LooksRare Wash Trades, Ohm Forks Fall, ETH 2.0 Staking

JAN 18, 2022 • 4 Min Read

Joo Kian + 1 other

DISCLOSURE: DELPHI VENTURES HAS INVESTED IN BTC AND ETH. MEMBERS OF OUR TEAM ALSO HOLD LOOKS, BTRFLY, AND OHM. 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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Long-dated U.S. Treasury Yields Hit 2-Year High

  • The yield on 10-year U.S. Treasury notes jumped to a 2-year high as investors brace for a more aggressive timeline on policy tightening by the Federal Reserve.
  • Nominal Treasury yields are a crucial barometer of the market’s outlook on economic growth and inflation. We’ve seen real yields pick up considerably over the last couple of weeks. This has been driven by 1) rising nominal rates and 2) a decline in inflation expectations (as measured by breakeven rates in the above chart). Real yields measure the difference between nominal yields and inflation expectations.
  • Sustained periods of negative real rates have historically been bullish for risk assets, including crypto. Accordingly, when real rates rise, risk assets tend to take a hit, as we’ve seen since the start of the year (the Nasdaq 100 is down nearly 7% YTD). Even though real yields are still negative, the positive rate of change we’ve seen recently is enough to spook investors.
LooksRare Washes Out

  • Since our previous daily on LooksRare, it appears wash trading has grown more rampant. We analyzed this phenomenon using the Zero Royalty Volume, where only 2% fees are paid on each transaction toward the platform and back to $LOOKS stakers. NFT Traders accumulate volume to earn a share of the daily 2.8M $LOOKS given as trading rewards, worth $12.6M ($4.4 per $LOOKS at the time of writing). This incentivizes wash trading on the platform and accounts for 98.8% (Zero Royalty Volume) of all volume on LooksRare.
  • The same Zero Royalty volume metric on OpenSea is much lower at $400k to $1.2m daily compared to LooksRare, where these collections trade consistently with $400M-$500m in daily volume.
  • The $LOOKS token has high staking rewards at ~782% APR, consisting of 343% of APR from $LOOKS staking rewards and 439% APR from $ETH from platform fees. Wash Traders likely stake their earned $LOOKS to reduce their platform fee through the rewards from staking. However, phase A rewards, which distributes the bulk of $LOOKS for staking or trading, ends on February 9th. After that, the $LOOKS rewards are reduced by more than 50%.
  • This model seems unsustainable long-term and will likely lead to a reflexive drop in trading volume as wash traders leave when it is no longer profitable.
  • Note: Zero Royalty Volume is defined by the following Zero Royalty collections (Meebits, Loot, The n Project, Terraforms, CryptoPhunksV2) as they account for the majority of volume on LooksRare. The exact amount for wash trading is tough to pinpoint, but this provides a fairly accurate proxy to wash trading volume.
Over 9M ETH Now Staked with ETH 2.0
  • More than 9M ETH are now staked in the ETH 2.0 deposit contract. This represents 7.7% of the current Ethereum supply staked in ETH 2.0.
  • Each validator is required to stake 32 ETH to run their own validator. For those with less, there are also liquid staking options like Lido’s stETH that enable users to earn ETH 2.0 staking rewards.
  • The ETH merge to Proof-of-Stake is expected to happen in Q2 2022.
Ohm and Ohm Forks

  • Olympus DAO has been suffering large price drawdowns the last few days, largely due to a large holder of OHM taking profit as well as liquidation cascades.
  • Ohm forks have similarly suffered the same fate, with the top few Olympus forks down 40-70% since the start of this year.
  • Founder Daniele Sesta recently announced plans to turn off token holder dilution and convert Wonderland’s treasury into a VC investment DAO that will resemble the SPAC model.
Notable Tweets

Polygon’s EIP1559 Launches

Multichain Exploit

Digital Asset Outflows

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Joo Kian + 1 other