Ambient Alfa, Arbitrum L3, On-Chain sleuthing & More
The Castle Chronicle: Volume 24
👀 What’s to Come in Volume 19
🔑 Key News: Kucoin KYC, re-filing of BTC ETFs, Wombat & Aave on Pulsechain exploited & more from CJ
📈 Macro Outlook: BIG update on BTC & ETH options markets from Hansolar
☕️ Ambient Finance Interview Recap by Otheym
📉 HTF Price Action Scenarios: Astrologist sees bull from Vlad
🍕 Francesco Feature on Arbitrum Orbit and how to launch an L3
⚔️ A Call to Arms
Think you have what it takes to enter the Castle and contribute to funding and advising projects across the space?
🔑 Key News
Kucoin introduces mandatory KYC starting on July 15
FTX Begins Talks on Reboot
Binance's Euro Banking Partner to Halt Support of the Crypto Exchange in September
Mastercard to continue crypto foray with the beta launch of ‘blockchain app store’
Fidelity, WisdomTree, VanEck, and Invesco/Galaxy have all re-filed their spot bitcoin ETF applications, naming Coinbase as the exchange
CME announces the launch of ether/bitcoin ratio futures in late July
South Korea Passes Inaugural Standalone Crypto Bill
IRS orders Kraken crypto exchange for turning over its users' information
Singapore wants crypto firms to keep client funds in a trust
Gemini’s Winklevoss demands $1.47 billion payment from DCG in ‘final offer’
Proposal for Hong Kong to Issue a Hong Kong Dollar Stablecoin to Compete with USDT/USDC
Exploits/Updates that happened this week
Useful Weekly Defi Updates
Mav Protocol announces details of the Maverick Ecosystem Incentive Program Pre-Season and $MAV token launched
Yield Protocol recovers post Euler hack
Maple Finance launches direct lending arm Maple Direct
Compound Finance founder developing regulated financial products for the blockchain
Rollbit migrates to Ethereum
Dopex partnering with Unibot to offer Telegram trading
CamelotDEX submits proposal to receive 12M ARB to distribute as liquidity & integration incentives
Binance lists Pendle and opening a launch pool
Eigenlayer To Increase Restaking Capacity for LST and Native Restaking
SSV Network unveils mainnet plans
Some interesting projects to look out for:
Rollux: Just went live, rollup secured by Bitcoin
Exit10ETH: Degen project for ETH bulls, mentioned by redphonecrypto
SuperstateFunds: Project founded by Compound Finance’s founder, compliant, blockchain-based financial products
Archway: Just went live, incentivized L1 blockchain that allows developers to capture the value their dapps
⛓ On-Chain Sleuthing
Froyo Fren buying back his $GRAIL
Froyo Fren, Chief of JonesDAO, bought back his $GRAIL bag on the 28th of June. He did so right before the proposal was made by the Camelot team on the Arbitrum DAO governance forum asking for another grant of 12 mln tokens for the ecosystem.
It is not a surprise he was in favor of this proposal.
Froyo Fren’s DeBank page
Froyo is also the 2nd biggest holder of $UNIBOT (not counting the protocol and the LP addresses). He holds close to 1.86% of the supply.
Another trading bot token accumulated by Smart Money
We have seen lots of $UNIBOT holders buying different tokens related to Telegram and Discord trading bots. One interesting project that caught our eye is $GENIE (Twitter link).
Rumors are circulating that this Telegram bot could be integrated with Meastro Telegram products.
[Redacted screenshots only visible for subs]
Smart Money Moves
Recently, there has been a good amount of participation from smart money in Protectorate's sales.
Moreover, smart money addresses have been actively LPing on Ambient, anticipating a similar airdrop to Maverick. (https://ambient.finance/)
In addition to that, Arrakis Finance has been gaining favor among smart farmers. You can check it out at: https://beta.arrakis.finance
The trend continues with smart farmers currently focusing on farming on Velodrome V2.
Meanwhile, farming R+DAI on Aura Finance remains a popular choice among smart farmers.
Furthermore, smart farmers have taken notice of Tarot on Optimism as an attractive opportunity.
The popularity of Maia V3 among smart farmers continues to grow.
Lastly, ETH-ARB farmers still favor Pendle V2 as a preferred option.
💹 Macro Outlook
7/5 FOMC minutes
7/6 ISM Services PMI / JOLTS Job Openings
7/7 Non Farm Payrolls / Unemployment Rate
7/12 Core Inflation / Inflation Rate
7/26 FED Interest Rate Decision
BTC, ETH and Macro
We’ve started the second half of July and both trad markets and BTC have been holding steady at their respective local highs over the past week. There seems to be a mix of optimism and caution in the air as recession worries seem to be subsiding and a small but growing group of analysts are edging towards a recovery of the economy.
Core PCE coming in cooler at 3.8% relative to the expected 4.6% was encouraging for risk on assets, while the ISM manufacturing PMIs still indicate a weaker economy.
Unless there is some kind of break down in the economy, it looks like the FED will continue hiking 25bps in July.
Net liquidity has fallen as TGA refills continue, but markets continue their March up which may mean the widely popularized model may be at the end of its lifecycle.
Either we're about to have the biggest correction in risk assets since Aug '22, or this model is no longer useful
Model says fair value for $SPX currently ~4000
& fair value for $BTC currently ~$28500 httpp
— Max Anderson (@maxjanderson)
Jul 3, 2023
Crypto Options Markets
$1m worth of outright calls targeting the eoy bought today. Put simply, if BTC moves towards 40k the option prices increases exponentially, but if it doesn’t reach 40k the $1m goes to ZERO by the end of the year.
The Bitcoin spot ETF news has definitely started to lifted spirits as well as IVs, but it is difficult to say we are out of the downward trending vol regime we have been seeing over the past year.
A $10m bullish call spread bought on the 30th. Put simply, a MASSIVE long ETH bet that aims to benefit from a rise in price in the second half of the year. They sold 2500 calls to finance some call buying.
Contract : buy ETH-29DEC23-1900-C + sell ETH-29DEC23-2500-C
CME ETH options OI also hit ATHs last month. Perhaps the tech sector bullishness is finally be spilling over to ETH?
☕️ Ambient Finance Interview Recap
Ambient Finance is a decentralized exchange committed to improving the experience for LPs and users alike. The CEO, Doug Colkitt, was recently interviewed by the chads at 0xResearch, where he shed light on the ambitious roadmap that his company is following to revolutionize the DEX space.
In the current DeFi ecosystem, liquidity providers often face a tough trade-off. Although they can earn fees, the risk of impermanent loss often outweighs the potential benefits. Liquidity mining can help offset this risk, but it's not a sustainable long-term solution.
A standout innovation is their dynamic fee model. Traditional LPs' fees remain constant, regardless of the market's volatility. However, Ambient's pioneering dynamic model offers a fresh solution. This model correlates fees with market volatility, increasing the chances of these fees offsetting potential impermanent losses. This strategy will be rolled out in two phases: initially, Ambient will learn from the pools outperforming in Uniswap V3, adjusting fees similarly. Phase two will take a more in-depth look at the origins of the order flow, allowing Ambient to refine the model further and optimize returns for liquidity providers.
They're also introducing an exciting change in the technical infrastructure of DEXes. Through a single-contract DEX model, they strive to make pool creation and asset swaps more cost-effective and efficient. This approach promises to make arbitrage more seamless, leading to more stable and efficient pricing.
As the interview drew to a close, Doug addressed the issue of latency disparities between CEXs and DEXs. He pointed out how the inherent high latency of on-chain trading, particularly when paired with the conventional automated market maker (AMM) model, means execution priority essentially rewards ETH over liquidity providers (LPs). The higher gas fees paid to expedite trades simply burn more ETH without conferring any real benefit to the LPs. To combat this, Doug proposed an innovative solution - constructing an auction system. In this setup, transactions paying the most to LPs would be prioritized for execution, creating a win-win situation for everyone involved in the trading ecosystem.
The world of spot decentralized exchanges is about to get more exciting with Ambient Finance's innovative approach. By addressing critical issues faced by liquidity providers, improving technical efficiency, and introducing dynamic fees, they are poised to redefine decentralized exchanges. They're not just fixing the broken economics of LPing; they're pioneering a path that could make on-chain price discovery the new normal. It's a refreshing and much-needed twist that could shape the future of decentralized trading.
[Redacted alfa on Ambient Finance]
Courtesy of Otheym
📈 HTF Price Action Scenarios
Last week I expected a continuation of the bullish trend and was looking to get involved in either the daily demand zone or on LTF bullish ranges.
Re-accumulation playing out
Fresh new highs
Longs from daily demand
Longs on LTF bullish ranges
Overall I still lean bullish. Longs are more probable here and I expect more upside.
Courtesy of Vlad - trend-based trader and MentFX student
🍕 Francesco Feature: How to Create your own L3 in 5 Minutes on Arbitrum
L2s have dominated the narrative during this recent bear market with a handful of other niches.
Luckily they have given us some entertainment in these dire times.
We have often seen the term L2 wars, to symbolize the competition between Arbitrum and Optimism. Before, this was a war to establish an essential infrastructure for L2s and gather an initial critical mass of protocols and users.
Now that they have established a ground layer and their protocols are thriving, the next step of this fictional war is for who will attract more and more projects to build on top of their stack.
With this regard Optimism has been closing one deal after another: first Coinbase with BASE and then Binance with OPBNB.
While Arbitrum seems to have taken the crown as the home of DeFi, more and more companies are choosing the OP stack to build their own chain.
Is Optimism winning this race?
How is Arbitrum trying to attract projects to build on top of its tech stack?
Enters Arbitrum Orbit.
Revolving around the Arbitrum Orbit
Arbitrum Orbit is part of the Arbitrum tech stack and allows any developer to easily and permissionless launch their own L3 ecosystem that settles on Arbitrum’s chains (One or Nova).
What can you build on Orbit?
Depending on the customizations and requirements, devs can build:
Arbitrum L3 Rollups
Arbitrum AnyTrust Protocols
Tailored Chains for specific use cases
Arbitrum Nova is an example of an AnyTrust protocol: it uses a data availability Committee (DAC) to store raw transaction data, expediting settlement and reducing costs by introducing a security assumption that relies on Arbitrum One.
The involvement of Arbitrum DAO governance in Orbit
While devs can always deploy any L3 permissionless, launching a new L2 chain using the Orbit stack directly on Ethereum needs the approval of the Arbitrum DAO, which has discretion on whether to grant these licenses.
To allow even more customization, Arbitrum will soon release Stylus, which will allow developers to use non-EVM programming languages such as C++ and Rust.
How can you benefit from Orbit?
Offering Gas reliability thanks to dedicated throughout and isolation based on the performance required
Stylus: benefit from EVM compatibility
Independence from Arbitrum roadmap
Permissions: choose who can read and deploy data and smart contracts
Choose the token to collect fees
Account Abstraction / Transaction Fee Subsidization: contributing to further abstracting complexity and improving UX.
Customizable protocol settlement/execution/governance
Nitro: leverage Arbitrum Nitro code upgrades to stay updated in Ethereum scaling tech
DAC to settle tx faster and cheaper
Low MVP costs
Thanks for reading, please follow us at Castle Capital and subscribe to The Castle Chronicle for an update each week!
Atomist & The Castle