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DEFI VORTEX
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BEQUANT Crypto&Coffee

Bitcoin continued to consolidate above $50,000, but it was Ethereum that radiated brighter as it approached the elusive $2,000 level. Specifically, market activity was dominated by call buying and similarly to Bitcoin, the open interest (OI) on Ethereum futures products rose to a new record high. However, the flow for Bitcoin for a lot more equally weighted and distinctly lacked the bullish sentiment which was in abundance elsewhere. Ethereum gas fees remain a “nuisance” for market participants but this is yet to derail the hunt for yield flow and with that, the number of Bitcoins locked on Ethereum network continues to creep ever so higher.

Over $41 billion is locked across the ecosystem, with Maker accounting for almost $7 billion. One particular project that has been gaining a lot of traction is Bancor (BNT), where the total value locked (TVL) has risen steadily since the introduction of an extensive liquidity mining program last year. The TVL now stands at $775 million, up sharply from around $80 million before the announcement last year. The latest update by the company features so called Vortex, function that allows one to borrow against staked BNT. All this meant that BNT rose to just over $6 and market cap of $550 million, while price/sales ratio is at 33x. But that will likely go down as more capital gets locked on the platform. After all, the spot price tends to move faster than the capital.

Looking elsewhere and while BNT has been steaming ahead, Kyber Network (KNC), despite the announcement in January relating to the planned updates, remains somewhat lost. To re-cap, the first major addition to new network, KNC will launch a brand-new liquidity protocol called the Kyber DMM — DeFi's first automated Dynamic Market Maker. Kyber DMM will provide important benefits to liquidity providers, allowing fully permissionless liquidity contribution from anyone and access to this liquidity by any taker (e.g. Dapp, aggregators, end users). 

Thirdly, to support the new architecture and increase the overall value of the network, a proposal to upgrade the KyberDAO and KNC to a new token contract will be made and voted on, with the aim to greatly enhance KNC token's governance power, create multiple streams of utility, as well as support new liquidity innovation. All of the above suggests that unless DeFi market place hits a brick wall and the growth stalls, KNC should benefit accordingly. However, pricing in positive news is not something that digital assets markets are known for, in part because the directional trading is very much trumped by quant/algo based. Also, momentum trading may be employed on Btc and Eth, and some other larger assets, but it is unlikely to have reached the rest of the market just yet.

Up until now, institutional market participants focused largely on Btc and Eth, but in a sign of things to come, CoinDesk reported that Goldman Sachs, ICAP, JPMorgan, and UBS have bought the first exchange-traded product (ETP) that offers exposure to Polkadot's (DOT) cryptocurrency. These banks and brokerages purchased small amounts of shares in Switzerland-based 21Shares' ETP. As such, while Btc may hold all the cards now, the competition will certainly heat up.

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