- There’s a sharp contrast in how ETH was used last cycle vs. today. In ’17, a lot of ETH demand came from ICOs. Today, the percentage of ETH supply in smart contracts is rapidly approaching 20%. ETH becoming a productive capital asset with yield is another reason why this rally is more sustainable than in 2017. DeFi and staking are key drivers.
- Over $5.1B in value locked in the ETH 2.0 Deposit contract (2.6% of supply / 2.9m ETH). The top 5 staking service providers account for 42% of all deposits.
- Over the past 2 weeks, there’s been a 40% increase to $2.4 billion in the amount of stablecoins in the top 10 pools/projects by weight. While the market still seems strongly risk-on, this may be an early sign of slight de-risking while still seeking yields.
Speculation Spillover by Kevin Kelly
- Fund managers have increased their risk appetite considerably in recent months, largely on the back of a “reflation” narrative that few dare to question. Asset prices are up, hedging is down, and venture capital funding is fresh off its biggest year on record.
- MicroStrategy could convince a new cohort of corporate treasurers to follow their lead later this week while another fiscal stimulus package could be enough to pour new capital in the market.
- Markets are being exceedingly one-sided and heavily tilted in favor of risk. We’re on the road to a volatile market in where there are more speculative investors than ever with too much leverage to play with. According to Bank of America, net percentage of investors are taking more risk than normal at a record and are underweight cash for the first time since May 2013.
- Any threat to the 2021 recovery story could cause a serious unwind in speculative positioning, causing volatility to rise and risk appetite to wane.
How The GameStop Fiasco Exposed The Ultimnate DeFi Bull Case by Ashwath Balakrishnan
- As the retail vs Wall Street narrative began to take off, GME stock price increased by roughly 5x. Retail investors were doing well until their brokerage firms halted buying activity. Brokerage firms were told by their clearinghouses that they would be restricting buy orders for the stocks being short squeezed.
- The Depository Trust & Clearing Corporation (DTCC) — which oversees the clearing and settlement of stocks — raised the cost of holding the targeted stocks as collateral during the regular 2 day settlement period. Clearinghouses couldn’t afford these increased costs and told their clients (retail brokers) that they would limit/stop buys in those stocks. This means institutions may not have been actively trying to censor the little guy — the stock market just runs on archaic infrastructure and processes.
- This entire situation brings light to decentralized exchanges and synthetic assets. They provide two important features that allow them to be censorship resistant: Peer-to-Contract Trading & Instantaneous Settlement.
- Synthetic assets are financial instruments that mimic exposure to an underlying asset without actually having to own that asset. Synthetix is expected to start listing individual stocks as Mirror Protocol already offers a handful of blue-chip stocks and major indices.
- Due to the need for deep pools of capital, pricing can be out of whack, funding a buffet for arbitrageurs at the expense of liquidity providers.
- The most significant drawback of synthetic assets is their lack of influence on price discovery. For stock prices to be controlled by a free market in the way assets on public blockchains are, the actual underlying shares need to be tokenized and migrated to an uncensorable, unstoppable data layer.
- Robinhood is a broker; Uniswap and Sushiswap are exchanges, clearing houses, liquidity custodians and market makers. They can’t sell your order flow the way Robinhood does but these exchanges charge a fee on each trade and are already cash flow generating machines.
As Aave Soars Maker Eyes Rate Hike by Medio Demarco
- Lending DeFi giants Maker, Aave, and Compound have a combined circulating market cap of $9.95b. Aave alone added $2.4b in a single day as its price went from $300 to $500 just a week.
- As demand for borrowing rises, interest rates get pushed up along with it. Some protocols adjust to supply/demand (Aave), while others require a governance vote(Maker).
- Due to Maker’s micro-management model, interest rates must be constantly monitored and manually adjusted. Community members realized that the rates they were charging were below the competitive average rates. Not wanting to leave money on the table, and better manage their risk, they put forward a proposal to hike interest rates across many of the top vaults, particularly ETH and BTC.
- ETH and BTC make up a significant amount of Maker’s Collateralized Debt Position (CDP), approximately 89% of it. If successful, this proposal would raise Maker’s annual revenues by +25%. Hopefully this gives it a fighting chance to catch up to AAVE.
Building Conviction In Magical Founders And Projects by Tom Shaughnessy
I often get asked what we look for at Delphi Ventures as we hunt for new investable projects. The dream would be to have unlimited time to due diligence every project and founder, but given the ever-increasing speed of the space, investing in crypto and DeFi often requires you to vet projects extremely quickly. Let’s dive into what’s important…
As mentioned, we will continue to iterate on the design of our Delphi Debrief based on your feedback—so please let us know which section you enjoy the most and what else you’d like to see!