🧘♂️SPOTTED: Profitable DeFi Strategy
Market Meditations | October 13, 2021
Enter A $200 Billion Industry Now!
Bitcoin has cooled down overnight but not enough to offset the impressive rally we have been seeing.
Whilst Bitcoin certainly steals the spotlight, there are other opportunities in the market which we shouldn’t overlook…
☄️ Top 5 Crypto Headlines Of The Day
? Introducing Wormhole: A Hot New Protocol
? Nansen Insights: Finding The Best Yield Outside of Ethereum
? The Future of NFTs? Find Out Why We Are Bullish NFTs
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? Track The Biggest NFT Traders. See what the most profitable NFT wallets are investing in
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⏰ In A Rush?
✅ Latest data shows the US now leads with 35% of Bitcoin’s hash rate
? Polkadot Sets Date for Hotly Anticipated Parachain Auctions
? SEBA Bank launches program for users to earn yields on crypto
? Bank of England leader calls crypto regulation a ‘matter of urgency’ for financial stability
? Worm Your Way In
The Wormhole protocol announced yesterday that they had started to support Binance Smart Chain (BSC), in addition to the Ethereum and Solana ecosystems.
But what is Wormhole and why do these popular blockchains want to be involved?
Wormhole is a “cross-chain interoperability protocol connecting high value blockchains” – in other words, a blockchain counsellor, helping the big boys talk to each other in spite of their differences.
The protocol allows users to bridge tokens and NFTs between the different blockchains by using wrapped tokens – for example, sending ETH from the Ethereum network to the Solana network will freeze the native funds and mint wETH tokens on Solana.
A key advantage of Wormhole is that the same wrapper is used on all chains i.e. you don’t get double- or triple-wrapped tokens.
To move tokens you need to have wallets on both the origin and destination networks, and will need to pay transaction fees on the receiving chain to redeem those tokens.
Since the initial ETH-SOL bridge launch there has been more than $200 million Total Value Locked (TVL) in the protocol.
The incorporation of BSC provides access to one of the largest crypto communities with more than 10 times the transactions done on Ethereum.
Keep in mind that wormholes come with the same risks as other smart contracts, but with all of this interconnectivity the DeFi and NFT space could really benefit.
As we mentioned previously, Terra has also collaborated with Wormhole and the UI for that should be ready soon. And as more blockchains connect, the potential for further growth increases.
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.
? DeFi: Finding the Best Yield Outside of Ethereum
? The Problem
DeFi has allowed participants to earn huge yields on their assets; however this year, DeFi on Ethereum has become increasingly expensive to use.
For many users, it is no longer profitable to use the ecosystem.
? The Solution
Fortunately this has driven the adoption of other layer 1 blockchains where fees are cheaper and DeFi is more accessible.
These alternative layer 1s often have large incentives to attract new capital and as such, not only are fees cheaper, but yields higher. The opportunity for profit is therefore huge.
We can use Nansen to dive into exactly where capital is flowing – so that you are able to take advantage of these high yielding opportunities.
? Step 1: Investigate USDC Flows over 7 days
Source: Nansen.ai: Balance Changes Over 7 Days for USDC
This table shows that the biggest net recipient of USDC over the last week was AnySwap: Fantom Bridge – the multichain bridge that allows assets to flow into Layer 1 ecosystem, Fantom.
The second largest is the bridge to Avalanche – highlighting the adoption of Layer 1 chains outside of Ethereum
If we look at WBTC and WETH, these mirror the trend, with Fantom being by far the largest recipient of those assets over the past week.
What does this tell us?
✅ It tells us that Fantom is going through a period of huge growth with Ethereum participants bridging large amounts of assets over to the ecosystem – likely in search of yield.
? Step 2: Dive Deeper Into An Individual Protocol
So we know that Fantom is gaining a huge amount of traction, however Nansen also allows us to focus our search on exactly what protocols capital is flowing into:
Source: Nansen.ai: Smart Contracts with Most Inflow (by $) over the past 7 days
Geist is clearly the largest recipient of assets in the last 7 days, representing 4 out of the top 5 hottest contracts.
Geist is a new lending protocol which since launch has accrued a total value locked of $2.6bn (data source: DeFi Llama).
Even though yields have now normalized since launch, causing some outflows, it remains over 50% of Fantom’s entire ecosystem in terms of TVL.
Using Nansen we could have seen these flows in real time and capitalised on this huge opportunity.
? Concluding Remarks
High yields are always present in DeFi, however they can be difficult to find.
Using Nansen we can dive into which layer 1 blockchains capital is flowing into and then drill down into exactly which protocols are the most active.
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?Will NFTs Go To The Moon?
As everyone prepares for an explosive 4th quarter for bitcoin, what will happen to the NFT market?
Some projects may be ignored, but it is probable that both established and emerging ‘blue-chip projects’ will experience altcoin-like performance.
Here’s why we are bullish NFTs:
NFTs have dominated headlines for months, with OpenSea serving only about .5 million people.
Watching the frenzy from the sidelines prompted Binance and FTX to launch NFT marketplaces and now Coinbase is quick to follow.
Backlinko.com reported that Coinbase had 56 million users in March of 2021. If only half of those users are interested in NFTs, that could result in exponential growth compared to OpenSea’s user count.
Bored Ape Yacht Club creator Yuga Labs just became the second NFT project to sign with a Hollywood talent manager, Gary Oseary, who represents Britney Spears, Madonna, and The Weekend. There are thousands of NFT projects and only two of them have representation!
There is a new and emerging use case for NFTs called fNFTs or Financial Non-Fungible Tokens. These fNFTs will allow liquidity providers to sell their LP position without liquidating the position.
Although Bitcoin will most likely steal the spotlight, the NFT space is just getting started and has only reached a small audience to date. Review our NFT guide for tips on identifying blue-chip projects.
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??♂️✍️ Stories in this newsletter were written by D. Beverly, Isambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Gerasimos P.
Not financial or tax advice. The content in this newsletter is for informational purposes only. Nothing in this email is intended to serve as financial advice. We are not financial advisors. Every investment and trading move involves risk. Do your own research when making a decision. See our important security disclaimers here.
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