M6 Labs L1, L2 & DeFi Weekly

Market Slump, TUSD Depeg, Grayscale Threat

Don't worry, Anon! Number will still go up, SIGNIFICANTLY! We just have a few minor challenges to navigate first. Let's take a closer look at our current situation.

Alpha Take Of The Week

State Of The Market: ETF Euphoria Dissipates

Just over one week has passed since the official confirmation of the BTC ETF, and the initial market response has left some underwhelmed. However, it's essential for both users and market participants to understand that short-term fluctuations and volatility were anticipated outcomes of this event, which still holds true.

To gain a more accurate perspective, it's crucial to adopt a long-term outlook. The influx of billions of dollars into the crypto sphere via institutional investments is anticipated to propel Bitcoin to new price heights. The ETF has already seen significant positive activity, 

With the BTC ETF event behind us, attention now turns to the forthcoming Bitcoin Halving and the anticipated ETH ETF, which could materialize in May. Larry Fink of BlackRock has expressed optimism about Ethereum ETFs, hinting at a potential price surge leading up to this event. For an in-depth exploration of this development, check out Virtual Bacon's informative video. Additionally, the prospect of a world filled with various crypto ETFs, including XRP ETFs, SOL ETFs, ADA ETFs, and more, appears to be on the horizon.


  • Digital asset investment products received $1.18B in inflows last week, although this didn't break the record set by Bitcoin ETFs in 2021. 

  • Trading volumes for these products reached a record high of $17.5B, indicating increased market activity.

  • Grayscale's decision to sell Bitcoin holdings is driven by high fees and investor withdrawals. Grayscale's 1.5% annual fee for its flagship product, GBTC, led investors to seek lower-cost alternatives. 

  • Bitcoin futures contracts worth billions could be liquidated if the price drops below $34K, posing a potential risk. 

  • USDT faced scrutiny from the UN, while South Korea considered sanctions on coin mixers. Regulatory frameworks in the crypto industry are expected to advance as governments seek control and taxation mechanisms.

  • TrueUSD (TUSD) struggled to maintain its $1 peg, with its value dropping to $0.984. 

  • Overall stablecoin supply in the market has increased but not significantly. 

  • Dex volume remains robust despite the recent market pullback, indicating healthy core metrics and on-chain activity.

Digital asset investment products received significant inflows of $1.18B last week, although this did not break the previous record set by futures-based Bitcoin ETFs in October 2021, which totaled $1.5B.

  • Trading volumes for digital asset investment products reached a record high of $17.5B last week, a substantial increase compared to the 2022 weekly average of $2B. These volumes accounted for nearly 90% of daily trading volumes on trusted exchanges, indicating heightened activity.

  • The United States dominated the inflow activity with US$1.24B, while Switzerland received $21M in inflows. 

  • However, Europe and Canada experienced minor outflows, possibly driven by basis traders shifting their assets from Europe to the United States.

  • Bitcoin attracted significant inflows of $1.16B, equivalent to 3% of the total assets under management. Short Bitcoin products also saw minor inflows of $4.1M.

  • Ethereum received inflows of $26M, and XRP saw $2.2M in inflows. Notably, Solana had only $0.5M in inflows.

  • Blockchain equities witnessed substantial inflows of $98M, contributing to a total of $608M in inflows over the past seven weeks.

ETF Updates and Market Slump

Bitcoin has now claimed the position of the second-largest commodity ETF in the United States, surpassing Silver. Spot Bitcoin ETFs have reached an impressive $27.9B in assets, securing ownership of 647,651 Bitcoins. Despite the market slump the ETF is still a huge success.

The Grayscale Situation

Grayscale's decision to offload Bitcoin holdings has raised questions and eyebrows across the crypto community. This move comes as a response to several factors that have put Grayscale in a challenging position.

  • One of the primary reasons for Grayscale's BTC sales is the burden of high fees coupled with investor withdrawals. Grayscale's flagship product, the Grayscale Bitcoin Trust (GBTC), imposed a 1.5% annual fee, considerably higher than other ETFs available in the market. 

  • This substantial fee difference prompted many investors to seek alternatives.

  • Furthermore, numerous investors initially acquired GBTC at a significant discount, up to 40%, which has since narrowed to zero. This narrowing of the discount prompted many investors to reconsider their positions and opt for more cost-effective options.

  • In the absence of a Bitcoin ETF, Grayscale was instrumental in becoming a significant BTC holder, alongside the mysterious Satoshi Nakamoto. However, this position has been challenging to maintain, especially with the rise of low-fee ETFs in the market.

  • The consequence of these factors is a wave of investors leaving GBTC, requesting redemptions of their shares. To fulfill these redemption demands, Grayscale is compelled to sell BTC holdings. 

  • This process could span weeks and may potentially result in fluctuations in the Bitcoin market.

  • As Grayscale navigates this challenging period, some investors are considering moving their funds to low-fee ETFs once the situation stabilizes. 

Largest BTC holders. Grayscale currently holds around 617K of BTC. Source

Furthermore, a situation is emerging as there's a risk of billions worth of Bitcoin futures contracts being liquidated if the price drops below the $34K mark. It’s likely with the right catalyst we see a pullback to these levels. 

BTC Liquidation Heatmap. Source: Coinglass

In the realm of regulation, USDT recently faced scrutiny from the UN, while South Korea is considering imposing sanctions on coin mixers, aligning with actions taken by the US. 

  • Furthermore, Circle CEO Jeremy Allaire has indicated that 2024 may witness the enactment of concrete laws governing the stablecoin industry in the US. The stablecoin market, valued at $135.3B, continues to operate largely unregulated, despite its pivotal role in facilitating crypto trading.

  • These instances represent just a glimpse of the ongoing discussions and debates surrounding crypto regulations. In the near future, we can anticipate substantial advancements in regulatory frameworks as governments aim to establish control and taxation mechanisms within the crypto sphere.

In other financial news, Barclays Bank has revised its outlook, now predicting that the FOMC will gradually reduce rates by 25 basis points at every other meeting, commencing in March. This adjustment deviates from their earlier projection of rate cuts beginning in June. 

  • The recalibration of nominal policy rates is expected to create a more favorable environment for crypto and risk-on assets in general. This improved environment will be further bolstered by the ongoing increase in global liquidity initiated by the Federal Reserve and the People's Bank of China.

TrueUSD (TUSD) experienced significant volatility and struggled to maintain its $1 peg. TUSD's value fell to as low as $0.984 and has not yet regained its peg.

  • Data from Binance indicates that about 60% of trading activity involving TUSD has been selling, leading to a deficit of approximately $155M.

  • The absence of TUSD mining in Binance's latest launch pool is believed to have contributed to the sell-off.

  • TUSD's Curve pool is imbalanced, with most traders preferring other stablecoins like Tether's USDT, Circle's USDC, and DAI.

  • 54M TUSD tokens were burned as users converted their holdings into fiat.

  • TUSD's supply has significantly decreased, falling below $2B, its lowest level since June 2023, after reaching a peak of $3.5B in September 2023.

TUSD circulating supply falls following struggles with deppeging. Source: DefiLlama.

Overall stablecoin supply has picked up in the market but has not increased significantly.

Dex volume indicates that core metrics remain robust despite the recent market pullback. Volume has shown significant growth, and on-chain activity continues to exhibit strength.

Blue Chip and Majors Overview

BTC, ETH, and SOL Ranging

This past week has been pretty bearish for the market, with BTC, ETH, and SOL all suffering losses. BTC, ETH, and SOL dropped by 9%, 3.5%, and 2.5% this past seven days. Bitcoin is currently sitting on top of crucial support at $41K. Meanwhile, ETH is sitting around $2,500, while SOL is trending below $100. It seems like the market is moving in a range prior to a breakout. Some believe that the spot ETF approval was a “sell the news” event, while others believe that the market is gathering steam before exploding. Let’s see how the next seven days pan out.

  • Sei -  The SEI token recently hit its all-time high just after the new year, rising to $0.87 on the back of an impressive 70% surge in seven days. However, the token’s price has dropped by 13% since then, currently trading at $0.7628. 

  • Metis - METIS fell below the $100 mark after registering a drop of nearly 7% over the past 24 hours. While the token has been in the red over the past week, it has registered a staggering increase of 267% during the past month. 

  • Chainlink - Most technical indicators are bullish when it comes to LINK. The token has registered an increase of 128% over the past year. 

  • Klatyn - Klatyn has been in the news after the token’s price surged by 35% on the back of a merger proposal with Finschia, supported by Kakao and LINE. 

  • Sui - SUI has registered remarkable gains over the past three months, with the token rising by a staggering 300%. This increase coincides with a 2200% surge in SUI’s total value locked (TVL). 

  • Xai - The XAI token has been on an upward trajectory since the recent airdrop. The token surged by 35% following the airdrop and hit its all-time high of $1.21 on the 17th of January, 2024, just 16 hours ago! 

  • Blur - The BLUR token has maintained its upward trajectory despite the unlocking of 50 million tokens, rallying by over 14%. The token went up by over 6% in the past 24 hours. 

  • Chillz - The Chillz price rally on the 16th saw it become one of the biggest gainers, rising by 18% in a day. However, the token is down by over 8% over the past 24 hours. 

  • dYdX - dYdX recently became the largest decentralized exchange by volume, surpassing Uniswap as trading volumes on dYdX v4 went past $600M. The token has registered a 13.7% increase over the past two weeks. 

  • Astar - The ASTR token has registered an increase of 5.4% over the past week. However, its long-term gains are more impressive, with the token registering a 77% increase over the past 30 days. 

  • Unibot - Telegram’s trading bot recently hit record use on Solana. Unibot’s UNIBOT token has seen its price rise by over 63% over the past month. However, the token is currently trading in the red, down by just over 12% in the past 24 hours. 

  • Tezos - Tezos (XTZ) is currently trading at a price of $1.05, a decline of 3.67% in the last 24 hours and an increase of almost 2.5 % over the past week. 

  • Orca - ORCA has registered an increase of over 15% after Bitget announced it was launching a spot P2P market that would allow traders to get early access to tokens not yet listed on major exchanges. The project features ORCA, BRC-20 token BTCS, and Depin project DIMO. 

  • Solend - Solana’s Solend (SLND) token has seen a considerable rebound after its price dropped to $1.76 at the end of the first week of January. The token has significantly recovered since, rising by 45% over the past week. SLND is currently trading at $2.97.

  • Toshi - Ethereum-based DeFi project Toshi (TOSHI) has affiliations with several notable individuals. The TOSHI token has a supply limit of 100,000 with no further mints planned. The token’s price peaked in December 2023, rising to $0.0002348. However, the token’s price has since dropped, and it is currently trading at $0.0001751.

  • Dogwifhat - Dogwifhat (DIF) registered a staggering surge of nearly 50%, rising to $0.48 as Solana-based meme tokens make a strong comeback. However, the token has since retreated, dropping to its current level of $0.43. 

  • Popcat - Popcat is another Solana-based meme coin that is ruling the meme coin market, along with the likes of BONK, JTO, and WIF. The token has registered a staggering increase of 548% over the past couple of weeks and is currently trading at $0.03191. 

  • Myro - In just over a month, the MYRO token has registered a stunning increase of 650%. In fact, the token is up 33% over the past 24 hours. This increase can be attributed to several factors, such as celebrity endorsements, social media exposure, and the overall growth of the Solana ecosystem. 

  • Polkaswap - Polkaswap is an open-source, non-custodial decentralized exchange protocol. PSWAP is currently trading at $0.0052, down by 0.8% over the past 24 hours. However, it has been extremely bullish in the long run, registering an increase of nearly 400% over the past 30 days. 

  • Redacted - Redacted (BTRFLY) recently announced its strategic integration with Chainlink Cross-Chain Interoperability Protocol (CCIP). While the BTRFLY token is down by over 9% in the past 24 hours, it has registered an increase of 106% during the past month. 

  • Hive Mapper - HiveMapper (HONEY) is another Solana-based token that recently defied markets, rising to a high of $0.257 even as the market retreated. Since then, the token has continued its upward trajectory and is currently trading at $0.270. This marks an increase of over 27% during the past two weeks. 

  • Connext - Connext raised $7.5M in June 2023, valuing the company at $250M. At the time, it announced plans to launch a token. The NEXT token has been extremely bullish over the past month, registering an increase of nearly 80%. 

  • INJ - Injective Protocol’s INJ was one of the best-performing tokens of 2023 and carried this momentum into 2024. The token hit its all-time high of $45.01 on the 9th of January. This represents a staggering 2000% increase over the past year. However, the price may face volatility as the token braces for an unlock of nearly $150M worth of INJ tokens scheduled for the 21st of January. 

  • Celestia - Celestia reached an all-time high of $20.16 on the 15th of January. The token has been quite bullish since its launch and has risen by nearly 50% over the past 30 days. 

Smart Money Movements

  • Recently, Roko has once again garnered the keen attention of smart money, marking a resurgence in interest over the past few days.

  • In anticipation of a promising 10% yield come June 2024, smart money has been diligently accumulating PT-eETH, strategizing for future gains.

  • An intriguing observation unfolds as smart money demonstrates notable accumulation in plsARB, prompting speculation about an imminent peg.

  • The maneuvers of smart money extend to USDR as well, strategically playing the RFV game plan through calculated accumulation.

  • A substantial $32M worth of $Blur has been unlocked and seamlessly dispatched to Coinbase, constituting 4% of the circulating supply. Check out the transaction details here.

Yield Farms:

  • Merchant Moe maintains its enduring popularity among smart farmers on the Mantle platform, offering a reliable avenue for yield generation.

  • Cleopatra emerges as yet another preferred protocol on Mantle, capturing the allegiance of discerning smart yield farmers.

  • Seamless Protocol celebrates increased adoption from the discerning realm of smart money, further solidifying its position among other DeFi protocols on BASE.

  • The rise of KelpDAO continues unabated, with smart money recognizing its potential and contributing to its growing traction.

  • Vertex, a standout protocol on Arbitrum, secures its position as one of the most favored choices among the Arbitrum smart money.

  • Notably, Velocimeter on the Mantle network has become a focal point, drawing substantial attention and interest from the smart farmers.

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