Research Summary
The report discusses the results of the Arbitrum Short Term Incentives Program (STIP), the surge in ThorChain’s monthly swap volume, and the depegging of the $USDR stablecoin. It highlights the impact of STIP grants on protocol market caps, the potential for increased capital and user influx into the Arbitrum ecosystem, and the implications of illicit activities on ThorChain. The report also examines the consequences of $USDR’s depegging and the importance of collateral liquidity in the crypto market.
Key Takeaways
Arbitrum Short Term Incentives Program Results
- STIP Voting Outcome: The STIP concluded with 50M $ARB to be distributed across 30 protocols. Notably, all 96 projects achieved the vote quorum, but some high-profile protocols like Lido Finance fell short due to not meeting the basic eligibility criterion of >50% “for” votes.
- Impact of Incentives on Protocols: The report suggests that a larger grant-to-market cap ratio indicates a higher impact of the incentives on a project’s market cap. Protocols such as Lode, Jones, and Grail lead with ratios of 38.18%, 23.15%, and 22.09% respectively.
- Anticipated Influx of Capital and Users: Following the STIP, an influx of capital and users toward Arbitrum ecosystem projects is expected. However, the much-anticipated โARB Seasonโ should heavily rely on prevailing market conditions.
ThorChain’s Monthly Swap Volume Surge
- Increased Activity: ThorChain has seen a 540% increase in monthly swap volume through their platform in September. However, illicit activities make up an average of 4.6% of the total trading volume on the network.
- Illicit Swaps Concern: The main concern revolves around the ease of conducting illicit swaps rather than their occurrence. There’s a worry that ThorChain could face similar actions to the sanctions imposed on Tornado Cash, resulting in ThorSwap, ThorChainโs leading DEX, to start screening user addresses.
$USDR Stablecoin Depegging
- Depegging Event: On 11th October, $USDR began its depeg falling as low as $0.51. Aggressive redemption of $DAI had begun six hours prior to the decline. As expected, $USDRโs selloff occurred the moment $DAI liquidity ran dry on the protocol.
- Importance of Collateral Liquidity: This depeg underscores the importance crypto participants attribute to collateral liquidity. In a fast-paced market such as crypto, the opportunity cost of capital tied up in illiquid assets is extremely undesirable.
Actionable Insights
- Investigate the Potential of STIP Grant Recipients: Given the significant impact of STIP grants on protocol market caps, it may be worthwhile to explore the potential of protocols with high grant-to-market cap ratios for capital allocation and project usage perspectives.
- Monitor ThorChain’s Regulatory Response: With the surge in illicit activities on ThorChain, it will be interesting to observe how global regulatory bodies respond to continued ThorChain network use for money laundering.
- Consider Collateral Liquidity in Stablecoin Investments: The depegging of $USDR highlights the importance of collateral liquidity in the crypto market. Investors should consider the liquidity of collateral assets when investing in stablecoins.
