Friday, 4 November 2022

Market Summary

Market Summary 4 November 2022

Bitcoin Price: US$ 20,207.82 (+0.28%)
Ethereum Price: US$ 1,531.01 (+0.83%) 


Price Oracles for Derivative Assets 

  • In this piece, we’ll analyze pre-existing assumptions on price oracles for derivative assets within the context of DeFi lending protocols. Specifically, we’ll discuss why using the underlying asset’s price as the oracle for a derivative asset is generally a bad practice that should be avoided. While we’ll focus on two types of derivative assets — bridged assets and liquid staking derivatives — a similar analysis could be generalized for any type of derivative asset.


Gearbox Protocol: Shifting DeFi Into the Next GEAR

  • Gearbox introduces a new primitive, called credit accounts, which are essentially smart contract-based wallets with certain built-in features. Between credit accounts and its own independent money markets, Gearbox brings a more efficient approach to leverage.
  • Gearbox’s risk framework allows for a loan-to-value ratio (LTV) up to 94.5% for a USDC loan using USDC collateral. A 94.5% LTV implies max leverage of 18.18x. 
  • Consider the case of Yearn’s ETH vault. It currently yields about 4% per year, which is a higher yield than lending ETH. And while relatively safe, it isn’t devoid of risk — specifically smart contract risks from Yearn deploying user ETH into other venues.
  • Using Gearbox, one can deploy a strategy of using ETH collateral to secure an ETH loan and deposit the proceeds into Yearn. Depositing 2 ETH and taking an 8 ETH loan — implying 5x leverage, since collateral is usable too — would allow a user to earn Yearn’s 4% APY on 10 ETH instead of just 2 ETH. With 2 ETH of principal, the user would now earn 20% APY. The same principle of levering up can also be applied to multiple strategies, including stablecoin farms.
  • Currently, Gearbox has over 20 options on its UI that allow users to deploy leverage into different yield strategies. However, at the time of writing, about 11 of those have negative returns plastered on the front-end.
  • Gearbox’s TVL eclipsed $100M recently, with most capital sitting in the liquidity pools. Liquidity providers currently earn interest paid by borrowers along with GEAR rewards. The reward program for LPs on Gearbox will last up to a year, but the DAO has the ability to shut it off early if it doesn’t produce meaningful results. However, given the inflow of capital, the liquidity mining program does seem to be doing its job.
  • Continue on Delphi…


$1B Crypto Hack Fears Spur 20% GALA Plunge, But Firm Implies It Attacked Itself as a Safeguard

  • Chaos ensnared Gala Games late Thursday, as fears of a potentially billion-dollar hack – or maybe a rug pull – drove its native GALA token down 20%, while a firm apparently related to the crypto play-to-earn platform said that they had actually effectively attacked themselves to prevent bad actors from absconding with users’ money.
  • Concerns developed after a single blockchain address appeared to mint over $1 billion worth of GALA token out of thin air. When crypto watchdogs PeckShield flagged that, pNetwork – which provides routing infrastructure for decentralized finance (DeFi) and gaming tokens, including apparently GALA – seemed to imply that it was behind the mint.
  • “We noticed pGALA wasn’t to be considered safe anymore and coordinated the white hat attack to prevent pGALA from being maliciously exploited,” they said, suggesting that the new tokens were printed as a way to help pNetwork drain a faulty PancakeSwap pool.
  • “All GALA tokens on Ethereum as well as the underlying bridge collateral are SAFE,” pNetwork tweeted, explaining the trouble was due to some kind of “misconfiguration of the p.Network bridge.”


Bitcoin Holders Continue to Shrug Off Macro Data

  • Hawkish monetary policy and macroeconomic uncertainty rage on.
  • But crypto investors ultimately have little else on their mind than cost basis. On a quiet trading day that saw bitcoin and ether sink slightly, and the Bank of England deliver the latest, global interest rate body blow – its highest increase in 33 years – investors continued to focus almost exclusively on how much they paid for an asset.
  • To be sure, macro data remains important as cryptocurrencies react increasingly to the same stimuli that have affected other assets for decades. Jobs and productivity reports, energy prices and Russia’s unprovoked invasion of Ukraine, for example, have all jarred markets over the past year.
  • However, crypto investors have grown increasingly adept at pricing in such events and others, and are less likely to be caught off guard, which accounts for bitcoin’s lack of major movement in recent months.
  • On Thursday, bitcoin was trading at almost exactly the same mark it held in mid-June, undisturbed by the Federal Reserve’s fourth consecutive jumbo rate increase, weeks of hawkishness from central bankers, GDP declines, hawkish remarks from Chair Jerome Powell and socio-political turmoil.
  • Through four consecutive 75 basis point rate increases, the largest cryptocurrency by market capitalization has formed a base that, depending on the week, has hovered over $19,000 or $20,000 since mid-June. This broad threshold will likely serve as support moving forward.


Japan Digital Ministry to Create DAO for Web3 Exploration

  • Japan’s Digital Ministry is to create a decentralized autonomous organization (DAO) to further its exploration of Web3 technology.
  • The DAO will help the government develop an understanding of what such organizations can achieve and identify their limitations, according to minutes of a ministry meeting. The ministry also wants to look at issues such as the legal position of governance tokens that are used for voting.


Stripe cuts 14% of workforce as fintech layoffs roll on

  • Payments firm Stripe is firing 14% of its workforce as layoffs continue at fintech and crypto companies.
  • The company cited the macroeconomic environment and falls in funding for startups. The cuts were shared in an email with employees. Founders Patrick and John Collison took the blame for the decision. 
  • “We overhired for the world we’re in, and it pains us to be unable to deliver the experience that we hoped that those impacted would have at Stripe,” they wrote.
  • The news follows other significant employee layoffs in the crypto and fintech sector as both traditional and crypto asset prices slid amid global economic uncertainty. Two days ago, crypto exchange Bitmex cut 30% of its workforce. Previously, companies such as Coinbase, Robinhood and Bitpanda also reduced their number of employees.


F1 Team Taps OpenSea for Racing NFT Marketplace, Cross Promotion

  • Haas F1 Team, the only American-owned team in the FIA Formula 1 World Championship, announced today a partnership with OpenSea, the largest NFT marketplace by trading volume.
  • The new deal will include the production of a line of branded NFTs and cross-promotion during racing events where the OpenSea logo will appear on the Haas F1 Team VF-22 series cars.


Meta to use decentralized data storage protocol Arweave to store NFTs from Instagram

  • Facebook parent Meta has integrated decentralized data storage protocol Arweave to permanently store digital collectibles from Instagram.
  • “Instagram users are now able to issue digital collectibles for their posts, stored on Arweave,” Sam Williams, founder of Arweave, tweeted on Thursday. Meta’s lead of commerce, fintech and web3, Stephane Kasriel, also confirmed the Arweave protocol integration in a separate tweet.
  • The price of Arweave’s native token, AR, surged as much as 75% since news of the Meta integration, according to CoinGecko.
  • Earlier this week, Meta announced that creators will soon be able to make their own digital collectibles on Instagram and sell them to fans, both on and off Instagram. Meta will support different blockchains for NFT issuance, starting with Polygon and Solana. The platform launched its Digital Collectibles feature in 100 countries, allowing users to connect to their digital wallets and showcase NFTs that they either created or bought.


Vitalik Buterin’s ‘Proof of Stake’: The CoinDesk Megareview

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