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Voyager has found a new buyer and you won’t believe who it is. Elsewhere, Grayscale considers returning a portion of investor capital if the SEC refuses its ETF application.

Today, we take a look into Filecoin’s recent nosedive while our Research team provides insights on estimating mark-to-market crypto asset values.

This is the Delphi Daily. Let’s dive in.

🚨 In Case You Missed It

Binance US agrees to buy Voyager‘s assets for $1B.
Grayscale explores returning a portion of investor capital if the SEC refuses its ETF application.
Former COO of Activision Blizzard, Daniel Alegre, joins Yuga Labs as the new CEO.
SBF will no longer contest extradition to the US from the Bahamas.

📊 FIL Loses $466M in Market Cap, Drops 36% Within 15 Minutes

On Dec. 17, 2022, FIL token price dropped by 36% within 15 minutes as it lost ~$466M of market capitalization. Since then, the price is up 26% from the local bottom of $2.41.
Filecoin has a linear unlock of 11.1M FIL tokens (worth $33M at current prices) during the month of December. Currently, only 17% of FIL’s token supply is in circulation.
Even though it is unlikely that a mere 0.6% supply expansion can lead to such drastic price action, the lack of liquidity for FIL can exacerbate any market moves.
Many market participants are speculating that FIL price crashed as part of a broader leg down in tokens related to DCG’s Grayscale. However, the firm does not own enough tokens to justify such price action, according to coinglass.
As liquidity dries up and volatility decreases, it becomes increasingly important to understand the implications of token unlocks on price movements.
For more on token unlocks, Delphi members can read our Delphi Pro report here.

⚡ A Nuanced Approach to Estimating Mark-to-Market Crypto-Asset Values

Though one of the most popular metrics, viewing market capitalization in isolation leads to distortions in actual and perceived value.
Take the example of a token with a circulating supply of 100M and a market price of $1. The implied market cap is $100M. Assuming one entity owns 95% of the circulating supply (the rest is in a liquidity pool), the MTM value of their holdings would be $95M.
Suppose an unfavorable fundamental change occurs, and the holder decides to exit their position. The token trades against USDC in a 50-50 AMM pool and has a total aggregated bid side of $5M (5M USDC/5% of 100M supply).
If the holder market sells all their tokens, the token price would effectively become zero. Since there is only 5M USDC in the pool, $95M of assets on paper would yield a mere $5M when sold.
This approach requires nuance because liquidity fluctuates quite a bit. Liquidity calculations change when you account for ghost liquidity (spoofs) and new orders (as price moves).
The resident liquidity on order books might vanish, leading to a greater price impact from market orders, wider spreads, etc. So, although there is nuance when other variables are included in the equation, the bottom line is that market cap helps evaluate the paper value of assets, but not the true realizable value.
The dollar value of aggregated liquidity helps determine the lowest price a seller will receive and its dollar value in the event of a sizable market sell.
We recognize this is a highly conservative way to MTM assets, but it holds the potential to calculate “true risk,” as it assumes the lowest price for liquidating as opposed to the current market price.

Binance cements its position in terms of dollar liquidity within a ~+/-25% price range. It is followed by Coinbase, Bitfinex, Bitstamp, and Gemini. The aggregated liquidity is ~$590M within the defined range.
Although sizable, a ~35k BTC (merely 0.18% of the circulating supply) market sell would send the price down to $12,500.
We recognize this scenario is improbable and would likely never materialize, owing to the existence of OTC markets which help absorb buy/sell pressure that secondary markets cannot. But mulling over such possibilities helps us contemplate the worst-case scenario.
For more on estimating mark-to-market crypto asset values, Delphi members can read our Delphi Pro report here.

🐣 Notable Tweets

Visa on Account Abstraction

At @Visa, we want to serve as a trusted bridge between the crypto ecosystem and our global network. Excited to share some update today, here is the 🧵

– Catherine Gu (@catgu_) Dec 19, 2022

On Coinbase Stock Issuance

1/10 Stock issuance is basically staking but only insiders can stake; then these insiders dump on the shareholders. Here is a deeper look at the historical tokenomics of $COIN. 🧵

-yo uh hmm (@cmspeary) Dec 19, 2022