🟣 Bull’s holding breath

US holiday week still has some economic news

Author

Macauley Peterson
July 03, 2024

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Welcome back to 0xResearch. Here's what we’ve got for you today:

  • German bitcoin

  • Liquity v2 license

  • Ethena USDe growth

  • CT: Extremely worried

Weak private sector job numbers in the US, courtesy of the ADP Payrolls report, have market watchers worrying about a so-called “growth scare.” On this shortened trading day headed into the July 4th holiday, BTC is once again probing the bottom of the current short-term range around $60k.

In the words of a trader I follow, “buyers need to defend this low or it goes much lower.” But that was true last Friday as well. Not much has changed.

Germany’s BTC stash

The German government has been transferring bitcoin to exchanges, according to Arkham Intelligence, presumably to sell. On Tuesday, Germany’s federal police office (the Bundeskriminalamt), sent about 644 BTC to known exchange addresses, then transferred back out 150 BTC. Maybe they took a look at the price rolling over and thought twice.

I joke, but all told the bitcoin horde, a result of a criminal seizure worth about $2.1 billion at the time the news was reported in January would be worth $3 billion today. With that much corn to unload, it makes sense to parcel it out slowly.

Liquity v2 for the world

The developers of Liquity v2 and $BOLD wrote today that while they are deploying the protocol on Ethereum mainnet, they expect friendly forks elsewhere. Therefore, they took the decision to publish v2 under a Business Source License (BUSL).

“Every DeFi eco deserves to have simple, homegrown access to credit for its native asset(s) — the Liquity v2 codebase will be the premier off-the-shelf solution to do just that,” the Liquity team wrote in an X thread.

The BUSL is a hybrid open source license that imposes initial restrictions on software, but transitions to a more permissive open source license after a specified period, usually after a few years. It aims to strike a balance between enabling developers to monetize their software while fostering community contributions and open source principles.

During the initial period, commercial use requires a separate license from the original developers. After the proprietary period expires, the software becomes fully open-source under a standard license like the GNU General Public License (GPL) or Apache License, allowing for unrestricted use, modification and distribution.

The original Liquity was forked over 35 times, notably by efforts such as Gravita to replace ETH with liquid staked ether and pursue a multichain strategy — two shortcomings of Liquity that could not be addressed due to its immutable nature.

This time around, they appear to be laying foundations for a forky future.

— Macauley Peterson (X: @yeluacaM | Farcaster: @Macauley)

From modularity to restaking, to the intersection of AI and crypto, to the long-awaited consumer-facing apps to the most recent Bitcoin-related innovations.

We’ll be breaking down all of these and more with the help of a few of the thought leaders in crypto at Permissionless.

Ethena USDe growth:

In just three months, synthetic dollar USDe has surged to a $3.5 billion total value locked (TVL), turning it into the fourth-largest stablecoin.

Stablecoins have proven their utility in DeFi, but 90% rely on traditional banking. Ethena's relevance is in developing a crypto-native store of value; USDe uses Ethereum and Bitcoin as collateral to maintain its peg through a delta-hedging mechanism that generates a yield from short positions on perpetual futures exchanges and staked Ethereum rewards.

Ethena’s multichain focus via partnerships has seen USDe gain rapid adoption across various crypto ecosystems — nearly 20% of USDe has been deployed on Ethereum L2s.

Plans are afoot for Ethena to branch out via Symbiotic’s shared security framework.

Observing USDe through market crashes will be crucial to assess the delta-hedging mechanism's stability. Surviving a full market cycle could position Ethena for full decentralization and value return to ENA token holders.

Stablecoins have proven their product-market fit by effectively enabling DeFi as a financial system. Ethena is highly relevant as it strives to disconnect TradFi systems from DeFi and offer a capital efficient crypto-native synthetic dollar. USDe has reached a $3.5 billion TVL in only three months and is now the fourth largest “stablecoin” by market cap.

We acknowledge TON’s highly unique distribution relationship with Telegram, Telegram’s ambitions as a super app and developer platform rivaling the scale of WeChat as a TON growth driver, and the TON chain’s relatively high scale and speed vs. popular EVM chains today. However, we believe the TON ecosystem is at a very early stage; its native smart contract language may be prohibitive to attracting meaningful developer activity, and that Telegram’s distribution is overstated. Its viability as a developer platform and super app is far more challenged than the market appreciates.

Plus, German and American government are dumping hundreds of millions of dollars in bitcoin.

For the US to fully realize the benefits of these new technologies, we need Congress to pass a strong legal framework for stablecoins.

The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm’s Financial Disclosures.