Chart of The Day: Crypto Loans for Emerging Markets

Goldfinch Protocol is a credit protocol that allows for uncollateralized loans for real-world businesses or trusts. These loans are flowing towards emerging markets and try to serve underbanked businesses and individuals. The borrowers are audited by the ‘Auditors’ who are also GFI stakeholders. The ‘Auditors’ are incentivized to act honestly to earn GFI or face slashing for malicious acts.
Over the past year, Goldfinch has served ~$100M in uncollateralized loans, with a superb utilization rate of ~98% — maximizing its capital efficiency.
Within Goldfinch, there are two different pools — Senior and Backer pools. The Senior pool is a lower-risk pool that diversifies its deposits throughout multiple loans and has priority to first-loss of capital. Backers have a higher risk but are rewarded with early backer rewards and 20% of the Senior pool’s yield.
Although yields are attractive, we must also take into account that these are basically high-risk bonds that can potentially have more defaults. That being said, the TAM of microloans is rather large and is expected to hit $343B by 2027, which Goldfinch can tap into with cryptocurrencies.
For more on undercollateralized loans, Delphi Members can check out the Delphi Pro report on Maple Finance here.

Navigating The Wake of Choppy Selloffs

[Excerpt from a Delphi Insights Report]

Everyone has their own way of executing trades within prevailing market conditions. Generally, one of the most prudent things to remember is keeping time horizons consistent when entering and exiting positions. In other words, if you are looking at 30-minute time rotation charts to identify overall areas of interest and then use a shorter timeframe chart (1min, 5min, 1000 trades per candle, 2mil volume per candle, etc) for entry criteria, these should remain consistent when looking for exit criteria. A common mistake many newer market participants make is taking shorter timeframe trades and turning them into multiple-day long holds. This is a form of thesis drift.
With all that said, the below charts are just one example of how someone might use many of the tools mentioned to drill down and determine an entry point once the above analysis has been done.
A quick caveat to start; these charts are showing data unique to the Bybit BTCUSDT product, not an aggregated view across all exchanges. In the majority of cases, most exchanges look similar to one another so long as you are focusing on an exchange relevant in terms of volume. Another interesting observation is one that has been made many times in the past; oftentimes Bybit gets aggressive, more so than the other major exchanges, and thus mean reversion traders often like to fade aggressive Bybit price action when there are additional factors providing confluence.

The below chart shows price action from May 25 – May 26, focusing on the attempted range breakdown on May 26. BTC price, volume, and profiles are located in the top pane. In the bottom three panes, you will find experimental Exochart indicators designed to track open interest, net longs, and net shorts. In other words, it estimates the net amount of futures contracts entering or leaving the market. These types of indicators only work with exchanges that report OI data rapidly, and even then it is not perfect and will not always reflect true market positioning, so it is important to keep that in mind.

When looking at OI, NL, and NS from May 26th, we can see Bybit OI increasing steadily while BTC price rapidly declined from $30K to $28K. In addition to increasing OI, we can see a relatively flat trajectory of NL, meaning that not many new buyers were responsible for the increase in OI seen above. In fact, the tail end of this downside move was met with a large decrease in NL, indicating the forced closure/liquidation of long positions.
Looking above we can see the culprit; net shorts increased steadily throughout the attempted range breakdown move. BTCUSD price reached its lowest point as OI and NS levels their highest daily levels. What happens next is quite interesting; NS continue to increase rapidly as NL continue derisking with OI remaining relatively flat at its new elevated level. This means that sellers have piled into the lows, and are now fighting the move as bitcoin returns into the overlapping value area defined previously. This is exactly the type of fuel that mean reversion traders are looking to fade/exploit.
The above Bybit dynamic is additional evidence to the above conclusion; “it becomes clear that this move to the downside was fueled by aggressive selling and long liquidations.”

For more, Delphi members can see the full Market Insights here.

The Hitchhiker’s Guide to Ethereum

[Excerpt from a Delphi Pro Report]

PBS was initially designed to blunt the centralizing forces of MEV on the validator set. However, Dankrad recently took advantage of that design realizing that it unlocked a far better sharding construct – DS.
DS leverages the specialized builder to create a tighter integration of the Beacon Chain execution block and shards. We now have one builder creating the entire block together, one proposer, and one committee voting on it at a time. DS would be infeasible without PBS – regular validators couldn’t handle the massive bandwidth of a block full of rollups’ data blobs.

Sharding 1.0 included 64 separate committees and proposers so that each shard could have been unavailable individually. The tighter integration here allows us to ensure DA in aggregate in one shot. The data is still “sharded” under the hood, but from a practical perspective, danksharding starts to feel more like big blocks which is great.
For more, you can see the full Delphi Report here. Pss… It’s available for everyone!

Notable Tweets

State of Global Macro

Just writing Global Macro Investor over the weekend and as ever, I like to share a few insights.

The narrative on Twitter is that tech is dead. The reality is that the Nasdaq has just reverted back to trend – 150 week moving average 1/

—Raoul Pal (@RaoulGMI) May 30, 2022

Market Updates by QCP Capital

1/ Hello everyone! We are back with another market update for 29 May 2022. Let’s begin 🧵

— QCP Capital (@QCPCapital) May 29, 2022

New ETH-Margined Contracts on BitMEX

⌛24 hours to go⌛

Three new ETH-margined contracts are coming to BitMEX:

🔹 ETHUSD_ETH
🔹 ETHUSDM22_ETH
🔹 ETHUSDU22_ETH

Are you ready?

Deets here:

— BitMEX (@BitMEX) May 30, 2022