Weekly Onchain Insights: The Square’s 50 million Bitcoin investment effect on YFI
The IntoTheBlock newsletter highlights weekly interesting data points about the crypto markets. Sign up here
Every week the IntoTheBlock team publishes a newsletter that summarizes key data insights about the crypto market. Below is a quick summary.
You can subscribe at: https://share.hsforms.com/1BIGbqGDERICP-iS0RGI1eg39rm8
Hey onchainers,
Welcome back to IntoTheBlock’s newsletter. We have created a different type of newsletter for crypto fans that is not about news, but about data and analytics. Every week, we deliver valuable data insights about the crypto market.
Bitcoin Update: BTC Stays Resilient Despite Broader Volatility
Despite the recent events affecting the market, as the charges against Bitmex, Trump calling to stop the stimulus packages conversations and Square buying $50 million in BTC, Bitcoin has actually seen a decrease in 30-day volatility.
Bitcoin is currently at the second lowest 30-day volatility it has experienced all year. This resilience in light of the broader exogenous factors highlight how Bitcoin has matured as an asset.
This Week’s Analysis: The Square’s 50 million Bitcoin investment effect on YFI
On October 8, Square, a payments conglomerate founded by Twitter CEO Jack Dorsey, announced that it had purchased approximately 4,709 bitcoins, with an aggregate value of $50 million.
A $50 million investment for a company the size of Square is not a major allocation but it does symbolize the rising institutional demand institutions have for Bitcoin as an investment vehicle and a store of value.
The announcement had an immediate effect in the crypto market, as many of the top 100 tokens saw a sharp increase in the price.
Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the recent event and its effect on Yearn.Finance’s token, YFI
1. Large Transactions in YFI reached its highest volume in a month
After reportedly receiving ‘death threats’ from the decentralized finance (DeFi) community, Yearn Finance (YFI) developer Andre Cronje has dropped out of public view, with YFI price dropping over 20% within the following 48 hours.
On October 8, the price of YFI went as low as $12,750, but it saw a massive spike after the Square announcement. Following this event, the volume of transactions greater than $100k reached a monthly high.
As can be seen in the graph above, large transaction volume went from 2.03 thousand YFI’s on October 5, to 13.93 thousand YFI’s October 8, with an aggregated value of $216.25m. This represents a 5.86x increase.
2. Perpetual Swaps Open Interest confirm the Upward Trend
As can be seen in the graph above, YFI’s perpetual swaps open interest is increasing along with the price. This trend suggests a bullish pattern, as more participants are entering the market, with an aggressive buying nature.
Today, the dollar amount in outstanding contracts reached its highest number ever, with $27.9 million.
3. YFI Exchanges On-chain Flows recorded its highest volume ever
Exchange total flows sums the volume of YFI entering exchanges plus the amount leaving exchanges. This indicator provides a strong signal about the activity in an Exchange
On October 8, the total volume exchange flows of YFI reached a new high with 2.67 thousand YFI, but more importantly the volume of YFI leaving exchanges also reached a new high. An increase in the flows of money out of an exchange could be a sign that traders are taking gains, simply pausing or transferring funds to a different vehicle.
Bonus Analysis: Aave Token Migration
An on-chain Analysis of AAVE (LEND)
DeFi lending protocol Aave started the migration from the LEND utility token to its new AAVE governance token. The migration had originally been proposed in the Aavenomics token economics upgrade paper and was recently approved through governance with 100% of addresses voting “Yae,” or in favor of the proposal. LEND holders will receive 1/100 AAVE tokens for every LEND token that goes through the migration process.
The anticipated protocol upgrade already had a strong impact on-chain as whales appeared eager to migrate their tokens. As can be seen below, LEND large transactions (greater than $100k) recently reached a new all-time high on October 5
While large transactions spiked a few days after the migration, address activity picked up right away. The total number of active LEND addresses reached 2.66K, the third highest in 2020, the day after the token migration started.
Additionally, zero balance addresses — addresses that transfer out all of their tokens in a given day — spiked to over 2,000 the same day. This points to the likelihood of a large percentage of LEND holders transferring their tokens to receive the new AAVE token.
