Trends in the crypto market for September: RWA, Web3 social, Rollup chains, and other new narratives, which ones are worth paying attention to?
DeFi liquidity is at its lowest level since February 2021.Author: THOR HARTVIGSEN
Compiled by: Deep Tide TechFlow
Market Overview
DeFi liquidity is at its lowest level since February 2021. It is well known that a high-interest rate environment makes chasing on-chain yields less attractive. Coupled with the decline in cryptocurrency prices, this has led to a new low in TVL.
What does this mean? It means that making profits in the short term has become more difficult. For a project to take off, liquidity needs to flow out from other areas of DeFi. Unless you have a solid advantage in this field or spend more than 16 hours a day staring at the screen, the best approach may be to formulate a long-term investment strategy and stick to it. Don't overtrade in this hostile environment and get shaken out.
Why Did Prices Crash?
As seen in the chart from Coinalyze, on August 17, most of the open futures contracts were liquidated, leading to a large number of long positions being forced out. Cryptocurrency volatility has been very low over the past few weeks, and when this happens, futures traders tend to increase their open interest to bet on market movements as volatility returns. When prices start to drop, a large number of long positions are forcibly liquidated, leading to more positions being cleared in a vicious cycle. Therefore, it is difficult to attribute the recent price action to any specific news. Additionally, there has been a significant sell-off in the spot market, which may indicate that larger participants are offloading their positions.
Winners of the Past 14 Days
Just by following cryptocurrency Twitter (Crypto X??), you wouldn't notice the price drop and market dullness. The new Rollup chain Base launched by Coinbase has recently attracted a large number of users and liquidity due to the Friend tech application.
Some statistics comparing Base/Arbitrum/Optimism:
14-Day Fees:
$3.4 million ------Base;
$2.6 million ------Arbitrum;
$2.5 million ------Optimism revenue.
14-Day Revenue:
$2.3 million ------Base;
$900,000 ------Arbitrum;
$800,000 ------Optimism.
Revenue is calculated based on the fees paid by users on the Rollup chain minus the costs of posting these transactions (calling data) on Ethereum. The data shows that not only has Base recently generated more fees, but its profit margins are also significantly higher.
Friend tech
Friend tech is a new social application on Base where you can buy and sell shares of registered Twitter profiles. It has seen explosive growth in user adoption and generated over $3 million in revenue in the past 7 days. All transactions incur a high fee of 10%, with 5% going to the platform and 5% to the users whose shares are being traded.
Friend tech is the main dapp attracting users to Base. As more protocols launch (like Aave and Uniswap) and the ecosystem expands, Base may continue to grow significantly. The current annualized revenue over the past 7 days is approximately $42 million, which is a significant component of Coinbase's annual revenue.
News and Catalysts
ETF Deadlines and Grayscale
Grayscale is currently involved in a lawsuit with the U.S. Securities and Exchange Commission (SEC) regarding the conversion of its existing GBTC trust into a spot Bitcoin exchange-traded fund (ETF). While many have been anticipating a decision this week, Grayscale may be required to reapply, which could take up to 240 days before a final decision is made. However, as seen below, Grayscale is expanding their ETF team. What does this mean? It likely indicates that they are trying to convey a message that they are very serious about converting to an ETF, rather than having some insider information about the case's outcome.
According to ETF experts, delays in ETF approvals are the most likely scenario.
Coinbase Acquires Stake in Circle
Coinbase has recently added another potential cash cow to their team by acquiring a stake in Circle. The terms of the acquisition are not yet clear, but it has been revealed that the "Centre Consortium," which manages USDC, will be shut down. USDC will also be launched on 6 other blockchains this year. Some of these are expected to include Polkadot, Near, Optimism, and Cosmos. In terms of revenue sharing, Coinbase and Circle will continue to share revenue based on the amount of USDC held on their respective platforms, while the interest income generated from the widespread use of USDC will be distributed evenly.
Frax Expands to RWA
After decoupling from USDC earlier this year (with $FRAX having a strong collateral relationship with USDC), the vision for FraxV3 has been brewing. Founder Sam Kazemian refers to FRAXV3 as the "ultimate stablecoin." This involves collaborating with Financial Reserves and Asset Exploration Inc Public Benefit Corporation (FinresPBC) to bring real-world assets on-chain as collateral for $FRAX. The profits from these operations will be passed on to token holders through so-called "Fraxbonds" (FXB). Fraxbonds allow people to purchase future $FRAX at a discounted price (i.e., buying $FRAX for $0.90 each two years from now).
Thorchain Lending Launch
Thorchain has just launched their lending product, allowing users to lend various assets with BTC and ETH as collateral. The list of collateral will soon expand to include a variety of new assets such as BNB, BCH, LTC, ATOM, AVAX, and DOGE.
One of the core mechanisms of this lending design is to burn $RUNE when issuing debt (when users borrow against collateral) and mint $RUNE when closing positions. This also allows for loans to be made without liquidation even if the price of collateral like ETH or BTC drops, as the collateral is stored in RUNE behind the scenes.
On-Chain Capital Flows
Off-chain Labs Appears to Be Buying Back $ARB
1.72 million ARB were purchased on Binance at a price of $0.98 per token (totaling $1.7 million) and sent to an address labeled Offchain Labs (the company behind Arbitrum). This is close to the lowest trading price for $ARB since its listing earlier this year.
CMS Holdings Accumulates $DYDX
CMS is an early investor in dYdX and has further traded the token over the past two years. They recently purchased 519,000 $DYDX on Binance at a price of $1.94 per token (totaling $1 million). The average purchase price for CEX trades (excluding private sales) was $1.88, with an average selling price of $2.78. Currently, CMS holds 3.05 million $DYDX (worth $5.98 million).
DeFi Airdrops and Strategies
Friend tech Airdrop
Friend tech will reward platform users with 100 million points over the next 6 months. Below is a table estimating the price per point based on issuance valuation and the percentage of airdrop token supply.
It seems that points are rewarded based on trading volume of shares, but may also be related to referrals. Nevertheless, it currently appears that top users have accumulated the majority of the distributed points.
Real World Asset (RWA) Mining
Maker's Spark protocol offers a 5% annualized yield on Dai savings rates (DSR). This yield comes from the income generated by DAI as collateral for RWAs like U.S. Treasury bonds. If you are a U.S. citizen with direct access to U.S. Treasury bonds, this may not sound exciting; however, a current proposal on Aave suggests adding the liquid token of Dai savings rate (sDAI) as collateral in the lending market. As shown, cycling 8 times (depositing sDAI on Aave, borrowing the native $GHO stablecoin, converting it back to sDAI, and repeating) would yield an annualized return of 11.29%!
This may go live in the coming weeks, and the annualized yield does not account for gas fees. Nevertheless, simply investing in DAI to obtain a sustainable yield of 11% from the U.S. government is very exciting and could attract new and more sophisticated participants into the space over a longer time frame.
Swell Airdrop
Swell is an Ethereum liquid staking protocol currently conducting an airdrop campaign. Staking ETH as swETH will earn "pearls" over time, which will convert to $SWELL tokens later this year. Depositing your swETH into protocols like Pendle or Maverick can also earn additional pearls. Recent calculations estimate that 1 pearl is worth approximately $0.33.
