Thursday, 8 September 2022

Market Summary

Market Summary 8 September 2022

Bitcoin Price: US$ 19,292.84(+2.67%)
Ethereum Price: US$ 1,630.00 (+4.55%) 

 

Coinbase Staked ETH Depegs Further As The Merge Approaches

  • Welcome! After yesterday’s Bellatrix upgrade, Ethereum is finally ready for the Merge, scheduled to happen some time between September 13-15th (according to Vitalik himself).
  • As the Merge approaches, Coinbase Staked ETH continues to trade below peg, while Aave pauses lending ETH to new borrowers. DBS, Singapore’s biggest bank, is diving deeper into crypto despite the bear market and a next-gen options AMM has caught the eye of our Research division.
  • DBS, Singapore’s biggest bank, plans to grow its crypto business despite the bear market by expanding access to its DBS Digital Exchange to 300k clients.
  • Russia is working with several countries to create a clearing platform for cross-border settlements in stablecoins.
  • Terence Schofield, CTO at Pantera Capital, and John Jonson, Head of Capital Formation, resign from the firm. Since May, Pantera Capital’s COO and legal counsel have also left, alongside a finance manager.
  • 21.co, parent company of ETP issuer 21Shares, announces a $25M fundraising round at $2B valuation, led by investment firm Marshall Wace.
  • Aave temporarily pauses lending ETH to new borrowers to mitigate protocol-wide risks arising from the Merge.
  • Coinbase Staked ETH traded at a price of 0.91 ETH per token, indicating a discount of almost 10%. The token traded at a price of 0.97 ETH per token when it was initially launched on August 25th.
  • Coinbase Staked ETH or cbETH is a liquid staking derivative that represents ETH staked through Coinbase. This ERC-20 token allows users to transfer or trade staked ETH, which would otherwise be locked until a future upgrade to Ethereum.
  • The 10% discount to ETH may indicate that users are accounting for risks arising from staking ETH with a centralized entity. This can include the potential risk of being slashed, if Coinbase begins censoring transactions at the protocol level.
  • Alternatively, this can also indicate that users are selling liquid staking derivatives to accumulate spot ETH and maximize the amount of any airdropped token from a potential proof-of-work hard fork.
  • Discounts among pegged assets can also persist due to low liquidity. However, the cbETH/ETH pool on Curve has $1.5 million of liquidity with almost 50-50 split among the two tokens, indicating no issues with liquidity.
  • Other popular alternatives to cbETH that are also trading at a discount include stETH from Lido trading at 0.96 ETH per token, and aETHc from Ankr trading at 0.93 ETH per token. On the other hand, rETH from RocketPool is trading without any discount at 1.02 ETH per token.
  • The main options AMMs include Lyra, Premia, Hegic, and Dopex. A full breakdown can be seen above, but each protocol has a select few defining characteristics.
  • Hegic was the first options AMM, allowing traders to select any strike price. Hegic had many problems, from its manually updated implied volatility oracle to high prices and rekt LPs. Hegic Hardcore, its newest release, has pivoted to offering split liquidity pools for calls and puts, as well as providing easy access to one-click options strategies.
  • Premia is a promising AMM offering American options with competitive prices. Premia computes implied volatility off-chain and relays it via Chainlink oracles. However, it suffers from capital inefficiency with its single-sided vaults for each asset, thus fragmenting liquidity. It has twice as many vaults per asset as Lyra but half the utility – traders can only buy, not sell, options.
  • Dopex is a hybrid AMM and DOV. It uses a Black Scholes AMM to price options, but functions similarly to Ribbon, allowing users to deposit into vaults to underwrite options at their desired strike price. Dopex is the ‘other’ way to sell an option on-chain, but it is more clunky than Lyra. Dopex is doing interesting work with Atlantic options.
  • Lyra offers a near-complete options trading experience without the off-chain concessions of its peers. Novel delta and vega hedging features protect LPs. Dynamic fees can sometimes heavily penalize users selling options back to the AMM, boosting the value proposition of Premia’s American options and sell-back feature.

 

Fed Vice Chair Brainard Calls for Crypto-Specific Regulations, Notes Stablecoin Risks

  • Federal Reserve Vice Chair Lael Brainard said the cryptocurrency market bears similar risks to traditional finance, but will need new regulations for situations not covered by existing laws.
  • “We have seen that the crypto financial system has all the same risks that we’re very familiar with from traditional finance,” she said in a speech at the Clearing House and Bank Policy Institute 2022 annual conference on Wednesday. But given the unique characteristics of crypto, there’s a need for “creating clear regulatory guardrails.”
  • Brainard is leading the central bank’s exploration of a digital U.S. dollar, and her role as the No. 2 person at the Fed makes her opinions on crypto quite significant. Brainard’s latest remarks echoed her previous statements that the sector needs to meet the same safety standard as traditional finance in order to prevent it from becoming a threat to the broader financial system.
  • The Fed vice chair also reiterated the risk of stablecoins in her speech. She predicted there will be a lot more of such tokens created by the private sector in the future, calling into question if the central bank should issue its own central bank digital currency (CBDC.)

 

Asset Manager Brevan Howard Reveals Details About Its Record-Setting $1B Crypto Hedge Fund

  • Last month, media reports suggested that global asset management giant Brevan Howard had raised more than $1 billion from institutional investors to create the largest crypto-focused hedge fund to date. Now the structure of that fund has come into further focus with a new filing with the U.S. Securities and Exchange Commission on Wednesday.
  • Brevan Howard, which had $25 billion in total assets under management as of July, submitted a filing for the Digital Asset Multi-Strategy Fund Ltd hedge fund, which has raised $184.15 million since sales opened on April 1. The capital came from four investors, and there’s a $10 million minimum set for any outside investments. The firm indicated “Indefinite” for total offering amount, essentially the fund’s target size.
  • The firm also updated its filing for the similarly named Brevan Howard Digital Asset Multi-Strategy Fund, L.P. to show $29.71 million raised from six investors. The firm first filed for the limited partner fund in January with $3 million raised at the time.

 

GameStop Partners With Crypto Exchange FTX.US to Boost Digital Asset Adoption

  • Video game firm GameStop (GME) is partnering with Sam Bankman-Fried’s crypto exchange FTX.US to promote interaction between the gaming and crypto community.
  • The deal unites GameStop, one of the key players in the meme-stock craze of a year and a half ago, with one of the leading crypto exchanges.
  • The two companies will promote e-commerce and marketing initiatives, while certain GameStop retail stores will carry FTX gift cards, according to a statement Wednesday. GameStop is also being given the label of FTX’s “preferred” retail partner in the U.S.
  • Deal terms weren’t disclosed.

 

Hawkish Fed Chatter Has Wall Street Betting on Big Rate Hike, Crypto Traders Shorting Bitcoin

  • Several Federal Reserve officials on Wednesday signaled that the U.S. central bank will continue to raise interest rates until there are clear signs that inflation is coming down for multiple months.
  • Bitcoin (BTC) has struggled to stay above the crucial psychological threshold of $20,000 this week. The largest cryptocurrency has faced pressure – along with other risky assets including stocks – from hawkish chatter by monetary officials. On Tuesday, bitcoin dropped to as low as $18,559, which was its lowest price since June 30.
  • “We are in this for as long as it takes to get inflation down,” Fed Vice Chairwoman Lael Brainard said Wednesday in a speech at a banking conference in New York.
  • The next rate hike decisions is set to take place on Sept. 21, when the Federal Open Market Committee will meet for the first time since last month’s annual Jackson Hole Economic Symposium retreat in Wyoming.
  • Fed Chairman Jerome Powell said in July that upcoming decisions would be data-dependent, which means that all eyes will be on the consumer price index set to be released next week for the latest reading on inflation. Last week, the Labor Department’s jobs report for August showed that the labor market has started to cool slightly.

 

Binance Seeks to Rev Up Its BNB Blockchain With Tech That Got Traction on Ethereum

  • Binance, the world’s biggest crypto exchange by volume, is seeking to speed up transaction times and reduce fees for its BNB blockchain, becoming one of the largest players yet to embrace a technology known as a zero-knowledge (ZK) rollup.
  • The upgrade, planned for next year, will allow BNB to process between 5,000 to 10,000 transitions per second, according to a statement Wednesday. That vastly outpaces the current capabilities of the blockchain, which is the largest smart-contract chain in terms of user base and transaction volume, surpassing even the better-known Ethereum.
  • What Binance effectively announced is a separate blockchain where transactions can be offloaded and processed faster and more cheaply, with the results passed back to BNB. It’s a complicated technology and deploying it in live environments was, until recently, thought to be years out. The fact that Binance is putting its significant weight behind a ZK rollup suggests there might be more advances to the space sooner rather than later. Binance’s decision follows ZK rollups gaining traction in the Ethereum ecosystem.

 

Crypto Lender Voyager to Auction Off Assets on Sept. 13

  • Insolvent crypto lender Voyager Digital will auction off the remainder of its assets on Sept. 13 as it moves through the Chapter 11 bankruptcy process, according to a Tuesday court filing. The auction will take place at the New York offices of Voyager’s investment bankers, Moelis & Company.
  • The auction results will become final during a court hearing approving the results on Sept. 29, according to the filing. Sept. 6 was the deadline for bids to have been submitted.
  • The identity of bidders has not been revealed but exchanges FTX and Binance are known to have had interest in acquiring Voyager’s assets. According to a presentation from Voyager’s company lawyers in early August, at least 22 investors had gone through due diligence and indicated their interest in bidding for Voyager’s assets, but it was not known how many had submitted formal bids by the deadline.

 

Glassnode:

#Ethereum speculative action continues, with over $6.12B in outstanding Open Interest for Call Options.

Put options account for a much smaller $1.5B, making for a Put/Call Ratio of 0.25.

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