Research Roundup Newsletter [March 2023]

In this issue, we feature trending market insights, our latest Visa Card Consumer Spending Insights for 2022, and our research reports on liquid staking derivatives.

Apr 05, 2023 Research Roundup March 2023

Welcome to the Monthly Research Roundup Newsletter! Adoption Index March 2023

1. Market Index

The 30-day price, volume, and volatility indices were positive at +19.98%, +16.61%, and +56.00%, respectively. Monthly Market Index March 2023

2. Visa Card Consumer Spending Insights Visa Card Consumer Spending Insights

We took a deep dive on how our users spend their crypto, where, and on what. For 2022, the card saw more than 80% growth in total spending compared to the previous year. 

Here is a summary of which categories attract the most crypto spending in 2022.

  • Recreation (including recreation, sports, and culture) grew the strongest, by 52%. 
  • Transportation came in second, spiking by 29%. This reflects increased consumer confidence post-COVID-19 as countries reopened their borders. 
  • Similarly, on the back of recovery from COVID-19, consumers’ spending on hotels and dining also spiked, by 28%.

3. Monthly Feature Articles Liquid Staking Derivatives

Monthly Feature Article | Liquid Staking Derivatives: Money Legos in DeFi

In this feature report, we provide an overview of the current market landscape, key market players and their features, how liquid staking works as ‘money legos’ in DeFi, and what the upcoming Shanghai upgrade entails for liquid staking derivatives (LSDs). Check out Liquid Staking Derivatives: Money Legos in DeFi

Key takeaways:

  • Liquid staking is now the second-largest sector in crypto after decentralised exchanges, replacing DeFi lending. Today, the liquid staking narrative remains strong in anticipation of Ethereum’s Shanghai Upgrade, which will enable staked ETH withdrawals in the network.
  • In liquid staking, native coins of a Proof of Stake (PoS) chain are deposited to a staking pool, which is delegated to one of many validators participating in the consensus protocol. The staking pool then issues a ‘receipt’ in the form of a liquid synthetic token that is often 1-to-1 pegged to the underlying PoS token.
  • Ethereum staking is the largest staking market, with over 17.8 million ETH (around US$32 billion) deposited into the Ethereum Beacon Chain staking contract as of March 2023, constituting 14.8% of the total ether supply. Over a third of the total ETH staked is locked up in liquid staking. 
  • In combination with other DeFi protocols, liquid staking can be viewed as a type of building blocks or ‘money legos’, which can be combined or stacked on top of each other to create more financial applications, typically through liquidity mining and/or lending and borrowing.
  • In general, there are several risks to consider regarding liquid staking, like slashing, centralisation, and depegging.
  • A case can be made that the Shanghai Upgrade will ultimately contribute to de-risking ETH staking and driving the development of the liquid staking derivatives market. ETH Staked Breakdown

Monthly Feature Article | Deep Dive Into Liquid Staking Derivatives

For our latest private report, we dive deep into LSDs. The concept of liquid staking is relatively new, and as such, the LSD market is still in its early stages. Nevertheless, there are already around 70 projects providing LSDs, which allow users to trade their staked tokens without having to wait for the staking period to end. This report will highlight three of the major LSD protocols: Lido, Rocket Pool, and Frax. We explore in detail their key features, their validator delegation mechanisms, and their associated staking derivative tokens. Read all of this and more in our report, exclusive to our private members. Check out Deep Dive Into Liquid Staking Derivatives

Key takeaways:

  • Liquid staking derivatives allow users to earn staking rewards on Proof of Stake (PoS) blockchains while retaining the ability to use their staked tokens on other decentralised platforms.
  • Based on the design of liquid staking protocols, there are three main liquid staking token models: rebasing tokens, reward-bearing tokens, and the dual-token model.
  • Various LSD protocols have different types of mechanisms to secure blockchain validation. 
    • Lido relies on node operators to run validator nodes on behalf of the protocol, and they receive a fee in return as a reward. 
    • A key feature of Rocket Pool is their minipool validator mechanism: Its nodes only need to deposit 16 ETH per validator, which will be combined with 16 ETH from the staking pool to create a new validator, called a minipool. 
    • The Frax Ether validator mechanism relies on the Frax ETH Minter (frxETHMinter) smart contract, which creates new validator nodes whenever sufficient ETH (32 ETH) is available.
  • Protocols also feature different mechanisms for yield generation:
    • Rocket Pool offers extra RPL rewards to node operators who provide RPL collateral as insurance to the protocol. Additionally, Rocket Pool node operators can earn more rewards by charging Rocket Pool users a set percentage of the rewards earned on their node.
    • Frax’s liquid staking system utilises a dual-token model: one for staking (sfrxETH), and another for farming and withdrawing back to ETH (frxETH). The frxETH (Frax Ether) token is also eligible for farming rewards from the Curve and Convex ecosystem. Frax owns a significant amount of CVX, enabling them to redirect CRV and CVX rewards to the frxETH pool.
  • Although LSDs can maintain liquidity while earning staking rewards, there are still some risks that users need to pay attention to. These include the centralisation of validators and the risk of depegging.
  • The liquid staking sector is expected to grow after the Shanghai upgrade given the relatively low staking ratio of Ethereum compared to other PoS chains. liquid staking protocols

Monthly Feature Article | Restaking: EigenLayer

Security is one of Ethereum’s most important aspects, achieved using the Proof-of-Stake (PoS) consensus mechanism. Restaking is a new service aiming to utilise Ethereum’s robust security. It allows Ethereum validators to ‘restake’ their ETH into smart contracts on Ethereum to secure brand new projects. Restaking could potentially enable rapid innovation at different levels of the blockchain stack, and give rise to new projects built on and around Ethereum and its ecosystem. 

EigenLayer is pioneering the development of restaking today. In this report, we cover what EigenLayer does, how its restaking service works, and two key ideas: pooled security via restaking and free-market governance. Read all of this and more in our report, exclusive to our private members. Check out Restaking: EigenLayer

Key takeaways:

  • EigenLayer is pioneering the development of restaking. It aims to solve the issues of fragmented trust networks by enabling users who have locked their ETH in staking to ‘restake’ it in a separate smart contract. This essentially means putting up the same capital for additional slashing risk. This restaked capital is then used to secure any new application or middleware created with EigenLayer.
  • This system reduces the cost of capital, as each of these projects do not need to create a new token as part of its trust layer; it is able to utilise Ethereum’s security, which is already considered to be robust. This also creates value alignment between the middleware being created and the Ethereum protocol, as their fate is now tied through shared security.
  • Without the need to bootstrap security and trust for middleware solutions, restaking could encourage innovation that previously was centred around the application level. It expands the space of blockchain applications over which security can be pooled. Thus, EigenLayer potentially increases innovation beyond the smart contract-based dApps enabled by Ethereum, to virtual machines, consensus protocols, and middleware. Restaking EigenLayer

Interested to know more? You can do so by signing up as a Private member, joining our Exchange VIP Programme, or collecting a Loaded Lions NFT.

4. Alpha Navigator

This institutional-focused report dives into macro trends, market-neutral pair trades, style-factor screens, and event-driven ideas. Read the full Alpha Navigator report here.

  • Amid the banking sector turmoil in March, Bitcoin outperformed all other asset classes by a significant margin. Alpha Navigator
  • BTC’s 1-month correlations with equities continued to be weak, with the exception of the tech-heavy NASDAQ 100. Bitcoin Price Correlations

5. Crypto Conference & Economic Calendar from Market Pulse

Crypto Conferences Calendar Crypto Events 2023

Economic Calendar Economic Events Calendar

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