After a strong week for equities and crypto, we saw significant profit-taking on Friday for crypto-related equities, with COIN and SI losing 10.2% and 8.3%, respectively. After US market close, crypto global Open Interest (OI) ramped up to over $20.2B (+3.9%) intraday at 8 am ET Saturday morning, the highest level since early November 2022 during the FTX meltdown. This newly deployed capital, likely looking to see further continuation into the weekend, was unfortunately late to the party, with many assets turning negative Saturday and seeing further losses on Sunday. In hindsight, maybe SHIB having a +15.8% move and BABYDOGE up 32.5% on Saturday was the signal to sell it all, touch grass, and enjoy the weekend. Sometimes it really is that easy. In a sea of red, there are always places for the hot potato of capital rotation to hide. GRT caught a strong bid, with the asset up 34.5% from Saturday open to Sunday close after their Twitter account hinted at an upcoming L2 scaling announcement. Post-FOMC, we get the chance to read some more tea leaves with multiple Fed officials speaking this week (Powell on Tuesday and 3 Fed presidents on Wednesday). We also have the University of Michigan's preliminary consumer sentiment numbers on Friday.
You'd think that with historically low unemployment rates, consumer sentiment should be near highs. It's not…it's still near multi-decade lows despite bottoming out during peak inflationary concerns in June 2022. Maybe it's because housing affordability is at worse levels than before the 2008 financial crisis, and a carton of eggs costs $6+ in my local grocery store. I'm not sure what this means for my magic internet coins, but I might need to sell some to continue to fund my morning bacon, egg, and cheese routine.
- EffortCapital
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Yesterday, crypto exchange Huobi listed FTX users' debt with a token (FUD). FUD deposits opened at 7 am UTC, with withdrawals being enabled today. FUD is a bond token representing the highest quality creditors in the FTX event issued by DebtDAO. During the early bird issuance phase, Huobi is selling the debt at a discounted price of 1 FUD = $1 with an initial supply of 20 million. As stated in the launch post, the fair price of FUD is between 0 and 5 USDT. This means that as of this morning, with FUD trading at $63, the market is pricing in a 1260% probability of recovery. By no means am I an expert in distressed debt assets, but pricing a 1260% chance of recovery seems a bit optimistic. In classic crypto fashion, the amount of debt the tokens represent is not actually known. There are also no additional details as to what the debt recovery process looks like. In the launch post, Huobi stated that once the actual debt of creditors is confirmed, DebtDAO will issue a secondary public offering that airdrops extra FUD tokens to all current holders so that the number of tokens equals the dollar amount of potentially recoverable debt. After this secondary public offering, the fair price of FUD should be between 0 and 1 USDT. How would you price this now? Just like any crypto token, whatever you think it should be. |
As you read this, one of the most hotly debated governance proposals is being put to a vote. In December, a proposal was made for Uniswap to deploy on BNB Chain to become the chain's leading DEX before its Uni v3 business license expires in April, allowing anyone to copy their code and frontrun Uniswap. Prior to this proposal, a temperature check determining which general messaging protocol should be used for cross-chain governance voting between Uniswap's Ethereum and BNB deployments was voted on. The choices: LayerZero (backed by a16z and Sequoia), Wormhole (created and backed by Jump Crypto), and two lesser-known bridges — deBridge and Celer. This is where things got interesting. Before voting on-chain, "temperature check" votes are done off-chain to assess community sentiment and iterate on feedback. These temperature check results often foreshadow what will be ultimately passed on-chain to honor the community's choice. With the temperature check for this vote concluding Wormhole as the bridge solution, the community thought it was all but certain that the on-chain vote, which explicitly calls Wormhole the bridge solution, would pass as-is. One small problem — a16z didn't participate in the temperature check due to an issue with their custody solution. Post-temperature check, a16z publicly said they would've voted for Layer Zero. With their voting power equivalent to 37.5% of quorum, their vote can easily sway any outcome. The Uniswap and crypto community as a whole began debating in the forums on what the right technical solution should be, whether a16z should honor the community's original choice, and the existential threat that crypto faces with token-weighted voting akin to a plutocracy. Currently, many UNI delegate heavyweights such as Compound Founder Robert Leshner and multiple university blockchain clubs, that a16z ironically delegated to, have decided to vote in favor of deploying with Wormhole. If this vote fails, Uniswap might be unable to deploy to BNB Chain before its license expires. With four days left for voting and only a 3.9% participation rate so far, there is still plenty of time for some governance shenanigans to take place. We will be watching this closely and provide an update by the end of the week. |
Sushi governance will vote on a tokenomics redesign and already passed a proposal that substantially impacts the token. |
The liquid staking derivative landscape is maturing as numerous solutions are now available for investors to choose from with various tradeoffs. |
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"The same way that we can convert between dollars in euros on a cross-border transaction, we should be able to convert between digital tokenized dollars and traditional dollars," Cuy Sheffield said. |
Rune Christensen, a longtime climate activist, wants public good codified as a "central purpose and value of MakerDAO." |
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm's Financial Disclosures. |
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