What's Driving Token Prices? August 9, 2023

Katie Talati
Aug 9, 2023

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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  • MKR (-8%) - On Monday, decentralized stablecoin issuer, MakerDao, saw an influx of deposits into its Dai Savings Rate product (DSR). This increase came following the rollout of a new rate (the “EDSR”) which offers 8% yield on DAI deposited in the DSR, up to 20% utilization (about $200m).  The rate is temporary and is designed to increase the circulating supply of DAI (which dropped at the end of last year) and raise cash so Maker can use the DAI to purchase more RWA assets. The interest rate paid comes directly from Maker's accumulated revenues. The influx of DAI was also driven by an arbitrage opportunity on Maker’s lend/borrow protocol, Spark, which offered DAI loans at about 3% allowing users to borrow DAI from Spark at and deposit it into the DSR to earn 8%, netting ~5% spread. As of Tuesday morning, a forum post from the founder, Rune Christensen, suggested lowering the rate to 5% and also raising the rate to borrow DAI on Spark from 3% to 5% thus reducing the potential arb opportunity. These modifications are still in governance discussions but the DSR will automatically decrease since utilization is above 40%. Maker has seen over $500M in DAI inflows since Monday. 

  • GFI (-4.8%) - Goldfinch, a decentralized lend/borrow protocol that services emerging markets small businesses, experienced its first default this week on a $5M loan equating to about 4% of TVL. According to user accounts and governance posts, the DAO knew about the issues with this particular issuer since December but had not been able to do anything until the borrower officially defaulted on the loan. The borrower failed to make interest payments although they had previously breached their covenants. 

  • GMX (-0.04%) - Decentralized perpetual swap trading platform, GMX, launched its v2 version last week. The update aims to improve a number of issues with GMX’s v1 including lowering fees to compete with dydx; implementing price impacts when previously there was no slippage leading to exploits; adding funding fees to balance the mismatch in open interest (as the “borrowing fee” used previously did not lead to to the rebalancing the pools via arbitrage); and also changed the structure of the GLP to offer better liquidity and protections from volatility. GMX made a splash with their original product late last year, stealing market share from dydx but has since cooled off. GMX is currently the fourth largest decentralized derivatives exchange by volume, however, volumes have seen a slight increase of 1% WoW. It will likely take some time for the impact of the v2 upgrade to reflect GMX’s fundamentals.

  • CRV (+4%) - An update following last week’s hack and threat to CRV price: since last Wednesday, two additional OTC deals were done where Curve founder, Egorov, sold around 106M CRV tokens for about $0.40 each (market price currently is $0.60). Tokens were sold to DeFi investors and protocols such as Gnosis Chain, Reserve Protocol, DFW labs, market-maker Wintermute, Justin Sun, DCF God and others. There has also been a proposal from Aave governance to purchase $2M of CRV for its treasury to better align incentives (still under discussion). Finally last Friday, the hacker agreed to return funds to Alchemix and JPEG’D, two of the protocols impacted, along with a return of partial funds to Curve (all in exchange for bounties). As the hacker did not return all funds, Curve turned over their bounty of $1.8M to the community for whoever could identify the hacker in any way that could lead to their arrest and recovery of assets.


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.

Statements in this communication may include forward-looking information and/or may be based on various assumptions. The forward-looking statements and other views or opinions expressed are those of the author, and are made as of the date of this publication. Actual future results or occurrences may differ significantly from those anticipated and there is no guarantee that any particular outcome will come to pass. The statements made herein are subject to change at any time. Arca disclaims any obligation to update or revise any statements or views expressed herein. Past performance is not a guarantee of future results and there can be no assurance that any future results will be realized. Some or all of the information provided herein may be or be based on statements of opinion. In addition, certain information provided herein may be based on third-party sources, which is believed to be accurate, but has not been independently verified. Arca and/or certain of its affiliates and/or clients may now, or in the future, hold a financial interest in investments that are the same as or substantially similar to the investments discussed in this commentary. No claims are made as to the profitability of such financial interests, now, in the past or in the future and Arca and/or its clients may sell such financial interests at any time. The information provided herein is not intended to be, nor should it be construed as an offer to sell or a solicitation of any offer to buy any securities, or a solicitation to provide investment advisory services.

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