Alchemix growth, Coinbase supports USDT & more - The Daily Gwei Refuel #106​ - Ethereum Updates

Transcript

hello everyone and welcome to another episode of the daily gray refuel where i recap the latest news in the ethereum ecosystem i'm your host anthony cesano and today is the 23rd of april 2021 all right everyone what a crazy 24 hours it has been we had a new all-time high for eighth peaking at about 26 44 here i think maybe just above that 47 or something like that and then inevitably we came crashing back down to about 2060 and now we're at like 22.64 so it's been a while 24 hours that's for sure it's been a euphoric 24 hours and you know i woke up this morning and i checked the price and was like wait why are we back at like 2200 or something like that and you know i checked twitter i checked the news and it was basically

i mean you know some people are debating against this but like from what i could see was because of some new kind of proposed tax plan in the us uh under the biden administration where uh basically the top bracket of of capital gains tax would be doubled so anyone earning over a million dollars essentially you know after that million dollars anything earned after that uh you'd be taxed at i think it was like 40 federal or almost 40 federal and then in some states like the the high tax states like california your effective kind of capital gains tax could go up to 57 for that bracket there so obviously uh you know people were kind of blaming that and saying that you know higher taxes are bad for capital markets so that's why they've been selling off and things like that

you know i can see that for sure i i have you know i've debated with people about this and i can see the other side of it as well that you know that the charts were saying that you know the mind was too overheated and we were due to kind of correct here but i do think that maybe both of the things can be true right i think that maybe the market needed to correct after going up so quickly um but maybe the correction was deeper than it would have been because of the news so to speak now this dump i actually think would have been much worse if there was more leverage in the system so if you see the other day there was a lot of liquidations that went on there was about 10 billion dollars in four hours of liquidations that happened

this time around i think it was about three billion dollars so it's actually really healthy that we cleared out all that leverage from the other days dump like this dump over here essentially from what was it like 20 the old i guess like the old all-time high you know down to around like what nineteen or two thousand dollars or something like that um so it's very healthy uh this is the one-hour chart by the way so this only goes back about a week uh or actually a week here um to the last all-time high but anyway um and i did have some kind of questions and people were confused about like all these terms that people use on twitter like liquidations and leverage and all this sort of stuff so just i wanted to give like a quick kind of run down there essentially what

happens as the market moves in either direction but um you know we'll just use going up for an as an example here so when the market's moving up you know people especially especially traders right day traders and things like that not even necessarily day traders but just traders in general or people that want to basically make a bet that you know the price is going to keep going up but they don't have any spare cash so what they do is they leverage their existing assets that's why it's called leverage to borrow against it to essentially buy more of the asset they're bullish on so for example if i have a thousand dollars worth of eath right and i want to borrow against that to buy more eath say i borrow a few hundred dollars i go buy eight with it and then i've used my existing each as

collateral right to basically get leverage against now if the price keeps going up say the price you know doubles right um just as in and as an easy example and i sell the uh kind of ether that i bought with the borrowed funds i pay down the debt to unlock my original eth and then i pocket the difference as profit simple kind of strategy right simple on the surface complex underneath so essentially what ends up happening is that when you borrow funds against your collateral you have a liquidation price so if you don't pay the if you don't pay the debt down in time what will end up happening is that your uh your position will be liquid liquidated your assets that have been put up as collateral will be sold off to cover that debt that you have and then you'll get back whatever whatever

remains essentially now the reason why you see a lot of these liquidations happen in these kind of like downward moves happening here right is because as the market's heating up obviously people are opening up more leverage and you know a lot of people like to play it risky like it's as simple as that a lot of people like to just gamble with it you know play play with fire essentially have liquidation prices that are very close to the current market price so what ends up happening is if say you open a position at twenty five hundred dollars right and you say okay well i'm super bullish on eth right now i'm going to lever up as much as i can and my liquidation price is going to be like 2 400 or something so you lever up and then you're all euphoric because the price has gone up

to like 26.50 or whatever and then uh you haven't closed your position or anything like they haven't sold off because you're like you know this is going higher but then what ends up happening is that this quick dump happens like this is this is basically four hours in four hours it goes to twenty four hundred dollars now if you're not monitoring your position right you're going to get liquidated uh by that if you haven't if you haven't paid it down you're gonna get liquidated and what ends up happening is that because the asset you bought was at 2500 um and it goes under that you can't sell as much of the asset that you bought so you can't actually get back what you what you paid for it and then you have to have to basically uh find money to pay it back elsewhere or you get liquidated right so that's

like the gist of it the higher level of what's hap what happens there um and you know this market cycle is very different to 2017 because of our leverage i think you know in 2017 we didn't have easy ways for kind of like retail investors to get access to leverage binance only launched mid 2017 a lot of the other exchanges like bit mechs and things like that were really you know they were they were popular but they were nowhere near as liquid or as popular as they are today especially with retail traders um so when you kind of like look at look at what's happening in the markets now and the rise of like binance which gave retail investors and d5 mind you retail investors like really easy access to leverage like you can set up a binance account and have access to leverage like

you know within the net within a day sort of thing right or you can kind of like go on define have access to leverage immediately just get some eth from an exchange go put it in make up borrow die that's your leverage right so from that point of view the market is just like constantly you know much more leveraged than it than it used to be in either direction right you can do what i just said about going it's called going long you can do that going short so where you would borrow the asset sell it and then buy it back cheaper and then pocket the difference right just works in reverse there but essentially this is basically the reason why we see such violent moves some of the time and i actually think it's healthy i think the market is healthier for it in the

longer term because what ends up happening is that you can quickly kind of reset the market essentially so what ends up happening is you basically clear the leverage out and then like after that there's just like you know people want to obviously buy again want to want to buy the dip so to speak investors buy the dip right and then traders will also buy it and then you know you naturally start moving back up again it doesn't happen immediately or anything like that and you can see on the chart now i mean we've tried to move back up a little bit but come back down and you know this might get choppy around here it might just go back up you don't really know at this stage but essentially um you know that's that's kind of like the gist of what happens there so this is why unless you're a trader there

is literally no sense in paying attention to short-term moves at all i mean that's why i stopped kind of like giving market updates on every refuel episode a long time ago is that like i try to position the refuel as uh like a place for like long-term aligned ethereum people to come and kind of get updates on the ecosystem and and and and all that good stuff there uh but if you if you are a trader or if you're trying to be one i would suggest learning about all this stuff before you're doing it i i suspect that there's a lot of people who will play with leverage and not understand it and then they'll probably get liquidated or something and they'll be like wow how did i get liquidated and i'll go back and they'll check and like wow you know i was playing with fire

essentially maybe it's good to learn by by um you know being burnt but i guess in general just like a bit of advice there just kind of learn what you're doing and that goes for anything not just trading but investing as well but anyway i'll leave it at that we'll see what the kind of price does over over the coming kind of like days i guess and see if we we're back at an all-time high we'll just stick around sideways for a bit i mean you guys know me long-term bullish always but short-term got no idea what's going to happen at the end of the day absolutely no idea what's going to happen in the short term anyone who say says that they do have any idea or any kind of certainty is is lying to you essentially so yeah play play long-term games and

you and you should be okay um just on that note as well about that kind of like proposed kind of tax hike dc investor put together a great threat here um and for a bit of background here dc investor worked in kind of like the government arena for 15 years so you know how how this all kind of works here but essentially he says there's a near zero chance the tax bill passes as proposed it's common for u.s presidents to articulate articulate crazy stuff in these proposals as a negotiation tactic this is especially true for tax bills when the bill goes to bipartisan committee it gets nerfed hard i think he goes on in a couple more tweets here but i won't read those it just basically reinforces his point here so essentially you know this is what people call

fudd right this is kind of stuff that is just so weird for the market to dump on but people love to do this or at least like traders and whales love to kind of do this because it's it's it lets them buy and cheaper right it lets them kind of i guess like dump um the market get you know wreck all the noobs right wreck all the over leveraged apes as they're called and kind of buy back in cheaper so that's why you kind of see that stuff happening there but i agree with dc here i mean i'm not an expert on us politics i i wouldn't even say like i have really any window into us politics but normally i guess politics in general is a game of negotiation right like you start i mean in general when you start a negotiation you want to

start like you know with your crazy demands and then work your way down you don't want to start like with the with the tempered demands and then work your way up but that's not a great negotiation tactic so if you're trying to pass a you know a tax hike you go as high as you can right and then from there you you know you kind of go down from there essentially um and and you know you kind of land on something that you all agree on ideally i don't know what's going to happen with with the bill i don't know what it's going to end up looking like uh and i would like to remind people that the crypto market is global it's not just the us the us is obviously a big part of it and i would also like to remind people that

this tax hike would be for just people making over a million dollars yeah right in the million dollar plus tax bracket um so you know from that perspective when you when you kind of look at it like that i think only 0.35 percent of americans um kind of earn that much or reported that much in income in the last kind of financial year so it wouldn't affect too many people but again it's all about the capital because what ends up happening is the taxes go up people need to sell more to cover the additional taxes right so and you know in general it's just not great for for kind of like um capital markets but in saying that rick burton had a great tweet today where he said rich people never sell their capital uh they borrow against it to avoid capital gains tax this is something very few people seem

to understand and he's right like you know i i mean if you really think about it you like this is just the way the world works like people who have assets especially people who have assets that they're bullish on still and don't want to get rid of like my eth for example or your eth for example you just borrow against it if you need the cash right and you'll keep like a safe liquidation price i mean you know non i mean you could you don't have to keep a safe liquidation price if you're rich enough you can just basically i mean you don't have to be that rich you just go to a bank or something and say hey i want to borrow money against like this is clutter all right and they'll just give it to you and you'll get like a really cheap rate

essentially um and you'll get like a really good deal depending on how much money you have um but this is not possible for most people right but again most people aren't um are making over a million dollars uh kind of like i i in that tax bracket essentially right maybe asking crypto maybe we're closer to it than most but i think in general that's a that's a lot of money for most people and you know as rick notes here right you know it can be easy for people to do this um you know do this essentially like um borrow to avoid capital gains tax by by leveraging something like make a dow and that's that's true right um but it's uh but like essentially if you're trying to avoid uh i guess like that higher bracket that doesn't apply to most people but anyway i

i'll leave it at that for now i just wanted to kind of cover that because that was all over my timeline today but yeah it was definitely very weird fudd and then on top of that i saw some random twitter account tweet out that uh you know uh janet yellen was gonna um was gonna put in an 80 crypto tax like crypto specific tax i was like what the hell and it was a joke it actually cited like heard on the street right as in like just like it was just a complete meme and a joke but people fell for it apparently i was like what like this is just super weird like what are you what are you like how can you fall for this like but anyway you know if you just see it and you have no context maybe but i don't know maybe the market sold off

because of that i don't buy it i i buy that the market did sell off deeper than it maybe would have um you know due to due to the biden kind of like tax thing there but yeah anyway enough on the on the price stuff for today i just felt it was very important to go over it because i had a lot of people asking me about it so alchemics put out a growth update here and boy are they growing they have 350 million diet deposited into their alcoholics platform which is 10 of the total diet supply they are on track to repay over 40 million in l usd debt over the course of a year and a alcx eat is one of the most liquid pairs on sushi swap i was looking at the other day it's actually incredibly liquid um you know to move the price two percent you would

have to make a 2.2 million dollar purchase or sale um which is which is quite deep and l usd is also one of the most liquid stable coins now alchemix is one of my favorite projects in the space i do hold alcx tokens so just some disclosures there but i think this is like a really great uh kind of like growth trajectory they've only been out for a few months not even essentially and they're offering a product that a lot of people are getting a lot out of because essentially you can basically i mean not only does your debt pay itself back using the yield by depositing your die in here but you can also borrow against it without al usd and do whatever you want with that and because it's one of the most liquid stable coins now it's even better because it means that you have like

these entry and exit liquidity whenever you kind of need it which is incredibly important for stable coins so yeah really really great to see alchemix's growth here and they've also got v2 coming as well soon which is going to enable a bunch of different stuff they're going to add more than just stable coins they're going to add other assets that you can kind of do this with um you know they spoke specifically about ether as well basically being able to stack more eth by borrowing against your eighth like it's just there's some crazy stuff coming to this project so if you're not paying attention to it you definitely should be but i've spoken about them a bunch of times so i'm sure a lot of you are already paying attention to alchemics here so four million eighth is now in the eth2 deposit contracts which meant

which means it is now staking on eth and at current prices this is what eight billion dollars or something like that probably more than that um you know it was 10 billion dollars the other day i think when east was like 2 500. so i think it's closer to nine but yeah four million eight that's that's crazy it's a crazy amount of eighth it's uh i i would say it's maybe three three point five percent of all ethos something like that um in the e3 deposit contract and obviously we still have eight locked in d5 going up that's at about 11 million um but it's really cool to see that four million is in there given that i think e2 staking being like one way bridge dissuades people there aren't like coinbase is still very early stages of their staking kind of um service there's definitely not uh not

not a lot of people kind of staking right now uh with with coinbase at least and it's still i mean i wouldn't say it's complex but it's it's you know it's still kind of something that is not like totally noob friendly right where it's just like a one-click thing setting up and staking you on your own does take a little bit of time right and there's a lot of kind of like there's a bit of a learning curve there for sure so yeah but yeah cool to still see this four million eighth locked in in the deposit contract you know i remember back to november where people were saying you know we're not even going to reach the minimum eighth which was 524 000 and we reached the minimum we we smashed past it right and now we're at 4 million which is incredibly healthy to see so

really great to see that i hope to see more kind of trend more going into the deposit contract over time so seller network has launched their layer 2 finance initiative on the ethereum mainnet which they say is taking on two of the biggest challenges in d5 high cost and complexity of use so you can now use rv compound and curve through app.l2 finance completely for free here so if you want to learn more about how this works you can you can go check out their launch blog post here but for those who don't know seller network is a layer 2 scaling solution that's been around for quite a while it doesn't get talked about as much i mean i know i don't talk about them kind of like as much but they are using rollup technology they did start off with state channels here

um but yeah it's just really cool to see just yet another layer two solution going live on mainnet here right i mean i talk about layer 2 ad nauseam like i don't have to kind of like talk about it again and like how bullish it is but it's really cool that we're seeing this layer 2 kind of like ecosystem just flourish you know permissionlessly on its own no one's kind of there's no like centralization of development here there are so many different teams working on it you know at least 10 plus teams more than that um working on it and like more are going to come into the fray i think people haven't realized just how big of an opportunity layer 2 is and the leaders right now in the space are already kind of like doing a lot of volumes i mean you know

diy dx built on star quest technology immutable x like all this sort of stuff i mean you know immutable x here has already saved a lot of gas for for their users essentially um and diy dx is doing i think i checked it before it was like 40 million dollars i did over the last 24 hours of volume so that's growing day on day some really steady growth there and yeah as i've said before i expect that to continue happening but yeah so congrats to seller on getting this out there really exciting to see go read this post it'll be linked in the youtube description below so as i was just saying immutable posted an update today saying that they have saved their users 2.4 million dollars in gas costs so far now i wrote about this in the daily grade newsletter today and about how i

how i look at this metric so the way you can kind of look at this metric is that if all the transactions that were done on immutable x were done on the ethereum main chain instead based on an average gas price which i'm sure they calculated it would have cost users 2.4 million dollars now the exciting thing here and i guess like the special thing about this is that would these users have paid 2.4 million dollars worth of fees to do these transactions i would bet most of them wouldn't because immutable x is an nft exchange trading like low value cards right most of them being low value that are worth less than the fees paid so essentially what immutable has done here is that they've unlocked 2.4 million dollars worth of gas of on of demand

by moving it to layer two so this is demand that just like wouldn't exist on the main chain essentially but if it did it would account for 2.4 million dollars of gas on the main chain this is really really bullish right this means that not only is immutable x saving users uh but the the the high gas costs here but they're also unlocking that potential uh and basically letting users do this kind of stuff for free because fees are kind of free right now on the immutable x chain here in the layer 2 chain which is really really cool and the other thing that i mentioned in my newsletter today was that as we progress through the layer 2 kind of world it's going to become you know hard to track the growth i think over time some of the metrics will be a bit kind

of like uh useless one of the metrics that i used as an example was trading volumes so if you think about it if if you know gas is like free or like basically free what's the stop stop someone from spoofing trading volumes right and they can do that but at the same time when you think about it each of each individual app is going to have their own fees like not gas fees but just like um you know app fees so for example if unisop is on layer 2 they're still going to have 0.3 kind of like fees um so you know if you try to kind of fake volume then you're gonna end up paying those fees but you can get around that if you were to start your own liquidity pool with a dummy token and kind of like trade back and back and

forth with your own liquidity right i don't know why you would do that but maybe you want to spam the chain or spam the metrics or whatever so from that perspective we're going to have to have metrics that kind of like look at that and look at the nuances and look for different heuristics to kind of measure that growth there but anyway really cool to see this from immutable as i said this is just like a bunch of value that's just been unlocked for people here uh and great to see their growth uh their growth continuing on on layer two so arjun i have teased this new uh update that they're bringing to their r to arjun next week called the argent vault so essentially they're selling this as multi-seek security when you need uh when you need it not when you don't and the highlights include

multi-factor authentication for self-custody uh lines of code on the app cut by 60 cheaper gas for d5 by 30 and cheaper transfers by 40 so a massive uh kind of upgrade across the board here quality of life improvements obviously cost improvements here simplicity improvements so if you use argent you're definitely going to be looking forward to this coming out next week here so if you want to learn like all the details about it uh definitely check out their blog post here it gives it gives a great kind of summary um and like essentially kind of i guess that goes over the benefits that are coming to end users here so nexus mutual uh is evolving uh so the uh christopher here put out a tweet saying that

uh they are launching not not necessarily mutual but like um 1kx which is which is what uh who christopher works for he's the co-founder sorry of 1kxia he's basically put out a forum post saying that he's launched something called operation war turtle which is which has the goal of sunsetting the legal entity behind nexus mutual which would remove the requirement for k of to kyc for nxm token holders this is big right anything that removes kyc in any kind of app um you know because nexus mutual i think was hammered but hampered by this kyc is a very big deal because no one wants to kyc when they're you know doing stuff in d5 that's the whole point so if you remove the legal entity that controls nexus mutual and you make

it an actual kind of dow then you can do this right you can remove that kyc so really really um encouraging to see here they've got like a whole forum post up here or none the nexus mutual forum of course you can go read through uh there's a bunch of kind of like comments discussing it here and basically gives a full overview of what uh what happens here and i like the branding operation wall turtle because it means that like nexus mutual is currently squirtle and it's going to be evolving once it gets to wall turtle i'm curious to see what blastoise looks like you know in the end but yeah really really cool to see this out of nexus mutual uh and kudos to them for actually pushing here and making sure that they can basically sunset that legal entity and remove the kyc

so a very interesting yet puzzling announcement from coinbase today they have announced that they are supporting usdt uh transfer so essentially the usdt token uh on their exchange and only for the ethereum based usdt so for those of you who know that usdt is on a bunch of different chains uh the the biggest one besides ethereum is tron and then there's like a bunch of smaller ones but the reason why this is interesting is for a few different reasons now the first reason is because coinbase is heavily involved in usdc right their own stable coin that they teamed up with circle for so why are they supporting usdt which is a direct competitor like that and i saw some kind of thoughts about this on twitter

and essentially um the reasoning was because they just have so much demand for it that by not supporting it they're leaving money on the table um secondly there was kind of like regulatory guidance given when that um that case with the the new york attorney general's office which was settled i think it was a couple months ago now um and and thirdly uh you know because it's leaving money on the table they're going to get new customers by by supporting usdt here i think all of those reasons make sense but i think an even weird and even more interesting thing here is that they're only supporting ethereum usdt uh transfer cr i think that's for two reasons one because they don't support tron as a network right so they couldn't support tron transfers and two when you think about it uh i i

wrote about ethereum being a credibly neutral platform the other day so in from that point of view coinbase is comfortable supporting ethereum maybe they're not so comfortable supporting tron because they know tron is an incredibly neutral platform they know tron is quite centralized right they know you know tron is seen as like a scammy project with an ecosystem so from that point of view them supporting tron in any capacity would probably be bad from a regulatory point of view so yeah i guess like ethereum is credible you travel neutrality wins again uh but yeah this is this is um this is very interesting i'm going to see how i want to see how this how this kind of grows here i want to see kind of like what coinbase's usdt kind of holdings look like in a few weeks uh i think you know they're

going to balloon because this is just another avenue for for i guess like traders to arbitrage between different exchanges for kind of like people to use usdt to kind of exit and exit um sorry exit and enter through or whatever whatever they want to do with it so yeah this was probably the most interesting announcement of the last 24 hours i would say uh just because no one saw this coming i mean even if you kind of like read the comments it's it's kind of funny to to to see this it's like will you be supporting the tether that's not backed by any reserves or only the backed kind you know some posting going on uh yeah people saying it's a terrible idea uh you know this really did confuse a lot of people across the the ecosystem i think there were like people for and

against that there are still lots of people who think tether is incredibly shady i think it is somewhat shady i think a lot of the shadiness has gone away at this point considering that they're now doing transparency reports and stuff like that but i'm not going to say that i'm ever going to use tether i actually specifically avoid tether i if i have to use a centralized stablecoin i'm just using usdc it's just as liquid for me right i don't i don't really see the big deal um and if i i prefer to use die of course but but usdc is definitely um you know what i use if i have to use a centralized stable coin here but anyway uh very interesting news curious to see what kind of growth this spurs for coinbase here all right finally we have the ethereum

gas limit that i discussed the other day effectively ethereum's block size is now at 15 million which represents a 20 increase uh from what it was just a few a couple of days ago which was 12.4 or 12.5 million now i said 25 increase here i just like screwed up the math so it is just a 20 increase and as david hoffman notes here we can now burn more eth right when eip1559 is implemented implemented and this is because the ethereum chain now has more capacity for more transactions so you know because it's a it's an effective block size it kind of like caps the amount of transactions that can be done at any given given time and by increasing it we can do more transactions um and you know i i don't expect any kind of like fee relief here i mean if

you look at it today the fees are back to 100 way but that's just because i think that the market cooled down a little bit um and like 100 grey has just been the norm for like the past i guess couple of weeks and we did spike a bit uh there but i don't think this got at least some gas limit increases had it had any kind of like major implications here and it is definitely not a long-term solution it's definitely not something that we want to be raising willy-nilly um as i explained the other day it increases like a bunch of different kind of problems like uncle block risk dos attack risk and i mean i can quickly go over that what essentially that means is that you know a dos risk is when uh the the chain can be attacked or at least

clients can be attacked with a denial of service attack and potentially put them send them offline uh and the uncle block risk is essentially that when when mine is minor block they can either mine a block that is part of the main chain or sometimes they'll mine what's called an uncle block or an omar block which is essentially a stale block it was not included in the main chain they still get rewarded for this but it's not included now if you have too many uncle blocks it can lead to instability of the chain and as you raise the gas limit uh more uncle blocks could potentially be formed because it's based on the blocks propagating through the network so if a block takes too long to propagate through the network through you know to all full nodes to all miners because the gas limit is too

high and the block is too large then you have um uncle block risk there so that's those are the two major risks of increasing the gas limit the third i mean i wouldn't say it's maybe a risk but the third negative externality as you that you increase the state size of ethereum which makes it harder to sync a full node and makes a full node larger in size and obviously we don't want that to happen so conservatively we've raised the 15 million maybe we'll go higher in the future there's open research into making ethereum a stateless kind of system which would mean that we could increase the the gas limit much higher but that's still a research problem it is not something that is definitely going to happen we don't know 400 if it can work in any kind of like ideal way very smart people are working on it

uh but yeah it's not something that's gonna happen anytime soon uh i think it's part of the eth2 effort uh or the wider effort like of eth2 but it's not something we should rely on so we shouldn't just increase the gas limit to 100 million and be like oh it's okay stateless ethereum's gonna fix that you know in a yeah because we don't know so better to play conservative here scale via layer two for now and then you know if stateless ethereum has shown to to work very well uh and work in an ideal way then we can look at kind of like raising this gas limit to much higher levels here but yeah that's basically the rundown of that and i think that's it for today so thank you again everyone for listening and watching be sure to subscribe to the channel if you haven't yet give the

video a thumbs up subscribe to the newsletter join the discord channel and i'll catch you all next week thanks everyone