Insights from a crypto portfolio manager: Weekly Institutional Call

Good Afternoon and Welcome to the Coin Based Institutional Markets Call: A Comprehensive Overview of the Crypto Space

Introduction

In this article, we will provide a comprehensive and engaging overview of the latest news and developments in the crypto space. We will cover a range of topics, including market updates, the rise of decentralized trading platforms, the growth of Layer 2 solutions like Arbitrum, and the potential of real-world assets in the crypto ecosystem. Additionally, we will discuss the upcoming deadlines for the Grayscale appeal and the potential approval of Bitcoin spot ETFs. Throughout the article, we will provide valuable insights and information to help readers navigate the ever-changing landscape of the crypto market.

Market Update

In the past week, the crypto markets have experienced relatively contained volatility, with most assets trading sideways. However, there was a brief period of risk-off sentiment due to escalating conflicts in the Middle East, which led to underperformance in altcoins. Bitcoin (BTC) dominance has risen to just above 51%, indicating a consolidation of BTC. Despite attempts to break above the 100-day moving average, BTC has failed to do so. There has been speculation about a potential squeeze higher in crypto, but geopolitical risks should be considered.

ETH vs. BTC

Ether (ETH) has underperformed BTC in the past week, with a decrease of almost 4.5% compared to a marginal increase of 3% for BTC. This can be attributed to heavy positioning in ETH, which has been one of the biggest consensus themes this year. BTC has gained popularity due to the ETF theme, especially since the summer. The launch of ETH futures ETF has led to an increase in demand for downside protection in ETH, resulting in higher implied volatility for puts compared to calls.

The Rise of Layer 2 Solutions: Arbitrum

Arbitrum, one of the leading Layer 2 solutions, has recently announced a governance proposal to allocate ARB token incentives to protocols on its network. This proposal aims to incentivize users and increase activity on the platform. The proposal has generated significant interest, with 97 different projects vying for ARB incentives. This development is expected to drive growth and adoption on Arbitrum, making it a more attractive option for users and developers.

Decentralized Trading Platforms

Decentralized trading platforms, particularly decentralized perpetual futures contracts, have become one of the fastest-growing and most profitable applications in DeFi. Derivative trading volume is three times higher than spot trading volume on centralized exchanges, making it a preferred method of trading. Decentralized perpetual futures contracts offer capital efficiency and are more accessible to users. The growth of these platforms is expected to continue, with the potential for multiple Bitcoin spot ETFs to be approved in the near future.

Real-World Assets in Crypto: Goldfinch and Maker

Real-world assets (RWAs) have gained significant traction in the crypto space, with Maker being one of the leading protocols. Maker’s RWA portfolio has surpassed $3.1 billion, generating substantial revenue. However, there have been concerns regarding the security and association of on-chain credit with real-world assets. Goldfinch, a protocol specializing in real-world lending pools, recently faced challenges when a $20 million loan defaulted. While the company behind Goldfinch has committed to backstopping the loan, it highlights the risks associated with on-chain credit and the need for robust security measures.

Frequently Asked Questions (FAQs)

1. What is the current market sentiment in the crypto space?
2. How has ETH performed compared to BTC in the past week?
3. What are Layer 2 solutions, and why are they important?
4. What is the significance of the governance proposal on Arbitrum?
5. How are decentralized trading platforms impacting the crypto market?
6. What challenges and opportunities are associated with real-world assets in crypto?
7. When can we expect a decision on the Grayscale appeal and Bitcoin spot ETFs?

Conclusion

The crypto space continues to evolve rapidly, with new developments and opportunities emerging regularly. Layer 2 solutions like Arbitrum are gaining traction, offering scalability and improved user experience. Decentralized trading platforms and real-world assets are reshaping the way we trade and invest in crypto. As the market matures, it is essential to stay informed and adapt to the changing landscape. The upcoming deadlines for the Grayscale appeal and the potential approval of Bitcoin spot ETFs are key events to watch. By staying informed and understanding the latest trends and developments, investors can navigate the crypto space with confidence.