Battle at the Gates

The Castle Chronicle: Volume 13

Author

Atomist
April 19, 2023 • Est. Reading Time: 18 minutes

We are all pleased to see the markets continue to deliver higher highs on lower timeframes and a great bullish structure on the daily. Now is the time to see if we can really flip this level and head toward 40k BTC or if we stay down in these lower ranges for months to come.

‘Sell in May and walk away’ has worked the last two years… what will you do this time, anon?

Let’s get stuck in 👇️ 

 👀 What’s to Come in Volume 13

🔑 Key News: Headlines, Exploits, Continued Adoption, DeFi Updates, New Projects & more from CJ

🔥 Hot Narratives: Perps Continue Their Dominance, Solidly Revival, and A Casino with Utility?! from Atomist

📈 Macro Outlook: Simplified Round-up and Implications from Hansolar

📉 HTF Price Action Scenarios: A Bullish Market from Vlad

⛓ On-Chain Sleuthing: Smart Money Stablecoin Holdings and $PEPE winners feature along with Smart Money Moves from Cl & Amir Ormu

🔬 EIP-4844 to Reduce All Fees on L2s from Francecso

🔑 Key News

  • DouYin added the Bitcoin price to their app which got taken down in 1 day

  • Shapella upgrade and withdrawals are live

  • FTX is rumoured to have recovered $7.3B in assets, leading to a spike in FTT’s price.

  • SEC revisits the definition of an exchange

  • US Congress drafting new stablecoin bill

  • Apple launches 4.5% APY high-yield savings account

  • SEC sues Bittrex Exchange

Exploits that happened this week

Adoption is not stopping!

Weekly DeFi Updates

  • Moonbirds announcing their new Diamond Exhibition collection and new reward token TALONS

  • BNB’s Greenfield testnet went live

  • Vela’s Hyper VLP miscalculation error leads to the closing of beta and their updates

  • MakerDAO updates Chapter 1 of the Maker Constitution

  • Rage Trade updates their DN GLP to hedge for trader PnL

  • Adidas updates on their ALTS dynamic NFT collection

  • Chiru Labs x IPX partnership (Azuki and LINE Friends)

  • Partnership proposal between Namada and zCash

  • Solana’s smartphone was finally unveiled with a launch date

  • Uniswap launched their mobile wallet

  • Popsicle Finance launches a new DEX on zkSync called WAGMI and updates ICE token holders

  • ROOK investors started redeeming the treasury

  • Conflux deploying Uniswap v3 and entering Curve Wars

  • Sui Network announces public sale

  • Chia Network submits registration to SEC for IPO proposal

  • Gala Games announces token airdrop of their v2 token in May

  • Arbitrum AIP 1.1 and 1.2 passes

  • Pancakeswap proposal to change tokenomics

Some interesting projects to look out for

Courtesy of CJ - check out his telegram channel for daily news, projects updates and new releases

🔥 Hot Narratives

Perps Continue Their Dominance

Pre-market rug today, GMX hit another all-time high of $90 in a week where the minting of GLP was supported on 7 chains and a new proposal for low-latency Chainlink Oracles for GMX V2 went underway. To further boost the perpetual narrative, Level Finance has begun to see forks popping up across the space due to their innovative LP tranche design and clever tokenomics. One new novel perpetual DEX coming close to launching is Unlimited Network, maybe one to keep an eye on.

Solidly Revival

Despite the poor price performance in recent weeks, Solidly DEXs look to be making a comeback further displaying the thesis around the AMM-type’s ability to continue to incentivise both users and LPs to continue participating in the ecosystem and locking their tokens. The two projects clearly dominating their respective chains are Thena (THE) on Binance Smart Chain (BSC), and Velodrome (VELO) on Optimism. It’s still unclear who will emerge as the Solidly DEX winner on Arbitrum. Our eyes will be on Chronos who are launching their DEX very soon after announcing several partners.

A Casino with Utility?!

A Casino project with added utility for DeFi enthusiasts has finally arrived, and not in the shape any of us expected. It’s quite genius. Pepe’s Game is a Slots x Binary Options in overdrive, everything a degen could wish for. The team have gone about their business very well, with a great brand and on-point marketing. They recently raised a total of $1.8M+ across all sales, of which a large portion will be used to accumulate PLS in order to become the lead bribe and vault product for plsAssets. You can listen to our AMA with them from a few weeks ago for more alpha around these future products.

💹 Macro Outlook

Past Week Events

  • 3/17 BTFP Starts : SPX, Gold, Crypto rally

  • 3/22 08:00 UTC FOMC : 0.25% : SPX & crypto fell, but gold rose to near ATHs and bond yields fell

  • 3/23 FED’s Balance sheet : DW down, BTFP up, FIMA increased to 60b

  • 3/31 12:30 PCE Inflation : Act 0.3% Fore 0.4% Prev 0.5% : SPX & crypto rally on softer print

  • 4/3 OPEC+ announces surprise oil output cuts : Oil spikes 7%, bonds yields rise and DXY falls

  • 4/3 23:00 ISM Manufacturing PMI : Act 46.3 Fore 47.5 Prev 47.7

  • 4/5 14:00 ISM Non-Manu PMI : Act 51.2 Fore 54.5 Prev 55.1

  • 4/7 12:30 Nonfarm Payrolls : Act 236k Fore 238k Prev 311k

  • 4/7 12:30 Unemployment Rate : Act 3.5% Fore 3.6% Prev 3.6%

Upcoming Events

  • 4/12 12:30 CPI(MoM) : Fore 0.2% Prev 0.4% Core CPI Fore 0.4% Prev 0.5%

  • 4/12 18:00 FOMC Minutes

  • 4/12 23:30 ETH Shanghai Fork

  • 4/13 12:30 PPI YoY Fore 3.0% Core 3.4% | mom Fore 0.0% Core 0.3%

  • 4/19 TSLA

  • 4/25 GOOG

  • 4/27 MSFT

BTC, ETH and Macro

The consensus seems to be that inflation will be sticky. Services make up the majority (+70%) of core inflation and services tend to be sticky.

  • Current estimates for YoY are 5.22% and core is 5.66%

    • Lower is bullish for BTC

    • Higher is bearish for BTC

(Consider the price action from the previous CPI print on the 31st of March)

Regional bank fears have died down and the FED balance sheet is shrinking week over week. The FED will continue to keep rates high as long as inflation stays high, which will continue to slow the economy until something materially breaks. Current week areas in the economy seem to be commercial real estate, savings(disposable spending runs out during summer) and income(jobs yet to drop).

Option Markets

Mixed gamma plot for BTC. Negative gamma below 30k could indicate a quick slide if we start trending downward.

ETH positive gamma at 1800 means it can work as support and 2000-2300 is showing negative gamma, which can get squeezed up towards here.

Courtesy of Hansolar - check out his telegram chat for all things options, crypto and DeFi

📈 HTF Price Action Scenarios

Gm frens!

Last week’s expectation was for price to deliver towards the 2k level. We now find ourselves above and still bullish as it gets!

The 12h chart shows a really nice bullish structure. Given the fact that it hasn’t been that long since we had a re-accumulation, I expect more upside. I have marked the last 12h demand zone from where I would like to see longs kick in.

On the 1h, we can see some sideways action. We usually assume re-accumulation here, therefore I’d like to see some kind of liquidation take place before more upside. That said, there is a clear build-up on the 1h already, and I wouldn’t be surprised to see it rip up.

This is a bullish market; therefore, it makes sense to look for long setups! The ideal scenario would be to see the 12h demand zone tapped and jumping on some LTF uptrend from there.

That’s all for this week! Trade responsibly and I’ll see y’all next week.

Courtesy of Vlad - trend-based trader and MentFX student

⛓ On-Chain Sleuthing

Smart Money Stablecoin Holdings Continue to Drop

As seen in the chart below, stablecoin holdings of smart money addresses continue to fall. The question is, are we nearing a local top and when will they begin more aggressive profit-taking?

Nansen

Small Wallets Make Huge Gains on PEPE

After taking the space by quite a storm over the last week, several small wallets were able to realise massive home runs on the memecoin, $PEPE.

One address made close to 14 ETH profit after investing 0.017 ETH at the launch. Another secured 64 ETH of profit from a 0.02 ETH entry at launch, turning $40 into $130,000 in less than 72 hours 👏 

But these don’t come close to the degeneracy of this final wallet, rightly tagged PEPE KING by our sleuths. Running up a $250 buy to $1.4m in 96 hours… still with their entire position intact.

Smart Money Moves - Tokens

  • Smart Money has been bridging to KAVA CHAIN recently, also smart money was detected in $TORE, a Geist fork on KAVA CHAIN that has caught the attention of investors.

  • Smart Money has been actively buying into memecoins following the success of $pepe, and memecoins have really shined in the recent week as a decent amount of capital has flowed into them.

  • Another ecosystem where smart money has been detected recently is the Arbitrum ecosystem, following the impressive rally of $ARB. During this rally, smart money was seen investing in several coins such as $VSTA, $GRAIL, and $PLS, which have become increasingly popular within the Arbi ecosystem.

  • Finally, smart money has also been detected in $THE, a leading Solidly fork on BNB CHAIN.

Smart Money Moves - Farms

  • Various farming protocols have gained popularity among smart farmers on AVAX chain. Notably, Smart Farmers are actively engaged in farming on Glacier Finance and SoliSnek. Additionally, BENQI has emerged as another prominent farming protocol on the chain.

  • For those looking to stake their ETH, unshETH has proven to be a viable option on both the ETH and BNB chains.

  • Meanwhile, Velodrome farms on Optimism have established themselves as a comfortable option for farmers.

  • Auragi has garnered attention from smart farmers as well.

  • Hermes Protocol on METIS has been a popular protocol among smart farmers too.

Research and analysis by Cl & Amir Ormu

🔬 EIP-4844 to Reduce All Fees on L2s

EIP-4844 is the first iteration of the sharding design of Ethereum, trying to add data availability capacity on Ethereum without compromising the composability and the execution layer on L1.

It is expected to be implemented sometime in the second half of 2023.

The reasoning behind this proposal is aligned with the Ethereum rollup-centric roadmap and further improves L2 scalability while being forward-compatible with future sharding developments.

Why EIP-4844: to create a cheap place for L2 solutions to post data on Ethereum and reduce overall transaction fees users pay on L2 by a large margin.

Problem: L2s produce an increasing amount of data. If there’s a way to post that in a cheap way, it will immediately reduce how much the networks charge users to transact.

Solution: new transaction format for “blob-carrying transactions”. It contains a large amount of data that “cannot be accessed by EVM execution, but whose commitment can be accessed”. Instead of embedding the full contents in the body, the contents of the blobs are propagated separately, as a “sidecar”.

EIP-4844 introduces separate fees for transaction computation and storage

L2s will use a different function to submit transactions to Ethereum using “blobs”.

Instead of using “CALLDATA”, which stores data forever, they would use blobs, which are pruned after a pre-defined period.

In fact, the blobs data does not have to be available forever, but for a certain period (e.g. 1-3 months), long enough that allow L2s to ensure at least 1 honest actor to reconstruct the state and challenge or replace the bad sequencer.

EIP-4844 provides significant scaling relief for rollups by allowing them to initially scale to 0.25 MB per slot, with a separate fee market for blobs allowing fees to be very low.

Read: transactions will be 10x cheaper.

This is probably one of the most interesting EIP for users, as they will directly benefit as they will be paying fewer fees on their favourite L2.

So.. Yes! EIP4844 will reduce transaction fees on L2s.

Research by Francesco

Thanks for reading, please give us a follow at Castle Capital and subscribe to The Castle Chronicle for an update each week!

Virtually yours,

Atomist & The Castle

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