ETH on Fire, Call Buyers Don't Tire, and NFTs Push Higher
AUG 09, 2021 • 4 Min Read
Ashwath BalakrishnanDisclosure: Delphi Ventures and members of our team may own positions in assets mentioned in this report. This statement is 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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Market Update
It’s a great day to be a crypto bull. BTC and ETH were pushed down during the Asian session but both coins (and the rest of the market) caught a strong bid in the European session. ETH is just under its weekend high while BTC made a new high on the daily chart. Sentiment is so bullish even ICP is in the green today.
$53 Million of ETH Burned
- EIP-1559 is living up to expectations as a potential deflationary force for ETH supply. Since the London Hard Fork (when the EIP was implemented) on Aug. 5, over 17,000 ETH, or $53 million as of the time of writing, have been burned. Before the EIP was implemented, miners would’ve pocketed all of that ETH as revenue for their services. However, with the new burn in place, miners earned just over 250 ETH in the same span of time. The average ratio of ETH burned to ETH sent to miners is currently 1:0.015 (or 1.5%).
- Ethereum miners made a killing over the last year as network usage and the median fee soared. With EIP-1559, miners are no longer the sole beneficiaries of rising Ethereum usage — token holders now reap economic incentives via the burn mechanism. It’s worth noting that mining Ethereum is still profitable, and the network’s hash rate continues to rise.
Near-Term Bullish Sentiment
- There’s been a spike in demand for near-term options as BTC and ETH obliterated their multi-month price ranges. Both assets seem to be in a strong uptrend, and speculators have been buying short-term options to capitalize on this.
- Implied volatility for short-term contracts have rocketed throughout this move, with ETH and BTC 1 week contracts now sitting at an IV of 115% and 95% respectively. Implied volatility has run up faster than realized volatility, which means the options market is starting to price in more volatility.
- So while market participants are turning bullish, there’s still risk of a short-term drawdown as implied by options being priced with more volatility.
- To further expand on this view, the 25 delta skew remains close to 0 for the same group of ETH and BTC options contracts (1 week duration). As the skew drifts down, it means there’s more demand for calls than puts and vice versa.
- With the skew hardly budging over the last week, this is an indication that market participants are still biased towards calls and aren’t apeing into puts (for insurance) just about yet. With rising implied vol and virtually no demand for puts, sentiment in the short-term is almost overwhelmingly bullish, which means a pullback could very well be in the cards.
NFTs Refuse to Slow Down
- July was the month of NFTs. Marketplaces hit all-time volumes, new projects attracted millions in capital — even older projects started to show signs of life as people turned their attention to the NFT space.
- Interestingly, the projects that were set up just before the NFT mania kicked in were set up perfectly to capitalize on this rush. Bored Apes, Meebits, and Veefriends fall into this category while ArtBlocks just blew up out of nowhere. Not pictured in this chart is CoolCats, which is up 4500% (45x) over the same time frame.
Notable Tweets
Circle wants to become a digital currency commercial bank.
Circle’s journey to become a national full-reserve digital currency commercial bank: https://t.co/3aNQ0bKPyr
— Jeremy Allaire (@jerallaire) August 9, 2021
Welcome to the Superverse.
Ok ok ok hear me out: NFTs as a social network.
I ran NFTs through @eugenewei‘s Status-as-a-Service framework, and it checks out…
I even made up a thinkboi term for this new kind of social network: the Superverse.https://t.co/WQkiXJnXat
— Packy McCormick (@packyM) August 9, 2021
Poloniex settles with SEC; sets precedent for DEXes?
SEC settles against Poloniex for $10.4M on charges of being an unregistered securities exchange
note the awkward, functionalistic framing of why Poloniex constitutes “an exchange”; they’re trying to build ‘precedent’ for DEXs https://t.co/4pRSZCn6T2 pic.twitter.com/ZLEN9eoYZX
— _gabrielShapir0 (@lex_node) August 9, 2021
