Another slow week in the wider market as the majors continue to crab around with relatively low volatility. However, as always, much is happening across smaller alts on-chain and innovation from DeFi is constantly being pushed.

Let’s get into it 👇️ 

 👀 What’s to Come in Volume 19

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

🔥 Hot Narratives: LSD Innovations, OP Unlocks, and Perp Catalysts from Atomist

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

📉 HTF Price Action Scenarios from Vlad

⛓ On-Chain Sleuthing: PEPE King Unveiled, Cyberprince Back, and GMX De-Risking feature along with Smart Money Moves from Cl & Amir Ormu

⚔️ A Call to Arms

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Fill out an application form!

🔑 Key News

• FTX CEO John Ray III confirms FTX 2.0 plans while TrigonX is relaunching post-FTX collapse

• Japan to Enforce Tougher Crypto Anti-Money Laundering Laws Next Month

• CCTV (China Central Television) broadcasted crypto

• Fahrenheit Wins Bid to Acquire Assets of Insolvent Crypto Lender Celsius

• Paradigm broadening crypto-only focus to areas including AI

• DCG closes Tradeblock while Unbanked is shutting down

• Bali to crack down on foreign tourists using crypto as payment

• BTC trades $5k cheaper on Binance Australia due to closure of fiat ramp

• Russia scraps plans for a national cryptocurrency exchange

• Tether invests in BTC mining in Uruguay

Exploits that happened this week

• SankoGameCorp v1 tokens exploited, relaunched v2 and exploiter returned funds

• DFintoch rugged for $31.6M

• Ede Finance ELP on BSC exploited while Arbitrum’s ELP got exploited by a whitehat claiming team was manipulating price, which they later admitted to

• WDZD Swap exploited for $1.1M

• TornadoCash DAO passes attacker's proposal to hand back control

• Vega Protocol halted as critical issue identified

• Aave v2 on Polygon operating normally again

• Rumours of MultichainOrg team arrested & their update

• CelerNetwork potential issues fixed @Jump_ & @_fel1x

• Jimbos Protocol exploited for $7.5M

• Vulnerability on TetherGold disclosed

• 0xPolygon zkEVM bug discovered

• Aleo inflation bug reported

• Trondao 0-day vulnerability disclosed

Adoption is not stopping!

• Chinese city launches gov’t-backed metaverse platform

• F1 Ticket Provider Platinum Group Introduces NFT Tickets for Global Racing Event

• Brazil's Central Bank Selects 14 Participants for CBDC Pilot

• IoT Devices Can Now Connect to Both Helium Network and Amazon Sidewalk

• Beijing releases white paper for web3 innovation and development

• Hong Kong Police Force launch new metaverse platform, ‘CyberDefender’

• Japan launches digital yen pilot project after second successful proof-of-concept

Weekly DeFi Updates

• Swell Network Voyage live

• Avalabs launches AvaCloud launchpad

• Tenet x Conflux partnership

• ConcaveFi restructuring tokenomics while Protocol FX releases theirs

• EclipseFND introduces first IBC-enabled rollups Cascade

• MagicEden launches NFT aggregator

• New version of Matcha went live

• BNB Chain Expected to Undergo ‘Luban’ Upgrade in June

• Stably launches Bitcoin backed USD on Bitcoin network

• y2kfinance introduces CAROUSEL

• EUROC live on @avax

• MakerDao gets proposal to raise DAI savings rate to 3.3%

• Fantom Gas Monetization completed

• Thena launches Futures trading

• BlockAnalitica launches Project Levon

• BwareLabs launches $INFRA token

• Optimism, Sui set for large token unlocks, worth a combined $650 million

Some interesting projects to look out for

• Neutron: Just went live, Permissionless CosmWasm Platform, Interchain-Secured by Cosmos

• Strateg: Omnichain Social Yield Infrastructure by Murphy Labs

• Tenet: Token just went live, a distributed basket of LSDs backing a native stablecoin

• Tai: LSD backed stablecoin, farming rewards went live recently

• FarmerFrens: Airdrop farming on TG service

• Enlight: Another LSD protocol

• Cogito: AI-driven stable assets pegged to non-financial indices

• Alternity: Immutable borrowing protocol that provides decentralized $CNY stablecoin backed by $ETH collateral.

• OmniScore: Related to Layer Zero, launching on 1st of June

Courtesy of CJ - check out his C4.gg for daily news, projects updates and new releases

🔥 Hot Narratives

LSD Innovations

With the increased ETH staking queue to over 40 days, LSDs remain prominent in the eyes of on-chain narrative chasers. Recently, led by Lybra Finance (LBR), we have seen a new wave of Liquity forks that increase the model's utility by introducing stETH as collateral for minting the native stablecoin.

One to watch moving forward is Prisma, backed and supported by the heavyweights of the Curve ecosystem.

OP Unlocks

With the market becoming more uncertain of late, unlocks in general may turn bearish. Regardless, this one definitely feels bearish from the outset. Roughly 9% of the OP total supply will be unlocked, doubling the current market cap of OP. The recent price action has echoed this bearish sentiment.

Perp Catalysts

As always, although some poor performance recently with reduced fees and lower market volume and volatility, revenue-generating perps remain a core pillar of a solid portfolio. One to watch in the short term is LEVEL Finance, whose expansion to Arbitrum has flown relatively under the radar. LEVEL has dominated BNB Chain, where perps are not widely used through a string of incentives for traders and LPs along with some very clever tokenomics. Arbitrum is THE Perp chain, so we are on the edge of our seats to see whether they can take market share from many other players in the space.

The real questions are how much market share will GMX lose and how quickly they can deliver v2 as a response…

💹 Macro Outlook

Previous Events

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

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

• 3/31 12:30 PCE Inflation: A 0.3% F 0.4% P 0.5% 👉 SPX & crypto rally on softer print

• 4/12 18:00 FOMC Minutes: Admission of light recession towards EoY

• 4/13 PPI : A -0.5% F 0.1% P 0.0% 👉 Large fall leads to risk-on rally

• 4/20 UK 👉 10.1% inflation numbers spark sell-off

• 4/28 Core PCE, Personal Income/Spending: A 0.3% F 0.3% P 0.3%

• 5/4 03:00 FOMC: A 5.25% F 5.25% P 5% 👉 SPX sell off BTC and GOLD up

• 5/5 12:30 Nonfarm payrolls A 253k F 180k P 165k | Unemployment Rate: A 3.4% F 3.6% P 3.5% 👉 SPX up Gold and BTC down

• 5/10 12:30 Inflation Rate MoM: A 0.4% F 0.4% P 0.1% YoY: F 4.9% F 5% P 5% 👉 whipsaws

• 5/25 NVDIA breaks ATHs

• 5/26 👉 Rally sustained from NVDIA/AI momentum

  • Core PCE Price Index A 0.4% F 0.3% P 0.3%

  • Durable Goods Orders A 1.1% F -1.0% P 0.3%

  • Personal Spending/Income A 0.4% F 0.4% P 0.3% / A 0.8% F 0.4% P 0.1%

• 5/28 Debt Ceiling resolution 👉 BTC +4.5% ETH +4.3%

Upcoming Events

• 5/31 Debt Ceiling Vote

• 5/31 14:00 JOLTS Jobs Openings

• 6/1 14:00 ISM Manu PMI F 47

• 6/2 12:30 Unemployment Rate F 3.5% P 3.4%

• 6/5 14:00 ISM Services PMI F 52.1 P 51.9

• 6/13 12:30 CPI P 5.5%

• 6/15 FOMC

BTC, ETH and Macro

• SPX and NQ have been on sustained upwards moves largely due to large AI-related tech stocks pushing towards ATHs; the star being NVDA, which is now flirting around the $1T mcap mark.

• Bond yields increased towards the fed funds rate after FED Waller’s statement that the terminal rate has not been achieved. Implied probabilities of rate hikes for June also flipped, and are now ranging at a roughly 60% probability.

• DXY increasing while GLD is falling is not a good mix for BTC. Will have to see whether they act as leading indicators.

  

Crypto Options Markets

• BTC and ETH stayed relatively muted in terms of volatility until the large expiry last Friday.

• Over the long weekend, there was a small squeeze pushing prices up about 5%. Positioning-wise option dealers may be squeezed further to the upside while covering their shorts.

  • Pink: Fast price movement

  • Blue: Slow price movement

• Term structure is in slight backwardation in the closer tenors as some sellers backtrack their short volatility positions. Otherwise, the downward trend in volatility is still very much intact. There have been some calls for a bottom, but it would be wise to enter longs slowly and not all at once as these regimes can last for long periods of time like earlier this year (a couple of months).

Courtesy of Hansolar - check out the Daily Volatility for all things options, crypto and DeFi

📈 HTF Price Action Scenarios

Gm frens!

• Volatility finally showed up

• Daily low held and LTF is showing momentum to the upside

• The expectation here is bullish

• Re-accumulation towards daily demand is still possible

• 8h double push to the upside with perfect mitigation (cluster)

• Looking for longs from marked up 8h untapped demand zone

• Practice proper risk management!

• Markets will do w/e the F they want to do. Always remember that.

That’s all for this week!

Courtesy of Vlad - trend-based trader and MentFX student

⛓ On-Chain Sleuthing

PEPE King is a Remilio

The previously tagged, PEPE king (that made close to 4 million USD in $Pepe by investing 0.125 ETH at the Pepe launch), is now without any doubt under the control of this Remilio account. We found some connections between some of his PFPs on Twitter and some owned by this same addy.

Cyberprince is Back

He returns to Twitter and is trying to justify why he sold all his REMILIO. He dumped all his YAYO on BLUR bid last week just after the bridge from CANTO to mainnet as seen here. The NFT Influencoooor is now fully out and will be shilling tech stock for the coming days.

De-Risking Across GMX Accounts

DeFiSurfer, a known GMX shill on Twitter has been de-risking some of his GMX bags in the last month.

The team at Castle has been intensively covering the known GMX chads & one pattern seems to be repeating: a lot of them have been taking profits. The decrease in volume and fees on the platform seems to have pushed some holders to de-risk.

However, it’s interesting to note that close to 5.7 million USD in fees are still pending from borrowed positions on the platform.

Smart Money Moves - Tokens

• The memecoin category continues to dominate as the most popular category among Smart Money addresses.

• $GHA remains a solid choice for Smart Money, with the added confidence of upcoming Paladin audits.

• $CRETH2 is another token that Smart Money is actively acquiring, as they believe it is currently undervalued.

Smart Money Moves - Farms

Shifting our focus to the realm of Yield Farms, several platforms have garnered considerable attention from smart farmers. Let's delve into the notable choices:

• Lybra Finance has garnered significant attention from smart farmers, with a substantial number of them engaging with the platform.

• Smart farmers have recently shown great interest in Vesper's presence on Optimism. As a result, this platform has experienced a surge in popularity.

• KyberSwap's enticing yields have recently captivated the interest of smart farmers.

• Smart Farmers continue to favour Chronos and The Granary for their yield farming endeavours.

• Ramses and The Ennead maintain their popularity as well.

• Pendle has successfully garnered the attention of smart farmers as well.

Smart Money Alert 🚨 

Lastly, Smart Money has been engaging in an exclusive move that warrants attention.

Recently Smart Money has actively participated in farming a potential Layerzero airdrop, leveraging protocols such as Stargate and BitcoinBridge, using them frequently and with higher volume.

Research and analysis by Cl & Amir Ormu

A bonus for this week - listen to Atomist host a DeFi Derivatives panel with some of the most interesting protocols in the space.

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