The Weekly #194
Bearish trader positioning, NEAR ecosystem growth, and Lido's multi-chain PMF
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Cryptoassets have come under pressure for a second week with global market capitalization falling 5.6% to $1.78T.
Sell pressure has driven BTC has fallen below $40k support while ETH has fallen below $3k. ETH/BTC is consolidating at the 0.074-0.075 zone.
BTC has found initial support at $38.6k with next support likely around the $34.3k zone. Bitcoin’s weakness comes as the Luna Foundation Guard now holds ~$1.7B which the market appears to be shrugging off completely.
The crypto markets at large have been softening with investor interest continuing to wane. Global daily exchange volume has fallen to new lows since July 2021 - $18.16B.
Bearish Trader Positioning
We noted last week an alarming market dynamic that was emerging. Increased leverage in an increasingly soft market.
BTC-denominated open interest (OI) in the futures markets topped out at 404k before falling to ~384k on April 17th.
Increased negative funding rates driven by bearish traders in the perpetual markets were likely reinforcing the downward pressure on price too.
Weaker price action eventually led to bulls being caught out with nearly $40m long positions being liquidated so far today (April 18th). Futures appear to be impacting on prices more than spot.
BTC OI was growing at a faster rate than its market capitalization.
The BTC OI/MCAP reached its 0.021 - a historically significant (yet arbitrary level) that precedes volatile price action. This played out yet again and in this case price moved to the downside.
You Say “Macro”, I Say “We Follow”
Now let’s pay attention to the drivers that weighed on cryptoassets to the downside.
Investors have braced for a week of Q1 earnings reports. Stock futures declined early Monday with S&P 500 falling 0.4% while Nasdaq fell 0.73%.
As we’ve highlighted ad nauseam, crypto remains closely tied to the performance of wider non-free risk markets like equities. We have some performance dispersion in crypto during sideways or positive periods but spiked correlation across the board during drawdowns.
There are some positive signs for equities:
77% of the S&P 500 reporting earnings per share are above expectations
Analysts believe Q1 earnings will jump 5%
Yet, we face the all to familiar headwinds:
Raised rates and inflation could negatively impact the outlook for earnings. The markets are placing a >90% odds on a 75-100 BPS target rate for May’s FOMC.
Russia/Ukraine conflict increasing prices of commodities (e.g. energy, food) leading to lower consumption
Treasury yields reaching highest levels in 3 years (>2.83%) which is weighing in on equities (see below image).
Investors will be looking for clues this week from the Federal Reserve policy makers around rate hikes.
Therefore the picture remains largely the same. The outlook may be skewed positively near-term but the macro factors mean markets remain dislocated for now.
And for those that missed it, it’s worth reflecting on last week’s takeaway:
In the meantime, in the case of macro-led broad sell-off, few assets may be spared in the short-term. After all, it’s how assets perform on the recovery that is key.
Lido Finance now commands a 29% market dominance for ETH2 deposits.
USD-denominated TVL has fallen 20% from its peak on April 5th but this was largely driven by cryptoasset prices falling over the same period. LDO now trades 84% below its TVL value.
TVL denominated in the native cryptoasset paints a different picture altogether. We are seeing ATHs be hit across several chains
WETH - 3.4m (+17% MTD)
SOL - 3.51m (+8% MTD)
MATIC - 8.64 (+94% MTD)
Lido’s multi-chain strategy appears to be working. However, we have yet to how alternative native liquid staking derivative platforms (that circumvent the need for Lido) will impact growth potential.
Last week, Lido released its update on its Decentralization roadmap.
NEAR’s ecosystem growth appears to bucking the wider market trends.
A number of core ecosystem stats have continued to grow in the month of April:
Active Contracts +64% (YTD)
Daily Tx Count +66% (YTD)
Daily # of Active Accounts +172% (YTD)
Total value deposited into NEAR has also grown to new ATHs ($425m). NEAR’s EVM layer, Aurora, has also seen promising growth in TVL, climbing to $925m.
This comes at a time when NEAR is rumoured to launch a potential stablecoin, USN, in late April.
Top performers are often mid-cap names ranging from 33-87. Few assets have printed positive performance with very little dispersion in the markets.
Top 100 (7d %):
DeFi (7d %):
Alpaca Finance (+7.2%)
inSure DeFi (+1.5%)
Bancor is launching v3 beta of the protocol in the coming days. New version includes impermanent loss protection, single-side pool tokens, BNT omnipool and unlimited liquidity provision for all assets in its network, read more here.
Frax offers $250K in bribes to veCRV holders to support Curve 4pool (FRAX/USDC/USDT/DAI) on Fantom with their gauge votes.
Following the launch of FPI, Frax deployed FRAX / FPI pool on Curve, FRAX / FPIS pool is expected soon. APR TBD.
Tokemak launched Toke Wars portal featuring detailed data regarding value locked in reactors, the TOKE holdings of various DAOs and protocol revenue. This tool is expected to help TOKE holders to keep track of their weekly rewards and make informed decisions of providing TOKE liquidity to different reactors.
Class action lawsuits for Uniswap and VCs will bring into focus consumer protection and force open scrutiny of what constitutes a security and the responsibility of exchanges to scrutinize assets on their platform:
Class action lawsuit accuses Uniswap Labs, its investors of allowing fraudulent activity on the DEX protocol (The Block)
Executive branches in the US and Canada continue to embrace sound crypto development with the appointment of educated central bankers (US) and advanced research of mass regulation, access, and stablecoins/CBDCs (Canada):
Biden to Tap Former Ripple Advisor as Vice Chair of Fed (Decrypt)
Bank of Canada Using Quantum Computing to Simulate Crypto Adoption Scenarios (Decrypt)
SEC Proposal to Redefine 'Exchange' Is 'Unconstitutional', Says Coin Center (Decrypt)
EU member countries are moving quickly to embrace crypt regulation as eastern powers continue to over-regulate.
EU’s Crypto Activism Gets Mixed Reception at Paris Blockchain Week (CoinDesk)
Portugal Grants First Crypto License to Bison Bank (Decrypt)
Global market cap: $1.88T; Global market cap has fallen by 7% as the market continues falls further below the $2T mark.
DeFi: $114B; DeFi market cap has fallen 11%, more than global MCAP over the past week. DeFi dominance has fallen 5% over the same period. More illiquid assets down the risk curve sold off more relative to higher cap names in aggregate.
Market shares; Bitcoin dominance is holding relatively steady at 48.5%. Bitcoin proving to be the less volatile high cap name for now.
BTC/USD and ETH/USD
Price action; Weaker BTC/USD price action over the last 3 days. ETH/USD next support at $2.8k. Daily RSIs approaching oversold levels with BTC/USD and ETH/USD printing 36.7 and 40 respectively. ETH/BTC RSI is more neutral (53) and potentially further to move before a full price reset completes.
Volatility (BTC & ETH); BTC and ETH 30D vol kept flat at their annual lows. BTC and ETH ATM 1M implied vol at annual lows (59.46% and 62.51% respectively). The 3M and 6M gauges also continue to decline.
Combined order books; Order books much heavier on the bid side. Slightly heavier resistance between $39.3k (Source: Bitcoinity).
Crypto vs. SPX; Cryptoassets maintaining a strong positive relationship to equities. Correlations to NDX and SPX kept above 0.9. Gold hitting a five-week high indicating the Ukraine crisis may also be dampening risk appetite for investors.
GBTC premium; Further narrowing of the GBTC discount over the past week (-22.64%) and divergent to spot price action. GBTC demand is softening however with 30D secondary market volumes falling 15% MTD.
ETHE premium; ETHE discount widened to ATH (28.58%) with the trust’s discount dynamics diverging somewhat from GBTC. ETHE volumes (30D) have been flat MTD.
Bitcoin Mempool activity (Size in MB); The mempool size for the Bitcoin network has kept low indicating relatively low congestion on the network.
On-chain real (BTC) & off-chain volume; BTC on-chain volume has increased 39% over the past week. Spot volumes falling to same degree - BTC spot volumes (7d MA) has fallen 21% while ETH spot volumes has fallen 22% over the past week.
Hashrate & Difficulty; Bitcoin hashrate (7D) has kept flat over the past week. Bitcoin mining difficulty has fallen 1.26%.
Active addresses (BTC); Active entities (30d MA) has increased by 0.5% over the past week to 291k.
Trader positioning; Put/call ratio for BTC has climbed to 0.51 as negativity trickles in for traders. Traders appear to be buying puts perhaps in a bearish risk reversal strategies (buy puts with lower strikes prices and selling higher-strike calls).
Funding rates moderately negative and also reflecting traders taking are taking a predominantly bearish stance and is likely to have reinforced the downward pressure.
Exchange inflow/outflow (BTC, ETH); Strong net outflows for BTC and ETH from exchanges ($3B and $4B respectively) - more assets are being withdrawn from exchanges than being added. The rate of net outflows has fallen over the past week. Note - negative outflows does not always coincide with or precede positive price action.
📚 Vision Investing vs. Problem Investing [@JavierAng_]
📚 Avalanche Tokenomics [@el33thvxor]
📚 Seed Rounds [@AriDavidPaul]
📚 Floor Wards [Secret Salsa]
📚 Data Extrapolation Framework for Risk Assessment of DeFi Lending Platforms [@Yaron Velner]
🎙️ Impact of Macro Themes on Crypto [Mike Bucella]
🎙️ How Will Bitcoin React To Recession? [Real Vision Crypto]
🎙️ On Proof-Of-Stake, Interoperability & Crypto Markets [Epicenter]
🎙️ Josh Mandel on Running on a Pro Bitcoin Platform [OnTheBrink]
🎙️ Why Crypto Isn’t Just The Great Financial Crisis, Part 2 [The Breakdown]
The information above does not constitute an offer to sell digital assets or a solicitation of an offer to buy digital assets. None of the information here is a recommendation to invest in any securities.