21Shares Monthly Review – May 2023

Written by
Published on
May 30, 2023

This Month in Crypto: Executive Summary

Markets have tumbled in fear of a default crisis in the U.S.; President Joe Biden and top congressional Republican Kevin McCarthy are closing in on a deal raising the government's $31.4 trillion debt ceiling for two years while capping spending on most items. Regulatory headwinds pushed two of the world's largest market makers to withdraw from trading digital assets in the U.S. Falling by 5% over the past month, Bitcoin had its share of speculation around its network’s soaring transaction fees, signaling unprecedented congestion. On the upside, Lido was the biggest winner of this month, increasing by 6%. Ethereum’s upgrade unlocking staked ETH has revitalized investor confidence in the cryptoasset. It also boosted demand for protocols like Lido, which saw a 6% increase in net new assets; despite Celsius withdrawing $800M right after the liquidity event. Our dashboards show that Lido processed withdrawals flawlessly to avoid putting additional stress on the activation or exit queue using a buffer of ETH from deposits and rewards.

Figure 1: Price and TVL Development of Major Crypto Sectors in May

Source: 21Shares, Coingecko, DeFi Llama. Data as of May 30, 2023.

Key takeaways from this report:

  • Bitcoin trials smart-contract functionality while inspiring legacy networks to continue innovating, and Avalanche launches a no-code launchpad to create Web3 applications.  
  • Lido V2 goes live enables withdrawals, Galaxy Digital executes its first on-chain options trade and Tether holds 2% in BTC and continues allocating 15% of net profits to BTC after a strong Q1.
  • Another try at borrowing against NFTs, as marketplace Blur launches NFT lending protocol and Binance launches NFT lending feature with zero gas fees.

Spot and Derivatives

Figure 2:  Total Liquidations

Source: Coinglass

On May 10, we saw over $100 million in liquidations after a pseudonymous source tweeted false information alleging that Bitcoin wallets controlled by the U.S. government were on the move. Most positions liquidated were long, as BTC dropped 5% from ~$28,200 to ~ $26,800 in less than an hour (see Figure 2). The market's overreaction was entirely avoidable. We built a dashboard over two months ago that anyone can access to monitor the U.S. government-controlled wallets in real time and in fact, the assets remained in the wallets.

Continue reading: https://21shares.com/research/monthly-review-may-23