Crypto Alpha Recap
11.04.2023: Shapella upgrade for ETH. CPI on Wednesday. Aevo is live. OpenSea Pro overtakes rival Blur. Sei Network has closed a $30M funding round.
This week all eyes are on Shapella and CPI, with both on April 12. The upgrade is expected to enhance the ability of institutions and risk-averse individuals to manage their capital more effectively. Consequently, this could increase accessibility to the yield offered on staked ETH. To date, just over 18M ETH (~$35B) has been staked, representing 15% of all ETH. LSD-related risk assets have been mixed, with the overhang of a potentially large set of withdrawals hanging over the market. Lido is expected to delay access to the withdrawal function until next May. Their staking pool comprises 177,342 validators, represented by stETH, holding over 31% of the entire supply of staked ETH.
Macro: The Cleveland Federal Reserve anticipates that tomorrow's Consumer Price Index (CPI) inflation figures will show a +5.22% YoY (compared to the previous +5.99%) for the headline number and +5.66% YoY (compared to the last +5.53%) for the core number. The headline number is projected to decrease significantly compared to the prior figure, while the core number is expected to remain high (the Fed prefers the core metric). The sustained elevated core inflation may lead to speculation about an additional 25 basis points rate hike in May. It is worth noting that last month, the Fed's preferred measure of inflation, PCE, rose by less than foreseen + posted the smallest increase since October 21.
Net short positions in S&P e-mini futures among hedge funds hit their most bearish level since November 2011 last week. And tech stocks are in focus.
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The biggest EV are airdrops
You should have seen plenty of threadoooors lavishing about airdrops and farming engagement by now. But it would be foolish to deny that airdrops aren’t an easy way to grow your stack. Being early often pays, and playing this niche strategically is a no-brainer. It’s something I deployed myself after losing most of my holdings in a Binance exploit back in the summer of 2021. Being short on liquidity forced me to think differently as it required little capital, limits downside (only wasting fees) and has tremendous upside. It was shortly after I got the infamous Paraswap airdrop - twice. It also taught me a precious lesson holding it to the bottom: governance tokens are memes. Anyway, since the zkSync token is still a year out, there is plenty of time, and I feel obligated to share it too. Like Arbitrum, at least one snapshot (lite > era) is taken by now, and I believe multiple ones will be weighed in.
General assumptions for all plays:
Everything that does make money will eventually have a token. After all, it’s the only option for most teams/investors to cash in on their investment.
The likelihood of heavily funded teams (zkSync $458M, LayerZero $293M, Starkware $282M, etc.) is exponentially higher.
Never bridge below 0.1 ETH. Why? Because the majority is below that threshold. It could also act as a sybill protection mechanism. Second, you need to create volume anyway. The 0.1-0.2 range makes sense; more is always better.
The best plays combine a baselayer (e.g., zkSync) and a project without a token (e.g., SyncSwap). Why? See reason number 1. In pursuing the first, you might get lucky with the latter too.
Don’t bother with testnets if there is a mainnet. Why cheap out on fees if you expect a 4-5fig airdrop? Testnet can act as a multiplier only if a mainnet isn’t live. Exceptions are Linea, Scroll, or Fuel, where only a testnet exists.
You don’t need to be a gigachad brain figuring out a framework for success. Arbitrum, Optimism, or Paraswap have good guidelines as it is always the “same, same, but different.”
A typical starter pack for minimum requirements would look like this: multiple swaps, volume >1k, interacted with various smart contacts, LP provider, NFT mint/trade, active over a consistent period: 3-5tx per month, the wallet has a DeFi history (Arbitrum, Matic, etc.). That’s it.
Don’t deploy blindly; smart contract risk is real. Some protocols don’t have audits (no, high TVL is not an indicator) yet, which is a common problem if you are early.
Understand the business case of a protocol. How do they make money? What kind of fees are they generating?
Take the perspective of the protocol. Would you reward a user who swapped once $100 and is LPing 50 bugs? Probably not.
The points above are universally applicable no matter which L1 or L2 you play. Starkware and LayerZero work the same, and there are already plenty of threads on CT about what to do. I did my first transaction in October 2021. Back then, the only thing was ZigZag Exchange, which resulted in my first zkSync ecosystem airdrop. If you already deployed funds before Era, you must bridge your lite assets via Orbiter Finance (another airdrop candidate) since the official bridge only supports deposits from ETH.
If you didn’t onboard yet, I recommend the following:
Use the official bridge first: https://portal.zksync.io/bridge (only ETH mainnet)
If you bridge from Arbitrum, use https://www.orbiter.finance
DEX: Swap on https://syncswap.xyz/ (no token), deploy USDC/ETH LP. The current loyalty program drives more volume towards it, and Mute / Velocore TVL is getting sucked (both got tokens anyway)
Supply ETH on https://app.nexon.finance/ (no token); the first lending protocol live on Era mainnet.
Mint / buy NFTs from https://mintsquare.io/
I also gambled in the Space pools (https://app.spacefi.io/#/farm), verdict: The IL is not worth it.
The list of new dapps will shoot up like mushrooms over the coming weeks. Follow the official zkSync channel. Good luck. And do the Starkware and LayerZero tasks too.
Meme of the Day:
Arthur Hayes's new fund Maelstrom plans to outperform ETH and BTC.
SBF declared Alameda not auditable. Also, he lost track of $50M and then 'joked internally' about it. Meanwhile, FTX billed $30M by bankruptcy lawyers and advisers.
According to Delphi Digital, the total funding for Web3 gaming investments fell 30% from Q4 2022 to Q1 2023.
Russia has become 2nd most powerful BTC miner in the world.
Winklevoss twins recently lent their Gemini cryptocurrency exchange $100M to support the business amid the market downturn.
The Shapella network upgrade (ETH Withdrawal) will activate on the Ethereum network at epoch 194048, scheduled for 22:27:35 UTC on Apr. 12, 2023.
Aevo is live. It’s an option’s AMM that currently allows users to trade ETH options built by the Ribbon team.
MakerDAO’s endgame plans will restructure protocol entirely - many are left feeling uneasy.
GMX proposes to make Chainlink oracle of GMX v2.
Solend V2 phase 1 is live with borrow weights, TWAP oracles, and outflow rate limits enabled on the Solend contract.
OpenSea Pro overtakes rival Blur in key metrics as volumes and addresses surge.
Solana reveals low-cost NFTs with state compression. Thanks to state compression, users can mint one million NFTs for roughly $110.
Adidas ramps up NFT strategy despite the bearish climate.
Sushiswap was exploited due to an approval bug and lost over $3.3M. Recovered 100 ETH so far.
Instagram digital collectibles are to be shut down by April 11th.
Arbitrum's proposal to return 700M Arb is live.
Mysten Labs says there is no planned SUI airdrop.
Magic Eden Bitcoin launchpad is live.
Bitget, the derivatives exchange operator, announced a new $100M venture capital fund focused on web3. The fund will invest globally, with a focus on Asia.
Gaming-focused venture capital firm Bitkraft raised $220.6M for its second "token fund."
L1 Sei Network has closed a $30M funding at an $800M valuation.