Crypto Research

HOW WE GOT HERE Looking back over the past month, we found ourselves stuck in unusual stasis. Macro risks were escalating, and negative seasonality was taking effect, while at the same time, the potential for positive industry-specific tailwinds were knocking on the door. This strange equilibrium led to a decoupling from macro variables, with volatility approaching historical lows. _Source: Velodata. app_ Our near-term bullish view was predicated on one or...

SCALABILITY PROBLEM Transaction fees on Ethereum have jumped to hundreds of dollars during times of high activity, rendering the mainnet unusable for anyone without deep pockets. Ethereum can only process 7-15 transactions per second, while centralized networks like Visa can scale up to over 65k tps. Since network fees function similarly to a road with a fluctuating toll, the more congested and in demand Ethereum’s rails become, the higher the...

WEEKLY RECAP Funding levels have rebounded significantly, rising nearly 4x from last week to reach $211m this week. Half of the funds raised came from industry veteran BitGo’s $100m series C round, our deal of the week. Web 3 & NFTs saw a significant jump in funds raised, with companies like ZTX and Port.3 looking to utilize blockchain technology for novel use cases. Infrastructure continues to be the main focus of investors, contributing $174m...

MACRO HAS BEEN WINNING THE BATTLE Last week, we advanced the idea that the recent decline in volatility might be traced to two competing forces: (1) positive industry-specific tailwinds and (2) negative macro headwinds. Additionally, the recent dip in macro correlations could be attributed to unique catalysts, notably the BlackRock ETF application. Our thinking was that without further industry-specific catalysts, traditional macro correlations would likely return. As evidenced by the...

WHAT IS LYBRA FINANCE? Lybra Finance is a lending protocol built on Ethereum that utilizes liquid staking derivatives to allow users to borrow against their staked ETH. When depositors supply staked ETH, they can mint eUSD, Lybra’s interest bearing stablecoin, at zero cost, improving capital efficiency and providing interest income. INVESTMENT THESIS The investment thesis of Lybra is predicated on two main points:Lybra's Product-Market FitGrowth of Ethereum Staking _LYBRA PRODUCT-MARKET...

WEEKLY RECAP Funding levels remain muted, rising $9m from last week to $58m this week. Most funds raised came from the DeFi and Infrastructure verticals, with DeFi seeing a jump in interest since the previous few weeks. The largest raise of the week came from the DeFi category, with Liquid Staking provider Helio protocol receiving $10m from Binance labs to expand to Ethereum-based staking. There were also a few strategic...

MACRO HEADWINDS VS. IDIOSYNCRATIC TAILWINDS In our prior notes, we highlighted the market's prevailing sideways trend. Over much of the past month, both BTC and ETH have exhibited remarkable stability, moving within a narrow range. Their realized and implied volatilities are nearing all-time lows. _Sources: Glassnode, Fundstrat_ We've also emphasized the waning correlation between Bitcoin's daily returns and macro assets such as tech stocks and the US dollar index. These...

WEEKLY RECAP Crypto funding seems to be on vacation as total funding fell on a weekly basis to $36 million compared to $157 million last week. Deal count followed suit, falling to a measly 7 deals, bringing total funding and deal count to their lowest weekly levels since the first week of 2023. Of the five deals with disclosed funding amounts, all fell within the $0-10 million range. Infrastructure was...

Today we discuss rates, correlations, but most importantly the increasing likelihood of a BTC spot and ETH futures ETF hitting the market this year. For our latest Crypto Strategy note click here.