What's Driving Token Prices? April 3, 2024

Katie Talati
Apr 3, 2024

Join Katie Talati, Arca’s Head of Research, weekly on Wednesday at 4PM EST / 1PM PST as she shares notable token activity over the past week and her insights on what market events drove these token price movements.

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  • PRISMA (-29%) - Prisma Finance, a stablecoin project backed by liquid staking tokens (LSTs), suffered an exploit of $11M over the weekend. In response to the hack, the team paused the Prisma protocol to investigate the issue and attempt to recover user funds. Interestingly, the hacker sent a message to the Prisma Finance team claiming they were a “white-hat” hacker and would return funds to the protocol if their conditions were met. The message demanded that the team hold a public press conference to reveal their identities publicly and apologize to users for their carelessness and for allowing the hack to occur in the first place. While the Prisma team has not responded, the hacker has started transferring some of the stolen funds to Tornado Cash, the mixing service that obfuscates the origin of tokens. 
  • AAVE/MKR (-7.7%/+15%) - On Monday, algorithmic stablecoin issuer, MakerDao, released a proposal to deposit $600M of its stablecoin DAI, into a lending vault for USDe, the newly launched stablecoin created by Ethena. In response, Aave, a lending protocol, released a proposal on its governance forum suggesting it reduce its exposure to DAI as a collateral asset, which would result in users being unable to take out loans against DAI. Representatives from Aave claim that MakerDao’s decisions are too far down the risk curve and don’t want the lending protocol exposed to this type of risk. The Maker and Aave proposals are still in the early stages and not yet approved. However, yesterday’s events highlight the rising tensions between “blue chip” Defi protocols and their individual roadmaps. 
  • ENA (+63%) - Decentralized stablecoin, Ethena, airdropped its governance token, ENA, yesterday. The DeFi project, backed by investors such as Arthur Hayes of Bitmex and Dragonfly, quickly amassed over $1.7B in TVL since launching in mid-February. The protocol issues its stablecoin, USDe, to users. In return, users deposit ETH or stETH which Ethena uses to open a short perpetual futures position against the long ETH position. The funding rate captured by the short perp position is collected as yield and distributed among stakers and Ethena. Ethena ran a popular airdrop campaign with the new ENA token, distributed to over tens of thousands of wallets. 

DISCLAIMER: This commentary is not intended to be investment advice, investment research, or a recommendation. Please consult your investment professional for your own circumstances."

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Disclaimer: This commentary is provided as general information only and is in no way intended as investment advice, investment research, legal advice, tax advice, a research report, or a recommendation. Any decision to invest or take any other action with respect to any investments discussed in this commentary may involve risks not discussed, and therefore, such decisions should not be based solely on the information contained in this document. Please consult your own financial/legal/tax professional.

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