Weekly Alpha #19
Latest DeFi Alphas Delivered in a Concise Newsletter.
Welcome to the latest edition of Weekly Alpha.
Every Friday, I deliver insights on the cryptocurrency market, emerging projects, macroeconomic trends, and DeFi directly to your inbox.
In this edition of The Weekly Alpha:
🗞️ Weekly DeFi News Digest
👩🌾 Latest Yield Farming Opportunities
📈 Market overview
🔍 In-depth Analysis: Swell Network
Your Weekly DeFi News Digest 🗞️
In this section, I highlight the week's most impactful DeFi news. This way, you can bypass the chatter on Twitter and concentrate on the essential updates.
Galxe front-end compromised in possible ongoing attack
Manifold launches $50M MEV-optimized LST
Avalanche Social App Stars Arena Drained of $3M in AVAX After Hack
$88M in Arbitrum grant proposals are competing for a $44M pot
FRAX taps Treasury yields with new staking vault
Circle rolls out native USDC tokens on Polygon
Not so Tangible? Real USD stablecoin turns illiquid
Lido faces skepticism for Arbitrum grant request
BarnBridge DAO votes to comply with SEC order
Uniswap Wallet is coming to Android
LayerZero’s ‘Gas Station’ will simplify cross-chain NFT swaps
Alpha Yield Opportunities 👩🌾
If you're looking for the best yield opportunities, I've curated them for you in this section.
Yearn Finance (Mainnet) - 25.72% APY on the yCRV vault
AAVE V3 (Arbitrum) - 6.59% APY on USDC deposits
Stargate Finance (Optimism) - 5.54% APY on the ETH Farm (OP Rewards)
Moonwell (Base) - 5.8% APY on ETH deposits
Holdstation (zkSync Era) - 5.35% APY on USDC deposits
DeFi market overview 📈
We can no longer deny that the market has become quite stagnant. Since last week, we've lost approximately 2 billion across all chains, bringing the current TVL to $35.75 billion. This reminds me of the lows we witnessed during the previous bear market – it was very slow and uneventful before the unexpected black swan event at the onset of COVID. However, this doesn't necessarily mean that history will repeat itself.
My strategy remains unchanged with my holdings. I'm primarily accumulating ETH and BTC through DCA, and I use my stablecoins and other tokens, such as SNX, for yield farming.
Top Protocols by Revenue Ranking
Over the past 7 days, there has been a noticeable slowdown in the revenue generated by Friend Tech. Last week, the SocialFI app produced revenues of $3.87 million, but in the most recent 7 days, it generated only $1.43 million. As a result, it has now dropped to 6th place. Both OpenSea and MetaMask have currently generated more revenue than Friend Tech.
TVL across Networks
Based on data analytics for the leading rollups and Solana, Arbitrum clearly dominates in terms of TVL. Solana, on the other hand, seems to struggle in attracting TVL, lagging behind both Optimism and Base.
Weekly Active Crypto Devs
This is the first time I've highlighted this metric in my newsletter, and I find it particularly intriguing. The number of weekly active crypto developers has consistently declined over the past three months. From my personal experience, I've noticed that activities in DAOs have significantly decreased due to the bear market and the underperformance of governance tokens.
Exploring the Depths of Swell Network 🌊
Since the introduction of the Ethereum PoS roadmap, there has been a rise in liquid staking protocols, with Lido at the forefront.
Many Ethereum researchers believe that Lido could pose a threat to credible neutrality if it surpasses 33% market dominance. Such dominance could effectively make it a governance overlay for Ethereum. This is why I've been exploring smaller alternatives to Lido, like Rocket Pool and Swell. They have a lower market dominance but a sufficient market cap to make me feel comfortable staking some of my ETH.
Today's Status ⚙️
Swell Network, launched in late April 2023, is one of the latest and leading liquid staking protocols, making it a fairly recent entrant in the space.
Swell operates on a fully self-custodial model and boasts backing from prominent investors, including Framework and Apollo Crypto. Notable angel investors supporting Swell include Kain Warwick from Synthetix and Fernando Martinelli from Balancer.
For those unfamiliar with Liquid Staking Tokens, they allow you to stake ETH without needing the 32 ETH typically required to run your own validator. With Swell, users can earn passive income by staking their ETH to receive rewards. In return, they are given a yield-bearing liquid staking token (LST) which they can hold or use within the broader DeFi ecosystem to earn additional yields.
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Swell On-Chain Metrics 🧐
If we look at data’s from Swell Network, the TVL has been growing steadly since launch and is now sitting at $78.81m while the median APY, so the ETH yield that you are getting from holding swETH is fluctuating between 2% and 5%.
Let's delve deeper into the analytics. According to the data from this Dune Dashboard, as of the time of writing this article, Swell Network has a total of 48,806 ETH staked, 1,509 validators, and 8 operators.
Compared to Lido, it's evident that Lido holds a dominant position in the field.
Lido has a total deposit of 8,850,695 ETH, 272,763 validators, and 29 node operators.
Opting for smaller liquid staking tokens inherently carries more risk, but diversifying your portfolio is crucial. Lido, despite its prominence, is not risk-free. The key is to conduct thorough risk assessments for your portfolio.
How to get swETH 👨🏫
There is two main way of getting swETH, stick to it because later in this article we are gonna discuss why the first way is the best for a potential airdrop.
Stake ETH on Swell
the primary method to acquire swETH is by visiting the Swell Network website and staking your ETH in exchange for swETH. The current exchange rate stands at 1 swETH = 1.0382 ETH, in contrast to Lido where 1 stETH = 1 ETH.Buy on Decentralized exchanges
You can purchase swETH on Paraswap at a 2.8% discount. Additionally, swETH is available on Arbitrum.
Swell Incentive program
Swell currently does not have its own token. However, they plan to introduce a token named SWELL. As per their documentation, this token will serve governance purposes via delegate voting and will also be used for growth incentives, encompassing liquidity mining, referral programs, and airdrop strategies.
Swell has initiated an incentive program, "Swell Voyage", where participants can earn PEARL tokens either by referring new stakers or by utilizing their swETH tokens across various DeFi protocols.
While there's no confirmed indication that PEARL will be involved in the airdrop, I firmly believe it will be. Given that LST is currently a significant narrative within the Ethereum community, it's crucial to strategize your position accordingly.
To participate in Swell Voyage, visit the Swell Network website, navigate to the 'Voyage' page, and generate a referral link. Alternatively, you can utilize the protocols listed on the site.
Several protocols, including Maverick, Pendle, Aura, Balancer, and Uniswap, are incorporated into Swell Voyage to promote the protocol's liquidity.
Risk involved
There are several risks associated with Liquid Staking Tokens. These include:
Smart-contract risks: These become particularly pronounced when you engage with multiple protocols using your tokens.
Slashing risks: These are outside of your control.
Credible neutrality concerns: These arise if the protocol grows significantly larger than Lido and captures a dominant market share.
swETH price fluctuations: Especially in secondary markets, if there's an oversupply of swETH tokens.
Additionally, one must factor in the potential risks if things go awry with ETH 2.0, as Liquid Staking Tokens inherently derive from it.
Final thoughts 🧠
I'm very bullish on what Swell is building. My optimism isn't just due to a potential airdrop, even though the incentive is significant. I genuinely believe that for the overall health of Ethereum, we need credible neutrality and other influential players entering the arena.
The fact that Swell is backed by some of the major actors in the space further strengthens my confidence.
However, I hope to see more than just 8 node operators. In my view, this number is low, especially when compared to Lido or Rocket Pool.
The "voyage quest" is a brilliant strategy to attract new users and enhance the protocol's growth. Moreover, the partnership with Pendle provides lucrative yield opportunities with swETH, which offers a higher return on top of the basic Ethereum staking yield.
Wrapping up for this week. For daily DeFi updates, follow me on Twitter
None of the information in this newsletter constitutes financial advice. While I personally use most of the protocols that I discuss, it's important to understand that they involve substantial risk. Don’t invest what you can’t afford to lose