🧘‍♂️ALERT: Big Crypto Trend

Market Meditations | April 13, 2022

Dear Meditators

Establishing trending layer 1s has led to large profits for those that manage to catch the opportunity. Today we are going to dive into an alternate layer 1 that has recently made headlines, Terra.

Today’s Meditations:

Using Nansen to Investigate Terra
Fortnite Updates
Analyzing the Current Crypto Climate

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⏰ Top Headlines

? Bridge to Terra-Bithia

Terra is a layer 1 blockchain that supports a native stablecoin (UST) in an attempt to become a peer-to-peer electronic cash system. It has recently made headlines as The Luna Foundation Guard, a project run by Terra founder, Do Kwon, announced plans to obtain $10bn in BTC, alongside $200m in Avalanche tokens to bolster their reserves.

Step 1: Establishing the Strength of the Layer 1 Chain

(1) Transaction Volumes Compared to Ethereum

Transaction volumes can be used as an indication of how much activity there is on a chain and therefore, as a proxy for adoption. Nansen allows us to compare the number of transactions on Ethereum to those on Terra:

Nansen.ai: 13/04/2022 – Transactions on Ethereum vs Terra

Ethereum’s transaction volume has been consistently higher since October 2021.
Terra’s transaction volume has been slowly increasing over this time period and is currently at an all time high.

(2) Contract Deployment

Whilst transaction volumes look at the number of users within an ecosystem, we can also measure developer activity through smart contract deployment. A smart contract is a computer program that executes when a pre-defined trigger occurs and are used to build decentralized protocols. This measure therefore can foreshadow new developments.

Nansen.ai: 14/04/2022 – Contract Deployment on Terra

Until March 2022, the ratio of smart contract deployments on Terra vs Ethereum was less than 2% showing significantly less activity.
Developer activity on Terra has since spiked to an all time high of an 8% ratio.

Now we have established that Terra is displaying an increasing level of adoption, we can explore the ecosystem itself.

Step 2: Diving Deep into Opportunities within Terra

Most Used Protocols over 7 days

Nansen.ai: 14/04/2022 – Most Used Protocols on Terra by Number of Users

Anchor protocol: is a lending protocol that has made headlines by offering a consistent 19.5% yield on the UST stablecoin. This is the largest protocol by total value locked on Terra.
Astroport: is the largest dex on Terra with over $1.52bn total value locked.
TerraSwap: is another dex within the Terra ecosystem. It also supports smart contract functionality which allows for automatic settlements.

✅ Tip: We can use Nansen to explore the further opportunities in the Terra ecosystem, diving into

Conclusion

Whilst terra has displayed a good level of adoption for some time, especially in the yield farming community through use of lending protocol, Anchor, recent news of large Bitcoin buys alongside an influx of developer activity indicates it is an ecosystem worth watching.

⚔️ Fort Knights

It’s already one of the world’s most popular games, and now the developers are receiving an extra $2 billion investment from their existing investors to enter the metaverse. We are of course talking, about Fortnite:

Fortnite was developed by Epic Games and released in 2017 with three distinct game modes: the last person standing ‘battle royale’, the cooperative ‘save the world’ and the free-roam ‘creative’ mode.
Sony Group Corporation and KIRKBI (the investment company behind The LEGO Group) both poured in another $1 billion each to help accelerate the company’s “metaverse ambitions”.
The CEO of Epic Games, Tim Sweeney, has been talking about the metaverse for several years now.
But the internet is already abuzz with what type of ambitions Epic Games has, given that their “game mechanics and monetisation are already set up to run in a Web2 way”.
The ‘creative’ game mode offers the potential to work in the metaverse given its sandbox-style, and the ‘save the world’ mode already acts as a social platform for its users.
There is also an in-game economy based on V-bucks, which are bought with fiat money. Leaked documents show that this generates billions in revenue for the developers.

So at first glance, with all of these components, some argue that Fortnite already is the metaverse. And while this announcement may be part of a marketing ploy, the investment should also help maintain innovation in the space for decentralized alternatives.

?Is Crypto Heading for a Blood Bath?

Has Bitcoin become just another proxy for the Nasdaq 100? Arthur Hayes, the former BitMEX CEO & co-founder of 100x, recently shared his predictions on not only the crypto markets but all risk assets. Although he is bullish long-term, he lays out some ideas as to why he believes the near future only holds carnage for the crypto markets.

Tightening monetary policy by the FED and other central banks is happening as we speak. Bitcoin experienced a dramatic rise when the FED increased its balance sheet, but now that they are reducing the size of the balance sheet and increasing interest rates, the opposite will happen.
The correlation between Bitcoin and the Nasdaq has become increasingly more evident. The Nasdaq recently failed to meet the 61.8 Fib retracement, and in Hayes’ words, “will continue to fall.”
Higher commodity prices driven by the continuing Russian/Ukraine war will cause global growth to decline.

You may be surprised to hear a fellow ‘cryptopreneur’ so bearish on the tech revolution that is Web3, but he also gives us some invalidation points to this thesis. Quoting his friend Danielle DiMartino Booth of Quill Intelligence, Hayes says when equities do fall, the Fed won’t intervene until the US corporate 2-year vs 10-year yield curve inverts.

Hayes also believes long-term bitcoin is heading for the moon, along with gold. When the West confiscated fiat reserve assets belonging to the Russian Central Bank, they ensured a new era, where countries will begin saving in gold or bitcoin. Of course, this would drive prices higher and higher, but first, he is preparing for a sell-off and putting his money where his mouth is by purchasing put options.

Astroport is Terra’s leading DEX by TVL.

Recently launching its Astral Assembly, the protocol’s DAO, control of the exchange has begun migrating to investors. As part of this process, Astroport has enabled staking and is gearing up for something called ‘Terra wars’.

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??‍♂️✍️ Stories in this newsletter were written by D. Beverly, Isambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Ellen B.

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