RESEARCH
BEQUANT Crypto&Coffee
Bitcoin, as well as the rest of the market made a strong recovery after the rout that ensued late last week, alongside a similar rout in equities market, resulted in broad based collapse of the sentiment. As a result, the contango term structure was temporarily crushed and Bitcoin traded below $10,000. Similarly, in the options market, aggressive unwind saw the skew profile shift higher, indicating bearish market positioning. Interestingly, both 3- and 6-month skew profile remained largely unchanged, while Bitcoin’s equivalent edged higher. This is likely linked to some unwind of collateral/leveraged positions. The silver lining to the aforementioned collapse is that the in focus DeFi will yet again benefit from the temporary collapse in Ethereum gas fees and the vicious loop of chasing higher yield will resume yet again until the pressure cooker can no longer hold.
It was DeFi related news that also dominated the events over the weekend. Specifically, Chef Nomi, the mysterious founder of SushiSwap—the latest decentralized finance protocol to flourish above the thriving canopy of this summer’s DeFi craze—has cashed out. Over the weekend, the self-described “head chef” withdrew 2.5 million SUSHI from the decentralized exchange in exchange for 18,000 ETH—worth about $6 million. He also removed 20,000 ETH, worth another $7 million, from the same liquidity pool. Since Chef Nomi withdrew the liquidity for the token—in other words, reduced the amount of SUSHI available to trade for ETH on SushiSwap—the price of a SUSHI has more than halved in the past 24 hours, from about $5 to $2.35. In a Twitter thread, Chef Nomi explained that he liquidated all his SUSHI because he cares about the community and wants to hand things over to other developers. Suspicious? Maybe, but as they say – innocent until proven guilty.
Still, the crypto community is usually quick to judge and given the numerous examples of exit scams from the very recent Initial Coin Offering (ICO) era, one can see why. However, to add to the latest drama, it was subsequently noted that Chef Nomi transferred his control to the CEO of crypto exchange FTX. Bankman-Fried tweeted that he will devolve power to the community once more by transferring control to a multi-sig address controlled by leaders elected by the community. "After that -- Sushi shall be back in the community's hands". You really can’t make this stuff up even if you tried, but the world of crypto and DeFi, works in mysterious ways.
As controversial as the move may be, the sell off offers an opportunity not only to re-evaluate outlook on the token valuation, but also that of Serum (SRM), the decentralised exchange. The new flippening theme may well have gotten a new boost and SRM is sure to put up a good fight against other exchange tokens that carry much higher valuation.
In related news, as the decentralized finance (DeFi) craze continues, growth in the supply of bitcoins tokenized on Ethereum is keeping pace, with one company – Alameda Research – gobbling up nearly 70% of wrapped bitcoin (WBTC) minted in August. CoinDesk writes that Alameda’s accumulation of 14,654 WBTC last month came after the quantitative trading firm lobbied in July for an increase in the amount of collateral placed to earn interest on the Compound platform from 0% to 40%. Notably, the firm had not minted WBTC prior to August.
In other news, the Dash platform will be introducing protocol versioning and other new features in its latest update. Dash announced its fourth update over the weekend. The platform normally releases new functionalities every six weeks, so the next update is expected between October 6 and 20. Dash said it is adding versions of its protocol to make it easier for developers to begin transitioning to a testnet and mainnet.
