GM, this is your Daily Bolt briefing.
In this edition, we’ve included a complete report on the current state of DeFi currently. From GMX v2 and how other onchain perps trading platforms compare, to other trends and airdrop opportunities, read our notes below to gain some important insights.
Speaking of insights; today we released our Analyst Insights on Render (RNDR). Render is a trending project that is capitalizing on the rapidly rising demand for GPUs from advancements in AI and AR/VR. Read our report to get in-depth analysis of Render’s catalysts and potential for upside, but also on the competition the Render Network faces and how this could affect RNDR.
This is what our latest product, Analyst Insights, brings to the table. We give you the latest information and in-depth news on popular projects and narratives. This information can help you decide if you’re bullish or bearish, and if taking a position is even a good idea.
Stay alert, stay informed⬇️
Taiki Maeda - GMXv2, EIP-4844, and the Next Big DeFi Catalyst
In this episode of Taiki Maeda, Host Taiki Maeda provides the latest developments in GMXv2 & EIP-4844. Read our notes below to learn more.
Background
Taiki Maeda (Host) - Independent Educator & Founder of Humble Farmer Army
Humble Farmer Army - DeFi research & strategies that give you an edge
Taiki's Birthday Curse, L2 Tokens, Timing, and $ARB Business Model
Taiki assesses the current state of the crypto and DeFi markets. He observes that the markets have been choppy with not much happening. In such environments, he believes people look for upcoming events or news that could potentially influence the market price. He underscores the importance of being aware of future market events and aligning one's strategy accordingly.
Taiki discusses his 'birthday curse,' remarking that historically, major crypto market events have coincided with his birthday (May 15th). He notes that on his recent birthday, the market seemed to be on the verge of correcting. He also reflects on the previous years when significant market events took place around his birthday.
Taiki suggests that the market may move sideways for the rest of 2023, which he believes is a plausible scenario. He points out that the past two months have not been great, contributing to an overall sense of apprehension in the crypto community.
Despite the sideways market trend, Taiki believes individual projects with strong fundamentals and positive news catalysts can still perform well. He points out that the Bitcoin volatility index is declining, which may suggest a reduction in market activity.
Taiki then discusses potential narratives that could impact the crypto market, starting with a network upgrade to Ethereum. Based on past events, he notes that such upgrades usually influence the price of $ETH. He anticipates that the forthcoming Cancun upgrade, which includes EIP-4844, will significantly improve the fundamentals of Layer-2 tokens like Arbitrum and Optimism.
The EIP-4844, also known as Proto-Danksharding, is expected to lower Layer-2 transaction fees by a significant margin, making it cheaper for users to interact with these networks. Taiki believes this upgrade could improve the profitability of Ethereum's Layer-2 networks.
Despite the lack of direct profit capture by tokens like Arbitrum and Optimism, Taiki thinks that this development could positively affect their value from a narrative perspective. He emphasizes that narratives play a significant role in shaping short-term crypto trends, even if they might not align with longer-term fundamental valuations.
Taiki mentions his interest in the Arbitrum DeFi ecosystem, especially with the recent meme coin craze. While unsure if the meme coins have peaked, he suggests that their popularity might help reduce gas fees.
Taiki explains his belief that more demand will shift towards Layer-2 solutions due to their cost-effectiveness in transactions. He speculates that incentives, such as token airdrops, could boost DeFi activity in the Arbitrum ecosystem.
He acknowledges that while he may be making predictions early, it's difficult to precisely time market movements. Therefore, he positions himself in anticipation and waits for market repricing, even if he's a month early.
Taiki shares his view that Arbitrum, despite being considered expensive at a ~$1 billion market cap (1 $ARB = $1.15 as of May 2023), could be a top performer among the top 50 projects leading up to the Cancun upgrade. He speculates that Arbitrum's ranking could improve, entering the top 20 or 30 by market cap.
While acknowledging that valuing an L2 solution like Arbitrum in a market lacking on-chain activity is challenging, he suggests that it could be trading above $2 or even $3 by the end of the year, potentially reaching a fully diluted valuation of $30 to $40 billion.
Taiki brings up the business models of Layer-2 solutions and highlights the security benefits inherited from Ethereum, reducing the need to emit tokens to secure the network. In contrast, competitors like Solana and Avalanche need to inflate their token supply to compensate their network validators.
He considers the potential for Arbitrum to inflate the $ARB token by 1-2% per year and sell it to $ETH, effectively making Arbitrum Layer-2 fees zero.
Taiki concludes the topic by stating his expectation that the market will eventually appreciate the favorable economics of Layer-2 solutions, and recommends Arbitrum as a potential long-term investment, even though he himself sold his Arbitrum tokens previously, reallocating the profits to on-chain perps.
GMXv2 Update, Testnet Release, Timeline, and Taiki's Significant Investment in GMX
Taiki starts by sharing that he had put together a thesis on GMX V2 prior to the testnet release. He has been involved with GMX and GLP for over two years and is familiar with the market dynamics. He also mentions that he has increased his stake in GMX.
He believes that GMX V2, due to be released soon (GMX V2 testnet launched on 18th May 2023, and noodles believes that GMX V2 will be launching in June 2023), will be the next significant DeFi innovation. He also thinks that people often incorrectly equate the price of DeFi tokens with their fundamentals or development progress.
Taiki explains that even when the token price falls, it doesn't necessarily mean that developers aren't working. It could simply mean that fewer people are using the platform, which doesn't deter long-term developers from continuing to build their products.
With GMX V2, Taiki mentions, they will implement Chainlink low latency oracles, potentially improving the trading experience. The significant change from GMX V1, according to him, is the addition of isolated pools and the gradual phasing out of GLP V1.
He elaborates on these new isolated pools, comparing them conceptually to Uniswap V3. These pools will allow for more synthetic trading pairs and more flexibility.
Taiki speculates about potential incentives for liquidity providers using the tokens allocated to the GMX team from the Arbitrum Airdrop (GMX protocol received 8 million $ARB tokens).
He perceives the change to GMX V2 as an improvement, stating that the current GLP model is functional but doesn't scale well. Taiki suggests that the release of GMX V2 might allow $GMX to enter price discovery.
He then talks about the timeline of the V2 release and his conversations with noodles, a developer building Rage Trade. Rage Trade is building GLP V2 and will possibly allow for a GLP-style basket built on GMX synthetics.
Taiki sees limited appeal for levered GLP vaults or delta-neutral vaults, despite the composability of DeFi.
He then talks about the competitive advantage of GMX, which he believes is the liquidity it offers. Even if GMX is forked, the GLP will always have the most liquid market.
As for the launch timeline, noodles suggests that GLP V2 will be released around June 2023. Taiki finds $GMX to be an attractive asset given this timeline, despite potential delays in GMX V2.
He mentions that he quadrupled his $GMX exposure at around $60 for a multi-month swing trade. He is confident in holding the token for several months, given the fundamental advantages of on-chain perpetuals.
Taiki comments on the recent price decrease and yield reduction of GMX, stating that it's not a big issue. He believes the narrative around the upcoming GMX V2 is more important than whether GMX yields 3%, 4%, 5%, or 6%.
Defensive On-Chain Perps: Tailwinds & Key Metrics in LVL, GMX, GNS, MCB
Taiki first discusses the potential tailwinds for the DeFi industry, referencing platforms such as Bybit and Binance. He suggests that increased regulatory scrutiny might push more users towards on-chain perpetual contracts, creating demand. However, he also admits to the uncertainty of this trend.
Taiki argues that when market conditions are uncertain, crypto investors typically become more selective about the assets they hold, with a preference for those that generate yields. He mentions $PEPE as an example of a token that investors may not want to hold when its value is declining.
He mentions Level Finance ($LVL) as an example of a token that inflates daily, indicating that he is not a fan of such assets due to the uncertainty surrounding their organic volumes. He mentions Arthur Hayes, Co-founder of BitMEX, is rumored to be an investor in Level Finance, but Taiki doesn't seem overly enthusiastic about this.
Taiki predicts continued growth for Total Value Locked (TVL) in DeFi, especially in yield-bearing assets such as $GMX and $GLP, despite the market's uncertainty. He notes the yields for these have come down but believes this trend will stop.
He provides critical insights on Gains Network's $gDAI token, expressing his concerns about the lock-up period and its impact on composability. Despite this, he acknowledges that the token's volumes are growing.
Taiki mentions MUXLP and observes that while its protocol income may have stagnated, its TVL is consistently increasing. He believes this is a positive development despite the market uncertainty.
He compares on-chain perps to a risk-off strategy, stating that TVL in on-chain perps tends to increase during times of market uncertainty. Taiki compares on-chain perps to consumer staples in the stock market, considering them a defensive sector.
Taiki also discusses Liquid Staking Derivatives (LSDs) and their appeal during uncertain market conditions due to their stable yields.
Taiki mentions the upcoming GMX V2 upgrade, noting it has been in the works for over a year and has been thoroughly audited. He believes that if the team behind GMX is trusted, the upgrade could be considered the next major innovation in DeFi, comparing it to Uniswap's successful V2 and V3 launches.
$GMX Price, Clones Analysis, and Hyperliquid Airdrop Insights
Taiki believes that the price of $GMX was stuck at around $55 to $60 in 2022.
He suggests that, at the beginning of the year, the price managed to exceed this and predicts there will be a new range below $100 until the launch of GMX V2.
Taiki considers that the launch of GMX V2 and its associated metrics will be critical to the price discovery of $GMX. He argues that investors will need to place faith in the team behind GMX.
Reflecting on trading tactics, Taiki mentions that they managed to break the $60 infinite sell wall, and with the upcoming GMX V2, he anticipates an influx of buyers at the $60 mark.
He admits to being one of the buyers at this price and suggests that even though the price could go lower, the launch of GMX V2 should offer market optimism and reasons to buy the dip.
Reflecting on the crash of FTX, Taiki notes that after a 27% drop, $GMX recovered by 35% the following day, demonstrating substantial support for $GMX in the $30 to $40 range.
He believes that similar support will be seen for GMX if V2 is on the horizon, and anticipates buyers within a certain range.
From a trading and investment perspective, Taiki sees $60 as a good entry point for buying GMX due to limited downside risk and potential upside.
Taiki also mentions the forks of GMX and speculates that if GMX V2 is a superior product, it could affect the value of the GMX clones. However, he also thinks that the crypto market's behavior will likely drive the clones to outperform if the value of $GMX increases.
He is betting on $GMX but also has stakes in other areas, such as MCB.
Taiki talks about the benefits of sticking with one investment, such as $GMX, to maximize sleep-adjusted returns, suggesting that focusing on $GMX, staking it, and selling higher later while researching other protocols might be a viable strategy.
Taiki foresees the launch of GMX V2 providing a boost for the token and expects future buzz around it on social media. He is confident that $GMX will be a solid asset to hold for the next few months.
Taiki briefly discusses Hyperliquid, an order book perpetual DEX built on its own L1 (Cosmos stack). He mentions that Hyperliquid’s mainnet closed alpha is live and that the product is promising.
He notes that the platform is less liquid than GMX and has higher fees but offers a daily listing of assets.
While Taiki isn't certain about a potential airdrop for Hyperliquid, he suggests it might be worth farming given the confirmed token and the ability to deposit and withdraw $USDC to and from Arbitrum.
He doesn't typically promote leverage trading due to ethical dilemmas but sees no issue with sharing referral codes for airdrop farming purposes, provided they're used responsibly.
Hyperliquid’s Airdrop Farm
Taiki displays mixed feelings about sharing referral codes for leveraged protocol exchanges due to ethical concerns around promoting leveraged trading. Despite this, he sees sharing codes as acceptable for airdrop farming.
Taiki has a limited number (3 referral codes/weekly) of referral codes for Hyperliquid that reset weekly on Thursdays, so he's gathered codes from other community members to ensure broader availability. Even if one is not interested in leveraged trading, he hints that this could be a good platform to potentially be eligible for an airdrop after making a few trades.
Taiki mentions that leverage trading could be beneficial on a good platform. He proposes that viewers might want to conduct a few trades, accumulate some volume, and perhaps become eligible for a token, even if they aren't particularly interested in the platform.
Taiki: Closing Thoughts
Taiki expresses his preference for Arbitrum and Optimism, but he's particularly focused on the Arbitrum ecosystem due to its superior metrics and potential incentives.
Among DeFi native projects, Taiki is most interested in the perpetual contracts sector. He is particularly excited about projects being built on top of Arbitrum, such as on-chain perps on Arbitrum.
Taiki highlights his favorite platforms: GMX, Gains, and MCB MUX protocol. He states that it's perfectly fine not to buy these protocol tokens, and instead provide liquidity for these types of assets.
Taiki anticipates that in the current market, capital is likely to flow towards on-chain perps as it is one of the best places to park one’s capital. Consequently, he expects the fundamentals of these platforms to improve, as increased liquidity will allow these platforms to accommodate more customers.