Markets have reacted in a polarized manner to the debt ceiling standoff in the US, as regulators scurry to reach an agreement this week. Bitcoin and Ethereum fell by 1.31% and 0.09%, respectively, over the past week, while Ethereum rose in TVL by 2.18%. The biggest winners of last week’s rally were Cardano, Polygon, and Aave. However, the increase in TVL on the last two protocols could be attributed to a bug on Aave v2 on Polygon that left over $100M stuck in smart contracts, which is due to the ReserveInterestRateStrategy smart contract deployed on Ethereum’s scalability solution, according to BlockSec. The bug is slated to be fixed after the vote on a proposal within the Aave ecosystem is complete.

Figure 1: 7-Day Price and TVL Developments of Cryptoassets in Major Sectors

Source: 21Shares, CoinGecko, DeFi Llama. Close data as of May 22, 2023.

Key takeaways

• Ripple jumps by almost 8% over the past week because of legal wins in its long battle with the US securities regulator. Also acquires Swiss fintech Metaco to weather regulatory headwinds in the US.

• Visa deploys two smart contracts on Ethereum to test a new technology designed to help the network become more user-friendly.

• Tether to buy more BTC with net profits, Galaxy Digital Executes the First Fully Onchain Options OTC Trade on Ethereum.

• Ubisoft reminds Web3 of its confidence in the space with Assassin’s Creed NFTs on Polygon.

Spots and Derivatives

Figure 2: Futures Long Liquidations Dominance

Source: Glassnode

Liquidations of long futures contracts have been dominant over the past week as investors look to realize profits in fear that Bitcoin’s price would drop in light of the macro headwinds led by the debt ceiling standoff and its implications on the banking industry.

On-chain Indicators

Figure 3: Lido’s Upgrade Echoes Success

Source: 21shares on Dune Analytics

Celsius withdrew over $800M from Lido last week, right after the staking protocol’s upgrade. With Lido being the largest DeFi app on Ethereum, our dashboards show that the staking protocol executed the staked ETH withdrawals flawlessly to avoid putting additional stress on the activation queue or exit queue using the buffer they had from the execution layer reward/daily deposits/partial withdrawals. As shown in Figure 1, Lido has performed the worst among its top peers within DeFi over the past week; this could be attributed to the drop in Ethereum’s price and additional speculation around Lido’s recent governance proposal, which we go into detail in the DeFi section later in this report.

Next Week’s Calendar

Source: Forex Factory, CoinMarketCal

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Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

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