Hello Defiers!

Here’s what we’re covering:

AAVE may be ripe for a pull back
MataMask is making bank
NBA Top Shots becoming largest NFT market by sales
Equilibrium is creating a version of Curve on Polkadot
Mastercard brings crypto to its network
BNY will hold, transfer and issue bitcoin

and more :)

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On-Chain Markets Update by Lucas Outumuro, IntoTheBlock

🔥 AAVE May Be Getting Overheated

TLDR Aave continues to surpass expectations from an investment standpoint and in terms of progress in the underlying protocol, but on-chain data shows holders may be preparing to take profits.

GROWTH Aave’s total value locked nearly doubled within a month to $5B, becoming only the second protocol to achieve this feat, and closing in on MakerDAO. Aave also launched the functionality for users to stake through a Balancer Pool Token, earning depositors both AAVE and BAL tokens simultaneously in addition to trading fees.

BULLISH SIGNS The number of AAVE tokens leaving centralized exchanges has accelerated as evidenced by the negative netflows. This suggests that more funds are being held outside exchanges or staked than entering to potentially be sold at lower costs (given the current high gas fees).

*As of February 11, 2021 using IntoTheBlock’s Aave Exchange Flows*

When applied to DEXs, negative netflows mean that users are swapping into a token and withdrawing it from AMMs’ liquidity. The most liquid DEX trading pair for AAVE, the AAVE/ETH pool has had mostly negative netflows throughout the past month. In other words, traders have been favoring AAVE in the pool, swapping more ETH for AAVE than the other way around.

BEARISH SIGNS Potential signs of holders looking to take profits are starting to emerge. Token balance on Aave’s staking contract — which requires users to go through a cooldown period of 10 days prior to withdrawing funds — has decreased over the past couple of weeks. While this trend has not yet materialized, it does suggest that holders may be looking to take profits following a remarkable 480% price increase year-to-date.

Signs of AAVE getting overheated appear in derivatives markets. Perpetual swaps’ funding rate is charged to either long or short contract holders to push the perp’s price towards the spot price. When the funding rate goes too far in either direction, it can be indicative of an over-extended price move.

AAVE’s funding rate in Binance has constantly been positive, meaning that long holders pay this percentage to short holders every 8 hours. This fee has been increasing as AAVE’s price pushed towards new highs, a sign that trading activity on the long-side getting overheated.

*As of February 11, 2021 using IntoTheBlock’s Aave Derivatives*

👉 READ THE FULL STORY HERE, IN THEDEFIANT.IO 👈

$170K/DAY

💰MetaMask Revenue Proves DeFi Wallets Can be Profitable

TLDR MetaMask is making about $170k per day thanks to its token swap feature, Tom Schmidt of Dragonfly Capital said in a tweet, which was later confirmed with data the wallet’s team published in a Dune Analytics dashboard.

SO WHAT These numbers show that wallets and decentralized exchanges and aggregators can grow into sustainable businesses. This contradicts the common take that open source protocols can’t be profitable because developers can easily copy the code and create a competitor with lower or no fees.

“I have a feeling that this is going to be good news for wallets everywhere. A lot easier to invest in something with a validated business model,” said MetaMask developer Dan Finlay, in response to a tweet.

MetaMask daily trading volume. Source: Dune Analytics

ROOM FOR GROWTH Over 100K unique accounts have executed 236k swaps within MetaMask, the data show. That’s still a small portion of the ~1.3M total accounts interacting with DeFi protocols. MetaMask’s daily swap volume is 10 times lower than other aggregators, like 1inch Exchange, whose daily volume has fluctuated around $200M during January.

👉 READ THE FULL STORY HERE, IN THEDEFIANT.IO 👈

NFT KING

🏀 NBA Top Shots’ $50M in Sales Beats NFT Heavy Weights

TLDR The whole NFT digital collectible market has been exploding lately, but NBA Top Shot is in a league of its own, overtaking the space’s heavyweights.

NBA Top Shot boasts $50M in total marketplace transactions after launching last fall. For comparison, CryptoKitties, which launched in 2017, has just over 35.5M in all-time sales, while Decentraland, which has the highest all-time volume on nonfungible.com, has $40M in total sales since its 2017 launch.

SO WHAT The surge of interest in digital basketball cards points to the potential for a new audience of crypto users. While financial services, speculation, and the appetite for “hard money” have been the primary selling points for cryptocurrencies so far, digital collectibles and games have the chance to draw in users who aren’t necessarily as interested in finance and tech.

WHAT IS THIS NBA Top Shot is a line of officially licensed, collectible NFTs (made by CryptoKitties creator Dapper Labs) showcasing the best moments from NBA games. Unlike most other collectible NFTs, which are dropped on marketplaces like Nifty Gateway, and issued on Ethereum, NBA Top Shots primarily live on their own official hub site (although, like other NFTs, they are still transferable to outside wallets), and are issued on the Flow blockchain.

SO FAMOUS Drops have been selling out in minutes, and drawing the attention of other big shots like Michael Batnick of Ritholtz Wealth Management and Mark Cuban. In a recent Twitter thread, angel investor and McKinsey alum Romeen Sheeth called the demand for NBA Top Shots “insane” and said that with $30M worth of sales over the past 30 days, they’re “on pace to be the fastest growing marketplace ever.”

👉 READ THE FULL STORY HERE, IN THEDEFIANT.IO 👈

LAYER 1 WARS

🔁 Equilibrium Creating Version of Curve on Polkadot

TLDR Equilibrium, an interoperable money market, announced on a Feb. 9 Medium post plans to create a version of Curve Finance’s automated market maker on the project’s chain within the Polkadot ecosystem.

“This is a deep strategic partnership in which Curve will supervise business logic implementation and fully support the development process for getting its AMM integrated with Equilibrium,” Equilibrium wrote in the post. “The finished result will see Curve’s AMM implemented as a lightweight exchange module on Rust and running on Equilibrium’s Polkadot parachain.”

SO WHAT The move is a sign that competition to become the settlement layer for open finance is increasing, as the number of DeFi offerings on new blockchains ramp up. Equilibrium is aiming to become the interoperable home of DeFi, and bringing Curve’s algorithm to the parachain represents a step in that direction.

POLKADOT TRADING Equilibrium will be able to facilitate trading for homogeneous assets on Polkadot, whether they are DOT-based or different tokenized versions of the same asset, like Bitcoin’s WBTC and renBTC.

LIMITED LIQUIDITY Equilibrium said in its launch post that the ported AMM’s “initial liquidity on Polkadot will be limited.” But the project notes that “Curve’s market-making algorithms can accurately minimize slippage in the trading of similar assets.”

👉 READ THE FULL STORY HERE, IN THEDEFIANT.IO 👈

ITSHAPPENING.GIF

💳 Mastercard Plans to Bring Crypto Into its Network

Mastercard will start directly supporting select cryptocurrencies, the world’s second-largest payment network announced on its website yesterday.

“Doing this work will create a lot more possibilities for shoppers and merchants, allowing them to transact in an entirely new form of payment,” the post said. “Mastercard isn’t here to recommend you start using cryptocurrencies. But we are here to enable customers, merchants and businesses to move digital value – traditional or crypto – however they want. It should be your choice, it’s your money.”

Not all cryptocurrencies will be supported on the network, Mastercard said.

It’s looking for four key items:

Consumer protections, including privacy and security of consumers’ information — the same level of security people have come to expect in their credit cards
Strict compliance protocols will be needed, including Know Your Customer, a requirement meant to snuff out illegal activity and deception in payment networks
Digital assets must follow local laws and regulations in the regions they are used
Crypto assets will need to offer the stability people need in a vehicle for spending, not investment

Mastercard said it was already working to provide consumers the choice of using crypto by teaming up with Wirex and BitPay for crypto cards, and LVL, a cryptocurrency exchange. In all of these cases, Mastercard’s partners have had to convert digital assets to traditional currencies on their end, then transmit them through to the Mastercard network.

The move announced Wednesday to support digital assets directly, will “cut out inefficiencies, letting both consumers and merchants avoid having to convert back and forth between crypto and traditional to make purchases.”

🔗 Bitcoin to Come to America’s Oldest Bank, BNY Mellon: WSJ

“Bank of New York Mellon Corp. , the nation’s oldest bank, will hold, transfer and issue bitcoin and other cryptocurrencies on behalf of its asset-management clients. In time, BNY Mellon will allow those digital assets to pass through the same plumbing used by managers’ other, more traditional holdings—from Treasurys to technology stocks—using a platform that is now in prototype. The bank is already discussing plans with clients to bring their digital currencies into the fold,” the Wall Street Journal reported.

“Digital assets are becoming part of the mainstream,” said Roman Regelman, chief executive of BNY Mellon’s asset-servicing and digital businesses.

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🧑‍💻 ✍️ Stories in this newsletter were written by Daniel Kahan and Owen Fernau, and edited by Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila and edited by Alp.

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DeFi, NFT & Web3 Insights - The Defiant

🏀 NBA Top Shot Overtakes CryptoKitties