🟣 T-5 To ETF Deadline

OI for BTC perpetuals and CME BTC OI reached year highs as people wait in anticipation for the expected ETF

January 05, 2024

Gm gm!

As the final deadline for the SEC to approve the Ark 21Shares Bitcoin ETF on January 10th approaches, rumors have begun circulating across CT that approval might come even earlier than that. Just as a note, James Seyffart and Eric Balchunas, from Bloomberg ETF Intelligence, have recently reiterated that they ‘believe there’s a 90% chance of approval by Ark’s Jan. 10 deadline’.

Additionally, as the deadline approaches, we’ve also seen higher volume on Deribit, where OI for BTC perpetuals reached a year high of $740M yesterday. CME BTC OI also hit an all time high yesterday, at $5.35B.

PEOPLE and TIA have continued to outperform, following their strong recovery after the wave of liquidations on Wednesday. Other alts have not been performing very well, and are either flat or down.

DeFi and onchain had a tough day yesterday. Gamma Strategies got exploited for 1300 ETH (worth approximately $3.5M), after the attacker manipulated Gamma’s accounting mechanics to mint excess LP tokens to withdraw the ETH. Aave Labs also had to temporarily disable new supply and borrows for AVAX, WMATIC and MaticX just in case due to a potential technical issue. On the bright side, Arbitrum announced that Layer 3 chains using Arbitrum Orbit, will be able to use any ERC-20 token that meets Arbitrum’s requirements to pay for gas and transaction fees.

See you back here on Monday,

 - bocaccio

Even as onchain capital and activity have spread across a larger number of ecosystems—mainly Solana in recent months—and new trading venues have entered the market, the total trading volume on Uniswap has begun accelerating in recent months. Activity on the DEX skyrocketed in October 2023, with the monthly trading volume in ETH terms increasing from ~12.0M to ~27.5M on a month-over-month basis and has stayed somewhat elevated in the two following months. With BTC’s price having been on an upward trajectory for the past 90 days or so, many are calling this the beginning of the next bull run, and it’s likely that although the DEX landscape and user preferences have changed drastically within the past few years, we’ll still see Uniswap hitting new trading volume ATHs in 2024. 

Having said that, the protocol has recently been in the spotlight for other reasons. In the middle of October, Uniswap Labs implemented a fee switch on swaps through the official Uniswap frontends. 0.15% is charged on swaps on top of the regular pool swap fees on certain tokens such as ETH, wETH, USDC, and wBTC, where both the input and output tokens need to be on the interface fee list to be subject to the fee. 

Since the interface fee was implemented, Uniswap Labs has created ~$3.8M in cumulative revenue, ~86% of which has been derived through Ethereum. Usage of the official interfaces has been surprisingly sticky when accounting for the fact that users could easily circumvent paying the fees by simply utilizing other well-established frontends. On Ethereum, the percentage of total volume charged an interface fee has stabilized around 2.7%, while the share on Optimism, Polygon, and Arbitrum is notably lower, in the ~0.7%-1.0% range.

Importantly, the interface fees go solely to Uniswap Labs, not UNI token holders. A protocol fee that would accrue value to token holders has been widely discussed within the community. Token holders voted on a fee switch proposal that ended in June, but the proposal didn’t pass, with notable “no” voters expressing concerns over tax and regulatory factors. Many community members have demonstrated their dissatisfaction with equity holders accruing fees instead of token holders. The current fee mechanism is a good reminder of the fact that token holders are seldom prioritized when a project has implemented a dual structure of equity and tokens. Nevertheless, it’s likely that we’ll see new protocol fee activation proposals pop up this year. If such a proposal passes, it’ll be interesting to see how much of the total volume migrates to other DEXs as a result of increased fees.

2021 was a massive year for network activity, so naturally protocol innovation and growth followed suit. Perps found true PMF, DEXs continued to launch new primitives, and stablecoins continued to excel.

Solana is generating an increasing amount of transaction fee revenue, with various fee market dynamics and ongoing proposals that are set to further accelerate this trend.

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.