What is LSD & why do I see a BTRFLY?!

plus Eth Shanghai upgrade, BONK bounces SOL & a GMX whale gets phished

GMGM welcome back to the wonderful world of crypto!

Hope you enjoyed touching grass over the holidays as we certainly did. Back in action now with a new layout to the newsletter to bring you more in-depth TLDR straight-to-the-point info-tainment.

In a parallel dimension, Ethereums LSD and Solanas BONK have just sparked off the crypto bull run多opium says its happening as Jimmy C keeps indicating up only with his bearish hate on crypto LFGGG.

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The TLDR of whats inside

The Big Topic: What is LSD and why is it the new narrative?Hot Crypto News: SBF drama gets more confusing, Defi Llama launches Dex Aggregator, BONK bounces Solana and Barry needs more time Updates Across the Block: includingBTRFLYs upcoming DINERO stable coin, Tarot Finance joins the roundtable at CamelotDEX, Skale launches ZK initiative and Velas Hyper VLP applications launched next week & more‾Chart of the day: Are we in for a bear market rally featuring the $SPX?

The Big Topic

What is LSD and why is it the new narrative?

LSD is a wonderful thing.

No really, there have been many studies floating around Twitter (and NetFlix IYKYK) the last few days as to the benefits of LSD and the impact that Shanghai could play on it.

For those new around here LSD is short for Liquid Staking Derivatives. Simply put LSD allows investors to generate more benefit from their staked assets, now liquid, which can be used as collateral in popular DeFi protocols to earn extra magical internet beans.

Check out the Defi Llama LSD TVL rankings地s it looks like something something special might be happening as Ankr, Frax Ether and cbETH showing some of the biggest 1 month gains.

But before we get lost along the rainbow road in a world of colour and weird shapes lets look at whats actually spurring this new narrative, and for that, Im going to take you to Shanghai.

The Shanghai Upgrade

Ethereum made history on September 6th 22 as the network went through its biggest, most successful upgrade leaving its mark in crypto history books. Eth 2.0 was the transition from proof of work to proof of stake, allowing investors and validators to stake their Ethereum to help support and secure the network to earn juicy rewards.

What the merge didnt do was grant permission for staked Ethereum to be withdrawn from the Beacon chain, yeah I feel the pain of all those who ape n staked close to $4,000安e salute you!

Word on the street is that the tentative date set for Shanghai to go live is March 23 with a primary focus on withdrawals before implementing The Surge-related Ethereum Improvement Proposal (EIP)-4884 (proto-danksharding which basically improves L2 roll-up scalability).

The Great LSD Wars

2023 might just be remembered (or at least in Q1 anyway) for The Great LSD War, as liquidity hunters look to support their (potentially drowned) staked bags of Ethereum to be used as collateral to, hopefully, bring their portfolio back to life.

Chances are that stakers will gravitate to the dex that has the deepest liquidity such as Curve or Balancer Curve War season 2 anyone? Luckily, Avi isnt around to fumble into any exploits.

There are 3 potential scenarios that we are seeing as to what could happen post-Shanghai upgrade.

  1. Increased sell pressure from OG whales / those wishing to part ways with their bags

  2. Stakers keep on staking as is好o change there

  3. Move the freshly unstaked Eth to LSDs for better returns and DeFi functionality

Point 3 is where we could start to see the battle of liquidity happen for the bigger dexes as they will want to continue to provide deep liquidity in order to generate returns for investors. Worth mentioning here that Aura and Convex may play a large role in LPs and incentives.

Fun fact, according to Hildobbys Dune Dashboard, only 20% of all staked Ethereum is in the green

Offft, let that sink in.

You can make your own judgment on the potential sell pressure, from what looks like real OG early Ethereum Whales and panic-selling $4,000 bag holders, will come from the Shanghai upgrade.

Too Late? Still Early? How can I position myself?

And as if by magic, CoinGecko has created a new section just for liquid staking governance tokens with LDO and SWISE being this weeks BIG winners. If you caught them early then Happy New Year to you!

If you are looking for exposure to the LSD narrative then tokens like LDO, RPL, and SWISE should be on your watch list because right now numbers go brrrrrrr.

As they have gone brrrr lets look at some other potential narrative plays.

Consider FXS, which according to everybody's favourite crypto Pickle might just be a smart choice to take a look at stating that

安hilst (s)frxETH is more tax efficient, has a better APR and functionality for all you DeFi degens out there that are looking to benefit from your now liquid frxETH.

As the title said I took a tab of LSD and saw a BTRFLY.

Redated Cartels BTRFLY tokens could be a potentially interesting narrative play, especially with the up-and-coming DINERO stable coin which is backed by staked Ethereum (we will know more about this when the white paper drops later this month).

Until then I wont speculate too much on what might happen with the Dinero stable coin but we do know that Redacted Cartel are proper giga brains and that the DINERO stablecoin will be used as a gas token.

I mean just look at that chart, somebody knows something about something because as soon as the new year flipped冰TRFLY spread its wings and began up only.

PS. we interviewed Redacted Cartel (BTRFLY) Founder Magus back in Oct 2022.

Our Take

As far as narratives go, this makes sense and is one to watch out for both on the way up and on the way down. Pick your side, play it smart and take profits because 2023 is going to be a rocky year.

As for Ethereum, like always its probably a buy the rumour sell before the news.

NFA DYOR of course!

Hot Crypto News

Ok lets get the SBF part out of the way as he pleads NOT GUILTY, cashes out $1.5m, anon bail co-signers remain anon (Gensler/OLeary宇hat you??), talks to the White House about pandemic prevention and Martin Shkreli tells SBF to listen to rap, shave his head and get street smart夷n other words, play GTA V. Retirement looks great for Sam!

Even whales get phishd as DeFi GMX holder loses over $3.4m in GMX tokens in an apparent phishing attack. Have we not learned anything yet?!

Defi Llama races towards the top with the launch of its Dex Aggregator surpassing both Metamask and Coindesk in Volume in 24 hours.

BONK bounces Solana as the liquidity providers cash in on the airdropped dog-based meme token as it brings life back to the tarnished layer 1. Claiming theyre on a mission to remove toxic Alameda-styled token economics.

Genesis needs more time after the Winklevoss twins unleash a public call out on Barry Silbert to repay over $900m to the real people of Gemini.

SEC Objects to Binance.US plans to acquire Voyager.

Updates Across the Block

BTRFLY, white paper dropping soon for it staked Ethereum-backed stable coin DINERO and how it will be used as a gas token.

CAMELOT DEX, the Arbitrum dex wars heat up as Tarot Finance joins the round table.

CONVEX, a new governance proposal to update protocol fees.

FANTOM, passes gas monetisation proposal benefitting ecosystem builders with a new revenue source.

JOE, everything you need to know about the JOEs move to Arbitrum.

SHIBARIUM, is it closer than we think?!

SKALE, launching ZK initiative in Jan 23.

VELA, more incentives and rewards are coming with Hyper VLP Applications launching next week.

and finally, get roasted by Nick Huber

Chart of the day

Is a bear market rally coming for the $SPX?

Theres no sugar-coating it, January 2022 sucked! It was the beginning of the end for the SPX as we saw a 12.37% decline testing the 50EMA before a continued downtrend that didnt stop.

12 months on we might flip-reverse it and see some upwards movement after a year of heavy selling. Its an 8% move back towards 4100 with major market-moving news coming next week (which I might add could swing either way).

Bull case, J Powell gives a neutral to dovish tone to his speech with the CPI numbers moving in the right direction giving investors confidence targeting the 4100 zone

Bear case, J Powell continues a heavy-handed hawkish stance on the outlook for 2023 to show he means business and isnt letting up targeting the 3500 and ultimately 3200 zone for a retest.

Come on JP serrrr, just 1 month of green夷ts almost valentines day after all!

A Final Word

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