Sebastian Sinclair

<div id="highlights-block_62157cba396d0" class="highlights">
        <ul>
                <li>Multicoin Capital and Pantera Capital co-led a $3 million raise for a Solana-based DeFi margin protocol</li>
                <li>The protcol is attempting to bring &#8220;institutional grade margining&#8221; to institutional partners and trading firms</li>
            </ul>
    
</div>



<p>A Solana-based protocol has lured two major crypto investment firms in a seed funding round based on a vision of simplifying margin trading in DeFi.</p>



<p>According to a press release on Wednesday, Multicoin Capital and Pantera Capital co-led the $3 million round in the Marginfi protocol which also saw participation from Sino Global Capital and Solana Ventures. </p>



<p>Funding will be used to drive community and ecosystem development and launch the protocol into a development network (DevNet) while supporting institutions and partner integrations, per the release.</p>



<p>While still in its infancy, the protocol&#8217;s DevNet is slated to launch by the first quarter of this year with an aim to flesh out its interoperable cross-protocol offering. Marginfi is aiming to bring “institutional-grade&#8221; margin trading for institutional partners and trading firms interacting within the Solana ecosystem.</p>



<p>Trading margin refers to the act of borrowing money to buy financial assets. Traders who use margin attempt to take on leverage and gain exposure to assets in a more capital-efficient way.  </p>



<p>Marginfi is expected to develop its protocol to make it easier for traders, trading margin, to manage open positions across different DeFi (decentralized finance) protocols via a single dashboard.</p>



<p>&#8220;In 2021, we saw an explosion of innovative financial products emerge across DeFi,&#8221; said Edgar Pavlovsky, founder of Mrgn Labs — the core contributing team of Marginfi.</p>



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow"><p><strong>&#8220;The problem is the trading experience is now extremely fragmented across different protocols which destroys capital efficiency and prevents traders from combining their positions into one unified account.&#8221;</strong></p></blockquote>



<p>Marginfi will allow traders to interact with its cross-margining engine through an application programming interface to control multiple derivatives positions. As an example, a trader could combine a long perpetual futures position on Drift with a short options position on Zeta and a parimutuel position on Hxro Network, Mrgn Labs said. </p>



<p>&#8220;This approach provides an upgraded risk framework to move quickly with exposure to underlying trading protocols,&#8221; said<strong> </strong>Mrgn Labs&#8217; Head of Growth MacBrennan Peet. &#8220;Marginfi is a way for trading firms to globalize on-chain positions and effectively execute arbitrage through a single account.&#8221;</p>



<p>Mrgn Labs said it is focused on whitelisting new institutions with the goal of moving $1 billion through the protocol by year&#8217;s end and plans on launching several trader-focused initiatives in the lead up to its DevNet debut.</p>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



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<p><strong>Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.</strong></p>



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Solana Protocol Gets $3M in Seed Funding With Aim to Bridge DeFi Margin Trading

Casey Wagner

<div id="highlights-block_61eb26b3cc7e7" class="highlights">
        <ul>
                <li>FTX US Derivatives, formerly known as LedgerX, is hoping to appeal to the CFTC with its new board of directors </li>
                <li>The CFTC has a list of requirements an exchange must meet before offering margin products</li>
            </ul>
    
</div>



<p>Cryptocurrency exchange FTX.US has added a board of directors as the company vies for regulatory approval to extend leverage to derivatives traders. </p>



<p>The board is a prerequisite of the CFTC permitting the exchange to offer leveraged trading, Zach Dexter, CEO of FTX US Derivatives, told Blockworks.&nbsp;</p>



<p>“It&#8217;s actually a requirement under the Code of Federal Regulations in the Commodity Exchange Act that a designated contract market or derivatives clearing organization must have people who have experience in risk management,” Dexter said. “This could include people who&#8217;ve dealt with liquidations for commodity derivatives products like oil futures or corn futures, or people with experience with bitcoin options, etc.”&nbsp;</p>



<p>The CFTC also requires exchanges looking to offer margin products to provide a risk model. That model must be able to calculate the initial amount of margin that needs to be posted, the amount of variation margin — or responses to price movements —needed and when liquidation occurs.&nbsp;</p>



<p>In October, FTX US acquired CFTC-regulated futures and options exchange LedgerX in a move that looked to expand the exchange’s trading offerings. The company has since been rebranded to FTX US Derivatives.&nbsp;</p>



<p>Margin trading allows traders to leverage their positions using funds borrowed from the exchange. It&#8217;s a high-risk strategy that magnifies rewards and losses alike.</p>



<p>“In crypto currently, the only direct-to-retail margin trading that is happening is on overseas exchanges that are either less regulated or in a still developing regulatory environment,” Dexter said. “But here in the US, if you want to offer margin trading direct-to-retail, you&#8217;ve got to have the licenses from the CFTC.”&nbsp;</p>



<p>Cryptocurrency exchange Kraken was <a href="https://www.cftc.gov/PressRoom/PressReleases/8433-21">fined $1.12 million</a> in September 2021 for failing to register its margin products with the CFTC. Coinbase Pro <a href="https://blog.coinbase.com/coinbase-pro-disables-margin-trading-42f5862f8a66">disabled its margin</a> trading services in November 2020 in response to growing regulatory concerns.&nbsp;</p>



<p>Providing it meets regulatory requirements, according to Dexter, FTX US is hoping to offer retail and institutional clients alike access to “a reasonable amount of margin.”</p>



<p>“You&#8217;ve got to have a back tested mathematical model reviewed by independent third party validators, it’s very serious stuff,” Dexter said.&nbsp;</p>



<p>The regulatory process, while lengthy, benefits investors, Dexter said. International exchanges do not have to meet the same guidelines, which may lead to riskier practices, he said.&nbsp;</p>



<p>Alongside Dexter, board members include Keisha Bell, Managing Director, head of diverse talent management and advancement, DTCC; Bryan Bishop, CTO at Avanti Financial Group; Joe Keefer, trader at Grapefruit Trading; Jerome Kemp, president of Baton Systems; Lucas Moskowitz, vice president and deputy general counsel at Robinhood; Bart Smith, global head of strategy for digital assets for the Susquehanna International Group of Companies and Mark Wetjen, head of policy and regulatory strategy at FTX US. </p>



<hr class="wp-block-separator has-alpha-channel-opacity"/>



<p><strong>Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.</strong></p>



<p><strong>Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.</strong></p>



<p><strong>Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.</strong></p>



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Crypto Exchange FTX US Vying for CFTC Sign-off on Margin Trades

Sam Martin

<div id="highlights-block_1de725d7417625c4c6cf81b9be52b950" class="highlights">
        <ul>
                <li>Bitcoin has seen a lot of ups and downs over the course of 2021</li>
                <li>A BTC short squeeze could be brewing</li>
            </ul>
    
</div>



<p>Coin Metrics released a <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-134" target="_blank" rel="noreferrer noopener">report</a> highlighting some BTC moments from 2021.</p>



<p>BTC wallets holding non-zero balances continue to notch new highs.</p>



<p>Bitcoin could be setting up for a short-squeeze as stablecoin-margined open interest rises.</p>



<p>Tether and USDC grew from a combined market cap in 2020 of $25 billion to a combined market cap of $117 billion in 2021, according to the Coin Metrics <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-134" target="_blank" rel="noreferrer noopener">report</a>.</p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul class="wp-block-list">
<li>S&amp;P 500: 4,649, +1.78%</li>



<li>NASDAQ: 15,341, +2.40%</li>



<li>Gold: $1,789, -0.18%</li>



<li>WTI Crude Oil: $71.47, +4.17%</li>



<li>10-Year Treasury: 1.470%, +0.053%</li>
</ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul class="wp-block-list">
<li>BTC: $48,667, +2.60%</li>



<li>ETH: $4,017, +1.30%</li>



<li>ETH/BTC: 0.0824, -2.17%</li>



<li>BTC.D: 40.63%, +0.54%</li>
</ul>



<h3 class="wp-block-heading">BTC 2021</h3>



<p>BTC opened the year strong with a Q1 rally up to <a href="https://coinmarketcap.com/currencies/bitcoin/" target="_blank" rel="noreferrer noopener">$57,500</a> ignited by Tesla&#8217;s <a href="https://coinmetrics.substack.com/p/coin-metrics-state-of-the-network-330" target="_blank" rel="noreferrer noopener">announcement</a> on Feb. 8, 2021, that they had added $1.5 billion worth of BTC to their balance sheet. </p>



<p>Tesla&#8217;s announcement coincided with an increase in the number of wallet addresses with a non-zero balance, according to data from <a href="https://studio.glassnode.com/metrics?a=BTC&amp;category=Distribution&amp;m=addresses.NonZeroCount&amp;modal=loginForm&amp;s=1572363587&amp;u=1640044800&amp;zoom=" target="_blank" rel="noreferrer noopener">Glassnode</a>. As seen in the chart below, the number of people who own BTC is at an all-time high.</p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png" alt="" class="wp-image-13002" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-number-of-addresses-with-a-non-zero-balance-1024x576.png?w=1800 1800w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source: Glassnode</figcaption></figure></div>


<p>BTC then marched on in Q2 of 2021 as Coinbase, the most widely used exchange in the US to purchase digital assets, <a href="https://news.bitcoin.com/coinbase-ipo-april-14-nasdaq/" target="_blank" rel="noreferrer noopener">went public</a> on April 14. The anticipation of the event led to a rally above $63,000 before breaking trend and retracing below $50,000 in the following weeks.</p>



<p>However, the big decline did not occur until China <a href="https://medium.com/coinmetrics/bitcoin-miners-are-escaping-china-d3937e8f018c" target="_blank" rel="noreferrer noopener">announced</a> it would ban bitcoin mining at the end of May. </p>



<p>&#8220;The Chinese government announced a regulatory crackdown of Bitcoin mining and trading. Although China has &#8216;banned&#8217; Bitcoin several times in the past, this time was different:&nbsp;<a href="https://medium.com/coinmetrics/bitcoin-miners-are-escaping-china-d3937e8f018c" target="_blank" rel="noreferrer noopener">Chinese Bitcoin miners started to shut down</a>&nbsp;and rapidly leave the country in anticipation of regulatory action. The amount of BTC transferred by miners hit a yearly high as some miners moved to sell their holdings and move out of the country.&#8221; reads a <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-134" target="_blank" rel="noreferrer noopener">Coin Metrics report</a>.</p>


<div class="wp-block-image">
<figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="702" height="407" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png" alt="" class="wp-image-13004" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=702 702w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=450 450w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=378 378w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.16.03-PM.png?w=80 80w" sizes="(max-width: 702px) 100vw, 702px" /><figcaption class="wp-element-caption">Source: Coin Metrics</figcaption></figure></div>


<p>Between the mining ban and a highly leveraged market structure, a lot of traders were forced to close their long positions which helped push the price below $<a href="https://coinmarketcap.com/currencies/bitcoin/" target="_blank" rel="noreferrer noopener">35,000</a>.</p>



<p>Futures open interest dropped from $20.73 billion on May 10 to $10.93 billion on May 23, according to data from <a href="https://www.coinglass.com/BitcoinOpenInterest" target="_blank" rel="noreferrer noopener">Coinglass</a>.</p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="382" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png" alt="" class="wp-image-13005" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/bybt_chart-6-4-1024x382.png?w=1340 1340w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source: Coinglass</figcaption></figure></div>


<p>After a long chop sideways in Q3, the launch of a US-based bitcoin futures backed ETF product in <a href="https://cms.blockworks.co/first-bitcoin-strategy-etf-puts-btc-in-overdrive-price-tops-64k-markets-wrap/" target="_blank" rel="noreferrer noopener">October</a> sparked another rally to fresh all-time highs.</p>



<p>The <a href="https://coinmetrics.substack.com/p/state-of-the-network-issue-134" target="_blank" rel="noreferrer noopener">Coin Metrics report</a> continues: &#8220;By October 19th BTC price topped $64K, surpassing Q2’s top and setting a new all-time high. Q4 also ushered in Bitcoin’s biggest upgrade in four years: Taproot. Taproot introduced new scripting possibilities and laid the foundation for new smart contract functionality, while improving Bitcoin’s security and privacy. So far, about&nbsp;<a href="https://txstats.com/dashboard/db/taproot-statistics?orgId=1&amp;from=now-30d&amp;to=now">1.6K BTC has been stored in Taproot P2TR outputs</a>&#8220;.  </p>



<h3 class="wp-block-heading">Bitcoin today</h3>



<p>BTC was last trading near $48,650, up ~5.20% on the day, according to data from <a href="https://www.coingecko.com/en" target="_blank" rel="noreferrer noopener">Coingecko</a>. Some traders are pointing to the possibility of a short squeeze on the heels of <a href="https://app.laevitas.ch/dashboard" target="_blank" rel="noreferrer noopener">mixed perpetual funding</a> rates and rising stablecoin-margined open interest when compared to flat coin-margined open interest.</p>



<p>@bit_hedge noted on <a href="https://twitter.com/bit_hedge/status/1473268340445618180?s=20" target="_blank" rel="noreferrer noopener">Twitter</a>, &#8220;We&#8217;ve seen this picture before,&#8221; alluding to a similar setup today as the beginning of the end-of-summer rally seen earlier this year. </p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png" alt="" class="wp-image-13008" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@bit_hedge-1024x576.png?w=1920 1920w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Source: @bit_hedge</figcaption></figure></div>


<h3 class="wp-block-heading">Other key metrics from 2021</h3>



<p>On-chain highlights for BTC, ETH, Tether and USDC over the course of 2021 can be found in the table below:</p>


<div class="wp-block-image">
<figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="670" height="467" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png" alt="" class="wp-image-13009" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=670 670w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=369 369w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=374 374w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=314 314w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-12.42.50-PM.png?w=80 80w" sizes="(max-width: 670px) 100vw, 670px" /><figcaption class="wp-element-caption">Source: Coin Metrics </figcaption></figure></div>


<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:</p>


<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="337" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png" alt="" class="wp-image-13014" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.43.50-PM-1024x337.png?w=1224 1224w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Top Ethereum Projects</figcaption></figure></div>

<div class="wp-block-image">
<figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="280" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png" alt="" class="wp-image-13015" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-21-at-2.44.04-PM-1024x280.png?w=1196 1196w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Top Solana Projects </figcaption></figure></div>


<p>If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.</p>



<hr class="wp-block-separator has-css-opacity"/>



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BTC Attempts End-of-Year Rally: Markets Wrap

<div id="highlights-block_617725d07bf3f" class="highlights">
        <ul>
                <li>Digital asset investment products saw first week of outflows in over 4 months</li>
                <li>Terra becomes the second largest layer-1 chain when measured by TVL</li>
            </ul>
    
</div>



<p>Digital asset investment products saw first week of outflows in over four months, according to a CoinShares <a href="https://coinshares.com/research/digital-asset-fund-flows">report</a>.</p>



<p>Terra becomes the second largest layer-1 chain when measured by TVL, according to DeFi Llama.</p>



<p>Margined open interest on BTC is more heavily weighted towards stablecoin margined open interest, implying a healthier market structure.</p>



<h3 class="wp-block-heading"><strong>Latest in Macro:</strong></h3>



<ul class="wp-block-list"><li>S&amp;P 500: 4,568, -1.14%</li><li>NASDAQ: 14,980, -1.24%</li><li>Gold: $1,789, -0.60%</li><li>WTI Crude Oil: $68.66, -3.10%</li><li>10-Year Treasury: 1.429%, +0.027%</li></ul>



<h3 class="wp-block-heading"><strong>Latest in Crypto:</strong></h3>



<ul class="wp-block-list"><li>BTC: $47,291, +0.91%</li><li>ETH: $3,943, +0.14%</li><li>ETH/BTC: 0.0833, -0.98%</li><li>BTC.D: 40.57%, +0.49%</li></ul>



<h3 class="wp-block-heading">Crypto investment products see outflows </h3>



<p>Digital asset investment products saw outflows totaling US$142m for the week ending on December 17th, the first outflow following a 17 week run of inflows, according to CoinShares latest fund flows <a href="https://coinshares.com/research/digital-asset-fund-flows" target="_blank" rel="noreferrer noopener">report</a>. The largest previous outflow took place in June of 2021 where weekly outflows totaled $97 million. </p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="769" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png" alt="" class="wp-image-12976" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png?w=342 342w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png?w=347 347w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png?w=292 292w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-2.47.55-PM-1024x769.png?w=1294 1294w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: CoinShares</figcaption></figure></div>



<p>The <a href="https://coinshares.com/research/digital-asset-fund-flows" target="_blank" rel="noreferrer noopener">report notes</a> that while the outflows appear alarming at first glance, there are a few key factors to consider for better context:</p>



<ul class="wp-block-list"><li>The outflows come at a time when the Federal Reserve has signaled increased tapering of asset purchases and rate hikes in 2022, which has spurred outflows across all risk-on assets</li><li>Outflows only represent 0.23% of the total assets under management (AUM) versus the outflows seen in early 2018 at the start of the bear market, which were equal to 1.60% of AUM at the time.</li><li>Inflows peaked at $9.5 billion for 2021 versus the total inflows of $6.7 billion seen in 2020, marking a record year of inflows for digital asset investment products.</li></ul>



<figure class="wp-block-image size-full"><img loading="lazy" decoding="async" width="932" height="648" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.20.05-PM.png" alt="" class="wp-image-12980" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.20.05-PM.png?w=932 932w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.20.05-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.20.05-PM.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.20.05-PM.png?w=370 370w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.20.05-PM.png?w=375 375w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.20.05-PM.png?w=315 315w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.20.05-PM.png?w=80 80w" sizes="(max-width: 932px) 100vw, 932px" /><figcaption>Source: CoinShares</figcaption></figure>



<p>Bitcoin products saw outflows equal to $89.2 million, which was enough to push month-to-date flows into negative territory.</p>



<p>Ethereum investment products saw record outflows last week, totaling $64 million according to the CoinShares <a href="https://medium.com/coinshares/volume-59-digital-asset-fund-flows-weekly-5a107746bc52" target="_blank" rel="noreferrer noopener">report</a>.</p>



<p>While the two blue-chip digital assets saw outflows from investment vehicles, Solana, Polkadot, Cardano, Ripple and others saw net inflows despite the volatility seen in the digital assets market over the past few weeks.</p>



<div class="wp-block-image"><figure class="aligncenter size-full"><img loading="lazy" decoding="async" width="702" height="590" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.26.51-PM.png" alt="" class="wp-image-12981" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.26.51-PM.png?w=702 702w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.26.51-PM.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.26.51-PM.png?w=306 306w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.26.51-PM.png?w=311 311w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.26.51-PM.png?w=261 261w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-3.26.51-PM.png?w=80 80w" sizes="(max-width: 702px) 100vw, 702px" /><figcaption>Source: CoinShares</figcaption></figure></div>



<h3 class="wp-block-heading">Terra (LUNA) climbs to number 2 chain by TVL</h3>



<p>Terra (LUNA) ousted Binance Smart Chain (BSC) and Avalanche (AVAX) over the weekend to become the second largest layer-1 chain when measured by total value locked (TVL). Terra currently boasts $17.66 billion of TVL according to data from <a href="https://defillama.com/chains" target="_blank" rel="noreferrer noopener">DeFi Llama</a>. The large increase in TVL can be attributed to the liquidity bootstrapping phase for a new DEX on Terra, <a href="https://lockdrop.astroport.fi" target="_blank" rel="noreferrer noopener">Astroport</a>, that concluded over the weekend.</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg" alt="" class="wp-image-12983" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=2048 2048w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Terra-TVL-1024x576.jpg?w=80 80w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: DeFi Llama</figcaption></figure></div>



<h3 class="wp-block-heading">BTC note</h3>



<p>The percentage of BTC supply held of centralized exchanges is hovering near 3-year lows, according to data from <a href="https://studio.glassnode.com/metrics?a=BTC&amp;category=Exchanges&amp;m=distribution.BalanceExchangesRelative&amp;modal=loginForm&amp;s=1517529508&amp;u=1639958400&amp;zoom=" target="_blank" rel="noreferrer noopener">Glassnode</a>.</p>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1024" height="576" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png" alt="" class="wp-image-12984" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=464 464w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/glassnode-studio_bitcoin-percent-balance-on-exchanges-all-exchanges-2-1024x576.png?w=1800 1800w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: Glassnode </figcaption></figure>



<p>&#8220;There are two types of BTC derivatives: BTC/crypto margined and stablecoin/USD margined,&#8221; <a href="https://twitter.com/DylanLeClair_/status/1472996720669863944?s=20" target="_blank" rel="noreferrer noopener">wrote</a> on-chain analyst, Dylan LeClair. &#8220;BTC margined longs are unfavorable versus stablecoins during a market downturn because as asset prices fall traders using BTC as collateral are liquidated.&#8221; </p>



<p>As seen in the below chart, stablecoin margined open interest is outpacing BTC/crypto margined open interest which is seen as a healthier market structure.</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="771" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png" alt="" class="wp-image-12985" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=341 341w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=346 346w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=291 291w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/@DylanLeClair_-1024x771.png?w=1634 1634w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Source: @DylanLeClair_</figcaption></figure></div>



<h3 class="wp-block-heading">Non-Fungible Tokens (NFTs)</h3>



<p>Trading data from <a href="https://opensea.io/rankings" target="_blank" rel="noreferrer noopener">OpenSea</a> and <a href="https://solanalysis.com" target="_blank" rel="noreferrer noopener">Solanalysis</a> of some of the top Solana and Ethereum projects can be found below:</p>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="328" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png" alt="" class="wp-image-12986" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.21-PM-1024x328.png?w=1223 1223w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Ethereum Projects</figcaption></figure></div>



<div class="wp-block-image"><figure class="aligncenter size-large"><img loading="lazy" decoding="async" width="1024" height="287" src="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png" alt="" class="wp-image-12987" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png?w=80 80w, https://blockworks-co.imgix.net/wp-content/uploads/2021/12/Screen-Shot-2021-12-20-at-4.23.10-PM-1024x287.png?w=1196 1196w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption>Top Solana Projects </figcaption></figure></div>



<p>If you made it this far, thanks for reading! I am looking forward to catching up tomorrow.</p>



<hr class="wp-block-separator"/>



<p><strong>Get the day’s top crypto news and insights delivered to your inbox every evening.&nbsp;<a href="https://cms.blockworks.co/newsletter/" target="_blank" rel="noreferrer noopener">Subscribe to Blockworks’ free newsletter</a>&nbsp;now.</strong></p>



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