$BTC ETF, Sifu Shorting, FTX Claims & More

The Castle Chronicle: Volume 40

AuthorAuthorAuthorAuthorAuthor

unex, CJ CJ, han solar, 0x_Vlad & Caroulemapoule
October 25, 2023 • Est. Reading Time: 18 minutes

 👀 What’s to Come in Volume 40

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

⛓ On-Chain Sleuthing: feature along with Smart Money Moves from Cl

🔥 Hot Narratives from unexployed

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

📉 HTF Price Action Scenarios: from Vlad

🍕 Francesco’s Feature

⚔️ 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

Major Headlines

  • Cointelegraph fake tweet regarding Blackrock Bitcoin ETF causes massive liquidations

  • Binance to temporarily stop accepting new UK users after FCA restriction and halts European visa debit card while Binance US halts dollar withdrawals

  • SEC drops charges against @Ripple's CEO

  • Reddit plans to sunset its blockchain-based reward service Community Points

  • Coinbase launches perpetual futures for non-US eligible customers

  • Etoro partners with Indexcoop to launch web3 portfolio manager

  • Grayscale submits new filing to SEC in attempt for spot bitcoin ETF approval following pivotal court ruling

  • FTX creditor claims rise above 50¢ in over-the-counter deals

Exploits that Happened this Week

Useful Weekly DeFi Updates

  • Uniswap implementing 0.15% swap fee for certain tokens on webapp and wallet

  • Lido Finance shutting down stSOL

  • Pyth Network reveals their tokenomics

  • Manta Pacific to migrate from Optimism to Polygon tech as a zkEVM Layer 2

  • dydx to become a Public Benefit Corporation

  • Stellar Adds Smart Contracts

  • Sui Network reported to being probed by South Korean regulators

  • Celestia Org introduces Blobstream while their genesis block was leaked

  • Developer exposed potential security issue on the Lightning Network

  • Polkadot crowdloan releases in on block 17,856,000

  • Worldcoin Switches Orb Rewards Plan to Boost WLD Supply

  • Bancor proposal to use their treasury ETH to buy and burn BNT

Interesting Projects

  • Big Balls Trade: News based trading terminal

  • Helix: Decentralized derivatives exchange built on Injective

  • Cove: Yield management platform built on Yearn Finance optimized by Gauntlet

  • Cookbook: One stop shop for smart contracts

  • Receipts: IRL>on-chain authentication platform

  • Ape Accelerator: Official accelerator and launchpad for the ApeCoin DAO

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

⛓ On-Chain Sleuthing

Sifu Down BAD on ETH Short

The infamous 0xSifu, ex-Wonderland lead and the pseudonym of Michael Patryn, is down a lot on his multi-million ETH short.

With a position of $21 million, Sifu has been shorting on-chain. His unrealized PnL is now sitting at a whopping negative $2.4 million.

Sifu’s Wallet [only visible for free subs]

People are clowning Sifu on the timeline for this move, but we suspect that he has a big long open on a different platform, most likely a CEX, to hedge his on-chain short. Potentially, to launder his money, who knows.

$OTSEA, a Pintswap competitor

We have covered Pintswap in the past. It aims to be a decentralized OTC desk for memecoins and other on-chain assets. Using the desk, users could get their hands on better deals and by-pass any taxes.

Unfortunately, the Pintswap launch went horrible and since then the token has been in a steady down trend.

We want to point out a similar project with a much smaller marketcap built by devs who have managed to gain attention.

We found a couple of interesting addresses that have been accumulating the token. We took a look at the top holders and concluded there is healthy distribution with some whales adding more as price went up. These are quite promising signs for such a low cap.

Take care, at the time of writing the token had mooned to $1.3 million market cap. We wanted to include it, because of its unique product (as Pintswap failed to deliver).

Research and analysis by Cl

🔥 Hot Narratives

Trending Markets

It seems that a mini-bullrun has commenced following the increase in positive sentiment around a potential BTC ETF.

Nothing has been confirmed yet, but there are signs that we are very close to one being approved.

Recently, the CEO of BlackRock, was on television and he stated that crypto could be a flight to quality during the times of turmoil we are experiencing in the world now.

More about the ETF and overall impact in Hansolar’s Macro Outlook following this section👇👇

Maestro Hacked

The biggest Telegram bot on the market, Maestro, a few hours ago. The router was exploited and affected a number of wallets, but not the entire userbase of Maestro.

The hacker had a field day dumping some of the most popular on-chain tokens, among others $JOE, $LMI, $MOG, and $BANANA. In total, he made over $400k.

In the meantime, Maestro has issued a statement and additionally stated to fully refund all affected:

Great to see that the exploit has been solved, but the biggest issue with these Telegram bot still stand which is the storage of private keys internally. If a malicious actor would gain access to the server base or storage location of the users of Unibot, Banana, or Maestro, the losses would be detrimental.

Another on-chain trading tool called BlackSmith aims to solve these shortcomings by implementing wallet abstraction and session keys. This method allows users to only give the protocol temporary control over the wallet and even limit its actions such as transferring assets.

BlackSmith is currently in Beta.

Uniswap Front-End Top 10 Revenue

The Uniswap front-end is currently within the top 10 of highest revenue-generating projects of the past 24 hours.

Quite a sight to behold and a significant revenue stream for Uniswap Labs. Despite the fee being very low, only a mere 0.15%, it manages to generate substantial amounts of revenue.

This is mainly because it is only applied to the most liquid markets and biggest “base” assets (USDC, ETH, wBTC, etc.).

Let this be a reminder for everyone to use an aggregator that directly interacts with the back-end of Uniswap and thus mitigates the FE fee.

Courtesy of unexployed

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💹 Macro Outlook

Please note that if certain technical jargon or concepts mentioned in this text are unclear, you can refer to investopedia.com for detailed explanations and definitions. Additionally, for a comprehensive overview of macroeconomic events, you can explore the event calendar on investing.com/economic-calendar/.

Upcoming Events

  • Thurs, Oct 26th : Powell Speech, Durable Goods orders, GDP Growth Rate QoQ

  • Fri, Oct 27th : Core PCE, Personal Income/Spending

BTC, ETH, and Macro

  • The Cointelegraph intern who cried wolf has now been exonerated as it looks like the spot ETF was closer than what most were positioned for. Blackrock’s spot ETF ticker; iBTC is currently listed on the DTCC(Depository Trust & Clearing Corporation, which clears NASDAQ trades) and CT over-optimistically took this as an imminent listing signal. It has in-fact been on the site since August. The spot ETF final approval date is currently mid Jan of 2024, but may be approved before hand.

  • The wake-up call ignited a fury of spot buying from Coinbase soon followed by bids from OKX and Binance.

  • This led to a chain of liquidations from the options markets; or more accurately a gamma squeeze. Multiple options accounts on Deribit were liquidated and apparently some 1000 BTC had to be bought back to cover their losses.

  • Gamma squeezes are situations where the market makers are holding short vol positions(in our case short calls). When the market moves against them, they end up exacerbating the move as they try to neutralize their delta positions by longing either perps or buying spot.

  • ETH’s relative mutedness could also be explained through the gamma profiles which are in reverse. Option market makers are generally long volatility, so when when prices move towards them they would have to sell ‘delta’(short perps or sell spot) to stay hedged.

  • tldr on gamma profiles : negative means prices move fast. positive means prices move slower.

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

📈 HTF Price Action Scenarios

Gm frens!

The bullish momentum has shown up! Price seems to be breaking out of its consolidation and moving up. My plan here is to wait for a smaller re-accumulation (liquidation of lows) and jump on the continuation.

  • Accumulation inside daily demand zone

  • Expansion out of consolidation

  • Bullish momentum

  • Ready for bullish setups

Before getting all horny and betting the house long, please keep in mind there is still a chance of this being a re-distribution, but I’d say those chances are now significantly lower. There is no certainty in trading and whoever tells you otherwise is a filthy liar and private group larp.

I will definitely look for LTF bullish setups to follow while being content with taking a few losses if I’m wrong. Trading is all about risk management and making sure you live to see another day. We patiently wait for our setups and we take on risk when they are presented. I believe the time to take on risk has come!

Trade responsibly and I’ll see y’all next week!

Courtesy of Vlad - trend-based trader and MentFX student

🍕 Francesco’s Feature

On the 9th of October a paper was released, talking about the possibility of introducing turing-complete smart contracts on Bitcoin.

Before diving into the BitVM, it's important to mention that Bitcoin design is a feature and not a bug.

The Bitcoin language is purposely limited in order to maximize security and decentralization, over code flexibility (which is something implemented with Ethereum).

1️⃣ What is the BitVM?

The BitVM is a revolutionary solution bringing Turing-complete smart contracts directly to Bitcoin.

With this VM, Bitcoin is not used to "execute" code directly, but only to "verify" the execution: it doesn't allow code execution on Bitcoin (due to scalability and practical issues), BUT it allows users to "publish proofs that a script has been executed (off-chain) incorrectly".

It can be interpreted similarly to optimistic rollups on Ethereum: the BitVM can create proof of incorrect execution in case of fraud or misdemeanor.

This is very compact in byte size, as it only requires the on-chain publication of the code where the error is occurring.

The value proposition of the BitVM is therefore to allow Bitcoin to run smart contracts without the need to go through a soft or a hard fork.

Currently, it's not clear which case studies will be enabled by the BitVM, as more research needs to be conducted.

Some include:

  • 🌉 Trustless Bridges

  • 🔮 Prediction Markets

  • 💻 New Op_Codes

2️⃣ How does BitVM work in practice?

BitVM leverages Taproot addresses so that the space used is minimized.

BitVM contracts involve two parties, a Verifier and a Prover:

  • They both deposit Bitcoin in a Taproot Address (2-of-2 multisig)

  • They begin a sequence of pre-signed transactions where the Verifier proposes a Challenge and the Prover will respond with a solution

  • Challenge > Response > Challenge, and so on

If the Prover can respond correctly to all challenges, then they will be able to access the deposited Bitcoins ✅

If the Prover fails, the Verifier can take the Bitcoins put at stake by the Prover ❌

Only in case of dispute between them, do the Challenge-Response transactions get posted on-chain on Bitcoin.

Otherwise, the transactions can be settled off-chain.

3️⃣ Food for Thought

The BitVM is an exciting innovation, opening the door for introducing smart contracts without the need for hard forks, as most computations happen off-chain.

But hold your horses...

While BitVM is by any means an interesting design, it is much harder to implement practically as it requires a lot of interactions between the parties.

The off-chain data required will likely grow to the extent that it will not be manageable.

Also, the BitVM contracts are currently limited to two parties, further limiting the use cases.

Nonetheless, the BitVM is a welcomed innovation, showing that new developments on Bitcoin are feasible, as long as they preserve and prioritize the safety of the chain.

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Virtually yours,

The Castle

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