It has been a wild week in the crypto markets with Bitcoin briefly reaching a new all time high on Wednesday & Ethereum falling around $10 short of a new all time high. Late entrants to the market getting long, were punished with a squeeze lower, as they levered up in anticipation of a breakout. The largest price drop being observed on Binance US, witnessing a massive flash crash as low as $8200. This was however, not the case on all exchanges, as we saw FTX pricing only drop to $58,500.
This is a subtle reminder that shakeouts of leverage are real & it is a much more sound idea to accumulate a spot position, than to lever up, and face the risk of liquidation.
The Pro Shares Bitcoin Strategy ETF went live this week on Tuesday & has seen massive demand already, with $1.1B inflows observed on the first 2 days. This comes as a slight surprise, as investors would’ve preferred a spot-based ETF. Being a futures-based ETF, the price will follow its basket and not the underlying asset, BTC. When looking at the basket, there aren’t just BTC futures contracts, but also treasury bills & repo agreements. This essentially means, when Bitcoin goes up, it will outperform the ETF. A spot-based ETF would solve this & have much lower costs overall.
Outside of Bitcoin news, the Layer 1 war continues to heat up with SOL, LUNA, DOT & ETH being the most promising. Next week, a proposal will be initiated to burn 90M of the LUNA supply, increasing the UST supply by $3-4B – leading to swap fees accruing & increasing staking rewards massively. The DOT parachain auctions are also coming to main-net in November & the highly anticipated ETH merge is still expected Q1 2022.
Speaking of Solana. After launching their NFT collection, one of the most highly anticipated Play-To-Earn blockchain based games, Aurory, will be launching a token. The market cap for the NFT collection is currently $61.5M with a floor pricing of +-23 SOL ($4729).
At the time of writing, there are still 25 hours left till the sale period ends. 7% of the supply has been allocated to the IDO, with +-$90M contributed so far. At these prices, the valuations are rather hefty, however prices can still change as individuals choose to withdraw contributions during the sale & grace periods. For those who are familiar to Mango Markets & Parrot, will know that the initial contributions were $500M & $240M respectively, and then these contributions dropped to $70M & $80M respectively.
When observing the Solana ecosystem, there is no clear winner in the P2E category whereas Axie Infinity (currently valued at $7.5B) is the clear winner on Ethereum. Axie Infinity also just raised $152M in series B funding led by A16Z. It will be interesting to see who are the dominant forces established on Solana, with Star Atlas & Aurory being at the forefront.
One of the largest players in this space, who is embracing NFTs in the Solana ecosystem also made headlines this week. The founder of FTX, Sam Bankman-Fried has done it again, raising $420,690,000 from 69 investors. Yes, you read that correctly.
In what could have been a huge exploit on the Polygon network, turned into a win for everyone this week. A bug was found in the plasma bridge that could’ve resulted in an $850M loss, but a former cyber security expert, Gerhard Wagner was able to fix the bug & secure the funds. He was awarded $2M for his white hat efforts.
Speaking of Polygon, there was a new & exciting project launched this week, KlimaDAO, an algorithmic carbon-backed currency. After an IDO & LBP which took place on Ethereum Mainnet, the project successfully bridged to Polygon. On a high level, the project plans to bring carbon credits on chain, locking them into the treasury. This in turn effects the supply, pushing the price of carbon up – which Klima is backed by.
You might be thinking, ” but why?” – Well to back track slightly, companies buy carbon credits to offset their carbon emissions. The price of these carbon credits differ and there isn’t an efficient carbon market. The price to offset emissions is cheap, so companies pay to offset, continuing to pollute at a cheap price, rather than changing operations. By raising the price of carbon, we can force companies to change the way in which they operate their businesses, having a positive impact on climate change.
Currently, the KlimaDAO dApp is offering massive APYs, using the same rebasing mechanisms as OlympusDAO. The incentive alignment of this project is exciting to see play out & we hope to see more mainstream adoption.
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