BTC Breaks Out, L2s on the Rise, & Options TVL Slumps

FEB 08, 2022 • 3 Min Read

Genevieve Yeoh

DISCLOSURE: DELPHI VENTURES HAS INVESTED IN BTC, ARBITRUM, IMMUTABLEX, DYDX AND FRIKTION. MEMBERS OF OUR TEAM ALSO OWN METIS, RBN AND SQUEETH. THESE STATEMENTS ARE INTENDED TO DISCLOSE ANY CONFLICT OF INTEREST AND SHOULD NOT BE MISCONSTRUED AS A RECOMMENDATION TO PURCHASE ANY TOKEN. THIS CONTENT IS FOR INFORMATIONAL PURPOSES ONLY AND YOU SHOULD NOT MAKE DECISIONS BASED SOLELY ON IT. THIS IS NOT INVESTMENT ADVICE.

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Weekend Pump

  • Over the weekend, Bitcoin rallied through the $38.5k and $39-$41k resistance levels we had been watching in “Key Trends as Markets Seem Fed Up.”
  • As mentioned in our recent Market Insights Piece, the 2022 yearly VWAP (pictured above in white) was acting as a key resistance level. With Bitcoin now trading around $42.5K, the VWAP was breached convincingly on Friday after several failed breakout attempts.
  • One important caveat is that weekend price action tends to be unreliable due to lower liquidity and volume conditions. Thus, it will be worth watching if these levels sustain throughout the week.
Arbitrum and Metis Lead L2 TVL Growth
  • Total Value Locked on L2s has risen back to levels seen at the beginning of the year (~$6bn) as per L2beat. This growth is driven primarily by Arbitrum and Metis.
  • Among the seven largest L2s by TVL, only Arbitrum (+19% YTD) and Metis (+94% YTD) have seen positive growth in 2022, while the others have experienced declines.
  • Newly launched applications on Metis and Arbitrum could be driving the capital inflow as investors flock to emerging yield farming and airdrop opportunities.
Option Vaults Drop in TVL and Performance in January

  • TVL in option protocols has dropped across the board since the start of the year, with the exception of Opyn (+21% YTD). (*Note that Katana is excluded from this as data for the protocol doesn’t go back to 1 Jan 2022 on DeFi Llama.)
  • The drop is likely attributable to falling asset prices. Lower asset prices result in poor performance for put-selling vaults and a “flight to safety” amid the market volatility, causing investors to withdraw capital from risky option vaults.
SQUEETH Trading Volume
  • Opyn’s growth in TVL was an outlier to other options protocols. This can be attributed to their new product SQUEETH, a financial primitive we recently covered in a post here.
  • Trading volume of SQUEETH has risen steadily over the past month, but its take-up rate hasn’t been outstanding. This may be due to the complexity of understanding and trading such a product.

 

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