Join Delphi Research today and immediately get access to our full Member Portal!
Join Delphi Research today and immediately get access to our full Member Portal!

Market Troubles, ETH Deflation, NFTs Cool Off

Sep 7, 2021 · 3 min read

By Joo Kian

Market Update

The crypto market experienced a flash crash as BTC moved downwards to ~$42k and ETH to ~$3k. ETH and BTC eventually bounced back to  to ~$47k and ~$3.5k respectively. A negative feedback loop of liquidations seems to be the primary cause, as the market punished over-leveraged apes.

Leverage Wiped Out Despite Open Interest ATHs

  • Open interest in ETH futures hits an all-time high, pushing ETH above $4,000, just short of its ATH at $4,200.
  • High open interest can be seen as traders starting to open more futures positions, most often with some amount of leverage.
  • Looking at the long-term funding trend, the current funding rates at ~0.05% are much lower to the prior peaks of ~0.20%. Low, stable funding implies a balanced as demand isn’t skewed towards either longs or shorts.

  • However, in the last few hours we’ve seen carnage. Over $2.1B of liquidations were reported by exchanges per Skew Analytics, and the real number is likely higher. BTC and ETH price decreased by a double digit percentage over the last 24 hours.
  • Given the steep rise in open interest over the last week, these liquidations gives the market a meaningful leverage reset.

Historic First Deflationary Day

  • On the 3rd of September, ETH had its first deflationary day, which means more ETH was burned as base fees than ETH minted for block rewards. The burns are proving to be an effective way of organically reducing block rewards as demand to use Ethereum grows.
  • The biggest culprit for ETH’s deflationary day is the recent NFT frenzy. NFT gas wars have become a common occurrence as everyone races to mint and flip NFTs. Loot (for adventurers) and its derivatives have been extremely popular over the past few days.

OpenSea Activity Slows Down

  • OpenSea activity is slowing down; daily volume fell 50% — from its late Aug. peak of $322M to ~$133M today. Daily transactions cooled down as well from ~80k at their peak to ~55k today. During the last few days of August, several hyped projects like Mutant Apes Yacht Club launched and caused a massive uptick in volumes.
  • However, this doesn’t mean NFT season is just over yet. There’s still a lot of attention on the space, as Loot and its derivatives took over Twitter during the weekend. Likewise, as ETH’s price goes up and the network gets congested, some of the activity could spill over to Solana’s fledgling NFT ecosystem.


Notable Tweets

Flash Crash Caused $2.6b in Liquidations

Alpha Finance Ventures Into the NFT and Metaverse World

OHMies Celebrate as OHM crosses $500M Market Cap

Join Delphi Research today and immediately get access to our full Member Portal!

Join Now  or  Sign in