🌅 Welcome!

Today, Starbucks announced they will introduce Polygon-based NFTs to their loyalty program. Monday mornings just became something to look forward to.

The Merge is projected to be less than 3 days away, ETH open interest is far out-pacing BTC, Saylor continues his digital gold accumulation, and our Research team explores the relationship between stablecoins and market prices.

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

🚨 In Case You Missed It

Starbucks will offer an NFT-based loyalty program on Polygon. Users can earn or buy NFTs that offer benefits.
CME Group launches ETH-based options, three days before the Merge.
MicroStrategy plans to sell up to $500m in Class A shares to buy more BTC. Elsewhere, BTC hashrate just hit an all-time high.
Algorand Foundation says it deposited 35m USDC on Hodlnaut before the platform suspended withdrawals.

📊 ETH Open Interest Reaches Largest Divergence From BTC

On September 8th, the notional open interest of ETH-based options marked the largest positive divergence compared to BTC options ever, at a ratio of 1.74. Historically, ETH options have averaged a ratio of 0.54 compared to BTC options.
On this date, the total open interest in ETH options totaled 7.54k (in $m) compared to 4.3k for BTC options. With the Merge now less than 3 days away, speculators continue piling into ETH options (vs BTC options) at historic levels.
Prior to the July 2022 announcement indicating timelines for the Merge, the aggregated open interest in ETH options had never surpassed that for BTC options. Since then, the ETH/BTC open interest ratio has increased by 300%, showcasing the intense appetite for ETH exposure leading into the Merge.
The upgrade is expected to occur on September 15th, triggered at block #15540293. Will the Merge be yet another sell-the-news event or will the changes to ETH issuance rate and tokenomics prove strong enough to keep the party going?
For more on the market updates, Delphi members can read our Delphi Pro report here.

⚡ Wake Me Up When September Ends

One topic that has garnered much discussion is the idea behind a USD Liquidity Index. The thesis is that the quantity of money (dollar liquidity) holds a greater influence over risk appetite compared to the price of money. Simply put, when liquidity is bountiful, so is risk tolerance. When liquidity dries up, so does risk.
One measure of dollar liquidity accounts for three metrics from the Fed’s balance sheet: Fed’s total assets, the size of the Reverse Repo facility, and the US Treasury’s general account balance.
This index is showcased in the chart above. When you plot it against SPX over the past two years, the relationship is striking. It’s clear the two have a strong symbiotic relationship and have maintained a 93% correlation for the last two years.

As we continue to beat a dead horse over the impact that global liquidity has on markets, an interesting thought experiment comes to mind. Are there any crypto-specific liquidity indicators that can act as a proxy to the USD index?
Of course, stablecoin issuance and USD liquidity are two completely different beasts, but we can draw a parallel to the change in stablecoin supply versus total crypto market cap.
Over the past 6 months, the variation in total stablecoin supply (on ETH) has entwined itself with the price action of the total crypto market cap. Interestingly, this relationship exhibits the same correlation of 93%. However, if we broaden the time horizon to 24 months, the correlation sinks to 67%.
It is possible that the rapid expansion of the stablecoin market over the past several years (from $2b to over $100b) has muddied this relationship. In turn, a tighter correlation between the two may be experienced moving forward.
For more on this, Delphi members can read our latest Market Insights report here.

🐣 Notable Tweets

FAQ About The Merge

The Merge countdown is on 🐼

We’ve answered the most important questions for stETH holders as we get closer to the Merge.

http://blog.lido.fi/the-ethereum-merge-faq

👇

— Lido (@LidoFinance) Sept 10, 2022

Why Did Delphi Labs Choose Cosmos?

1/ Yesterday Delphi Labs has published a report detailing our vision for DeFi, where we believe the space is headed and ultimately where we believe is the best place to focus our builder efforts.

Quick thread with highlights and why we ultimately decided to build on Cosmos 👇

— Luke Saunders ✦ 🔴 (@lukedelphi) Sept 8, 2022