Crypto Is a Hedge Against This Craziness
Even if the current rally has nothing to do with it. Also, institutions are coming to ETH, ShapeShift axes KYC, Uniswap liquidity approaches a new record, and more.
We’re changing up the newsletter a bit: Here, you’ll find the TLDR version of the thoroughly reported stories you know and love :) To dive in, just click through the story on The Defiant website. Let us know what you think of this format!
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🙌 Together with Zerion, a simple interface to access and use decentralized finance, Neutrino, an algorithmic price-stable protocol that enables the creation of stablecoins tied to real-world assets, Value DeFi Protocol, a suite of DeFi products including the Value Liquid AMM, which allows anyone to create trading pools with flexible ratio pairs, and Cartesi, an optimistic roll-ups solution that aims to revolutionize smart contracts by allowing developers to code with mainstream software stacks, has just launched CTSI Reserve Mining.
🚨 As Rioters Stormed the US Capitol, Markets Rallied On
TLDR The market shrugged off the unprecedented siege on the U.S. Capitol yesterday. Cryptocurrencies, meant to be a haven from traditional institutions, continued their rally though it’s unlikely that it was triggered by the turmoil.
“Although what’s happening in DC right now is terrible I can’t think of anything that could happen from here that affects markets, practically speaking,” Messari researcher Ryan Watkins told The Defiant.
Meltem Demirors of CoinShares agrees.
“The institutional trust narrative doesn’t matter that much,” she told The Defiant. “If it did, people wouldn’t be buying on Coinbase, they’d be buying on Local Bitcoins. I think it will take a few more years before people really get it.”
🛡 HEDGE AGAINST CHAOS For some crypto enthusiasts though, the chaos at the center of power in the world’s largest economy still strengthens the long-term case for why permissionless and censorless money is needed, even if it doesn’t move the needle amid an already raging bull market.
Castle Island Ventures partner and Coinmetrics co-founder Nic Carter referred us to his Nov. 24 Tweet (which he had just retweeted), saying: “‘I don't like Bitcoin, it's a bet on chaos.’ ‘...does the world look orderly to you?" while DeFiDad likely reflected the thoughts of many in crypto in his tweet, “Imagine watching all this chaos and remaining in US dollars.”
On-Chain Markets Update by Lucas Outumuro, IntoTheBlock
👨💼 Institutions are Coming to Ether - But for Real This Time
TLDR Ethereum has seen a wave of positive events unfold. While these are driving a confluence of improvements for Ethereum’s long-term potential, short-term metrics point to the recent rally being over-extended.
💰 $100k+ TRANSACTIONS CLIMB IntoTheBlock’s Large Transactions Volume aggregates the volume transferred in transactions of over $100k, acting as a proxy to institutional activity. This metric surpassed $10 billion in daily volume for the first time since January 2018.
CME Ether futures expected to drive institutional adoption
OCC decision to allow banks to process and issue their own stablecoins, which encourages use of public blockchains where stablecoins are settled, such as Ethereum
Through EIP 1559, Ether is set to be burned as a result of increased usage
🐻 EXCESSIVE BULLISHNESS IS BEARISH Funding rates for perpetual swaps hit an all-time high on exchanges such as Binance and FTX. This points to a significant premium between derivatives and spot markets, highlighting the disproportionate allocation towards Ether long positions.
INFLOWS INTO CEXES Aggregate net flows —deposits into centralized exchanges minus withdrawls— for Ether reached their highest level since February 2018. Inflows into CEXES can often indicate holders looking to sell their positions.
BOTTOM LINE While Ethereum’s increasing institutional adoption and approval for stablecoin usage are positive developments for its long-term growth, over-extended funding rates and high netflows urge caution.
“Look Ma! No Liquidity Mining”
🦄 Uniswap Liquidity Near Record Sans Liquidity Mining
TLDR Uniswap liquidity is fast approaching an all-time high and this time the most used decentralized exchange (DEX) isn’t riding the wave of its liquidity mining program.
🧮 GIVE ME THE NUMBERS Assets in Uniswap just crossed $3B, near the previous high of $3.36B at the end of its incentive program when the exchange was awarding liquidity providers (LPs) with UNI, in addition to the .03% rewards granted to the capital pool.
PRICES BOOST Some of the increase should be attributed to higher prices. Wrapped ether (WETH), is over one-third of total staked assets. The exchange’s liquidity is up 44% on the year, but ether’s price is up 63%.
🥇 THE REAL VICTORY Liquidity provided before the recent jump was at $1.5B, roughly double what it was before the liquidity mining program. That means the incentive program worked: ether’s price was relatively flat during the UNI liquidity mining period, but overall liquidity doubled from start to end of that time, meaning LPs continued to contribute liquidity despite reduced rewards.
Back to its Roots
😎 ShapeShift Embraces DeFi, Axes KYC
TLDR ShapeShift will be fully embracing DeFi protocols and getting rid of KYC.
BUT HOW The Colorado-based company will now route trades to decentralized exchanges, rather than holding cryptocurrency and being the counterparty in customers’ transactions. This change allows it to stop collecting users’ information.
“Today, ShapeShift is announcing that it has integrated decentralized exchange protocols and is sunsetting its 6+ year business of trading with customers. Because of this fundamental change to our business model, ShapeShift’s users no longer need to provide personally identifying information to us,” wrote CEO Erik Voorhees in a Jan. 6 Medium post.
BACKSTORY Despite originating in 2014 as a non-custodial exchange platform guided by an ethos of total consumer privacy protection, ShapeShift implemented know-your-customer policies in 2018 as a response to impending regulations. The move lost ShapeShift 95% of its user base.
To the Moon
🌚 Deribit Introduces 10K Ether Strike Price
TLDR Deribit is introducing an ETH option with a $10K strike price and Dec. 21, 2021 expiry. With Ethereum closing in on $1,200, option buyers would be betting on an over 700% increase in price between now and then.
HISTORY RHYMES While a major jump, crypto proponents need to look no further than January of last year when ether was hovering at $143 to see comparable growth. The question is, will it repeat?
Over 1000 of the $10K ether calls have been traded.
Stellar CTO and Ripple architect Jed McCaleb cashed out a whopping $411 million in XRP in 2020, according to an updated report from blockchain analytics account Whale Alert, reported by Cointelegraph.
OTC and market-making firms in the crypto space have been under pressure to meet rising demand and these businesses are seeking to grow their teams in response, The Block reported.
🧑💻 ✍️ Stories in this newsletter were written by Daniel Kahan, Owen Fernau, and Lucas Outumuro, and edited by Camila Russo.
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).