DeFi News
18 MIN
Jan 4, 2023

DeFi Research News December 2022

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DeFi TVL Updates

Key DeFi Stats for December:

December was a snore-fest for DeFi TVL: It started at ~$42B and ended at ~$39B. Ethereum chain was snoozing with a 58-60% share of the total TVL whereas runner up Binance chain held around 10-12%. There wasn't enough activity to get the DEX volume to move with only ~$9B weekly.  MakerDAO once again topped the list by maintaining its TVL at ~$6.2B over the past 30 days. Lido Finance also maintained its second spot with ~$6B, followed by Uniswap (which was #5 last month) at ~$4.6B. AAVE and Curve settled for a tie at the 4th place with ~$3.7B in TVL. 

Source: Token Terminal. TVL of each protocol

Macro View

State Of The Inflation

The overall prognosis for the global economy during the first half of 2023 appears to be one of continued decline. The United States is currently experiencing an economic downturn with a strong possibility of a recession within the year. Nevertheless, the markets are beginning to feel hopeful with the Federal Reserve's gradually easing policy, as inflationary pressures are starting to abate. This has led to a decrease in the value of the US dollar following its huge surge throughout the year.

Source: U.S. BUREAU OF LABOR STATISTICS, All Items, Not Seasonally Adjusted

Regulations and Institutional Update

Visa is exploring crypto auto-payments on Ethereum using Layer 2 system StarkNet

Visa, a payments processing company, has suggested using smart contracts to create a system called "account abstraction" for automated, programmable payments on Ethereum. The system would be deployed on the Ethereum layer 2 network called StarkNet, and self-custodial wallets could utilize the "account abstraction" method to establish automatic recurring payments on StarkNet.

Mango exploiter Einsberg imprisoned in Puerto Rico - waiting for the trial 

December saw the arrest of Avraham Eisenberg, a crypto-investor in Puerto Rico, according to court documents. Eisenberg had allegedly employed a "highly profitable trading strategy" that resulted in the depletion of $110 million worth of cryptocurrency from DeFi trading platform Mango Markets. Eisenberg manipulated the price of perpetuals contracts (a type of futures contract popular in crypto markets) for Mango Markets’ native token MNGO. He sold massive amounts of MNGO perpetuals contracts to himself, thus pumping the price of those contracts 1,300% in less than an hour. Source

Noteworthy VC money Raised

  • Fleek a developer platform to simplify spinning up Web3 protocol closes a $25 Million Series A round led by Polychain Capital.
  • Perennial, a derivatives trading protocol closes a $12 Million Seed Round led by Polychain Capital and Variant Fund. 
  • Embattled crypto lender Amber Group raises $300 million in a Series C round
  • Bitcoin Group agrees to buy centuries-old German bank Bankhaus von der Heydt for more than $14 million
  • Privacy-focused Web3 firm Aztec Network raises $100 million in Series B funding led by a16z
  • Non-blockchain decentralization platform Nillion raises $20 million
  • Web3 infrastructure firm Blocknative raises $15 million for Ethereum block building market
  • Crypto insurance firm Evertas raises $14 million in a Series A round led by Polychain
  • DeFi Infrastructure provider raises $4.5 million in Series A+ founding round
  • On-chain AR digital assets creator Anima raises an additional $3 million from Polygon Studios and others


Other Noteworthy News/Events in December

Ledger Introduces Stax Hardware Wallet with Full Touchscreen and Support for Over 5,000 Crypto Assets

Image source: Ledger

Ledger has released Stax, a hardware wallet designed by iPod creator Tony Fadell. The device has a full touchscreen, supports over 5,000 crypto assets, and was made for NFT collectors. Users can customize their lock screen with their favorite NFT. The release of Stax comes at a good time, as retail investors are becoming more aware of the importance of self-custody in managing digital assets. Stax also appeals to users interested in NFTs as it allows them to interact with these assets in a way that other wallets do not.

Ren 1.0 to Be Sunset for Ren 2.0 Launch; Users Urged to Bridge Assets Back to Native Chain

Due to the relationship with Alameda, the Ren team had to retire Ren 1.0 and launch Ren 2.0. Users were asked to bridge assets back to their native chain as soon as possible. 

Core scientific files for bankruptcy - Argo avoids bankruptcy 

Nasdaq-listed Core Scientific has officially filed for bankruptcy following a decline in the firm’s operating performance and liquidity. Core Scientific declared that they are committed to carrying on business as usual while they move expeditiously through the restructuring process. Source

Meanwhile, Argo Blockchain, a Bitcoin miner, is being saved from bankruptcy with a $100 million bailout from Galaxy Digital, a company founded by Michael Novogratz. Galaxy will purchase the Helios facility from Argo for $65 million, and give a $35 million loan to assist the miner in the transition. Source

Crypto Investment Firm Midas Closes Platform After Suffering Losses

Midas DeFi saw a $50 million loss, equivalent to 20% of their $250 million in assets, following the downfall of Celsius Network and FTX. 60% of assets held on the Midas platform were then withdrawn. Founder and CEO Levin stated that the firm is now turning its attention to a fresh endeavor that is compatible with the CeDeFi (Centralized Decentralized Finance) vision. Source

Sango coin postponing listing amid market condition while El Salvador Bitcoin Bond is soon to be released in 2023 

The Sango Coin was introduced in July with the intent of collecting around $1 billion in the year ahead. However, based on the details on the Sango website, only $1.66 million worth of the coin has been sold. Sango Coin provides useful benefits to foreign investors, such as the ability to gain citizenship through investment and, eventually, a Central African Republic (CAR) passport, along with advantageous governance options. However, the CAR has announced it will delay the listing of cryptocurrency, Sango Coin, on crypto exchanges due to current market conditions and marketing reasons. Source

Meanwhile, El Salvador is set to launch its Volcano Bonds in 2023. The bonds will raise $500 million for infrastructure in Bitcoin City and another $500 million to buy Bitcoin. With a minimum investment of just $100, investors will be able to join in on the fun of creating a tax-free utopia powered by geothermal energy, and be rewarded with some of the appreciation in digital currency that comes with it!. source

On-Chain Metrics & Data

Bitcoin Update

Bitcoin continues to chop above and below $17,000.

Source: Look Into Bitcoin

A quick look at the chart above shows that overall the current price levels BTC is in an attractive accumulation zone as per the MVRV Z-score. If present day were to rhyme with the past then the next such opportunity is at least 4-5 years away. 

On the shorter term, Arthur Hayes, former CEO of exchange BitMEX tweeted that if $BTC can hold FTX lows of around $15,500, that’s positive. Toni Ghinea tweeted that BTC Dominance will increase in the upcoming weeks, bringing good news to BTC Bulls and more difficult times for alternative coins (alts). 

Bitcoin market cap dominance annotated chart. Source: Toni Ghinea Tweet

Breez Expands Lightning Infrastructure Solutions

Breez’s original product was a Lightning wallet app. Since then, they have expanded into offering SDKs which enables mobile developers to integrate Lightning and bitcoin payments into their apps. Application include from social apps that want to integrate tipping between users to content-creation apps interested in adding bitcoin monetization.

Ethereum Update

Ethereum developers announced their 2023 plan with the following upgrades: 

  1. Capella: A consensus layer (CL) upgrade scheduled for March 2023, that will unlock ETH withdrawals — enabling users to access their coins staked on the network.
  2. Shanghai: An execution layer (EL) upgrade, will take place simultaneously with Capella to introduce the Ethereum Virtual Machine Object Format (EOF), an improvement to the blockchain's EVM programming environment
  3. Cancun: An execution layer (EL) upgrade, that is in development with plans to improve scalability of the network with what's called EIP-4844 or proto-danksharding. This may go live later in the year.

One common myth is that large amounts of ETH that is being staked by validators will be available for withdrawal after merge which might cause flooding of ETH liquidity. However, it is important to note that only six validators may exit per epoch i.e. every 6.4 minutes, so 1350 per day, or only ~43,200 ETH per day which will slow down the exodus if it happens. We must note that this withdrawal limit represents 0.29% of the total current staked supply. 

A look at the top DeFi protocols based on the revenue generated

And finally let’s look at the top 5 DeFi/NFT protocols/ecosystems with most fees generated over 30 days, which generally translates to most active protocols. In some cases the protocols take a % of the fee as revenues (eg. Lido Finance) in other cases its distributed almost entirely to the Liquidity Providers Stakeholders (eg. Uniswap Liquidity Providers). 

Source:  Token Terminal

Ethereum ecosystem still sees the highest amount of activity with $73.2M fees generated, followed by OpenSea (NFT Trading Platform) with $33.5M fees generated. Lido Finance (ETH Liquid Staking Protocol), Uniswap (DEX)and BSC (Binance ecosystem) have generated $24.7M, $19.1M and $14.4M respectively over the same period. These five contenders have maintained their spot in the top 5 for two consecutive months. 

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