The past few weeks in the crypto world have been nothing short of remarkable. Market volatility remains a constant, with major crypto experiencing significant price swings and high-profile security breaches at several crypto exchanges have heightened concerns over cybersecurity in the digital asset space. Let’s dive in!

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DeFi & L1/L2s

State Of The Market: The Crypto Circus

This recent period has been marked by a mix of challenges and breakthroughs. For enthusiasts and investors alike, it’s a realm where change is the only constant, ensuring there’s never a dull moment in crypto!

TLDR

• Major crypto exchanges like Binance, Bittrex Global, and Kraken faced regulatory challenges, but the market remained stable.

• Hacks impacted the crypto space, with notable breaches at Poloniex, Kronos Research, Velodrome, Aerodrome, Heco Bridge, and most notably Kyber raising security concerns.

• Inflows of $346M into digital asset investment products flowed into the space.

• Arbitrum is experiencing increased activity and inflows, surpassing other Layer 2 solutions.

• Blast, an Ethereum-based Layer 2 network, gained attention with a Total Value Locked of $621 million within 10 days of launch.

Exchanges

Recently, Binance settled with the US government for a record $4.3B and CEO Zhao stepping down shocked the market. Bittrex Global also announced its decision to cease operations, while Kraken became embroiled in a legal battle with the SEC. 

Surprisingly, these significant developments had minimal impact on the crypto market, with only minor fluctuations observed. Despite the regulatory crackdown on major exchanges, the power dynamics within the crypto space remained largely unchanged. Institutional players like BlackRock entering the scene could potentially benefit from this regulatory environment, and the path for spot ETF approvals seems clearer. 

Hacks

In recent developments, the digital asset space continues to grapple with significant security breaches. Notably, Poloniex, suffered a substantial hack resulting in a loss of approximately $114M. Additionally, Kronos Research, known for its algorithmic trading and market-making in the crypto domain, faced a security breach with $26M in losses.

The incidents also extend to Velodrome and Aerodrome, where compromises in their front-end systems were reported. These incidents highlight the ongoing vulnerabilities in the infrastructure of digital asset platforms. Furthermore, the Heco Bridge, a cross-chain interoperability platform, was hacked, leading to a staggering loss of $115M. 

These events are not isolated but part of a series of significant breaches in the digital asset space. The most notable incident of the week involves the Kyber Network, where the hacker responsible has issued specific demands. This event has drawn considerable attention within the community. Read some of the hacker’s demands below.

The cumulative effect of these hacks is multifaceted. On one hand, they undermine trust in the digital asset space, causing concern among investors and users. On the other hand, some analysts suggest that these continuous attacks serve to strengthen the ecosystem by exposing and addressing vulnerabilities, essentially battle-testing the infrastructure.

Despite the resilience demonstrated by the space, the recurrent nature of these attacks poses a critical challenge. The pathway to a more secure and robust digital asset environment is contingent upon effectively addressing and mitigating these security vulnerabilities. 

This evolution is essential for the advancement and mainstream acceptance of digital assets and blockchain technology. The situation also often prompts regulatory bodies to consider and potentially implement stricter regulatory measures to safeguard investors and maintain market integrity, which is ultimately stifling for the crypto industry. 

In-flows

Last week, digital asset investment products experienced significant inflows of $346M, the largest in a nine-week streak, primarily driven by anticipation of a US spot-based ETF launch. This surge in inflows pushed total assets under management to $45B, the highest in over a year and a half.

Bitcoin received inflows of $312M last week, bringing year-to-date inflows to over $1.5B. Short-sellers continue to reduce their positions, with outflows totaling $0.9M for the third consecutive week.

Ethereum saw inflows of $34M last week, marking a four-week streak of positive sentiment and almost offsetting its previous outflows this year.

Canada and Germany contributed 87% of the total inflows, while the US, presumably awaiting the ETF launch, only saw $30M in inflows. Additionally, other cryptocurrencies like Solana, Polkadot, and Chainlink received inflows of $3.5M, $0.8M, and $0.6M, respectively.

The derivatives market is seeing a notable increase in activity, with DEX volume on track to surpass $75B, marking its highest monthly total since February 2022. DYdX is emerging as a frontrunner in the perpetuals ecosystem. Presently, it maintains a strong presence with daily volumes around $1B.

Arbitrum has recently seen a resurgence in activity. This is largely attributed to the introduction of a new Short-Term Incentive Program. Launched in September 2023, this program aims to allocate up to 50M ARB tokens from the Arbitrum DAO Treasury to support its ecosystem, particularly focusing on decentralized applications and DeFi projects. 

In the realm of stablecoins, there has been a noticeable increase in activity on the Arbitrum platform. Reports indicate a growing interest from stablecoin issuers in Arbitrum, with a significant rise in the stablecoin market capitalization, which exceeded $1.7B as of late October 2023. 

Blast, a new Ethereum-based Layer 2 network, has reached a Total Value Locked of $621M within 10 days of its launch, closely approaching Solana's TVL. Blast was founded by Tieshun “Pacman” Roquerre, also the creator of the NFT marketplace Blur.

The network gained significant attention when an anonymous investor deposited 10,000 ETH shortly after its launch. Blast aims to be the first Ethereum Layer 2 platform with a built-in yield model and has already attracted over $75M in funding and on-chain investments.

In summary:  Despite recent challenges and security breaches, the crypto market remains healthy and on a positive trajectory. Major exchanges faced regulatory issues, but the market remained stable. Hacks occurred, raising security concerns, but the market continues to show resilience. Inflows of $346M into digital asset investment products indicate strong investor confidence. Layer 2 solutions like Arbitrum are experiencing increased activity, and new networks like Blast are gaining attention.

Blue Chip and Majors Overview

Mantle has been on a tear this past week, going up by 13%. In fact, since October 19, 2023, MNT has been on an upward trajectory, delivering an impressive return of 62.5%. Currently, Mantle ranks as the world’s 6th largest layer 2 platform, boasting a Total Value Locked of $218M.

Terra Luna Classic LUNC has experienced a remarkable surge, which saw it gain 60% in valuation over the last week. Since October 20, LUNC has gained a staggering 111.4% in valuation. The timing of these gains coincides with Binance's introduction of perpetual contracts for USTC (LUNC's sister token), featuring up to 50x leverage. This development has fueled anticipation surrounding USTC's prospective overhaul, which may incorporate Bitcoin as a foundational element, further heightening interest in the token.

• IOTA has seen a remarkable surge of over 40% following the establishment of the IOTA Ecosystem DLT Foundation in Abu Dhabi. This foundation has the distinction of being the first of its kind to be registered under the Emirate's innovative regulatory framework specifically designed for blockchain foundations.

• dYdX experienced an 8.5% decline in anticipation of a significant token release scheduled for December. This event will introduce $500M worth of tokens into the market, a development that is closely watched by investors and market analysts.

• BNB witnessed a 4% decrease over the past week amidst ongoing legal challenges involving its former chief, Changpeng Zhao. The situation escalated as CZ was officially designated a flight risk in the wake of the indictment proceedings by the Department of Justice.

• APE has registered an 8% increase over the last week, breaking through the critical $1.50 threshold. Market data reveals a significant bullish sentiment among traders, evidenced by the placement of buy orders for 11.6M APE tokens at the current price level, reflecting strong confidence among investors.

• UNI pumped from $4.90 to $6.35, between November 22 and 28, as liquidity flowed in amid the Binance drama. However, the price has since dumped to $5.90.

• TORN has dumped by 57% since November 27 after its Binance delisting.

• SOL is up 5% this week. This is partly due to the performance of the Solana-based memecoin BONK, which is up 600% over the last 30 days.

• XRP dumped and broke below the $0.60 support line before recovering as whales dumped over 57 million XRP tokens. 

• BLUR is up 7.5% this week due to the overall sentiment around its sister protocol BLAST - a new layer 2 platform.

Smart Money Movements

Tokens 

• BitStable ($BSSB) has captured the attention of smart money, facilitating stablecoin generation against Bitcoin ecosystem collateral assets—a project that has piqued considerable interest.

• Recently, Smart Money has also acquired some $Auction, likely influenced by the launch of $BSSB on their platform (Bounce Finance).

• Another noteworthy development is the smart money bids on $BYPASS ,this week, a bot enabling users to trade on centralized exchanges like Binance without the need to log in.

• Additionally, $PLANET has caught the attention of smart money, shining in the realm of Real World Assets narratives.

• In the past week, several smart money addresses have accumulated $RVF as well.

Yield Farms

• Smart farmers are actively engaged in farming ETH and stablecoins on Ambient Finance pools on Scroll, waiting for the $Ambient drop, and maybe $Scroll soon too :)

• Lybra Finance continues to be a preferred choice among big investors.

• Smart Farmers are heavily involved with Prisma Finance, participating in various pools offering decent APRs, including mkUSD/USDC - Convex with an unboosted APR of 29.37% and a Total Value Locked of $3.67M!

• Some smart farmers have acquired $BLUR and deposited them on blur.io to farm points for the $BLUR S3.

Major Onchain Movements 

GSR has made a significant acquisition, obtaining $2.5M worth of $HFT which is close to 5% of the circulating supply in the last month and storing them in a newly created address.

A whale (0xd5) recently removed 35% of the onchain liquidity of $Sidus. Explore their Debank Profile

Hashflow team just transferred $3.15M worth of $HFT to the airdrop claim contract, this transfer represents ~6% of the circulating supply! Link to the transaction in here.

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