Ahmad Mustafa Kida
Data Analyst
Last Updated:
April 19, 2024
•
4 mins
DeFi Analytics 17th Apr 24
This week's edition of our DeFi Analytics report.
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Beacon Chain
Cumulative Beacon Chain Deposits
Beacon Chain Deposits and Withdrawals
Ethereum Gas Market
Ethereum Gas fees burnt from the total supply - 5h bars
- The downtrend in transaction fees and block utilisation was briefly and aggressively interrupted amidst the crypto spot pullback that occurred from the 11th to the 13th of April
- Transaction fees spiked to over 20 dollars (for an ETH transfer) with blockspace mainly being used to capitalise on MEV opportunities that arose such as Arbitrages and Liquidations
Average cost to transfer ETH (21,000 Gas)
Ethereum Blob Gas Used - 5h bars
- Blobs on the Ethereum network were not exempt from the congestion during the spot pullback
- During this time, blob utilisation spiked for similar reasons as they did from the 27th of March to the 5th of April
- BlobScriptions once again saw a comeback during this period as demand for mining new Inscriptions picked up
Excess Blob Gas - 5h bars
Borrowing and Lending
Liquidity-weighted average lending yields across Aave & Compound
- Interestingly, the effect of the spot pullback was not felt in the lending and borrowing markets of stablecoins
- DAI, an algorithmic stablecoin saw the most volatility on the 14th of April, seeing its lending yields fro from over 15% to less than 10%
Total Stablecoin value locked in Aave and Compound
USDC TVL
USDT TVL
DAI TVL
TUSD TVL
WBTC TVL
WETH TVL
- It was however the markets of WBTC and WETH that experienced the most significant decline in TVL during this period
- The TVLs of WBTC and WETH fell by more than $200M, with depositors withdrawing their collateral, and some borrowers being liquidated out of their positions
Uniswap V3
Uniswap V3 Hourly Volumes
- Unsurprisingly, Uniswap saw a spike in transaction volumes on the 13th reaching an hourly peak that was nearly 3 times the peak seen in the weeks beforehand
Uniswap V3 Hourly Transaction Count
Liquidations
Aggregate Liquidations across Aave & Compound
- Aave saw a significant wave of liquidations occur during the spot pullback as loans became under-collateralized and open for liquidators to liquidate
- Here are some notable WBTC liquidations that happened during the week
- Despite the magnitude of the liquidated amounts, the liquidators had to forward most of the revenue to the block builder to have their transactions included in the blocks before other liquidators, drastically reducing their profits
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Crypto Derivatives 7th May 24
Volatility has fallen following the recent spot sell-off, during which implied vol at short-dated tenors had spiked above longer-dated tenors and inverted the term structure. ETH continues to trade between 5-10 vols higher than BTC. In addition, the sell-off in spot saw a strong skew towards puts in both majors as investors became concerned with buying OTM puts for downside protection. This has since recovered - due to the selling of OTM puts - although ETH’s skew trades slightly lower than BTC at short-dated tenors, indicating more bearish positioning. Leverage as indicated by perpetual swap funding rates and futures-implied yields has increased slightly, but still remains far below the extremes observed in March.
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Crypto Derivatives 30th April 24
Leverage as indicated by perpetual swap funding rates and futures-implied yields remains much lower than the extremes we saw ahead of the flush-out at the end of March. Implied volatility levels have crashed lower for both tokens and across their term structures, led by a significant under-performance in shorter-dated tenors. Vol smiles remain intermittently skewed towards OTM puts at short tenors as the market appears to brace for further downside in the short term. ETH vols trade some 5 vols higher than BTC’s across the term structure, with both future-implied yields and vol smile skews indicating more bearish positioning than in BTCs markets, particularly in the short term.
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Crypto Derivatives 23rd April 24
Following a bounce in spot price at range lows, BTC and ETH currently trade at $66K and $3.2K respectively. Funding rates remain close to zero for both majors, and future-implied yields are near their lowest levels in more than a month as BTC trades in the middle of its sideways trending range. In the past week, volatility at short-dated tenor options has fallen, correcting the front-end of BTC and ETH’s previously inverted term structures. The fall in volatility was matched by a recovery in skew from OTM puts to more neutral levels at all tenors less than 3-months, indicating that investors are less concerned with buying OTM puts for downside protection.
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Crypto Derivatives 16th April 24
Funding rates and future-implied yields are near their lowest levels in more than a month after the weekend’s spot selloff took prices back to the bottom end of the sideways trending range. Volatility at short tenor options rallied, causing an inversion in both BTC and ETH’s term structures at the front end, without lifting volatility levels at longer-dated expiries. The rise in volatility was matched by a strong skew towards OTM puts of volatility smiles at all tenors less than 3-months, indicating a strong switch in sentiment towards a demand for downside protection.
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Crypto Derivatives 9th April 24
ETH lead another attempt by spot prices to cross above the year-long highs recorded in March. With it, we saw a return to high levels of leverage in derivatives markets: high yields implied by futures prices, high perpetual swap funding rates, and a rally in short dated at-the-money implied volatility that briefly inverted the term structure. However, the rally was shorter lived and smaller in size than that which took BTC prices to all-time highs. Furthermore, while volatility continues to trade flat across the term structure at its higher, 70-80% range, futures markets report a collapse in funding back to their longer-held trend.
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Crypto Derivatives 2nd April 24
After reaching locals highs of $71k and $3.7k earlier in the week, both BTC and ETH spot prices have fallen. This pullback has resulted in a slight decrease in demand for leveraged long exposure, reinforced by the increased skew towards puts in the smiles of both majors. However, excess demand for downside protection is less extreme when compared to earlier in the month where the 25-delta risk reversal skew for BTC and ETH reached lows of -9% and -17% respectively. Rather, the bearish turn in derivatives appears to be a repeat of the leverage flush out that we have seen several times during this rally. Implied volatility has risen for both majors, and particularly in short-dated tenors which has resulted in a flattening of the volatility term structure from its previously steep shape.
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Crypto Derivatives 26th March 24
After a pullback earlier in the week, both BTC and ETH have bounced to $70k and $3.7k respectively. Future-implied yields have risen, whilst implied volatility for both majors remains within a tight range. Perpetual swap funding rates remain positive, but low. The term structure for BTC and ETH - which was previously inverted - has corrected, with implied volatility at short-dated tenors falling below the volatility at long-dated tenors, suggesting reduced demand for long volatility exposure at shorter tenors. Furthermore, the 25-delta put/call skew has increased for both majors, indicating that traders are less worried about buying protective puts to hedge possible impending downside.
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Crypto Derivatives 19th March 24
We previously observed increased demand for downside protection, indicating that the market may be positioning itself against any potential retrace. Following a rally to all-time high levels, the market has pulled back. Short-dated tenors show a significant decrease in spot yields for BTC and ETH, signalling a shift in near-term market sentiment. Funding rates, although positive, have cooled from their monthly highs, indicating reduced demand for leveraged long exposure. Fluctuations in BTC and ETH's ATM vols suggest ongoing market uncertainty. Additionally, the 25-Delta Risk Reversal has shifted towards puts at short-dated tenors, indicating a bearish sentiment that is more pronounced in ETH than BTC.
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Crypto Derivatives 12th March 24
Future-implied yields and perpetual swap funding rate showcase the high demand for leveraged long exposure enjoyed by traders during the rally in spot prices to all-time high levels. We also see a slightly inverted term structure of volatility, suggesting high demand for long volatility exposure at shorter tenors. However, the breakthrough of the psychological $70K and $4K barriers has brought with it an increased demand for downside protection in 3- to 6-month tenor puts (and more prominently for ETH), indicating that the market may be positioning itself against any potential retrace below the freshly printed recorded levels.
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Crypto Derivatives 5th Mar 24
Weekly crypto-derivatives market analytics, spanning futures, options, and perpetuals.
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October 2023 Crypto Volatility Review
October has brought implied volatility back into the mid-50s once again, as strong demand for participation in any further upwards moves sees the skew of both majors volatility miles move further towards calls. Despite the strong anticipation, however, realised volatility remains very close to historical lows. This leaves the volatility ratio of both BTC and ETH options at its highest since 2019, a spread that we believe cannot be attributed entirely to ETF speculation.
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Crypto Derivatives 27th Feb 24
Weekly crypto-derivatives market analytics, spanning futures, options, and perpetuals.
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Crypto Derivatives 20th Feb 24
Weekly crypto-derivatives market analytics, spanning futures, options, and perpetuals.
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Maximal Extractable Value
The Ethereum network's pivot to a new consensus mechanism in September 2022 caused a dramatic shakeup to the reward system available to blockbuilders. Maximal extractable value, previously merely a popular side project for Proof of Work miners, has now become the most attractive reward stream for validators, and understanding its nuances is key to a profitable validator operation.
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Ethereum's Gas Mechanics
The Ethereum network boasts the biggest Decentralised Finance ecosystem of any blockchain, an ecosystem supported by a network of smart contracts that allow for composable blocks of code to be executed by validators in the form of onchain transactions. The computation required by a transaction is performed by the validators (analogous to Bitcoin's miners) who create new blocks on the chain and is paid for in ETH by the sender.
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THE MERGE
In mid-September 2022, Ethereum’s blockchain completed its long-awaited merge into a Proof of Stake chain, deprecating the Proof of Work system that has found consensus for the network since its inception in 2015. The Merge marks the most significant event in crypto to date, as the community has never seen such a drastic change to such a high-profile chain, and with such unpredictable consequences. It represents the culmination of many years of research and testing by both the Ethereum foundation and its community and is just one step on a long roadmap of planned upgrades.
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Crypto Derivatives 13th Feb 24
Weekly crypto-derivatives market analytics, spanning futures, options, and perpetuals.
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Ethereum Staking Deep Dive: Understanding Consensus Layer Rewards
Ethereum has emerged as a prominent and transformative force in the world of blockchain and decentralised finance, revolutionising the concept of digital currencies and paving the way for countless innovative applications. With its robust infrastructure and vibrant ecosystem, Ethereum continues to captivate the imagination of developers, entrepreneurs, and investors alike with an evolving ecosystem. As part of that evolution, the Ethereum Foundation has released a roadmap of planned upgrades, intended to enhance the network’s scalability, security, and sustainability. The transition from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) model in the Merge was the first (and maybe most ambitious!) of these upgrades. Completed in mid-September 2022, the shift required a stunning feat of blockchain and community engineering to put an end to Ether mining and instead derive the blockchain’s security and reliability from staking. After over two and a half years since the genesis block of the Beacon Chain, and ten successful months of PoS-powered blocks post the Merge, Ether staking has grown from infancy to an established & maturing practice.
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Ethereum Staking Deep Dive: Analysing Execution Layer Rewards & MEV
In this second part of our examination of Ethereum staking rewards we will perform a deep-dive analysis of execution layer rewards, describe and assess the contribution of Maximal Extractable Value (MEV) to a staker’s income, and review the drivers of MEV and its link to price volatility. We hope that you enjoy the full report, from which several key findings are outlined below.