Crypto Market Observations — DeFi and NFTs boost ALTs

Gains in DeFi and NFTs give Alts a boost as option market activity suggests a bullish bias towards ETH. Recent changes in open interest point to further consolidation in the current range.

There continues to be a general lack of market volume and on-chain activity as implied vol slides lower, DeFi yields compress, USDT market share hits an all time low, and stablecoin reserves remain at record high levels.

Options currently show a slightly more bullish bias for ETH relative to BTC, with 25d RR skew on ETH climbing up from the June lows whilst BTC remains relatively weak. Dec-21 $5000 ETH calls have seen the biggest change in OI, up 5040 contracts over the past week. Biggest OI increase on puts was for $2000 30-Jul, with BTC seeing most of the increase in July $40k calls and $30k puts. Recent changes in open interest aligns with the narrative that the market will continue to move rangebound for the immediate future.

DeFi has been leading the strength in Alts, with the DeFi index up 30% on the week and 71% from June lows

• Yields continue to shift lower, with COMP lending rates for USDT and USDC now at 1.5% and 1.4% respectively, compared to levels of 5%+ seen for most of the year
• Decentralized VS centralized exchange volume is up 5% from May at a ratio of 12%. Daily protocol revenue remains stable since June, uniswap still the leading Dex with $2m daily revenue
• Network data mirrors the bullish price action, with a $5bn increase in total value locked since the start of the month. DeFi TVL is up 130% since Jan-21 at a total of $55bn, with lending protocols also showing a 100% increase in outstanding debt since the start of the year

NFTs show excitement whilst the rest of market remains rangebound

• Along with DeFi, NFTs managed to find some momentum this week with ETH based game Axie infinity (AXS) up 300% from a month ago, now sitting at a market cap of $850m
• Axie Infinity is a trading and battling game that allows players to collect, breed, raise, battle and trade token-based creatures known as “axies,” which are digitized as their own NFTs
• With all-time-high level stablecoin reserves and falling DeFi yields, NFTs may potentially continue to benefit in the current market as major coins move sideways
• Cryptopunks are seeing an increase in attention too with sales up 350% from June, as CryptoPunk #1886 recently sold for $1m. A high price, but still well below the record price of 4200 ETH paid for a punk in March-21

USDT market share hits all time low, USDC and BUSD pick up most of the slack

• At the start of the year USDT accounted for 75% of the total stablecoin market supply, but has now seen a continuous decline to hit an all-time low share of 59%. The majority of the decrease has been compensated by the rise of USDC, which in the same period saw it’s market share rise from 14% to 23%

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