Defi Insights: Tools, Trends, and Spread Trades

In the ever-evolving landscape of decentralized finance (DeFi), finding a winning trading strategy can be like searching for a needle in a haystack. However, armed with the right tools and insights, traders can uncover hidden gems and capitalize on emerging trends. This week, we explore three powerful tools that have led to the discovery of a potentially lucrative opportunity in the DeFi space.

DeFi Llama: Uncovering Gems in TVL Growth Our journey begins with DeFi Llama, a platform that tracks the Total Value Locked (TVL) in various DeFi protocols. Recently, Fantom, a blockchain protocol, caught our attention with a remarkable 50% increase in TVL over the last month. The resurgence of interest in Fantom can be attributed to the return of legendary developer Andre Cronje, who is back full-time and is endorsing Fantom's upcoming upgrade - Sonic.

Sonic promises to revolutionize the Fantom ecosystem with features like parallelized execution, faster confirmation times, and high Transaction Per Second (TPS). Additionally, Fantom is introducing a decentralized sequencer that can be utilized by other Layer 1 (L1) and Layer 2 (L2) solutions. This bullish development has resulted in increased volumes and TVL for decentralized exchanges (Dexes), signaling a potential rise in meme coin popularity.

Dex Screener: Identifying Memecoin Opportunities Using Dex Screener, we filtered for coins on the Fantom chain and discovered an intriguing memecoin called $SONIC. Launched just yesterday, $SONIC has quickly become the second most actively traded coin on Fantom, with a market cap still below $1 million. While the temptation to buy $SONIC might be strong, a prudent approach involves analyzing on-chain data to identify smart money moves.

Loch Chain: Analyzing Smart Money Moves Delving into the top traders list on Dex Screener, we identified a savvy trader known as ericfartman.eth. Analyzing his wallet using Loch Chain revealed that Mr. Fartman has amassed a net profit of almost $3.5 million. Despite the bullish sentiment surrounding Fantom and $SONIC, Mr. Fartman has chosen to consolidate his portfolio into stable assets like $ETH and $USDC. His only altcoin position is in $TRESTLE, a bridging solution between Ethereum and Celestia that utilizes LayerZero technology.

Looking Ahead: Cross-Chain Solutions on the Horizon The insights gleaned from DeFi Llama, Dex Screener, and Loch Chain paint a clear picture of the current DeFi landscape. Fantom's bullish momentum, coupled with smart money moves into LayerZero solutions like $TRESTLE, indicate a potential cross-chain season on the horizon. As traders brace for what lies ahead, studying LayerZero and other cross-chain solutions like Wormhole, Axelar, and Across could prove to be a strategic move in navigating the evolving DeFi ecosystem.

The DeFi space is ripe with opportunities for traders who are willing to dig deep and uncover hidden gems. By leveraging powerful tools like DeFi Llama, Dex Screener, and Loch Chain, traders can gain valuable insights and stay ahead of the curve in the fast-paced world of decentralized finance.

Unveiling a High-EV Spread Trade:

In the world of finance, identifying high-EV (expected value) spread trades can be a game-changer for investors. One such trade that has caught the attention of many is the long position on Ethereum (ETH) paired with a short position on Visa (V) over a 24-month horizon. This trade is not just about the potential gains but also about the underlying fundamentals that support this strategic move.

Visa as a Proxy for M2 Money Supply: Visa, a global payments technology company, is often considered a proxy for the M2 money supply as its revenue is closely tied to overall transaction volume in the fiat system. With the increasing adoption of digital payments and the rise of stablecoins, Visa's dominance in the payments space could face challenges in the coming years. This makes Visa a compelling short candidate in this spread trade.

Stablecoin Settlement Volumes vs. Visa: Stablecoin settlement volumes are on track to eclipse those of Visa, signaling a shift in the way transactions are conducted globally. The rise of decentralized finance (DeFi) and the increasing acceptance of stablecoins for payments and settlements are driving this trend. As stablecoins continue to gain traction, Visa's transaction volume and revenue could face pressure, further supporting the short position on Visa.

Ethereum's Incentive Alignment for L2 and Protocol Builders: Ethereum, the world's most widely used blockchain for decentralized applications (dApps) and smart contracts, offers incredible incentive alignment for Layer 2 (L2) solutions and protocol builders. With the upcoming transition to Ethereum 2.0 and the implementation of Ethereum Improvement Proposals (EIPs) aimed at enhancing scalability and efficiency, Ethereum's ecosystem is poised for significant growth. This makes Ethereum a strong candidate for a long position in this spread trade.

Ethereum's Deflationary Nature: Unlike traditional fiat currencies, which can be subject to inflationary pressures, Ethereum is deflationary by design. With the implementation of the Ethereum Improvement Proposal 1559 (EIP-1559), a portion of the transaction fees on the Ethereum network is burned, reducing the total supply of ETH over time. This deflationary mechanism could drive up the value of ETH, further supporting the long position of Ethereum in this spread trade.

The long ETH, short Visa spread trade presents an intriguing opportunity for investors looking to capitalize on the evolving landscape of digital payments and blockchain technology. With Visa facing challenges from stablecoin settlement volumes and Ethereum poised for growth with its deflationary nature and incentive alignment, this trade offers a compelling risk-reward profile. As always, investors should conduct thorough research and consider their risk tolerance before engaging in any trading activity.

 Disclaimer: The information provided is based on public data and should not be considered financial advice. Investors should conduct their own research before making any investment decisions.

Via: https://twitter.com/Prithvir12/status/1778318411560354209

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