USDC in Maker, DAI would be in an extremely difficult position. However, things seem to be changing for the better.
  • Since October, ETH and WBTC have slowly re-gained collateral dominance on MakerDAO. ETH recently overtook USDC as the dominant collateral asset on the protocol, and stakeholders will be glad to see it.
  • DeFi’s total capital locked sits a new all-time high above $250B. However, as noted yesterday, Ethereum’s dominance over DeFi activity has taken a big hit in H2 2021.
  • As the multi-chain narrative plays out, capital has been moving to ecosystems outside of Ethereum. The main L1s that stand out are Solana, Terra, and Avalanche; each of them quickly grew to each hold 5% of global DeFi TVL.
  • High gas fees on Ethereum have been the main contributor to usage moving cross-chain. For comparison, a DEX swap costs ~$70 (~70 gwei gas price) on Ethereum while the same on Solana or Terra costs under $1. As smaller users got priced out of Ethereum, other chains have seized the opportunity.
  • Exchange balances of BTC and ETH have been on a consistent decline since Apr. 2021. BTC balance on exchanges is currently at a three-year low, and ETH balance on exchanges is at a two-year low. The rise of DeFi has allowed users to seek yields on their assets rather than keeping them dormant on an exchange.
  • Previously, exchange balance was a good indicator of cyclical tops and bottoms as all trading happened on centralized exchanges. With DEXes available across a variety of L1s now, the indicative power of this metric has declined. May’s cycle top gave us a glimpse, as ETH balances hardly increased despite rampant selling and negative price action. BTC, on the other hand, isn’t as liquid on DEXes (as WBTC), which is the primary explanation for why ETH is moving out of exchanges at a faster pace.
  • Open interest hitting new highs as ETH prices trend upward is a sign of positive sentiment for the asset. While volume may not be back at it’s peak, the increase in trading activity since the early Q3 bottom is clear as day. Though with the macro picture looking slightly bleaker than last week, there’s reason to tread with caution.


MercadoLibre plans to accept BTC and cryptocurrencies as payment for all products

  • MercadoPago, the fintech arm of e-commerce giant MercadoLibre, has enabled its Brazilian customers to buy, sell and hold Bitcoin (BTC), Ether (ETH) and the Paxos-issued U.S. dollar-backed stablecoin Pax Dollar (USDP). In a statement issued Thursday by U.S.-based Paxos, the blockchain infrastructure platform used by PayPal and Facebook, the partnership between MercadoPago and Paxos will allow users to pay for all products sold on the platform using cryptocurrency.
  • This news signals one of the largest stablecoin operations within a non-crypto wallet to date. Brazilian users looking to hold U.S. dollars can now do so for as little as 1 Brazilian real within the MercadoPago app by purchasing USDP. In inflation-plagued Latin America, stablecoins can provide a safety net against fiat monetary debasement.


SEC rejects WisdomTree’s application for spot Bitcoin ETF

  • The United States Securities and Exchange Commission, or SEC, has officially disapproved asset manager WisdomTree’s spot Bitcoin (BTC) exchange-traded fund (ETF) after deferring on a decision several times this year.
  • According to a Wednesday filing, the SEC rejected a proposed rule change from the Cboe BZX Exchange to list and trade shares of WisdomTree’s Bitcoin Trust. Specifically, the SEC said any rule change in favor of approving the ETF would not be “‘designed to prevent fraudulent and manipulative acts and practices” nor “protect investors and the public interest.”


DeFi disasters: $31M drained from MonoX and BadgerDAO losses top $120M

  • More than $150 million has been lost this week in separate security breaches at DeFi projects MonoX and BadgerDAO.
  • Multi-chain decentralized exchange (DEX) MonoX (MONO) suffered a cyber attack on Nov. 30 leading to about $31 million in losses. BadgerDAO (BADGER) suffered a front-end attack that was discovered on Dec. 2 with estimates of Badger’s losses hitting more than $120 million.


First NFT-focused ETF lists on NYSE Arca

  • On Thursday, registered investment adviser and fintech firm Defiance announced it has launched the first nonfungible token (NFT)-focused exchange-traded fund (ETF) on the New York Stock Exchange Arca. The fund is listed under the ticker symbol NFTZ and has a management fee of 0.65% per year.
  • The fund does not directly buy and hold NFTs to store in wallets. Instead, it tracks an index of companies operating or intending to venture into the NFT space, as well as the Metaverse. The BITA NFT and Blockchain Select Index, which the fund intends to mirror, is maintained by Germany-based fintech company BITA. launches beta version of its own NFT marketplace

  • Crypto finance company announced Thursday that it is going to be launching its own non-fungible token (NFT) platform, which will be powered by OpenSea. 
  • While its NFT marketplace is still in the beta stage and requires individuals to sign up on a waiting list, now joins one of many other crypto firms entering the NFT market. The firm’s forthcoming NFT marketplace will enable individuals to purchase, sell, and store NFTs inside their wallet. 


Fed’s Quarles says regulators should show ‘constraint’ on stablecoins to avoid hampering innovation

  • Speaking publicly for the last time as a member of the Board of Governors of the Federal Reserve System, Randal Quarles urged regulators to exercise restraint on stablecoins.
  • In a prepared statement for his speech at the American Enterprise Institute on Dec. 2, Quarles expressed concern that regulations could hamper innovation in the digital asset space, particularly when it comes to stablecoins. According to the Fed governor, some of the approaches on stablecoin regulation from the President’s Working Group on Financial Markets’ November report are unnecessary, including “limiting wallet providers’ affiliation with commercial entities.”


Iota set to launch decentralized smart contract platform to expand Web3 ecosystem

  • Iota has announced the release of decentralized layer-one smart contract network Assembly, and accompanying ASMB token, in a bid to accelerate the expansion of smart contracts across a multitude of sectors, including decentralized finance (DeFi) and nonfungible tokens (NFTs).
  • Assembly utilizes the Iota network’s existing architecture, most notably the directed acyclic graph structure, to operate adjacently as an interoperable, self-sovereign bridge that reaps the benefits of scalability and robust security, among others.


Adidas enters the Metaverse with NFT partnerships

  • On Thursday, Adidas announced it was entering the Metaverse in collaboration with Bored Ape Yacht Club, gmoney NFT, and PUNKS Comic. In an article posted on the Adidas mobile app, the developers behind the initiative said the following: “This autumn, Adidas, known for celebrating ideas at the bleeding edge of originality, it settling in at the frontier of creativity: The Metaverse. Our goal there? To see every one of its inhabitants thrive. The Metaverse is where anyone can express their most original ideas and be their most authentic selves, in whatever form they might take. And thanks to the blockchain [and NFTs], those pioneers can own a piece of what they create.”

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