There was a ton of drama over the past few weeks. Long story short, SatoshiVM’s a new project.
They used a ton of influencers to market their project (~12m worth), and around 50% of the tokens were immediately dumped.
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Crypto’s a battle for attention. And protocols have long realized that using KOL’s / Influencers can be powerful. Unfortunately, not all of them disclose their sponsorships or behave ethically.
That’s why I’ve always stressed being careful, listening to people’s calls, and building your own systems. Things are going to get way worse as the market heats up.
Here’s what we got today:
- Binance Research Summary. Major themes for 2024.
- Applying inversion to crypto investing. How do you not lose money in crypto?
- Chart of the Week. The Rise of EigenLayer and LRTs.
- Around the Web. AltLayer announced its airdrop for EigenLayer and Celestia stakers, Fantom’s new Sonic testnet is live, and more.
Today’s email is brought to you by Kelp DAO – the DAO for rsETH LRT.
Here’s your Edge 🗡️!
What to look for in 2024?
One thing I love about the beginning of the year is seeing everyone’s different “theses” and predictions for this year.
It’s an easy way to leverage nerds and see a birdeye’s view of the space. One of my favorite ones this year is from the team at Binance Research.
Here’s what they’re bullish on:
#1 Bitcoin: The catalyst of the current bull market was the speculation surrounding the Spot BTC ETF. And it’s now been approved.
This is bullish for $BTC. TradFi will likely allocate more money to it, and legacy media will talk about it more.
BTC is also getting an onchain revival. Bitcoin L2s, Ordinals, and BRC-20 ecosystems have all captured the attention of degens. And they’re going to get developed even further in 2024.
#2 Ownership economy: Big Tech owns Web2. Everything, from personal data to computation, is stored on the servers of large companies like Facebook and X.
In contrast, Web3 utopia promises that users can own their data. This is called the ownership economy.
Binance’s report highlighted Decentralized Physical Network Infrastructure and Decentralized Social Media.
I think DePin has some potential. I’m not as bullish on decentralized social media. Incentives matter. People care more about “clout” and where their friends are than owning their own data.
#3 Real World Assets: We talked about this narrative last week. It encompasses projects that bring traditional assets onchain.
Infrastructure linked to this narrative, including decentralized identity, oracles, and interoperability, are going to improve in 2024. We’ll also likely see the increased institutional adoption of crypto for RWAs.
In 2024, tokenized treasuries are going to lead in this sector. High-interest rates are going to act in their favor.
#4 Onchain liquidity innovations: The current onchain trading landscape includes token swaps, derivatives trading, and yield. And all depend on liquidity.
Binance’s report highlighted two innovations in the liquidity landscape:
a. Liquidity management: Leading DEXes using a Concentrated AMM design. But this requires active management of LP positions. Many protocols seek to automate liquidity management for LPs.
b. Request for Quote systems: These allow traders to request prices for a specific trade from multiple liquidity providers, like asking multiple shops for their best price on an item. This ensures a competitive deal. Some examples of this are CoW Swap, 1nch Fusion, and Uniswap X.
#5 Account abstraction: Traditional wallets are a tech nightmare for the average user. Account abstraction tries to make wallet management as easy as email management.
This will come with many new capabilities, such as automated transactions and more sophisticated authentication methods. We’ve also talked about this before.
The above five themes are a solid list of things to pay attention to. You can use this as a starting point and learn more about them in your own time.
The full report from Binance Research has more details. If you want to read it in full, click here.
Mint $rsETH to Make More With Your LST
Restaking is taking over DeFi.
Degens want more yield and airdrops. And EigenLayer is giving them that!
However, there are a few challenges as well.
- Technical complexities.
- Finding competent node operators.
- Once you restake, you’ll lose the liquidity of your tokens.
- And more.
Solution? Enter Kelp DAO. Just deposit your LSTs into Kelp. In return, Kelp will give you rsETH, a Liquid Restaked Token. Now, you’ll be able to get a higher yield without dealing with the above challenges.
You won’t lose liquidity, either. You will be able to use $rsETH in DeFi. Pendle has already teased some opportunities.
What if you want the points? Don’t worry. Kelp DAO is giving you both EigenLayer and Kelp Miles. And these points will probably be rewarded with airdrop.
Here are some more tips to milk additional Kelp Miles:
- Use their referral program.
- For every one rsETH that a user mints, they get a 100k bonus Kelp Miles.
- If you restake with ETHx, they’ll get an overall pool of 1 Million extra EigenLayer points.
On January 29th, EigenLayer will lift their liquid staking token caps. If you want to reserve your spot for restaking then click the button below.
How Can you Avoid Losses in Crypto?
Charlie Munger is known for promoting a technique called “Inversion”. It involves thinking about what you want to avoid and not doing anything that may cause it.
Right now, I’m trying to improve my sleep. So, I’ll ask myself, what will screw up my sleep?
Drinking alcohol, using my phone before going to bed, and not getting sunlight in the morning. Now that I’ve identified these issues, I can simply avoid them.
So here are some common mistakes I see in Crypto.
1. Waiting to “Break Even” Before Cutting Losses: Many wait until their investment breaks even before cutting their losses.
However, this is a psychological error. It assumes that the market cares about the price at which you entered. Of course, the market doesn’t care about your buying price at all. Also, you have to realize the opportunity cost. Even though you’re down 30%, the remainder could be better used elsewhere.
2. Following Other People’s Calls: Everyone goes through different levels of this. The first one is following the idiot shillers on YouTube and Twitter. You get wrecked and learn from it.
The second level is when you follow people who are “gigabrains.” Oh man this guy went to Standard and works for this VC! Becareful of the Halo effect and the authority bias.
The right way to use an influencer call is as a signal for further research. Then you need to develop a thesis for your potential investment.
3. Not Taking Profits: Degens often gets greedy when it comes to taking profits.
The thrill of making money can cloud judgment. Even if a token 3x, many won’t take any profits. They believe that the token will do another 10x. And once the token falls 90%, they end up losing all of those gains.
The key to overcoming this is establishing a profit-taking system that operates independently of emotions. For example, you always take out your principal investment after the first 2x return. You take 25% out after another 2x. And so on.
This systematic approach removes emotions from the equation. And it will help you to secure profits.
4. Overtrading: I used to play poker for fun. One mistake I made was the action bias. Basically, I’d get so bored waiting for a good starting hand, that I’d played garbage hands because I wanted some action.
Patience is an advantage here. There are a few times each year where the market’s on “easy mode.” Guys screw up because they lose everything trying to trade choppy markets. No trade is a trade.
5. Leverage Trading: Leverage trading is like speeding in a sportscar — it might get you to your destination faster, but on the way, the slightest mistake might kill you.
While leverage trading can magnify gains, it also amplifies losses. Many people have wiped out their entire portfolio through leverage trading.
The advice here is straightforward: stick to spot trading unless you’re entirely confident in your understanding of leverage. Leverage should only ever be used cautiously and only by those who fully understand it.
Avoiding stupidity is more important than seeking brilliance. All of the above are stupid ways to lose money. And since crypto has great potential, if you can avoid losing money, you’ll be able to make a lot more in the long run.
The Rise of EigenLayer
The above chart tracks the Total Value Locked of EigenLayer, the Restaking Protocol on Ethereum.
What is restaking? Restaking is a pretty simple concept. You take your staked ETH, then restake it. You promise to provide certain services to the new protocol in return for yield. If you fail to provide those services, you might lose some of your staked ETH.
This is a win-win deal. Protocols can more easily secure their networks and work with new ways to design tokenomics while restakers can access additional yield.
EigenLayer is the platform that will connect restakers with protocols. Think of it like Uber connecting travelers with rides.
The above chart is denominated in Ether instead of USD. This is because the entire EigenLayer inflow is in $ETH and its LSTs. If we use USD in the chart, random price movements of Ether will affect the TVL.
As of now, EigenLayer has ~719,000 Ether in it. That’s around $1.75 billion. This is impressive.
We can also see that the TVL is growing in a step-by-step manner. It stays pretty constant for a long time. And then suddenly we see a rapid increase in TVL. This is due to the nature of the guarded launch of EigenLayer.
Until now, EigenLayer didn’t allow LST deposits most of the time. Deposits were allowed only during the specific periods where the cap of Liquid Staking Tokens was unpaused. So, the rapid rise in TVLs is due to EigenLayer enabling deposits.
The next unpausing is coming on 29th January. There’ll be a ton of deposits to EigenLayer. Consequently, EigenLayer and Liquid Restaking Protocols on it will garner considerable attention.
There are different ways of utilizing this opportunity. We’ll cover those in the next newsletter on January 25th.
🚀 DeFi Catalysts
Frax Finance v3 Bonds are live. They are tokens that’ll convert into 1 $FRAX stablecoin trustlessly when they mature.
AltLayer announced its airdrop for EigenLayer and Celestia stakers. And the token launch on Binance Launchpad.
Berachain announced Build-a-Bera. It is a zero-to-one incubator focused on fostering innovation in the Berachain ecosystem.
Fantom Sonic closed testnet is live. Sonic is a new update that will make Fantom faster and cheaper.
Aave is voting on the proposal to activate Aave v3 BNB Pool. Right now, most are in support of the proposal.
NEAR Protocol‘s Data Availability layer has integrated with Polygon CDK for devs building Ethereum ZK rollups.
EigenLayer is unpausing again on January 29th. Cap of existing LSTs will be increased. And sfrxETH, mETH, and LsETH will be allowed to restake.
📰 Industry News
MetaMask introduced Validator Staking in MM Portfolio. With 32 $ETH deposit, MetaMask will run the validator for users.
Arbitrum announced the Orbit Expansion program, a self-service path to launch custom Orbit chains (L2s or L3s) that settle to Ethereum.
Gitcoin-backed L2, Public Goods Network, is shutting down. Operational costs and user migration were listed among the reasons.
🧠 Twitter Alpha
- 2023 Crypto Developer Report.
- Top 10 Crypto/Macro crossover thinkers.
- The Avalanche Thesis from Aylo.
- Binance report on AltLayer.
- A collection of dashboards related to Ethereum.
