Patterns in DeFi: What Should You Be Keeping an Eye On?
MEV Blocker | Human Capital as an NFT? | Current Market Narratives
GM, this is your Daily Bolt briefing.
In today’s latest edition, we’ll be briefing you on the latest you need to know on the most relevant topics in crypto today, including utilizing MEV Blocker to mitigate onchain arbitrage, tokenizing human capital, and more.
If you’re looking to gain key insights and strategies in this current market environment, continue reading; today’s Note of The Day includes DeFi farmer Taiki Maeda’s latest market thoughts, what he’s bullish on, what he’s avoiding, and more.⬇️
Stay alert and informed.
1/ On the Brink Ep. 417 - Eric Wall on Eric’s Orb
Preview: In this episode of On the Brink, Nic Carter and Eric Wall discuss his project, the Orb, as an innovative NFT concept that allows weekly questions to the person associated with the Orb. Click here to listen to the full episode (76 mins).
Read our Note (2 mins) and save 74 mins.
Georgios Konstantopoulos, a layer 2 researcher, played a role in inspiring Eric Wall's Orb concept.
Eric Wall, inspired by NFTs and World of Warcraft wanted to create a utility-based NFT for real-world situations.
Orb allows investment in someone's human capital and entitles the holder to ongoing services from a specific person.
Orb focuses on providing specific value to one user, making it easier to understand the value received.
To use the Orb, buyers sign in with their Web3 wallet, bid on the Orb, and ask a question up to 280 characters long.
Both the question and answer are hashed and put on the Ethereum blockchain for transparency.
2/ Alluo Twitter Spaces April 14th, 23 w Jeff
Preview: In this Alluo Twitter Spaces, host 0x_preacher (core contributor for product and marketing at Alluo) is joined by 0xec.eth (co-founder of Alluo), and Jeff (Head of Partnerships at ReveloIntel) to discuss the current market state and their experiences. Click here to watch the full episode (61 mins).
Read our Note (2 mins) and save 59 mins.
Here are some key takeaways:
Decentralized exchanges (DEXs) with a particular version are gaining traction due to partnerships and incentives for token locks.
Privacy becomes increasingly important as more businesses come on-chain and compete in data gathering and analysis.
There are popular privacy-focused protocols with use cases for high-net-worth individuals and institutions.
The Shanghai upgrade did not lead to a "sell the news" event.
Institutions may now have more confidence in staking Ethereum due to the upgrade, possibly driving the price increase.
Staking will become more decentralized as more institutions enter the space.
3/ Unchained Ep. 482 - Why MEV Will Always Be Controversial?
Preview: In this episode of The Unchained Podcast, host Laura Shin is joined by Justin Drake researcher at the Ethereum Foundation, and Uri Klarman CEO of BloXroute Labs, to talk about the concept of Maximal Extractable Value (MEV), nuances of MEV Blocker and more! Click here to listen to the full episode (68 mins).
Read our Note (8 min) and save 60 mins.
Here are some key takeaways:
The concept of Maximal Extractable Value (MEV) distribution is that; validators can extract maximum value by ordering transactions and seeing trades trading ahead of them.
MEV is the value generated by economic activity on top of an economic system, and the process by which it is extracted.
The concept indicates that if someone is attempting to purchase on UniSwap, there is a benefit in trading just ahead of it and then selling it soon after it occurs.
With the evolution of the MEV ecosystem, people can now identify where value can be captured.
Recently, a group of various MEV entities formed a group called MEV Blocker, which is trying to block MEV from being exploited.
MEV Blockers are saying that MEV exploiters have profited by $1.38 billion dollars from everyday users so far.
There is an equally important problem of enabling back running, which is to facilitate the extraction of MEV from a transaction so that it can be rebated back to the user.
Mev Blocker, Native wallet boosts, and OpenMev are all doing the same thing, but in different ways.
If you read these 3 Notes on Revelo Intel you would have saved: 3 hours and 13 minutes!
Taiki Maeda – State Of DeFi & NFTs – April 2023
In this Taiki Maeda video, Taiki discusses the state of DeFi & NFTs Report for April 2023.
Read our notes below to learn more
Shapella Upgrade Recap
The market behavior in crypto can sometimes be unexpected, as seen with the Shapella upgrade resulting in bullish outcomes for Bitcoin and Ethereum despite expectations of a bearish or neutral impact.
All About Positioning
Market sentiment in crypto can swing to extremes ahead of certain events.
Bullish news in crypto often leads to selling rather than buying.
Market positioning ahead of an event is more important than the event itself, and it's better to stick to a general strategy.
ETH/BTC & BTC.D
Taiki believes live withdrawals may introduce sell pressure, but demand for Bitcoin is high.
Taiki started as a Bitcoin Maxi but thinks it's important not to get caught up in a pure NFT mindset.
Taiki is bullish on the market but cautious and has a position in Curve’s LP token tricrytpo to hedge against Bitcoin dominance.
Echo Bubble Manifestation
The echo bubble suggests crypto follows four-year cycles with a pattern similar to the 2018 bear market in 2019.
A similar pattern is expected in 2023 with the market pumping into June and selling into May.
Crypto is a reflexive asset class dependent on how people feel, and it is recommended to de-risk investments by selling in April.
May Seasonality & On-chain Trends: Bear Market PTSD and Prioritizing LP Tokens
Institutional and larger players are increasingly trading crypto as it matures as an asset class.
Legacy correlation is important to consider when investing in crypto.
"Sell in May and go away" doesn't always hold true for crypto, but caution may be warranted in May.
Hedging or raising cash may be wise, LP tokens can reduce volatility, $GLP has performed well, and a long-term perspective is important.
GMX Synths V2
$GMX synthetics will enable more assets to be listed, including Solana, but will have isolated pools for each pair similar to Uniswap.
$GLP V2 may eventually be phased out, but it is not happening soon.
Hedging Strategies
Taiki is not bullish on the $AVAX to $ETH ratio and may switch from his Bitcoin hedge to $ETH.
He plans to use a short position in $AVAX against their collateral to protect their downside and limit their upside.
Taiki's strategy involves buying coins he likes and shorting assets like $AVAX to protect against potential losses.
Taiki is considering scaling into shorts on $AVAX after the Avalanche Summit on May 3rd.
He is hesitant to deploy capital into new projects like Benqi.
Trader Joe Updates
Trader Joe is doing well and benefited from the Optimum Token airdrop.
For Trader Joe to appreciate value, it needs to gain market share from other altcoins.
Taiki conducted an experiment comparing LPing on Trader Joe to LPing on Uniswap in Arbitrum $USDC ranges to determine its profitability.
Trader Joe is introducing revenue sharing with $sJOE and may implement automated liquidity strategies, which Taiki finds interesting.
Liquidity Book vs UniV3 Experiment
Liquidity Book 2.1 is a twist of Uni V3’s concentrated liquidity and it has capital efficiency and LP advantages.
Taiki conducted an experiment depositing on a single-sided pool on Trader Joe and Uniswap with a range of $1.00 to $1.45, and Uniswap proves more profitable.
Another experiment was conducted on April 3rd with a range of $1.22 to $1.40, and Uniswap again proves more profitable.
Taiki believes the design of Liquidity Book 2.1 offers significant advantages, which may explain why more money was made on Uniswap.
Why UniV3 LPs Make More Money
UniV3 sees a significant amount of trading volume, leading to higher fees for liquidity providers (LPs).
Many people in the crypto industry prefer to use UniV3 directly rather than aggregators to find the best price.
The trend may shift towards Trader Joe concentrated liquidity in the future, but they have not had much success with investing in it.
Liquidity Book 2.1 Innovation
Liquidity book 2.1 is an innovation in concentrated liquidity that compounds fees back into the pool where trades occur.
This feature distinguishes it from Uniswap v3, where fees are accrued separately.
Auto-compounding the fees back into the pool makes LPing more capital efficient and increases LP share as more trades happen in a certain range.
Trader Joe or liquidity book 2.1 is an LP optimization protocol aimed at increasing the efficiency of LP positions.
V2 of Trader Joe will implement a 25% fee, which could be promising but competitive with Uniswap's lack of revenue share. Introducing revenue share could make Trader Joe a multi-billion dollar protocol.
Altcoin Anxiety
Taiki discusses the current state of altcoins and the anxiety surrounding them, recommending buying coins one believes in to avoid stress.
The on-chain markets have been stagnant, possibly due to the $USDC and lack of retail, while Bitcoin dominance is up and there is a general sell-the-news mindset across the markets.
LSDs, $BTRFLY, $DINERO & UnshETH
LSDs have recently shown good performance, however Lido's pumping pattern and distribution phase ratio may not be reliable.
Dinero has introduced a new overcollaterized decentralized stable coin backed by Ethereum block space, incentivizing damage liquidity and building out liquidity on Curve using $CVX in their treasury.
UnshETH is building an index of LSDs to decentralize the value of the stack.
Investing in newer projects building on existing protocols may be more beneficial, and percentage growth should be considered when investing.
Pendle & Flashstake
Pendle and Flashstake are involved in trading yield and he does not own any of these tokens.
Pendle has benefitted from the LSD narrative and has gone up 10x from the bottom due to the team's continued building efforts.
Taiki believes that projects that have been dumped on but found product market fit is worth considering in a bear market.
Pendle and Flashstake have created a marketplace for yield tokens, allowing users to get yield up front and speculate on the price of yield tokens.
Taiki believes that these altcoins have potential, but there are concerns about sustainability, emissions, and the complexity of the platforms.
L2/Crosschain Apps
Option tokens and L2 native projects are potential areas of interest.
Taiki is not impressed with the fundamentals of most options token ecosystems.
Anticipates an options alt season part two after grants go live and protocols are incentivized.
GAMMA & UniV3 Optimizers
Taiki finds Gamma interesting and thinks it has potential as a UniV3 automator for LPs who lack experience.
Gamma could be used to create LP strategies as there are many V3 forks emerging with the Uniswap V3 license expiring.
Taiki prefers UniV3 and thinks it's better to side with experienced developers during a bear market. They plan to sell their current token and are drawn to Gamma due to its TVL and potential partnerships.
Unidex
Unidex is a token aiming to be a spot and props exchange aggregator, the platform allows leverage up to 10x and offers the best price execution.
The team doesn't have token allocation and only earns revenue from fees.
Unidex is live on zkSync and building an app chain on the optimism stack.
Taiki suggests using GMX instead of Unidex but recommends investing in micro-cap altcoins to get comfortable with risk and the altcoin market.
General DeFi Trends & Final Thoughts
Taiki dislikes Arbitrum/zkSync only projects and considers them to have low quality.
Established projects with a year or more of development behind them are considered to have higher quality, even if they were once thought of as dead.
The current market favors multi-chain projects with proven security against rugs and TVL.
Recovering from zero and non-believers selling out is seen as a healthy market chart pattern.
Taiki recommends LP tokens for portfolio stability and is in crypto for the long term, with a preference for altcoins over Bitcoin and Ethereum dominance.