What's Driving Token Prices? November 22, 2023

Katie Talati
Nov 24, 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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  • DYDX/YFI (-14%/-30%) - Over the weekend, DeFi yield aggregator, Yearn Finance, saw its price manipulated on perpetual exchange, dYdX. At the end of last week, open interest on YFI began increasing from $800K to $67M for a few days. Since YFI open interest was higher on dYdX than any other perpetual platform, the dYdX team tried to increase YFI’s initial margin ratios for YFI. Unfortunately, their actions were too slow and the price of YFI crashed about 40% on Friday, allowing users to withdraw USDC from the exchange against this long position. A number of on-chain sleuths tracked the wallets behind this position and found that they belong to the same user and believe this same attacker also attempted to use this exploit on the SUSHI market a few weeks ago. As a result of the attack, $9M was drained from dYdX’s insurance fund. 
  • BNB (-7.2%) - The big news to drop this week was that the largest crypto exchange, Binance, has agreed to settle with the DOJ to the tune of $4.3B. As part of the settlement, Binance pleaded guilty to violating U.S. anti money-laundering (AML) requirements and Chanpeng Zhao (known as “CZ”) pleaded guilty and agreed to step down as CEO of the exchange. Although the market immediately reacted negatively to the news, rumors that Binance was under a DOJ investigation were circulating for months. By having the investigation conclude with a settlement and no action to shut Binance clears the market of this overhang. Interestingly, in his resignation post on Twitter, CZ mentioned that the DOJ’s investigation did not find Binance guilty of misappropriating user funds or manipulating the market, both of which FTX was accused of doing. 
  • PYTH (+30%) - Decentralized oracle provider, Pyth, launched its token via airdrop on Monday. Launched in 2020, Pyth focused on servicing projects and ecosystems outside of Ethereum and managed to grow to secure 124 projects across Solana, BNB, Avalanche, Comos and others. Compared to Chainlink’s oracle system, Pyth differentiates itself by using a “pull” price update instead of a “push” update offering better latency and gas efficiency, which are important features for chains such as Solana with high TPS. The PYTH token is up about 30% since launch and currently has a $663M a $4.4B FDV,  a small fraction of Chainlink’s $8.1b market cap. While Pyth does charge fees for using its oracle, the product is currently making about $2500 in fees per day, and the token only has a governance as its use case.
  • BLUR (+36%) - Late Monday, leading NFT marketplace, Blur ,announced the release of its Season 2 token rewards along with another major announcement. In addition, the founder of Blur, Pacman, announced his newest initiative, Blast, a Layer-2, which offers native yield generation and aims to solve for inefficient gas fees that users rack up by trading NFTs on L1s. For Blur’s Season 3 rewards, rewards will be in the form of Blast tokens instead of Blur tokens, and will be split between users who hold $BLUR and those who trade, list, or lend on Blur. Blast already raised $20M, led by Paradigm and Standard Crypto, and Pacman announced an additional $40M raised to support the Blur ecosystem. Blast has already come under some criticism since access to the protocol uses a referral system that looks very similar to a pyramid scheme. Additionally, if bridging assets to Blast, the bridge is one-way with users unable to remove assets until February. 

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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