🟣 The Ceiling is the Roof

Despite our desire to enjoy the long holiday weekend without any big news, we were instead hit with a deal regarding the debt ceiling. Under the deal, non-defense spending would remain relatively flat in 2024 and increase by 1% in fiscal 2025, student loan payments would restart, some Covid relief funds would be clawed back, and work requirements for food stamps will be expanded.

Despite our desire to enjoy the long holiday weekend without any big news, we were instead hit with a deal regarding the debt ceiling. Under the deal, non-defense spending would remain relatively flat in 2024 and increase by 1% in fiscal 2025, student loan payments would restart, some Covid relief funds would be clawed back, and work requirements for food stamps will be expanded.  The deal also mentioned a plan to cancel the total 2023 staffing funding request for the boatload of new IRS agents that were supposedly being hired, reducing the spend by $10B.  Looks like we're going to continue to see a lot more boating accidents this year. Oops. While non-defense funding is capped through 2024, there will be no budget caps in 2025 and beyond as of this deal. This headline sparked a lot of "printer go brrrr" memes on Twitter, but is something that will likely be dealt with prior to 2025 especially if the GOP gains control. The deal itself still has a long way to being accepted as is, so we will just need to wait and see.  The market also saw a small rally on Sunday, with certain tokens getting a shockingly large short squeeze. Among these was TOMO, which rallied 100% in just a few minutes as one hour funding shot to 51%. You really can never rest as a trader in this market, as there is always something happening in some corner of the market. However, while ETH jumped as high as $1927 yesterday, it is now trading below $1900 again. For the US folks out there, I hope you're enjoying the long weekend! - Westie With the LSTFi narrative heating up, liquid staking governance tokens continue to appreciate. RPL (+141%), LDO (+96%), and COIN (+69%) have outperformed ETH (+59%) while FXS (+56%) has recently lagged. This sector has seen a decent shakeup over the last six months, with Rocket Pool being the biggest gainer. The decentralization-focused liquid staking provider has expanded its market share from 5% to 8% over the last six months, so it is no surprise to see RPL as a top mover. With more than 12,000 LEB8 minipools live, Rocket Pool's recent Atlas Upgrade has improved the protocol's scalability. With a current minipool queue of 11 days, Rocket Pool is working to find the rETH demand to match its new supply of node operators.  Last Friday, MakerDAO's risk core unit proposed a set of parameter changes to increase the stability fee of most collateral types and hike the DAI savings rate from a measly 1% to a respectable 3.33%. This is part of the endgame plan to align MakerDAO's interest rates with the risk-free rate, which currently stands at 5-5.25% if you compare it directly to the Fed Funds Rate.   There are concerns this sucks liquidity away from DAI and decreases the willingness to borrow, but an increased DAI savings rate also creates a higher native onchain yield. Throughout the past year, DeFi has traditionally had a hard time matching the risk-free rate of TradFi, and this is a step in the right direction to attract more institutional capital. However, tokenized T-Bills are also moving us in that direction.  As monetsupply stated, "The logic is that the market will grow more efficient eventually, so it is better to be a first mover," and for MakerDAO to capture that market opportunity. MakerDAO's new lending/borrowing protocol, Spark, will also be affected as a result of this parameter change with the borrow rate increasing to 3.33%.    It's China season once again. Last week, we talked about bullish crypto regulation for retail traders in Hong Kong coming online on June 1st. Well, it looks like China has more for us. While we were relaxing over the weekend, it's rumored that China put out a whitepaper titled Beijing Web 3.0 Innovation and Development Whitepaper. We all know China used to have the power to move markets when they "banned" crypto, but maybe this time they'll move it the other way.  On a similar note, crypto has been making increasingly frequent appearances on Chinese television. For example, a famous Chinese singer recently appeared on a star-studded Chinese singing show wearing a CrytoPunks dress. Similarly, in the 2023 World Table Tennis Championships broadcast, memecoin FLOKI appeared on the billboard as a partner. I feel like a mini China narrative is coming, so it'll probably be worth paying attention to China coins V2.    Curve's Stablecoin and Lending Market AMMs are at the root of everything elegant and useful in DeFi.That's why Curve put LLAMMA at the center of its lending protocol. Read More → The State of LSTFi There are five broad use cases for LSTs that are gaining traction alongside growth in demand: leverage farming, liquidity providing, LST baskets, stablecoin collateral, and interest rate derivatives. Read More → Singapore's Temasek Punishes Execs Who Invested In FTX The decision to back the exchange, which negatively impacted Temasek's reputation, has resulted in a pay cut for those behind its doomed $275 million investment Read More → Bali Warns Tourists Against Using Crypto as a Form of Payment Those using crypto to pay for accommodation, restaurants, activities or shopping will be dealt with "firmly," Bali's governor reportedly said Read More → 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. 133 W 19th St, New York, NY, 10011 Manage your email subscription preferences here.