Hi guys,
This is the weekly newsletter powered by DeFi Talks, with the help of the Defi Talks Intern Team :)
Hope you will enjoy it, feel free to share and ask questions in the comment section.
Support us:
Donate using any EVM compatible crypto: 0x1db2bC5951A75C61E12C1A5e8C0475FBb9df95eD
And don’t forget to follow us on:
YouTube: https://youtube.com/defitalks
Twitter: https://twitter.com/myDeFiTalks
Telegram: https://t.me/defitalks_updates
Let’s start…
MACRO TALKS:
So here we are, what a week this was, wasn’t it?
Pivot guys smoked again!
Cpi print was awful, beating estimates with an MoM change of +0,4% vs 0,2% exp. and the YoY figure stands at 8.2%.
The actual cause of concern is Core Cpi which printed a whopping +0,6% highlighting sticky inflation, hard to knock down…
Interestingly 100bps rate hikes aren’t even taken into account, and that’s at least is a good news.
Another data that no one has talked about, but is very important is the figure on expected inflation from the University of Michigan.
Expected inflation is a figure that can affect current inflation, but how?
If people expect inflation to rise over time, they will demand a higher nominal wage to compensate for the loss of purchasing power.
UMich 1Yr Inflation Expectations jump from 4.7% to 5.1%, Exp. 4.6%
5-10Yr inflation expectations from 2.7% to 2.9%, Exp. 2.8%
If wages begin to be adjusted for inflation, it becomes a structural problem and will be increasingly difficult to pull down, as we can see from the MoM change in core CPI…and the FED doesn't like that.
In our opinion, the FED will come to a crossroads where they will have to choose between continuing the fight against inflation, or saving the global economy, accepting it above 2 percent We are not sure they will choose the second option.
ALPHA:
Did you know that there is a very simple way to calculate the "fair value" of the S&P 500 and identify market tops/bottoms?
Let's dive in!
Since the FED started "printing money" (academics pass me that term) a correlation has arisen between risky assets like the S&P 500 and the net liquidity (NLQ) of the FED.
When the CB wants to tighten financial conditions "NLQ" will go ⬇️, and vice versa.
With these assumptions, we can build a model that calculates the Fair Value (FV) of the S&P 500 based on NLQ.
The formula for obtaining net liquidity is:
FED total assets - TGA - REPO
If you do not know this data, I suggest you read this article.
After that you only need to calculate the S&P FV:
NLQ/1.1-1625
If you want a more in-depth look at this tweet.
No aerospace engineering, with 1 subtraction and 1 division we arrived at calculating Fair Value.
After getting the FV we should subtract it from the current price of the S&P 500, if the result is positive it means the index is overvalued, and vice versa.
For the lazy just enter this formula on tradingview to get the result:
SPX-((WALCL-WTREGEN*1000-RRPONTSYD*1000)/1000/1.1-1625)
As we can see, when the difference is around 250/300 it is an excellent opportunity to long/short.
INTO THE DEFI RABBIT HOLE:
DeFi TVL (7d change) according to Defi Llama:
Ethereum: $45,74b (-3%)
Bnb chain: $6.36b (-1,5%)
Tron: $5.55b (-1%)
Avalanche: $1.61b (-3,5%)
Polygon: $1.4b (-4,5%)
Top protocol revenues (last 7d) according to Token Terminal:
Opensea: $8m (-13%)
Lido Finance: $6,5m (-2%)
Uniswap : $6m (-20%)
Convex Finance: 3m (-6,4%)
Pancake Swap: 2,4m (-40%)
Venture capital rank by Mcap according to CryptoRank:
Alameda Research: $85b (-3%)
Multicoin Capital $68,7b (-4%)
Pantera Capital: $53,4b (-6%)
Weekly winners: (data from CoinGecko)
$ HT +70%
$ CSPR +23%
$ QNT +23%
Weekly losers: (data from CoinGecko)
$ CLAY -23%
$ CHZ -16%
$ ICP -15%
Top stable farm:
USDC-MIM on Velodrome (Optimism)→ 12% APR
DEFI NEWS:
After Terra-Luna crash in May many protocols within (and outside) DeFi were affected, the crypto space took a bad hit, some died, some are zombies and some are still standing...
Abracadabra's degen box was one of the best tools used back then enabling users to earn up to +100% APY on $UST with a loop strategy, everyone was happy earning that juicy yield.
Unfortunately, the crash was so quick and severe that degen box's liquidations couldn't keep up causing the platform to accrue a bad debt of 12.5mln.
The good news is that they have a treasury holding $14mln (at the current valuation) in various crypto assets including $CRV, $MIM, etc. which can if needed, compensate the debt.
After a lot of speculations, the time to discuss how to repay the debt has come, yesterday @MIM_SPELL tweeted about a new proposal to repay this bad debt:
Highlighting three different scenarios:
Use all the treasury funds to repay the bad debt,
-pros: faster repayment of the debt,
-cons: selling strategic reserves ($CRV),
Use protocol revenue to repay the bad debt, (how?) increasing the % of protocol revenue directed towards the operational treasury,
-pros: the protocol keeps his $CRV stack,
-cons: slower repayment of the debt and less fees accrued by $SPELL stakers,
Use a combination of treasury funds and protocol revenue.
Remember that being a proposal Abra is open to any suggestion expressed by the community.
It’s too early to say which solution will succeed, what appears evident is that whatever choice will pass it will not come without a price. One scenario means burning the whole treasury cutting down the runway and the power of the DAO itself, the other one means making SPELL an empty box. Better days will come, meanwhile the sky looks pretty dark on Abracadabra.
That’s it, what’s your thought on this?
Let us know!
In the meantime to stay updated click here and join their discord.
Do you want to support our job? Don’t miss these opportunities:
EXCLUSIVE BONUS:
CRYPTO.COM: 45$ BONUS only if you use this link
https://crypto.com/app/defitalks/
- 10$ If you trade 500$ volume in the first 30 days
- 25$ if you activate a card
- 10$ if you spend at least 100$ in the first 30 days of usage
Support us:
Donate using any EVM compatible crypto: 0x1db2bC5951A75C61E12C1A5e8C0475FBb9df95eD
And don’t forget to follow us on:
YouTube: https://youtube.com/defitalks
Twitter: https://twitter.com/myDeFiTalks
Telegram: https://t.me/defitalks_updates