🧘♂️IDENTIFIED: Biggest Rewards in DeFi
Market Meditations | October 20, 2021
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⏰ In A Rush?
? FOMO for BITO
History was made yesterday when the first-ever Bitcoin futures ETF launched on the New York Stock Exchange with the ticker BITO.
BITO, the Proshare bitcoin strategy ETF gained around 5% by close; ending the day trading at $41.94 but the most incredible numbers of the day were related to volume. The fund broke the record for natural volume on opening day, with over $1 billion traded by the end of the day.
The spot price of Bitcoin also rose with the excitement of the US finally approving and allowing any type of Bitcoin-related fund to trade on the NYSE.
With record-breaking volume for the first futures-based bitcoin ETF, where will that leave the other ETF applicants?
The Valkyrie futures ETF is expected to begin trading today or tomorrow with the ticker BTF. Originally it was slated to be BTFD but was changed last minute.
Invesco has rescinded its application for a futures-based ETF but plans to launch a Bitcoin spot ETF with Galaxy Digital.
Time will tell if the Proshare fund will have a first-mover advantage or if another fund will be favoured by investors.
Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool.
The Cycle of DeFi Money Flows
DeFi has been hugely successful in revolutionizing the way we interact with finance. Ethereum alone is currently home to over $150bn locked in DeFi proctols.
Understanding the cycle of money flows in DeFi can help us find the best yields and understand which new protocols may succeed in the long term.
1️⃣ Project Launch
First, comes the launch of a new protocol such as a lending platform. New protocols with untested code are risky so why would any users want to put their assets on such a platform ?
2️⃣ High Yields and High Inflows
These new protocols offer huge incentives to use their platform in the form of their token. Users see the opportunity for profit and move large amounts of capital onto the platform .
An example of this which we covered last week was Geist protocol on Fantom. Within only 24 hours of launching they had managed to secure $3.8bn in total value locked. Their growth was so explosive because of the high yields they were offering.
✅ TIP: To find the highest yields – actively seek new protocol launches that are offering large rewards programs.
3️⃣ Low Yields and High Outflows
Protocols cannot pay users to deposit their capital forever so these rewards must come to end.
Leveraging our example, Geist currently has $1.7bn TVL – over 50% down from the same metric one day post launch.
With Nansen we can also see impact on the wider Fantom ecosystem ?
Source: Nansen.ai: Graph of Balance of WETH Deposited in Fantom Bridge
The graph shows us that after a huge increase in WETH on Fantom, the cooling off of rewards have led to outflows which look set to continue.
Wrapped Ether (WETH) represents the largest asset that is bridged from Ethereum to Fantom.
✅ TIP: Adoption of a Layer 1 chain does not always equal price movements however they can be helpful to understand wider narratives and when these are cooling off.
☄️ Liquidity Mining and DeFi 2.0
The Geist saga has demonstrated the big issue arising from liquidity mining – it is incredibly short term. When reward programs end – capital simply moves to another project.
So what is the solution and can we profit from spotting this early?
There has been a new narrative surfacing around protocols that look to solve this issue which have been coined DeFi 2.0.
Tokens within this sector have outperformed the market and may continue to do so.
However remember, all solutions are experimental and we do not know whether they will work in the long run.
Understanding the DeFi money flow cycles allows us to focus our search for the highest yields by looking at new launches and new protocols that solve real issues in DeFi.
Using Nansen we are able to keep track of these flows and see the money flow cycle in real time.
With Nansen’s On-Chain data, you can secure an edge in the crypto and NFT markets:
? Exciting New Opportunities. See where funds are moving their money.
? Perform Due Diligence. Get more information on projects or tokens.
? Defend Your Positions. Create smart alerts to track over 100 million ETH wallets.
? Track The Biggest NFT Traders. See what the most profitable NFT wallets are investing in
To grow your crypto portfolio today check out the Nansen website. Currently, they are running a 7 day trial for just $9. Link here ?
Coinbase has been busy recently, popping up in the news for several different reasons, from regulation to sponsorship deals to partnering with Facebook.
Let’s take a closer look at what they’ve been up to:
On Sunday Coinbase published a proposal for how the U.S. could regulate cryptocurrency.
Yesterday Facebook launched the pilot version of its new crypto wallet Novi. At the same time Coinbase announced that it had been chosen to act as the custody partner, meaning they will store the cryptocurrencies on behalf of users. The aim of Novi is to “enable people to send and receive money abroad instantly, securely and with no fees”.
Also yesterday, Coinbase announced a multi-year sponsorship deal with the NBA and WNBA. This follows in the footsteps of FTX, who sponsor Major League Baseball and have the naming rights to the Miami Heat basketball team’s stadium.
So Coinbase is making waves and it seems to be helping their share price. $COIN is up more than 10% this week already, and surely hoping to capitalise further on the back of Bitcoin’s latest rally.
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