HashKey Capital Digest Issue No. 22

13th August 2021

Outlook

With the growth of the crypto market, the research and opinions of the industry and the community are becoming more and more sophisticated. HashKey Capital hopes to collect and present valuable articles in the market on a regular basis. In terms of format, we will list the highlights in the articles and the parts that we think are interesting or thought-provoking for discussion by the industry and readers.

This week, we have selected a variety of themes, such as the review of Genesis Trading in the second quarter, how Maker is valued, how DevOps-based protocol works, etc.

In this issue, we select the following topics which have been frequently mentioned by other institutions: Genesis Trading, DeFi, MakerDao, Keep3r, and Layer2.

Genesis Trading in the second quarter

In the second quarter, GT offered $25 billion in new loan originations, up $20 billion compared to the first quarter, but the total active loans outstanding decreased by 8.1% to $83 billion.

Supply of digital currencies in the market increased: GT’s digital currencies are mainly from some deposit-aggregating retail platforms such as Gemini Earn, Luno, LEDN and BitcoinIRA. The active parties in the US Crypto lending market are primarily individual borrowers and large trading firms as lenders. Currently, as the supply outpaces demand in the lending market, the yield is compressed, without any sign of emergence of any strong borrowing power for the moment. One of the dominant operations in the second quarter was to lend crypto spot and buy crypto futures to get the funding rate, which led to an increase in the crypto lending rate starting from the second quarter.

In terms of trading volume, BTC accounted for a smaller proportion, while ETH and other coins experienced an increase.

A market trade structure for GBTC market is to 1) borrow BTC, 2) convert BTC to GBTC, 3) hold the product for six months and 4) sell the product in the secondary market and buy back BTC and return the loan for a gain. However, the collapse in GBTC transactions resulted in a mild decline in the yields of both USD and BTC, while forward yield did not change much. The increasing influx of crypto into market depressed crypto yields.

The market changed in the second quarter in that there was no particularly positive news for BTC, but the continued negative news put greater pressure on ETH and DeFi. BTC waned somewhat as its average daily trading volume in May was only $2.7 billion, lower than January’s daily average of $3 billion and ETH’s May daily average of $3 billion.

The rise of DeFi could not be ignored. Its activity continued to grow, despite a sizeable decline in its total market value.

Notably, institutions suggested entry into DeFi, and Millennium Management, Point72 Asset Management and Matrix Capital Management began to actively make relevant layout.

Outlook:

  • BTC-Follow the changes in the BTC ecosystem brought about by the Taproot upgrade in November of this year.
  • ETH-EIP1559 will lead to a decline in Ether inflation
  • DeFi-The upper limit on Layer2 in the third quarter will offer new access to DeFi.
  • Regulation-Emerging regulatory clarity for institutional investors will also add some restrictions. The SEC has 10 BTC and 2 ETH ETF applications in the pipeline.

Link to the original text: https://genesistrading.com/about/insights/

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