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🟣 ETH ETF launch doesn’t disappoint

Playing “PoliFi” with Polymarket

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

  • ETH flows

  • Revisiting crypto’s political arbitrage

  • Polygon x OKX Explorer

  • Avail staking

In a “very solid first day” for spot ether ETFs, total net inflows were about $107 million. That comes despite the $484 million in outflows from Grayscale’s Ethereum trust (ETHE).

As with GBTC before it, some rotation out of ETHE — which carries a 2.5% management fee — is expected. We’ll be keeping an eye on volumes, and how net flows evolve over time.

Bloomberg’s James Seyffart speculates that the outflows from ETHE are more pronounced than those of GBTC on day one of the US spot bitcoin ETF trading because the latter was still trading at a discount to NAV at the time of launch.

The Harris arbitrage

Following President Biden’s disastrous debate performance last month, I posited that the Polymarket odds for Kamala Harris did not accurately reflect the probability that she would be the Democratic nominee.

At the time, a bet on Harris could be had for $0.04. Today, that market is giving Harris a 34% chance to become president. That’s still well below the polling data, which indicates the race for US president is much closer.

Part of that could be the tendency of Polymarket to skew towards the pro-crypto viewpoint. But arguably, more explanatory is the difference between polled voters being asked how they would vote if the election were held today versus how the global betting population is putting money on an outcome.

In the days since Biden announced he would drop out of the presidential race, a prominent Harris memecoin (KAMA) has more than doubled. So, assuming KAMA expresses a Harris-to-win tilt, one way to play the political arb could be a pair trade on Trump via Polymarket with a long on KAMA. (The reverse, Harris + TREMP, might also work.) Adjust the balance for your preferred risk exposure.

Exploring the AggLayer

One difficulty with tracking cross-chain transactions is the need to rely on multiple block explorers. The Polygon-launched AggLayer will need a way to follow along a transaction’s lifecycle as well. Polygon and OKX announced a partnership today to do just that.

The goal of the OKX Explorer is to streamline access to onchain data and developer tools across all AggLayer-integrated chains, expanding its coverage from 44 public chains to include all live Polygon chains such as Bitcoin, various EVM networks, Tron and Solana, with Polygon CDK chains to follow.

In April, OKX launched X Layer, a Polygon CDK-based chain that connects to the AggLayer.

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

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Block builder centralization:

The job of an Ethereum block builder is to construct a payload of transactions for a block to be sent to an MEV relay for eventual inclusion in the blockchain. In the past month, that market has tended towards further centralization.

Historically, the bulk of MEV-Boost blocks (~90%) were built by three entities: Beaverbuild, Titan Builder and Rsync. Rsync, controlled by Wintermute, has lost some market share in the past month, leaving Beaverbuild (by market maker SCP) and Titan Builder with oligopolistic control of the market.

— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)

The latest major airdrop to hit the market is Avail (AVAIL), a modular data availability layer that the Polygon team spun out in March 2023. Avail is the largest player riding the DA narrative since Celestia’s (TIA) successful launch earlier this year.

At present, AVAIL is valued at a $2.2 billion FDV, about 3x less than TIA’s $6.8 billion. Token holders can already stake their AVAIL either directly or through a nominated pool. 

According to Avail’s official dashboard, 5.1% of AVAIL is currently staked, earning an average 20% APY. As more stakers come onboard, however, expect these rates to decline.

— Donovan Choy (X: @donovanchoy | Farcaster: @donovan)

Solana Mobile is a highly ambitious foray into the mobile consumer hardware market, seeking to open up a crypto-native distribution channel for mobile-first applications. The market for Solana Mobile devices has demonstrated a phenomenon whereby external market actors (e.g. Solana-native projects) continuously underwrite subsidies to Mobile consumers. The value of these subsidies, coming in the form of airdrops, trial programs and exclusive NFT mints, have consistently covered the cost of the phone and generated positive returns for consumers. Given this trend in subsidies, the unit economics in the market for Mobile devices, and the initial growth rate and trajectory of sales, it should be expected that Solana mobile can clear 1 million to 10 million units over the coming years. As more devices circulate amongst users, Solana Mobile presents a promising venue for the emergence of killer-applications uniquely enabled by this mobile-first, crypto-native distribution channel.

Metaplex, the leading NFT protocol on Solana, has established a dominant position due to its comprehensive suite of tools. It has a functioning economic model with a buyback program that enhances its value through revenue generated from SOL-denominated fees. While initially focused on NFTs, Metaplex is diversifying its offerings to include non-NFT services, indicating a promising future as a comprehensive token creation suite on Solana.

Plus, are cataclysmic bugs still a threat?

Bitcoin’s down Tuesday, while ETH-correlated assets like ENS and ARB see growth.

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.