Wednesday, 9 February 2022

Market Summary

Market Summary 9 February 2022

Bitcoin Price: US$ 44,042.99 (+0.46%)
Ethereum Price: US$ 3,116.69 (-0.74%)


BTC Breaks Out, L2s on the Rise, & Options TVL Slumps

  • Over the weekend, Bitcoin rallied through the $38.5k and $39-$41k resistance levels we had been watching in “Key Trends as Markets Seem Fed Up.”
  • One important caveat is that weekend price action tends to be unreliable due to lower liquidity and volume conditions. Thus, it will be worth watching if these levels sustain throughout the week.
  • Total Value Locked on L2s has risen back to levels seen at the beginning of the year (~$6bn) as per L2beat. This growth is driven primarily by Arbitrum and Metis.
  • Among the seven largest L2s by TVL, only Arbitrum (+19% YTD) and Metis (+94% YTD) have seen positive growth in 2022, while the others have experienced declines.
  • Newly launched applications on Metis and Arbitrum could be driving the capital inflow as investors flock to emerging yield farming and airdrop opportunities.
  • TVL in option protocols has dropped across the board since the start of the year, with the exception of Opyn (+21% YTD).
  • The drop is likely attributable to falling asset prices. Lower asset prices result in poor performance for put-selling vaults and a “flight to safety” amid the market volatility, causing investors to withdraw capital from risky option vaults.
  • Opyn’s growth in TVL was an outlier to other options protocols. This can be attributed to their new product SQUEETH.
  • Trading volume of SQUEETH has risen steadily over the past month, but its take-up rate hasn’t been outstanding. This may be due to the complexity of understanding and trading such a product.


Uni Gains Ground, Miners Offload BTC, & MEV Profits Tighten

  • In May 2021, when V3 was released, Uniswap began to eat into Curve’s market share. This was further exacerbated by the launch of 0.01% fee pools which provided an advantage over Curve. Due to the comparable price execution in V3 alongside a severe undercutting in fees, Uniswap has been able to match Curve’s volumes in stableswaps, turning this into a nearly 50/50 market in a little over six months. What’s even more impressive is that Uniswap has done this with virtually nil emissions. Compare that to Curve which emits $2M in CRV per day ($750M annualized). 
  • The NFT aggregator competition has been heating up. Genie and Gem are two NFT aggregator platforms making it easy to shop across a number of NFT marketplaces. Both make it easy to bulk purchase NFTs in a single transaction.
  • Gem, which more recently launched, has a strong focus on gas optimization. Gem’s superior fee execution (calculated in yellow) consistently amounts to 30-40% less in gas fees relative to Genie. This markedly better execution has allowed Gem to quickly become a strong competitor.
  • Over the past 2 months, miners have been continuously accumulating BTC, even as prices fell from 55k to 35k.
  • With the weekend pump, miners are starting to offload their BTC holdings as Miner Net Position Change turned negative for the first time in 2 months.
  • MEV profits are starting to slow down over the past 2 weeks, with the lowest profitable day only earning $172K.
  • Spikes in profits mostly occur during volatile days where there’s an increase in volume and high-slippage trades.
  • As covered in our previous Daily, CowSwap, a unique DEX Aggregator that allows for MEV-protected swaps, has achieved its highest monthly volume. This is likely to impact MEV profits as there are fewer opportunities for MEV attacks.


‘China’s crypto ban had little impact on Neo,’ says organization’s developers

  • Once hailed as the “Ethereum of China,” Neo’s token price has fallen on hard times ever since the world’s most populous nation introduced a series of acute bans on cryptocurrency operations last year. In an exclusive interview with Cointelegraph, Neo’s developers — who wished to remain anonymous — explained that partners run most projects sponsored by Neo Global Development, or NGD, from a wide range of countries outside China t serve users all over the world.
  • In addition, Neo continues to expand inside China. It is currently one of seven open permission blockchains servicing the nation’s Blockchain-based Service Network, or BSN. One of the group’s goals is to expand the adoption of nonfungible tokens (NFTs) in the country.


PayPal establishes advisory council for crypto and blockchain

  • Major U.S.-based payment processor PayPal has assembled a team of industry experts to act as advisors on crypto, blockchain and digital currencies. 
  • In a Tuesday announcement, PayPal said the addition of six members to its Blockchain, Crypto and Digital Currencies advisory council would help to support its current and future products as well as its goal of creating a more inclusive digital financial ecosystem. Fortress Investment Group co-CEO Peter Briger, Georgetown University Law Center professor Chris Brummer, Weizmann Institute of Science professor Shafi Goldwasser, former Commodity Futures Trading Commission chair Timothy Massad, MIT Sloan School of Management finance professor Antoinette Schoar, and MIT Digital Currency Initiative director Neha Narula will be joining the PayPal initiative.


Wonderland’s treasury saga exposes the fragility of DAO projects today

  • The Wonderland protocol became the talk of the decentralized finance (DeFi) world after the platform was found at the center of a brewing controversy. 
  • On Jan. 27, DeFi analyst zachxbt revealed that one of the anonymous co-founders of Wonderland happened to be QuadrigaCX co-founder Michael Patryn, who has been operating under the name of Sifu.
  • QuadrigaCX is a defunct crypto exchange from Canada which closed when Gerald Cotten, the exchange founder and sole person with knowledge of the exchange’s wallet keys, passed away. Following his death, $169 million worth of user funds were irreversibly lost.


OpenSea once again delists CryptoPunks v1 as legal battle heats up

  • Late Monday, popular nonfungible tokens, or NFTs, platform OpenSea once again delisted the CryptoPunks v1 collection, which spiraled into existence along with the iconic CryptoPunks v2 collection due to a smart contract bug. This was allegedly due to a Digital Millennium Copyright Act takedown notice issued by CryptoPunks v2 developers Larva Labs to OpenSea. As the company is also the creator of the CryptoPunks v1 collection, this move has struck some as strange.


Alchemy joins Web3 decacorns club following $200M funding

  • Web3 development platform Alchemy announced a fresh round of $200 million funding, bringing up the company’s valuation to $10.2 billion, just above the decacorn threshold.
  • The latest funding round was led by venture capital firm Lightspeed along with Silver Lake, an American global private equity firm. Alchemy’s funding also saw participation from previous major investors as well.
  • As Cointelegraph previously reported in Oct0ber 2021, Alchemy attained a $3.5 billion valuation following a $250 million Series C fundraising round led by Andreessen Horowitz. Since October, Alchemy reported a three-fold growth in the number of Web3 initiatives being built on their platform.
  • Another reason for Alchemy’s explosive growth is the increase in the annualized on-chain transaction value. It currently stands at $105 billion compared to a modest $45 billion back before the Horowitz-led funding. Alchemy co-founder and CEO Nikil Viswanathan added: “In 2022, we’ll be doubling down on our commitment to meeting developer needs in more places, making it easier than ever to unlock the potential of Web3.”


Polygon stablecoin Qi Dao exploited for $13M on Superfluid vested contract

  • Polygon’s native stablecoin protocol, Qi Dao, faced an exploit on its Superfluid vesting contract, which led to a 65% drop in the price of the governance token Qi Dao (QI). QI’s price fell from $1.24 to $0.18.
  • Qi Dao took to Twitter on Tuesday to acknowledge the exploit on the Superfluid vesting contract but assured that users’ funds are safe and no funds from Qi Dao have been affected. Superfluid also confirmed the exploit on Qi Dao and said it was investigating the situation and would update accordingly. The protocol enables users to move assets on-chain in a constant flow in real-time from one wallet to another.
  • While there was no impact on users’ funds, the hackers behind the attack managed to get away with $20 million worth of tokens including 24 Wrapped Ether (wETH), 562,000 USD Coin (USDC), 44,000 Stake DAO (SDT), 1.5 million Museum of Crypto Art (MOCA), 23,000 Stacker Ventures (STACK) and nearly 40,000 sdam3CRV. Early information suggests that the stolen funds belonged to some of the early backers of the project and included team-vested tokens as well.


Bitcoin Lightning Network goes live on Cash App

  • Mobile payment service Cash App revealed that Lightning Network can now be used to transfer Bitcoin (BTC) through its app. With the new feature, its users can send their BTC to any Lightning or on-chain BTC address.


DODO Launches on Boba with WAGMI Incentive Program

  • DODO is officially launching on the Boba network, a next-generation Ethereum L2 Optimistic Rollup scaling solution!
  • The WAGMI Incentive Program is Boba Network’s creative take on liquidity mining. Users can earn WAGMI options by using their favorite dApps on Boba. WAGMI options are KPI (Key Performance Indicators) options redeemable for $BOBA tokens based on metrics relating to the Boba Network, such as monthly active wallets or project-specific TVL.
  • WAGMI options will also be distributed to liquidity providers for the DODO/USDT trading pool on DODO as part of the DODO Boba Liquidity Mining Campaign. 


Kazakhstan proposes power price hikes and taxes targeting crypto miners

  • The Kazakh government is considering a three-pronged proposal designed to make crypto miners pay much more for operating in the country, which could make Kazakhstan less attractive to the industry.
  • On Friday, Kazakhstan’s First Vice Minister of Finance Marat Sultangaziyev proposed a price increase from $0.0023 per Kwh to $0.01 (around a 335% increase) specifically for crypto miners. He also proposed a tax on each individual graphics card (GPU) and each piece of equipment needed for crypto mining. He likened the tax-per-video card to the way casinos are taxed for each table they run, whether or not the table is active.
  • The third part of his proposal was to remove mining hardware from an exemption on value-added tax (VAT).

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