Weekly Market Commentary — DV Chain — June 3, 2024
Welcome back to DV Chain’s Weekly Market Commentary! In this edition, we’ll get into last week’s market recap as well as preview potential market catalysts, and trading opportunities. Let’s get started:
Market Recap
- Gemini earn creditors received $2.2B in crypto, in kind last week
- Biden Vetoes Sab121, which directs financial institutions holding crypto for customers to keep the assets on their own balance sheets
- Sentiment surrounding the U.S policy stance towards crypto came back down to earth, after the surprise ETF approval was thought to mark a pivot point for US crypto policy
- Trump found guilty on 34 felony counts, but election betting odds were mostly unchanged, and Trump remains the favorite to win
- Roaring Kitty Returned to social media over the weekend, showing a massive position in GME of 5 million shares as well as a huge options position, potentially igniting animal spirits in retail traders
- Linea stopped producing blocks after Velocore Dex was hacked, highlighting centralization issues with L2s
- Celebrity memecoins emerged as a budding trend on Solana, as Iggy Azalea, an artist with nearly 8 million twitter followers launched and heavily promoted her memecoin $MOTHER
- several other celebrities including Floyd Mayweather, followed suit
- this sparked some debate on whether it was good or bad for the industry, as on one hand it’s seen as good for adoption as celebrities bring attention, while on the other hand it’s seen as a cash grab and value extractive towards retail which further damages the reputation of the industry
- Uni fee switch vote was postponed citing more diligence needed, with no new date set
- $NOT, a telegram affiliated memecoin went on an incredible rally and led all tokens (including BTC and ETH) in trading volumes over the weekend
- 6x’d over the span of a week and topped at nearly 3B in market cap
Upcoming Catalysts / Trade Ideas
- $ETH
- With the ETH ETF approved, we think it will continue higher on both an absolute and relative basis
- As it’s up almost 30% week over week with about 2B increase in offshore open interest and about 500m in CME OI, the question is how much upside is priced in and how much is left
- If we look towards the BTC ETF approval, we saw about 4B notional and about 60k units of BTC in coin terms in CME OI added between when the ETF started being rumored to be approved and the actual trading date, and CME Basis traded up to 20% apy
- Interestingly, for BTC, crypto natives were more offsides. Offshore OI added about 2.5B in notional aggregated OI but decreased in coin terms
- A lot of notional Open interest has been added last week, but the market is also larger now
- CME Basis and Offshore funding rates both sitting near 10% suggests there’s not as much leverage frontrunning the ETH ETF flows as much as the BTC ETF flows, although Ethena now exists to compress those rates
- It’s also worth studying that for BTC, ETF frontrunning flows took it from 25k to 50k, it sold off briefly when trading began, and then the actual flows took BTC from 40k to 70k
- On a relative basis, we saw BTC march higher with limited drawdowns since the ETF, while most other tokens bled and fell over 50% from highs.
- On the BTC ETF move, we saw a few “BTC Beta” tokens achieve parabolic gains, namely $STX and $ORDI, which leads to the next trade Idea
- $LDO
- With the ETH ETF approved, alts finally showed some sign of life following the ‘altpocolypse’ of the last few months
- ETH has led week over week, but it’s worth noting that $LDO is one of the few significant outperformers to ETH, suggesting that the market is showing its hand in which coins are the best ETH Beta
- LDO fundamentally is a very strong project, clipping almost $200m in fees on an annualized basis to it’s treasury
- It has maintained majority of market share in the LST/LRT space, despite higher temporary yields in new competitor’s liquidity bootstrapping farms
- From an institutional standpoint, it is much stronger than competitors in terms of safety and network effects. The Lido Dao’s roadmap prioritizes institutional adoption, which we think is an astute plan, given the recent interest in crypto from Wall Street
- $ASI Launch, 6/13
- Originally set for 5/24, the merger was delayed and now slated for 6/13
- $FET, $AGIX, and $OCEAN merge and get converted to $ASI
- As the 3 tokens all convert to $ASI, there is an arbitrage opportunity since $FET trades at a premium to $AGIX and $OCEAN
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