Round Tripping
as always, thanks for reading and follow me here
tl;dr: Avi bets on SUSHI, MKR buys treasuries, evaluating crypto market fit (CMF), & DeFi’s potential revival through LSDs, RWAs, stablecoins, & legacy on-chain data
BTC dominance 38% | ETH dominance 16% | DeFi TVL $47.6B |
Total Crypto Market Cap $989B | Stablecoin Supply $149B |
musings:
DeFi’s Potential Revival
We’re now entering month twenty-seven of the excruciating DeFi bear market that has seen ETH out-perform all tokens across the sector. Outside of @DegenSpartan declaring an end to DeFi winter, there have been few catalysts outside of token emissions fueling unsustainable APYs and an anon dev(s) faking organic TVL while leveraging it multiple times over.
Fortunately, there may be a light at the end of the “DeFi Tokens Depreciate Only” tunnel. What lies on the other side of that tunnel is innovation through and yield generation through several potential catalysts including: increased yield and financial products through Liquid Staking Derivatives (LSDs), potential stablecoin returns passed through yield generating assets the issuers control, Real World Asset (RWAs) integration, and innovation through reliable legacy market data on-chain.
Several of these hypothetical catalysts have gained momentum in recent weeks as the following developments occurred:
MakerDAO (MKR) initiates their $500M investment in U.S. Treasuries & investment grade corporate bonds to diversify & strengthen its balance sheet
Two Sigma Securities to contribute legacy market data to LINK’s oracle networks
Cboe Global Markets partners with SOL-based oracle Pyth to stream equity market data on-chain
Hamilton Lane to tokenize three of its funds through partnership with Securitize following private equity giant KKR making their Health Care Strategic Growth Fund available on AVAX a few weeks ago
Fidelity launches ETH index fund; Bitwise launches Web3 ETF BWEB
GoldenTree, a traditional asset manger with ~47B AUM (more crypto native than any legacy financial institutional thanks to Avi), takes $5.3M stake in SUSHI
RBN launches Ribbon Lend which their calling “undercollateralized Aave” for trusted institutions — crypto market maker Wintermute and Folkvang (backed by SBF) are the two current borrowers
COMP launches institutional borrowing from the Compound Treasury
Frax Finance launches fxsETH liquid staking derivative
DeFi tokens are not the only sector specific thing down over the past several months as experimentation in DeFi has been uninspiring since the collapse of “DeFi 2.0”. Circular, mercenary capital severely limited the surface area of possible experimentation as market participates became aware of the capital rotation games and prioritized not around the protocol when yield evaporated.
I’m not going to pretend to know the outcome of what yield passed through LSDs, RWAs, potential stablecoin yield, and legacy market on-chain data enables, it’s a much needed blank design canvas nonetheless.
What is clear though, is DeFi “blue chips” have established themselves while the demand for copy-paste protocols and “DeFi 2.0” mechanisms have evaporated. The catalysts for a DeFi revival are beginning to come online and the potential for innovation and sustainable yield providing a flywheel of speculative capital throughout the crypto ecosystem is taking shape. While macro conditions unequivocally remain in control of volatility, liquidity, and capital entering the ecosystem, seeds of future growth continue to be planted throughout various crypto sectors.
funding:
NYDIG raises $720M for its Institutional Bitcoin Fund
Golden, crypto tooling & data protocol, raises $40M series B
Horizon Blockchain Games, marketplace & gaming platform, raises $40M series A
Exponential, DeFi yield tooling platform, raises $14M seed
Blackbird, web3 “hospitality platform” for loyalty & restaurant rewards, raises $11M seed
Coolkicks raises $6M seed @ $50M valuation for MynaSwap collectible platform
Xalts, provider of institutional access to crypto ETFs & mutual funds, raises $6M
Scale3 Labs, blockchain node infrastructure, raises $5.3M seed
Arch, DeFi asset management startup, raises $5M seed
news:
Visa partnering with FTX to offer debit cards in 40+ countries
Fidelity launches Ethereum Index Fund
Bitwise’s Web3 ETF (BWEB) now listed and trading
Cboe Global Markets, major exchange operator & trad market infra provider, partners with SOL-based oracle Pyth to stream equity market data on-chain
DeFiLlama consistently ships, launches borrowing optimizer & yield dashboard
Fintech unicorn Stash to enable customer purchases of eight largest tokens
Hamilton Lane to tokenize three of its funds through partnership with Securitize
Two Sigma Securities to contribute legacy market data to LINK’s oracle networks
Storied venture firm Bessemer, who said in March it would commit $250M to crypto investments, provides updates on DAO investing group that sources deals
Japan’s Prime Minister says, “we will promote efforts to expand the use of Web 3.0 services that utilize the Metaverse & NFTs”
Mt. Gox BTC repayments pushed back to 2023
tokens & protocols:
MKR — initiates allocating $500M towards U.S. Treasuries & investment-grade corporate bonds to diversify stablecoin reserves
SUSHI — Avi reveals GoldenTree’s $5.3M stake in SUSHI tokens & Jared Grey was named the new Head Chef of the protocol as it tries to reestablish itself
AXL — Axelar, cross chain communication platform, officially launches token
USDC — supply has declined by $9B (~16%) in last 90 days
Krypton — MEV-resistant DEX protocol joins LINK’s BUILD program
LDO — staked ETH (stETH) is now available on OP& Arbi as wstETH
FXS — CRV, CVX, & FXS are now available as collateral on Fraxlend
Aztec Network — releases Noir, the universal zero knowledge proving system
MYTH — Mythical Games confirms upcoming launch of foundation, DAO, & token
BMEX — BitMEX CEO says planning to launch their token by end of year
SYN — passes proposal to deploy CANTO asset bridge
X2Y2 — launches p2p loans with NFTs as collateral
reading:
“Crypto Market Fit: Redefining Product Market Fit in web3“ — Jeff Morris Jr.
“Crypto Market Fit (CMF) is PMF for web3-native products judged by web3 metrics and mechanics rather than web2’s old standards..web3-native financial apps like DEXs can have massive financial success with a fraction of the user-base compared to a web2-native trading platform or even a CEX..in crypto, the metrics are of far higher intent. There is money spent.“
As the choppy bear market continues, the core learning from last cycle revolves around evaluating a protocol’s (token) success and what metrics determine that. While the answer remains relatively opaque, two things have become clear. TVL inflated through mercenary capital chasing unsustainable token emissions is an unreliable metric and traditional web2 metrics aren’t relevant.
Uniswap had once passed Coinbase in daily volume, and Jeff outlines the incomparable nature of conventional user metrics by comparing UNI to HOOD and COIN while highlighting that, “with 2.3% of the monthly transacting users of Coinbase, Uniswap did 79% of the trading volume…a pattern you’ll begin noticing.”
Clearly, the success of a protocol based on long-established web2 vanity metrics are insufficient as the intent, monetary value, and impact of a protocol’s use are orders of magnitude greater than product teams optimizing their algorithms to find the perfect emoji which results in a user opening an app for twenty-two seconds. We’re still in the early stages of understanding CMF, but the metrics and conventional wisdom of user engagement is entirely different.
around the ecosystem:
King samczsun explains the Binance (BNB) hack & brief chain “pause”
NoSleepJon is finally back with reading list v17
0xKofi with an excellent piece on hacks in “The State of Crypto Security”
Arthur’s new essay “Contagion” on Yield Curve Control and the ECB
Ace details and explains all things CANTO, the public good DeFi L1
tweets:
worth scrolling the replies to confirm your bag & thesis biases
Cheers tolks, insightful as always