Weekly Beluga Insights

While ETH and BTC prices stand high at time of writing, volatile movements had led to a big sell off for alt coins. FOMC and earnings reports added to these movements and has made for an odd week. Regardless of day-to-day movements, things continue to feel bullish. The Blast layer 2 network is set to launch in a week, which will see the $1.8B in liquidity unlocked and hundreds of project launches.

One interesting point of information is that Wednesday saw the least inflows from Bitcoin ETFs in 2 weeks, with the trickle slowing down to $25.5M. Positive inflows are never a bad thing, but it might be a sign that the new Bitcoin ETFs have lost some interest from retail traders.

Major Movers of the Week

• Worldcoin (WLD) +140.72%

• Fetch AI (FET) +70.21%

• The Graph (GRT) +51.79%

• Sei (SEI) -16.42%

• Helium (HNT) -14.34%

• Arbitrum (ARB) -12.10%

What We’re Watching

The talk of the town this week has been Ethena Finance, a synthetic dollar protocol offering up to 30% APY on their USDe token which is pegged to $1. With an innovative offering and big backers like Dragonfly and Arthur Hayes it has quickly risen in popularity. For those who remember the Luna collapse, yield numbers like this might feel familiar. While the yield is similar, Ethena draws its yield from a delta neutral strategy on Ethereum rather than the good old fashioned Ponzi scheme that Terra employed.

Basically, Ethena uses Ethereum deposits to stake and receive an average of about 4% APY a year. They then enter into a short on Ethereum to balance out their position (the “delta neutral” part), and since the market has been moving up funding rates on Ethereum perps are huge positive. This means people pay the shorts in order to keep longs open, which right now is at about 25-30% APY however is subject to market movements. The two sources of yield in combination provide USDe holders with a theoretically safe 30% APY. The major problem with this model lies in the fact that if Ethereum drops significantly and funding rates flip, the USDe yield would fall to 0. A further bank run would prove fatal for the coin given how early in its lifespan it is, so there are serious risks involved.

What is more interesting to us is this model of providing high yield. With the success of Ethena so far (over $400M in deposits already), others are sure to take the model and adapt it to other uses. Given the risks outlined above, there may be better choices for delta neutral strategies. This is a new primitive for crypto and we will continue to keep an eye on other implementations that pop up, as some may prove to be even more successful than Ethena.

Quick Quips: Catch Up on What You Missed

• FTX Estate in Process of Liquidating $2.5B Worth of Unnamed Asset

• Do Kwon Extradited to the US

• Yuga Labs Purchases Moonbirds’ Creator PROOF

• US Banks Petition SEC to Store Bitcoin

• Starkware Walks Back Controversial Vesting Schedule

Tweet of the Week

Chart of the Week

AI hype from OpenAI’s release of Sora drove the entire AI altcoin market up, with the leader TAO reaching new ATH’s recently. Their tech might not be great, but hey the market says it’s good and who are we to argue?

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Did you Know?

In 2022, a New York couple was arrested for attempting to launder $4.5B worth of Bitcoin stolen from the Bitfinex hack in 2016. After the arrest, it was discovered that the wife had made a horrendous rap video that ended up going viral.

Disclaimer
The content on this site is for informational purposes only and should not be construed as investment advice. While Beluga strives to ensure the accuracy and timeliness of information, there may be discrepancies when comparing our data to that of financial institutions, service providers, or specific product websites. Always consult with a professional before making any financial decisions.