GM, this is your Daily Bolt briefing
It can be hard to stay optimistic in bearish times. Whether prices are rapidly dropping or just not moving much at all, it’s important to keep sight of what is to come. In this edition, we’ll provide you with some info around primary catalysts for the next Bull cycle, specifically relating to the halving and U.S. regulatory environment.
We’ve also included some notes on f(x) Protocol, which aims to provide a decentralized stablecoin by using a dual token system consisting of fETH and xETH.
Over and out ⬇
1/ Steady Lads – Catalysts for the Next Bull Run?
Preview: Justin, Taiki, Jordi, and Alex discuss FTX’s asset liquidation, regulation, friend.tech, and more! Click here to listen to the full episode (56 mins).
Read our Note (7 mins) and save 49 mins.
Justin shares that he attended the All-in Summit in Los Angeles where he heard talks from Brian Armstrong, Elon Musk, and Ray Dalio.
Alex discusses the large amount of supply entering the market, detailing FTX estate’s assets and planned liquidations.
Jordi talks about the potential impact of a billion dollars of SOL being sold quickly.
Jordi asks what catalyst might turn the market bullish again, suggesting that the Bitcoin halving could be a possibility in 2024.
Taiki asks if the halving cycles in Bitcoin still have the impact they once did, and what they think about Bitcoin’s price in 2024 and 2025 in line with these cycles.
Justin says that the halving doesn’t have a significant impact on the market and suggests it’s more about the narrative than the actual supply change. He says that other factors like regulatory clarity will be the main drivers for market growth.
Alex focuses on the financial aspect, saying that from a pure flow perspective, halving Bitcoin’s annual inflation could potentially bring billions into the market. He compares this to the potential impact of an Ethereum ETF.
Jordi says that the halving still has an impact and suggests that the four-year cycle in crypto is natural. He mentions his discussion with Olaf from Polychain, highlighting that the market moves in cycles based on collective behavior.
Alex mentions Ethereum’s upgrades, saying that they initially caused price pumps but eventually faded, questioning if Bitcoin’s halving will sustain a price boost.
Jordi discusses the ETH/BTC ratio and introduces the idea of “community money,” suggesting that the ratio might reflect the financial well-being of the crypto community.
Alex says that altcoins have a stronger correlation to Ethereum than to Bitcoin, adding empirical weight to the “community money” thesis.
Jordi is optimistic about the future demand for both Bitcoin and Ethereum but says that people first need to become comfortable with digital assets. He mentions that improvements in security and user experience are required.
Taiki discusses the future of DeFi and NFTs, suggesting that the next bull market will require real-world use cases beyond speculation. He mentions that being paid on-chain might be a catalyst for this.
Jordi says that he doesn’t think the U.S. is lacking in understanding the power of the dollar and its potential advantages in the world of DeFi. He says there’s a geopolitical game being played, especially in how the U.S. chooses to target certain protocols. He says that significant change in U.S. regulation will likely come from citizen demand, which will grow as DeFi products improve and gain broader adoption.
Justin questions the recent rumors about CZ from Binance potentially facing criminal charges related to Russia, asking whether this action is motivated by real issues or if it’s part of a larger regulatory strategy.
Alex says that sacrificing innovation in the DeFi space might be a strategic decision by the U.S. to protect its citizens from potentially malicious schemes. However, he feels this could be short-sighted as DeFi, particularly in dollar-denominated assets, could bolster the U.S. economy and its global influence.
2/ The Edge Podcast – f(x) Protocol
Preview: DeFi Dad and Nomatic are joined by Kmets and Crouguer to discuss Aladdin DAO's f(x) protocol, leverage, stability, and more! Click here to listen to the full episode (55 mins).
Read our Note (11 mins) and save 44 mins.
f(x) Protocol is a dapp that creates a new class of decentralized low volume assets paired with a new leveraged long $ETH perpetual token.
Aladdin DAO is a decentralized builder and incubator of cutting-edge DeFi protocols.
Guests Kmets and Crouguer are Core Contributor at Aladdin DAO.
Crouguer says Aladdin DAO initially served as a curation council and eventually pivoted to an investment DAO. He mentions the influence of the Curve ecosystem in Aladdin DAO’s journey and mentions that they decided to build protocols they’d want to invest in due to the thin investment opportunities.
Crouguer explains that Aladdin DAO has gone through different iterations and eventually focused on building protocols, first with Concentrator. He mentions two more products they developed: CLever, which adds leverage to convex bribing, and f(x) Protocol, which deals with stables and leverage, moving beyond the Curve ecosystem.
Nomatic asks about the correct pronunciation of “f(x) protocol.”
Crouguer shares that he decides on pronunciations based on his own perspective, influenced by his degrees in physics and electrical and computer engineering. He’s committed to his way of pronouncing it, either as “f(x)” or “F at X.”
Kmets says that people have referred to it as both function protocol and f(x).
Nomatic asks what f(x) is and its underlying motivations, mentioning Aladdin DAO’s history of building products they want to use themselves.
Kmets mentions the banking crisis on March 13th, 2023, which had a significant impact on centralized stablecoins like USDC. He says that decentralized stablecoins performed better during the crisis, setting the stage for the creation of f(x).
Crouguer explains the limitations of existing decentralized stable coins and introduces the concept of f(x). He explains that f(x) aims to create a scalable, decentralized stablecoin by pooling everyone’s collateral into a single Collateralized Debt Protocol (CDP). The system would involve two types of participants: fETH holders and xETH holders.
fETH acts like a stablecoin but with limited exposure to ETH volatility, while xETH serves as a leveraged ETH token that absorbs most of the volatility. The protocol aims to benefit both groups, with xETH holders shielding fETH holders from high volatility and fETH holders providing $xETH holders with that same volatility.
DeFi Dad asks for a high-level overview of alternatives to $fETH and $xETH in the current market. He mentions that decentralized perps exchanges are an option but mentions the high funding fees and risk of liquidation as drawbacks.
Kmets explains that $fETH mimics holding 90% of a decentralized stable coin like LUSD and 10% of $ETH, but all in one composable token. Kmets says that unlike with perps, $xETH does not have funding fees. He adds that you can’t control the leverage with $xETH, leaving room for Crouguer to elaborate.
Crouguer says that $xETH is a novel product in the market, with no similar Options available. He highlights that $xETH allows for long-term holding without incurring funding fees, making it different from traditional perps. He says that the risk of liquidation is very low with $xETH, making it more appealing to people who would normally not consider using leverage.
Crouguer highlights that with $xETH, users don’t have to worry about short-term price fluctuations in $ETH and can hold the token indefinitely without panicking. He says that the token eliminates the need for emergency transactions, which could be costly due to high gas fees, thus making it a safer option for non-whales.
Kmets says that the demand for their protocol is healthy, with a collateral reserve fluctuating between 150-160%, indicating stability even amid $ETH price drops. He says that $xETH can be attractive both in bear and bull markets, as it allows investors to dollar-cost-average into an $ETH position at a larger discount than regular $ETH. This makes $xETH potentially more lucrative when the market recovers.
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