What caused the latest pump?

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By EdgyNovember 16, 2023

Not gonna lie, my morning coffee tastes better seeing green candles.

Alt layer 1s are having their moment in the sun again with Solana and AVAX pumping. Celestia also saw massive gains this week.

Don’t try to catch them all – find a few sectors to specialize and go deep in.

Here’s what we got today:

  • Is bull market here? My take on why the market is pumping.
  • How to focus on a sector? Your guide to developing an Edge.
  • Account Abstraction 101. A solution to crypto user experience problems.
  • Around the Web. OKX is launching an ETH L2, CoW Swap launched programmatic orders, Dopex shipped CLAMM, and more.

Here’s your Edge 🗡️!


Why are the markets pumping?

A digital bull in a digital landscape.

The charts are all green.

Your cousin who left Crypto 2 years ago is probably about to text you, “Yooo, why are the market’s pumping?”

This is what you can tell him.

#1: ETF Speculations

The current rally started with fake news of the BTC spot ETF approval. In half an hour, the BTC price went from $27.8k to $30k. The pump caused by the fake news made many investors realize they hadn’t created a big enough BTC position.

Now, the fake news might become real news.

There’s a growing optimism and anticipation that the BTC spot ETF will be approved. Blackrock is in the ring. Grayscale has won against the SEC in court. And the next SEC deadline on the BTC spot ETF is here.

There are currently 12 spot Bitcoin ETFs applications in review.

To make things ecstatic, it has been revealed that BlackRock has applied for an ETH spot ETF. They have registered a corporate entity named “iShares Ethereum Trust” in Delaware.

At least five other firms are also seeking SEC approval for a spot Ethereum ETF: VanEck, ARK 21Shares, Invesco, Grayscale, and Hashdex.

If these ETFs are approved, they’ll be a channel for institutional money to buy crypto.

#2: Reflexivity

Crypto markets are incredibly reflexive. $1 in net additional buying pressure can increase the price by $10 (I made up those numbers. But they are directionally correct.)

Here’s how it happens: Once BTC gets a sustained rally, investor sentiment surrounding crypto improves. Investors start thinking, “Hmm. This might be the start of next crypto bull run. Lemme just take positions on tokens some alts.

And the alts pump a bit. Since they have a lower market cap, they’ll experience greater returns than BTC. Seeing this, BTC holders will want exposure. They might take loans against BTC or directly rotate to BTC.

This raises metrics such as transaction volume, transaction fee, TVL, etc. Projects then make announcements to capture some of these pumps.

(a ton of projects have been holding back announcements. and launches because they want to wait for better market conditions)

For people outside, it’ll look like the actual fundamentals are improving. They’ll also want exposure, which will pump prices again. Price -> Sentiment -> Activity -> Fundamentals -> And the cycle will begin anew.

Right now, we are seeing this reflexivity in action. Prices are going up. Everyone is optimistic. Activity and fees are rising. Projects are making announcements. And on and on it goes.

#3: And many more

While the above two are major reasons for the current crypto rally, there are many more additional factors contributing to the rally:

  • SBF getting jail time has improved sentiments big time.
  • China pumped the most cash since late 2016 into the financial system with one-year policy loans.
  • Data indicates that inflation is slowing down. So, many are expecting Fed to cut rates in 2024.
  • Metrics are up across the board, including TVL, BTC fees, ETH fees, trading volume, Open Interest, etc.
  • Markets are pricing in the upcoming halving. In previous cycles, the markets always start pumping before the actual halving.
  • The space has shipped a ton over the last two years. Chainlink shipped CCIP, BTC now has Ordinals and BRC-20, and Solana also shipped a ton of improvements. We also won several court cases. The market might be pricing in these bullish events as well.

​Edgy’s take: So, are we in a bull market or not? In my opinion, we are in the starting phase of the next bull market. For many tokens, this is likely the best price you’ll get for a while.

But don’t take out loans and buy BTC just yet. (In fact, never do it.) The BTC spot ETF speculation heavily drives the current pump. There’s a miniscule chance the SEC won’t approve them.

Ask Edgy

How to focus on a sector?

An infographic on focusing on two sectors.

Hey Edgy, I have a job and a family. This probably leaves me 2 hours a day to devote to Crypto. I can’t keep up with everything. Any tips?

You need an edge to make money in crypto.

And one of the best ways to develop an edge is by focusing on 2-3 sectors. If you chase too many rabbits, you might end up with no catch at all.

Here’s your guide to developing an edge by focusing on a specific sector:

Step #1: Choose a sector

Firstly, you should have an interest in that sector. If it is boring, you won’t be motivated to track a sector closely.

Assuming that, here are some of the criteria that are worth considering when selecting a sector:

  • High growth potential. You don’t want to be in a dying niche.
  • High transaction volume. You want a sector in which people actually trade regularly. If there isn’t much trading, you can’t make much money.
  • Where you naturally love learning. For example, I can write about DeFi every single day. Writing about makeup tutorials? Eh, I can’t do it no matter how much they pay. So figure out those sectors that just naturally stand out for you.

​So, you have a sector that you like to focus on. What’s the next step?

Step #2: Be on top of your sector

Start by doing comprehensive research on your chosen sector. Study all the protocols. You should be familiar with how each is different to the next. You should also watch out for new entrants to the sector.

Learn about what makes certain protocols successful, aka competitive dynamics. Let’s take DEXes as an example. Fast execution, low slippage, high liquidity, etc. are what make one DEX better than another. It’s critical for your analysis.

You need to be on top of everything that happens in your industry.

So, create Twitter lists consisting of protocols, founders/team members, and top influencers. We have a dedicated playbook for this in our Double Your DeFi course.

Stay on top of protocol announcements. You’ll come across them by simply following select Twitter accounts. But go the extra mile. Stalk their governance forums and join their Discord/Telegram chats. Many protocols, or their founders, have newsletters. Subscribe to them.

Form mastermind groups. You’re already following all the key players in your sector. Start by offering value to others in Twitter replies and on governance forums. Once people start noticing you, you’ll gain access to those people. On Twitter, it’ll be easier for you to connect with people who are at a similar follower count or slightly ahead of you.

Create onchain mechanisms to track whale wallets in your sector. Whenever you see a pattern in their buying or selling behavior, you should pay close attention. And if necessary, adjust your positions.

Create watchlists and set price alerts on DexScreener. With that, you can keep track of the prices of all the projects across your sector more easily.

Do you see how much more of an edge you’ll have compared to the personwho’s trying to keep up with everything?

Step #3: Make money

If you’re a long-term investor, you can choose one or two projects and just hold. I like investing in the market leader, and a slightly different beta play.

I wouldn’t invest in McDonald’s and Burger king. They’re too similar. Instead, McDonalds + ShakeShack. Different strategies.

But if you want to trade more frequently, you’ll have to create more trade ideas. Here are a few examples:

  • Join a presale for a dApp that you think has potential.
  • You might notice an undervalued protocol relative to its competitors when following metrics.
  • Or you might feel community sentiment growing, which can lead you to enter additional positions.
  • You notice an upcoming catalyst that’ll pump a project’s prices. You can start accumulating early.

​There will also be sector-specific ways to make money. For example, yield farming on DEXes requires a different skill set than trading tokens. Or if you’re into LSDfi, you can become an expert in certain farming strategies. And so on.

If you’ve got a full-time job, you’ll only have limited time for crypto. Focusing on one or two sectors is a great way to develop an edge.


Account Abstraction 101

What if managing your crypto is as easy as managing your email?

In fact, this is already kinda possible. However, it just hasn’t got widespread adoption.

Traditional wallets on Ethereum are called “Externally Owned Accounts” (EOAs). They are just a combination of a public address and a private key.

And to be honest, they suck.

  • You have to manage private keys on your own. This is challenging and risky for non-technical users.
  • Apart from sending and receiving tokens, they can’t do much alone. They can only do stuff that dApps/smart contracts they interact with are explicitly programmed to do.

​So, Ethereum came up with a solution.

Account Abstraction and Smart Wallets

In the Account Abstraction (AA) system, the wallet is a “smart wallet.” These wallets can run code, which makes them comparatively powerful.

Here are just a few examples of things that smart wallets can be programmed to do, but traditional wallets (EOAs) can’t do:

  • Automated transactions
  • Social recovery mechanisms
  • Anyone can pay gas-fee
  • More sophisticated authentication methods.

EIP-4337 is the proposal that implemented Account Abstraction on Ethereum. (It is the current practical solution. There were other theoretical solutions, but those had implementation challenges).

Since many existing wallets and dApps are built around EOAs, smart wallets haven’t yet received widespread adoption at the Ethereum L1 level. Safe, Worldcoin, Ambire, and Sequence are a few smart wallet examples.

But Layer2s are welcoming smart wallets with open hands. ZK-Rollups, such as StarkNet and Zksync, offer native account abstraction.

Why is this a big deal?

  • Better user experience.
  • Better security. No more losing money due to lost seed phrases.
  • More innovation. Devs can use smart wallet functionalities to create more cool stuff.

​I don’t want anyone to hate crypto ever again just because they forgot their seed phrase. With Account Abstraction, users can have a smooth web2-like experience in the crypto space.

Last week, Safe introduced wallets that can be created using your Google account.

I’ve always felt that UI / UX has held back a lot of Crypto adoption. This is one small step towards helping that.

🚀 DeFi Catalysts

dYdX v4 chain is live for bridging, trading, & staking. They’re discussing a $1 million community grants program spread across 2 quarters.

ARB STIP season is firing up. Protocols have started distributing their allocations to users.

CoW Swap launched a new class of orders: programmatic orders. They’ll execute automatically, in perpetuity, according to the conditional parameters you set.

Dopex has shipped CLAMM, aka Concentrated Liquidity Automated Market Makers. It is their first step in Dopex v2 overhaul.

Lyra Finance is discussing tokenomics upgrade for LYRA token. The aim is to decentralize governance, improve adoption, and make DAO sustainable.

SushiSwap launched smart pools. They’re an Automated Liquidity Management (ALM) solution powered by Steer Protocol.

Near Protocol‘s Nearcon saw several announcements. NEAR Data Availability Layer and Fast finality layer using Eigenlayer are two examples.

Linea, a zk-l2 from Consensys, announced Linea Voyage XP program. Many are speculating that participating will help in qualifying for their airdrop.

Aave has decided to set the optimal interest rate for borrowing to 5%. This rate is more aligned with the broader interest rates.

Neutron‘s, a CosmWasm-based cosmos blockchain, grant program is now live. These are usually helpful in attracting builders to the network.

Filecoin, the world’s largest decentralized storage network, now has a DEX. SushiSwap is now live on Filecoin.

📰 Industry News

OKX is launching its own Ethereum Zk-L2 network built on Polygon’s CDK. It’ll connect 50M+ users with Polygon & Ethereum ecosystems.

Opyn founders, Zubin Koticha and Alexis Gauba, are leaving crypto due to the regulatory actions against Opyn.

Immutable is partnering with Ubisoft‘s Strategic Innovation Lab to further unlock benefits for players through web3.

XRP got a temporary pump from a fake XRP ETF application. Someone tried to mimic Blackrock’s filing by creating a Delaware filing “iShares XRP Trust”.

Poloeix exchange was hacked for around $114M. It is said that the exchange will reimburse users and offer “white hat bounty” to the hacker.

Karnot is a rollup as a service solution that uses Starnet Stack. It provides RPC, proving, bridging, and other services for appchains.

🧠 Twitter Alpha

  1. The SOLana play.
  2. Is de-dollarization a thing?
  3. 3M Arb Incentives are live on Camelot.
  4. All the stablecoin news from this week, in one place.
  5. Arthur Hayes latest article, Bad Gurl, is summarized by 0xjaypeg.

😂 Meme