Liquidity
OP liquidity remains steady despite large token unlock.
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Over $550mn worth of the Layer 2 network Optimism’s OP tokens were unlocked this week, more than doubling the circulating supply from under 300mn tokens to nearly 700mn tokens. The unlock distributed 180mn tokens to early investors and 200mn to core contributors, who are only identified as “people who helped bring Optimism and the Optimism Collective from concept to reality, and will continue to pay for development of the protocol,” in official docs.
OP slipped from $1.67 to a low of $1.36, beginning its slide a day before the tokens were unlocked, suggesting much of the move was in anticipation of sell pressure. Despite this, OP’s liquidity has been mostly stable, with a drop in 0.1% bids and asks before a return to normal. At the 1% level, bids dropped more than asks, though both have since bounced back. This suggests that there has not been significant selling of unlocked tokens yet, as market makers would likely pull some liquidity to avoid toxic flow if they detected strong selling.
Interestingly, the quantity of bids at the 1% level far outweighs the quantity of asks, which suggests a possible bid wall at lower price levels.
USDT’s market cap hits ATH despite low volumes.
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Last week, Tether’s supply hit an all-time high of more than $83bn, bucking the trend that other stablecoins have faced amid a prolonged bear market and falling activity. With trade volumes dwindling on both CEXs and DEXs, recently hitting multi-year lows, demand for USDT seems to be driven elsewhere. It is not secret that trading remains the primary use case for stablecoins today, but Tether’s CTO suggested on a recent podcast that demand could be coming from developing countries.
It is difficult to have accurate data on this, though, as Tether transactions are anonymous on-chain. One of the only ways to measure regional activity is via crypto exchange volume, such as on regional venues like BTCTurk or Bitso. Kaiko has observed a big surge in Tether’s market share on BTCTurk, which supports a bit of the regional growth narrative, but overall trade volume is still down for the year.
Tether’s CTO estimated that 60% of USDT is used for trading and 40% for store of value/transaction use cases, and we will continue looking out for more concrete data on this.
DeFi blue chips register lowest volume in 3 years.
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The tokens associated with early DeFi projects such as Link (LINK), Synthetix (SNX), Curve (CRV), Uniswap (UNI), Maker DAO (MKR), Aave (AAVE), and Compound (COMP) registered their lowest combined volume in since January 2020 last month. The tokens registered just under $3.25bn in volume, with $225mn on DEXs and $3bn on CEXs. The overall volume is eerily similar to May 2020, right as DeFi Summer was beginning. That month, the tokens registered $3.5bn in volume, though with just $4mn on DEXs. The recent slumping volume is reflective of broader market trends – last month was one of the lowest volume months in the past few years – and changing narratives that have not been friendly to most DeFi 1.0 tokens.