Data & Insights Recap - April 3, 2023

Forgive and forget (or don’t) 

Source: The Block

• On March 13th, one of the largest, at the time, DeFi exploits occurred. Euler Finance was hacked for $197 million after a flash-loan attack. 
  • When the funds were first drained, Euler offered a 10% bug bounty to the exploiter if they returned 90% of the funds. If not returned, Euler would offer a $1 million reward for information that led to the money being given back. 
  • The hack came only behind the exploits of the Ronin and Wormhole bridges in terms of magnitude. 
• Three days later, the hacker laundered $1.8 million through the crypto mixer Tornado Cash, but people were optimistic since this amount came out to less than the $19.7 million bounty provided. 
  • The hacker also sent 100 ETH to the Ronin bridge exploiter address, which is associated with the Lazarus Group from North Korea.  
  • They also gave 100 ETH to a victim of the hack, who sent the exploiter a message declaring their 78 wstETH on Euler was their life savings. 
  • Then on March 18th, $5.4 million was returned to Euler. While still drastically under the $177.3 million Euler was hoping for, it did serve as a start. But due to the attacker’s previous transaction history, some thought this could be a ploy.
  • Over the weekend, the exploiter returned another $102 million in the form of over 58,000 ETH, a pattern that continued into early last week. 
• This past Tuesday, the hacker sent a series of transactions to himself, using the input data to share messages with everyone. They said they were sorry and that they would be returning the remaining funds as soon as possible. 
  • However, since sending those messages, there has only been one outgoing transaction from that Euler exploiter wallet to a seemingly inactive address, with the input data saying that the exploiter was asked to do this. 
  • At the time of the messages, the exploiter has only returned about 77% of what was taken. With the funds recovered so far, the Euler exploit is no longer in the top 8 DeFi hacks. 

Given the option to succeed 

Source: The Block

• The open interest of bitcoin options in terms of BTC soared to a new all time high this month, and while open interest in USD terms didn’t quite set a new record, it still saw explosive growth over the course of March, reaching almost $13 billion this month after sitting below $8 billion for most of the year. 
  • Well, with the end of the month upon us, we were finally able to measure just how much monthly volumes for bitcoin options were able to stack up.
  • And stacking UP they were, reaching over $32 billion in volume across Deribit, Delta Exchange, Binance, and OKX. This marks the second-highest month ever, just behind April 2021 by $200 million. 
  • CME separately put up $1.67 billion in volume, a new all time high for BTC options on the platform. 
  • In case you need to be reminded, the recent options surge seems to be tied to the banking crisis, which also spurred a rally in crypto prices. With bitcoin options providing exposure to the volatile asset without actually needing to hold any crypto, thus allowing people to easily speculate on future price movements, it’s not super surprising we’d see activity drive up like this. 
  • Bitcoin futures volumes also reached the highest point since June 2022 this month. 
• ETH derivatives also derived some upwards momentum ahead of the Shapella upgrade, which will allow the withdrawals of staked ether on the Ethereum network. It is the most anticipated upgrade since The Merge, which drove the all time high of many metrics in September last year. 
• The open interest put/call ratio for both BTC and ETH remain at overall bullish levels and have been relatively stagnant through late March, although both saw sharp movements this weekend, likely as end-of-quarter contracts expired.

Binance keeps its cool amidst heated CFTC lawsuit

Source: The Block

• Last week, we highlighted how Tron was still the blockchain with the second largest TVL (and it still is) despite charges from the SEC against Justin Sun and the Tron Foundation, and allegations that its native token TRX was a security.
  • And it now seems like somewhat of a trend that when U.S. regulatory bodies go after entities that (in theory) don’t have too huge of a U.S. presence, everything seems to go okay.
  • The latest example is Binance, which got sued by the CFTC last week for a multitude of reasons, primarily focusing on the fact that U.S. entities were able to trade on Binance if they used a VPN, or in more advanced cases, set up an offshore corporate entity. There was also mention of compliance issues on the anti-money laundering and terrorism front, which had some pretty jarring quotes, like the now infamous “we see the bad, but we close 2 eyes.”
• Despite this being the first seemingly official action against Binance from any U.S. regulator (it was speculated before that the Department of Justice might go after them), the market remained relatively unphased. 
  • For starters, crypto asset prices stayed mostly flat and quickly recovered from any initial dips, with BTC even briefly reaching over $29,000 on Thursday. 
  • And while Binance did see an uptick in outflows, it also saw a corresponding increase of inflows, leaving the net flows for the day largely neutral compared to days even earlier this year. On both March 27th and March 28th, the exchange saw over $1 billion in daily outflows, but inflows on both days were over $800 million. The net negative $622 million flow on the day the lawsuit was announced wasn’t even the worst net flow in March, let alone the year. 
  • Binance’s spot volumes have also dropped in the second half of the month, but that is not uncommon, given most exchanges saw a spike this month during the USDC crisis. 
  • Binance’s dominance on the futures front also seems to be remaining steady at a 40% share of open interest across bitcoin futures. 
• Similar to the Tron story, we now wait for a trial to reach any resolution on this matter, which might explain the lack of reaction.
  • Additionally, the suit was heavily centered around Binance’s futures trading operations, so people might not be too worried about spot trading. 
  • Also, U.S. entities should not have been trading futures on Binance anyway, so a permanent injunction (which is what the CFTC is seeking) shouldn’t really change business up too much for all users not based in the U.S. (which, again in theory, should be everyone).  

Blur dominates trade volumes, OpenSea dominates traders 

Source: The Block

• It is not shocking that once again, Blur claimed the spot as the NFT marketplace with the highest volumes on Ethereum as it saw explosive volumes after its airdrop last month. 
• • The Blur Marketplace also has burned more gas over the past 30 days than OpenSea, with Blur only burning less gas than Uniswap, transfers of ETH, and Tether. 
• What is perhaps more interesting is the fact that while Blur put up over triple the amount of volume as OpenSea, the latter had over three times as many unique users. 
  • OpenSea had over 281k traders compared to Blur’s 92k, whereas Blur put up over $1 billion in volume compared to OpenSea’s almost $298 million.
    OpenSea also led the way in terms of number of trades over the month, although the gap was more narrow. 
• Given that OpenSea does lead the way in terms of sales count, but has much less volume, it implies cheaper sales are happening on the original NFT marketplace powerhouse. 
  • The number of trades divided by number of traders, while not an exact method for calculating how many times each user traded on the platform, does give us a proxy for user activity, revealing that Blur users, on average, made 5 more trades a month than those of OpenSea. 
  • Blur does reward its users with its native token BLUR, which would encourage loyalty in terms of using it as your default NFT marketplace and encourage more active trading. 
  • As my fellow The Block Research analyst Brad Kay highlighted, the top 1% of Blur users make up 70% of its volume, whereas the top 1% of OpenSea users only account for 20% of its volume.

DeFi dominance defines relative low 

Source: CoinGecko

• DeFi dominance, or the percentage of crypto’s total market cap that the market cap of DeFi tokens makes up, fell to 4.05% this week on March 28th and also reached this point on March 26th, marking a new low since July 2022. 
  • The dominance hit a relative peak of 4.65% at the start of the month. 
  • March saw the end of the strong rally for many crypto tokens, but in general, most fared well. In particular, other large market cap tokens had breakouts this month, specifically XRP and XLM, which were the only two top 20 market cap tokens to outperform bitcoin this month. 
  • XRP’s rally seems to be tied to people soon expecting a possibly optimistic outcome of the SEC’s case against Ripple as crypto comes to the forefront of regulator attention. 
  • And while 14 out of the top 20 crypto assets by market cap are ending the month on a positive note, only 6 of the top 20 DeFi tokens are, and the negative price performance of the 14 others is much larger in magnitude than those of the overall top 20. The worst-performing DeFi token, MKR, is down almost 25%, whereas ATOM as the worst performer in the overall top 20, is only at -8.66% for March. 
  • The popularity of the top 20 market cap tokens could be helping them fare better towards the end of the rapid price increases we saw during most of this month. 
  • DeFi dominance has recovered a bit to 4.13% at the start of April and seems to now be on the upswing.