The Weekly - 7th October 2024
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About Re7 Capital
Re7 Capital is a research-driven digital asset investment firm specialising in DeFi yield and liquid alpha strategies.
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Our DeFi Labs team who are one of the highest respected curators of lending and borrowing vaults, and due to the fast-growing nature of the business we need an analyst to provide much-needed support.
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Summary
In this edition, we cover:
Measuring upside momentum and who is winning
Ecosystem flow dynamics
Lombard BTC re-staking
Upside Momentum (Continues)
In our last Weekly newsletter, we highlighted that fundamentals positively diverged to their most extreme degree to valuations.
Markets are continuing to edge higher with BTC, charging towards $65k once again.
History appears to be rhyming with seasonality starting to kick in for risk assets.
For the 2016, 2020, and 2023 bull cycles, the average returns were 80% in their respective Q4s. With +4% so far in October, markets have a long way to go to reach the historical average.
Alts are now up 10% against BTC since their relative lows on August 5th with alts market capitalisation +30% over the same time period.
Alts have historically outperformed the orange coin in Q4 in the last two cycles by ~70%.
In terms of ecosystem flows, we continue to see Solana leading the charge for net positive flows over the past month at $800m.
Our internal market intelligence points to heightened speculation around memes and AI-related names that are once again driving attention, interest, and volume.
For example, our narrative relative strength indices over the past month visualise the power law of attention.
With human attention being a finite commodity, only a select few sectors win out vs. others.
Bitcoin Re-Staking
In other pockets of the market, Bitcoin is becoming further entrenched in Decentralised Finance.
Lombard, a protocol that allows users to stake their BTC and mint a liquid staking derivative (LBTC) that can be used within Babylon’s DeFi ecosystem, has seen>8k BTC staked (0.04%).
LBTC is being deployed across protocols like ZeroLend, Pendle, and others.
What’s interesting about Bitcoin liquid staked derivative (LSD) growth is that it is exceeding the growth of legacy-wrapped BTC products such as tBTC (3.7k).
In other words, Lombard LBTC has over 2x the supply of tBTC in less than 2 months.
The potentially more attractive financialization opportunity of securing PoS networks with BTC coupled with incentives is driving attention to LSD over ‘pure’ cross-ecosystem bridging protocols.
Points Farms Turn to Real Yield
Points are finally turning to airdrops with the end of EIGEN and Ethena's latest season. We expect users across protocols will now look to reposition their farming activities to take advantage of new points and token programs going live.
There are several new integrations across the Re7 Labs vaults that are looking attractive to DeFi yield farmers.
Re7LRT and Re7 restaked WBTC tokens are now live on Rumpel, a protocol that lets you turn points into liquid tokens. Implied yields are over 6% before any staking yield. Use our referral code for access: YHSC4I
Re7 Labs is now curating a liquidity management vault in collaboration with Renzo. Deposit ETH to earn 6% yield plus 6x Renzo points.
SUSDS launched as collateral for the Stablecoin Maxi vault on Euler. This lets users take up to 13x leverage on SUSDS vs other supply-side stablecoins like USDS, USDC and USD0. With current borrow rates at 3.5% and the SUSDS rate at 6.5%, leveraged carry traders are starting to enter the Euler vaults.
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Disclaimers
The content is for informational purposes. None of the content is meant to be investment advice. Use your own discretion and independent decision regarding investments. The opinions expressed in all Re7 public research articles are the independent opinions of the authors at the time of publication and not the opinions of the affiliates of Re7.
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