DeFi Market Overview
-Will Sheehan
Base
Coinbase announced their new L2 Base, a Coinbase branded chain that will have “Seamless Coinbase product integrations [and] easy fiat onramps”. A big splash from Coinbase with a proper move onchain and a laundry list of integration partners were announced that will integrate at the outset. Whether Coinbase’s brand and gaudy userbase can be siphoned onchain remains to be seen, however the infrastructure choice here is more immediately meaningful. Base is using the OP stack and a new setup optimism has coined “Superchain”. The rollup centric ethereum roadmap has always been severely lacking in details on the rollup side - putting the ball in the court of rollup builders to fill in the edges. Superchain is a shared optimistic rollup bridge with a path towards native cross communications and data availability. There’s a tricky balance for rollup providers to strike, integrated systems like Superchain are re-centralizing but the ethereum roadmap has not done any of the necessary work the OP is doing, tricky balance and my longtime expectation has been that optimism attempts to enshrine themselves into ethereum with tooling like this. Of course Arbitrum, the ZKRUs, and many emerging “rollup providers” will have a lot to say about that.
A higher level question for Base and Optimism is whether any rollup ecosystem can compete with Arbitrum. There are around a dozen high profile EVM rollups/chains launching in the next 12 months. Beyond simple transaction metrics, Arbitrum wins the sniff test for L2s with heavy lifts from native projects like GMX.
NFT Market Overview
-kezfourtwez
Last week Blur dropped their token to 146,000 addresses, pre-anticipation of the value of the airdrop was completely wrong and it was grossly underestimated. Your average degen trader received anywhere from a 3 to 6 figure airdrop. It’s been a long time since NFT traders had been rewarded like that, it was a huge stimulus package for NFT’s and as expected the market was brimming with liquidity. Though this didn’t mean that everything went up, in fact most collections became pegged to their current price point after a small initial pump.
Just as soon as Blur season 1 finished and the claim began, so did season 2. Now that people had an estimate on the payment for their efforts based on the airdrop, the perceived incentive to farm season 2 became that much greater. Thousands of ETH poured into the Blur bidding pool and TVL 4x’d. Bidding rewards are weighted based on the daily volume of each collection, and the highest bids taking on the most risk get a disproportionate share of the points. This walked up floors slowly as whales set thousands of ETH in bids at floor or even above, on the top collections like apes, mutants, azuki, clones etc.
There’s been a lot of controversy on the timeline since launch about whether this is good for the market or not. Basically the market just got a whole lot more liquid, NFT total market volume also 4x’d yet floors became stable, why? Because liquidity dampens volatility, the market can absorb more sell pressure but upside is also limited. I think as the market grows, collections become bigger in size, more participants etc, having highly liquid markets is a good thing. Personally I am a fan of the instant exits while we have them. The question is why they are so liquid, is it sustainable, and how long will it last? My answer is no it’s not sustainable, and we don’t know how long it will last for. When $BLUR as a reward is no longer deemed valuable enough to farm points, liquidity will be pulled and the negative flywheel begins. As sellers that have accumulated hundreds of NFT’s they don’t want, panic at that lack of liquidity and compete to be first out the door as floors plummet.
We have already seen an example of this, a couple of days ago OSF and Mando decided to take advantage of the insane liquidity and completely exited their BAYC position with 0 slippage, dumping a total of 72 apes into (mostly Machi’s) bids for a total of $9m. A day or so later the market was a little spooked at this prospect and some bids had been pulled, Machi is holding 170+ apes and begins to start dumping them into bids. The market panics, the BAYC floor drops, some BendDAO liquidations are triggered and suddenly the floor is down 17% in a day. At the time of writing there is still more than 20k ETH in all of the bidding pools across the top collections, and you can already see the bounce back on them below, Azuki especially is showing strength. Though, to see what can happen in such a short period of time, I think it was a good chin check for highly aggressive bidders. The competition was previously so fierce that bids were almost always slightly above floor. They seem to now be more like 1 or 2% below.
Notable Pepe’s
Well known crypto art collector and tastemaker, Vincent Van Dough has planted the seeds and begun nurturing a new art ecosystem centred around beloved internet meme Pepe the frog. Pepe already has a rich history on the BTC chain in the form of Rare Pepe cards, first incepted by an anonymous group of BTC enthusiasts in 2016 and carried on by the community in a decentralised manner until this day. Rare Pepe’s aren’t exactly NFT’s per se, they are BTC tx’s inscribed with metadata using a protocol called counterparty that is built on top of Bitcoin. You can browse a plethora of dank pepe content and learn all about the ecosystem on pepe.wtf. Probably the most well known Rare Pepe is the first ever card, the Nakamoto card pictured below - currently it sells for 8.25 BTC or Ξ119.
VVD is famously known for his role in Starry Night Capital, an NFT venture funded by 3 Arrows Capital. I wrote about Starry Night in a prior issue if you want some background knowledge. Aside from Starry night, VVD is a true patron of crypto art and has done a lot for both the BTC and ETH crypto art world, both as a collector and thought leader pushing the culture forward.
Essentially Notable Pepe’s is an extension of the Rare Pepe eco brought to Ethereum, it has its own page on pepe.wtf where you can view the cards, and a wiki article where you can learn all about it. On Feb 4th VVD dropped Pepe Checks on Manifold, an Open edition priced at $6.90. It was peak Check euphoria as they made their run from Ξ0.2 - Ξ2.7, consequently it became one of the largest ever OE mints at 237,000 editions. Many speculated that Pepe Checks weren’t the be all and end all, but it was a mysterious drop with no promise of further work to be done. On Feb 14th VVD announced Notable Pepe’s, a Pepe art subscription of sorts that can be likened to the Memes by 6529, a series of Pepe cards brought to you by OG Rare and Fake Rare creators. Every Sunday, 5 new cards will be dropped at Ξ0.069 per piece and ranging from 100-1000 in supply. A snapshot is taken sometime in the days prior and each Pepe Check held counts as 1 entry into the raffle.
Pepe Checks served as card #1 and Pepe Cheques were announced as card #2 along with an interesting mechanic. The supply is 2k and any artist that had minted a Rare or Fake Rare Pepe were eligible to claim one. Another portion went to an allowlist and the remainder of the 2k supply still exists, but in the form of this FAKEASF card which can be burnt 1:1 to receive a Cheque on Ethereum. The final piece of the puzzle and the reason why artists had a free claim; In order to create a Notable Pepe card, each artist will have to burn a Pepe Cheque, making them deflationary.
Rare Pepe cards are the original NFT’s, they have a rich history and a lot of lore, I’ve had a lot of fun diving into them over the past few days. I think bringing them to Ethereum is a great idea and will help bring more eyes to both ecosystems. Looking forward to the first proper 5 card drop in a couple of says.
At the time of writing, the floors on Pepe Checks and Cheques are Ξ0.023 and Ξ1.88 respectively.
Thanks for reading and bye for now, stay on top of the markets with Parsec and we’ll see you next week
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