Round Tripping
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tl;dr: the war on code and privacy, The Merge confirmed, another green week, the cost of being late to narratives (L2s this week), and ETH/macro continue the rally
BTC dominance 38% | ETH dominance 19.5% | DeFi TVL $67.5B |
Total Crypto Market Cap $1.22T | Stablecoin Supply $153B |
thoughts & notes:
Market Overview
Tokens pushed higher again this week as the month+ rally fueled by the merge narrative and a strong legacy market recovery continued. While it’s great to see another green week, crypto markets remain extremely correlated to macro markets and economic indicators. Markets continued their recent recovery across the board as U.S. inflation numbers came in lower than expected giving investors some renewed confidence in risk as the potential confluence of weakening inflation, a potentially averted recession, and the FED’s ability to orchestrate a soft landing increased this week (although the increase is small and liable to change as data does).
In crypto, ETH continued garnering strength ahead of the long awaited merge as BTC dominance ticks lower while the ETH/BTC ratio slowly climbs higher. ETH gained another ~15% this week and briefly wicked above 2k early this morning. Elsewhere, alternative L1s felt the downstream effects of ETH’s strength as AVAX (+19%), SOL (+15%), NEAR (+14%), and ATOM (+11%) enjoyed residual flows. AAVE (+9%) and LDO (+13) continued to pace the DeFi sector as (almost) the entire crypto ecosystem climbed higher on the back of ETH and legacy markets.
One sector that severely underperformed this week, and had massively outperformed in recent weeks, is OP, GMX, VELO, SNX, and others in the recent L2 meta narrative fueled rally. As you can see through the DexGuru token terminal shown above, OP and VELO’s underperformance jumps off the page. Being late to narratives and rotations in crypto is survivable, and sometimes even still profitable, in bull trending markets but can be extremely painful in other market environments such as now. The L2 underperformance this week is a good reminder that while the markets have rallied, it largely remains a PvP, fast rotation environment where market participants should remain risk averse, protective of their capital, and secure profits as narratives quickly collapse. Arriving late to the L2 rotation this week would not have only cost you the loss in OP, GMX, VELO, etc. but also the obvious miss of another 15% gain in ETH.
Tornado & Software Wars
While tokens continued rallying this week behind the confirmation of ETH’s merge date and macro strength, the enthusiasm was overshadowed by the start of what will likely be one of crypto’s most important fights. The fight for privacy online and surrounding financial transactions became paramount as the U.S. Treasury’s OFAC announced that it added Tornado Cash and numerous associated ETH addresses to their Specially Designated Nationals And Blocked Persons list.
While I’m neither a legal expert nor a developer or cryptographer, I strongly believe in financial privacy online, the precedent that supports and protects the publishing of open source autonomous code, and the importance of protecting tools and code that can be used for both good and bad. CoinCenter (donate to them!!) summarized the issue well in their most recent post saying,
“This is a first for OFAC, which typically sanctions people or companies. We have never seen autonomous decentralized code added to the list before. This is a hair-raising precedent that has already been followed by the deletion of open source code from hosting providers and the arrest of at least one developer.”
What’s unfortunately clear, is that this will be one of the most important battles the crypto industry has faced so far as we’re already beginning to see the downstream ramifications effecting protocol decisions and blacklists (USDC, dYdX, UNI, AAVE, BAL, Infura, MetaMask, POKT, etc.) reinforcing the need for more robust decentralized practices combined with constitutional protections of autonomous code.
Goerli, Pandas, & The Merge
On a positive note, the merge is almost here. With the success of the Goerli testnet merge (and pandas appearing) on Wednesday, ETH core devs have announced the block in which ETH with officially transition the consensus mechanism from PoW to PoS. This transition is tentatively expected to occur on September 15th or 16th and depends on when the Total Terminal Difficulty (TTD) reaches a specific threshold dependent upon hashrate and difficulty factors that can introduce some small variance on the exact date and time. You can track when the TTD is expected to reach that threshold triggering the long awaited transition to PoS at bordel.wtf.
funding:
Messari, crypto data platform, plans to raise $35M @ $300M valuation
Spartan Labs spins out of Spartan Group with $100M to invent/launch products
LongHash Ventures announces new $100M fund
Lattice Capital raises $60M for its second crypto fund
Injective, $INJ Cosmos based DeFi chain, raises $40M
CreatorDAO, platform to provide capital/audience to creators, raises $20M
Pinata, decentralized NFT infrastructure provider, raises $21M seriesA/seed
Merkle Sciene, analytics platform focused on bridge security, raises $19M
Unstoppable Finance, DeFi wallet and web3 co-pilot, raises $12.8M
Lysto, web3 gaming verification platform, raises $12M
RISC Zero raises $12M to build zk proof based blockchain
Satellite IM, decentralized p2p communications network, raises $10.5M
Jito Labs, MEV mitigation infrastructure on SOL, raises $10M (s/o @0xEdgar)
Ansible Labs, payments platform for blockchain accounts, raises $7M
news:
BlackRock ($9T AUM) launches private trust for institutional investors to access spot BTC exposure; BlackRock said, “despite the steep downturn in the digital asset market, we are still seeing substantial interest from some institutional clients in how to efficiently and cost-effectively access these assets using our technology and product capabilities.”
Reddit to launch Community Points on Arbitrum’s Nova in partnership with FTX
USDC’s Circle announces support for only ETH’s PoS asset in new blog post
Interactive Brokers, global broker ($IBKR), launches 24/7 crypto trading
FTX partners with Paradigm to launch one-click futures spreads trading
U.S. Treasury’s OFAC adds Tornado Cash and associated addresses to Specially Designed Nationals (SDN) list.
BTC miners continue selling to cover costs as XYZ structural selling pressure still in tact? leading to ETH/BTC ratio and ETH leading market????
tokens:
Arbitrum (token soon) launches access to Arbitrum Nova, a L2 chain optimized for gaming and social applications — FTX supporting “direct on-boarding”
Arweave (AR) launches suite of six new services/protocols, breakdown here
Immutable X (IMX) L2 support added natively into GameStop’s Wallet; NFT collection Worldwide Webb to launch season 1 on IMX
NEAR launches JavaScript enabled smart contracts SDK and rallies combined with announced Coinbase listing
REN introduces Ren 2.0, a multichain app protocol with EVM support
around the ecosystem:
Vitalik details his idea for extending zk-SNARKS to ERC-721 tokens (NFTs)
@caseykcaruso releases gasguzzlers.wtf, provides insights to gas consumption
OnChainWizard’s A Simple Guide to the ETH Merge
tweets:
