Delphi Office Hours Call (July 20th, 2022)

Below is the full recording and transcript of the Office Hours call our team did on Wednesday July 20th, 2022.

• Overview (00:35)
• Macro (01:24)
• Curve vs Uni (06:35)
• Fuel (10:20)
• Generative Art (13:49)
• Pollen (17:48)
• NFT Insights (21:10)
• Q&A (31:54)
  • Are EVM network effects overrated or underrated? (31:54)
  • Are NFTs more important than DeFi for bringing in new participants? (40:52)
  • Has The Merge filled the narrative void? (46:25)
  • Is Chainlink under-appreciated? (51:43)

Transcript

Nick (00:36)

All right, folks, GM, thank you for joining. Today is July 20th and this is Delphi Pro’s Office Hours. Quite a lineup for you ready to go here. Let’s take a look at what we’re going to cover. Today’s rundown includes something around the Macro situation, Curve versus Uni, some recent research that we published around that. We’re going to talk about Fuel and exciting developments in L1 land. We’re going to talk about a recent post in Generative Art, as well as something around Pollen in wireless networks and crypto networks. And we’ll finish off with something around Cosmos. As always, we’re going to take Q and A live. We also got a couple of questions ahead of time, but we’d love to get your questions in the Zoom chat, so just add those anytime, we’ll take a look, we’ll try our best to answer them. And with that, we’re going to turn things over to Jason to talk a little bit about the recent market pump. Jason, what are you feeling about all this?

Jason (01:33)

Hey Nick, thanks. As many of you probably know, one of the bigger macro factors that we continue to monitor is the dollar. And we’ve seen the dollar’s latest rally has kind of come at the expense of the Euro and the Japanese Yen, both of which are seeing some pretty material long term technical breakdowns as a result of the crises going on in those regions. The EUR/USD is kind of trading at the lowest level it’s been in over 20 years as the outlook for the euro area continues to worsen relative to the United States. Obviously, a lot of this is a result of the energy crisis going on over there right now. We’ve also seen an aggressive hawkish stance taken by the Fed, which is also given the dollar a boost. And then we’ve also had those hotter than expected CPI prints last week coming in at over 9%, clocking in at 9.1% year over year. All of this is culminated in the increased likelihood of an even bigger rate hike at the next FOMC meeting in July. This meeting is set to occur on July 26th and 27th. It’s also important to note that there’s another big macroeconomic print this week and that is the Q2 GDP numbers that come out on July 28th. These are probably going to come in negative again, signalling two consecutive quarters of GDP contraction which a lot of people use as one factor, one signal of a recession, right? Suffice to say, it’s going to be a big week with macro numbers coming in.

Jason (03:11)

Market concerns are also finally starting to shift from these inflation fears to fears of increased recession risks, right? So as the Fed continues its path of aggressively tightening, the risk of sharp economic slowdown over the next six to nine months also rises considerably, unfortunately. So as of now, the Fed funds rate for the second half of next year is lower than where it’s expected to peak in Q1 of 2023, which means that the market is kind of signalling that it thinks the Fed will pause or pivot in early 2023, assuming things don’t get significantly worse on the economic front. So, as we stated before, as the Fed continues its current policy, we are still currently heading towards a recession. So there’s still some room for risk assets to fall further. So how does that kind of like translate to crypto markets right now in the pump that Nick was referring to on the next slide? So we’ve seen Bitcoin and then to a higher extent altcoins, like Ethereum and even more higher beta altcoins experience some pretty nice rallies over the last several days, most of which started actually after the CPI print on the CPI print last week. So what can we kind of take away from this?

Jason (04:32)

This chart kind of shows like a couple of things, right? So to me, the big takeaway from this chart is that the price is pretty much still ranging at least with Bitcoin, which is honestly the only asset that matters right now when it comes to crypto markets. You’d expect in a period of, say this is a bear market rally, for example, you’d expect other higher beta assets to outperform on those rallies just as you expect them, and we saw them to, outperform on the downside during capitulation events. But I think the bigger takeaway here is that Bitcoin is literally just oscillating between big macroeconomic prints, right? We had CPI numbers back in June, which showed us increasing and accelerated inflation from May and then Bitcoin sold off significantly. We also had the 3AC liquidation event a couple of days later, which added more fuel to the fire, but that sell off had occurred before 3AC news had kind of made the rounds, right? And then more recently this week, we had the CPI prints and now we’re starting to see prices rally. Right?

Jason (05:36)

So now we’re heading into next week, July 26th, 27th and 28th, where we have inflation or where we have GDP prints and the July FOMC meeting where they will likely hike rates 75 or 100 basis points. So it’s kind of like Bitcoin is just trading like a macro risk asset with higher leverage than most, which is honestly as you’d expect a market like this to trade. So right now it’s kind of like, great, we’ve had this awesome relief rally, but I wouldn’t get too over exuberant at the rally, right. We have a lot of headwinds that still need to be resolved on the macro front. So kind of just take it easy. I wouldn’t be longing huge here, right. With the expectation that this week brings some turbulence for three out of the five days. So, yeah, with that said, I think I’ll hand it back to Nick.

Nick (06:29)

Awesome. Thanks for that, Jason will be something worth watching as the next few weeks unfold here. Well, next up we have Duncan here to talk a little bit about Curve and Uni. This has just been an area of ongoing research for us and we just put out a piece kind of comparing the biggest stableswap platforms in DeFi. So with that, Duncan, what did you learn in this research? And yes, what are your main conclusions here?

Duncan (06:56)

Yeah, for sure. So basically our most recent Curve versus Uniswap report just came out yesterday and this was focusing specifically on Curve V2 versus Uniswap V3. And I guess some of the most interesting things that we found here when we actually kind of like dug a little bit deeper into different trades that occur on both platforms. So we pulled every