🤠 DeFi Tokens & ETH-Killers Lead Risk-On Market
Also, BTC locked in DeFi near record, Bitcoin "double spend" scare
Hello Defiers! Here’s what we’re covering today:
DeFi and ETH killer tokens are best performers so far this month
BTC locked in DeFi is rebounding near a high
Bitcoin “double-spend” scare was sensationalism
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IntoTheBlock Market Update
TLDR Most of the best-performing assets in 2021 thus far are either smart contract platforms or DeFi tokens. The notable exceptions are Dogecoin and Stellar, even though the latter does have limited smart contract compatibility.
Here’s the table:
🦋 BUT WHY? There are two likely reasons for smart contract platforms’ and DeFi’s leading returns: the market’s risk-on stance and the increasing demand for censorship resistance.
The risk-on positioning from the market can be observed from the high returns of volatile assets such as crypto. This positioning is linked to the upcoming $1.9 trillion stimulus package in the United States, which has increased forecasts for economic growth in the largest economy.
Decentralization has also gained momentum amidst unprecedented censorship. Following the incitement of violence from former U.S. president Donald Trump, social media platforms permanently banned him. Similarly, social network Parler was kicked off Amazon Web Services following the incident. As a result, Google search results for “censorship” worldwide reached a five-year high.
BOTTOM LINE Smart contract platforms and decentralized finance protocols have accrued the most value as they fit both of these narratives. Ultimately, the next few years should be pivotal for crypto protocols to realize their potential as censorship-resistant next generation applications, instead of merely a risky bet.
BTC PUT TO WORK
TLDR The total value of Bitcoin locked in DeFi is rebounding from a three-month low to the highest since November, when BTC in decentralized finance protocols was at its all-time high of 154K BTC, according to data by DeFi Pulse.
CONTEXT PLEASE The climb towards an all-time high in January has come on the heels of a 4% drop in December, while the cryptocurrency’s price was surging by 50%.
BTC’s December TVL “dropped off because of the need for higher returns to justify inherent risk that is DeFi,” said Chris Spadafora, operations lead at BadgerDAO, a DeFi product suite for collateralized Bitcoin. Bitcoin’s price increases make it easier for people to justify simply holding the asset rather than “trying to squeeze 20-40% more interest out of it.”
📈 REASONS FOR COMEBACK
A cool off in Bitcoin’s price increase, which may be leading some investors into DeFi to increase their yield.
Ethereum and DeFi tokens are outgaining Bitcoin on the year. Investors may be using their BTC as collateral to access ETH and DeFi tokens and ride the wave.
TLDR After Bitcoin’s price spiraled down 12% on the morning of Jan. 21, many crypto community members pointed to BitMEX Research’s recent Twitter thread regarding a potential “double-spend” picked up by their ForkMonitor.
The story was picked up by Cointelegraph, which published the headline “Bitcoin double-spend spotted in the wild.”
The only problem: There was no actual double-spend.
WHAT ACTUALLY HAPPENED The situation in question boils down to a “RBF” (Replace by Fee) transaction, wherein a user’s initial transaction gets stuck due to underpaid fees, so they increase their fees on the already broadcast transaction in order to give it priority.
As explained in a Twitter thread written by Coin Metrics Network Data Product Manager Lucas Nuzzi, in this particular instance, the user’s replacement transaction fees weren’t high enough either, so they attempted a third (successful) transaction with even higher fees. Despite the fact that the situation might have temporarily looked like a double-spend, Nuzzi assured readers that the situation is “business as usual.”
TLDR Enzyme Finance, the on-chain asset manager formerly known as Melon Protocol, launched its V2 to include more assets and integrations with a greater number of DeFi protocols.
NEW FEATURES include access to lending, automated market maker pools, and support for nearly 150 different assets, including synthetics. Users can also express bearish views by taking synthetic short positions and earn farming rewards and airdrops through external DeFi plug-ins.
MIGRATION NEEDED Enzyme will only be supporting v1 smart contracts until April 11. Former Melon users will need to liquidate and move any remaining assets over. There will be no fees to use Enzyme for the first few weeks.
Eight Ethereum mining pools amounting to around 30% of the network’s hash power have cast their support behind tiny mining pool Flexpool’s stance against Ethereum Improvement Proposal (EIP) 1559, CoinDesk reports.
Justin Roiland’s first foray into the non-fungible token (NFT) art scene ended up with a bang as his debut crypto art collection was sold for roughly $1.65 million in total yesterday, according to metrics platform CryptoArt.io, Decrypt reports.
✊ Head to THEDEFIANT.IO for more DeFi news 📰
🧑💻 ✍️ Stories in this newsletter were written by Daniel Kahan and Owen Fernau, and edited by Camila Russo. Video was produced by Robin Schmidt and Alp Gasimov. The podcast was led by Camila Russo and edited by Alp Gasimov.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access, while free signups get only part of the content. Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button above ($10/mo, $100/yr).