Top of Mind at Shipyard
- The roadblock for DeFi derivatives is the imbalance in long/short interest. The recently launched Ethena synthetic stablecoin may introduce a solution.
- While unlikely to fill the use case of stablecoins on the scale of Tether, Ethena’s delta neutral strategy is greatly improving liquidity for leveraged long ETH positions. This may be the secret to unlocking improved liquidity on long tail pairs as well.
The roadblock for DeFi derivatives right now is the imbalance in long/short interest–it seems few in DeFi want to go short! However, the latest launch in crypto is a positive omen.
This month, the Ethena synthetic stablecoin launched. USDe generates delta neutral yield for holders by converting stablecoins into stETH, which it then hedges by shorting ETH perps on centralized exchanges (and pocketing the funding rate for doing so). As of writing, Ethena’s strategy yields ~24% APY (on a USD basis) and has attracted over $500M TVL.
Our take on Ethena is positive in terms of strategy, but it’s unlikely that it will scale to fill the use case of a stablecoin. This is because the strategy’s capacity is limited by the market’s leveraged long interest. While large, that interest is not enough to support a stablecoin on the scale of Tether. At some point, yields will compress. When they compress to below U.S. Treasuries, additional interest will be snuffed out.
On the other hand, the strategy is massively improving liquidity for those who do want to go long ETH with leverage. This may be the secret to unlocking liquidity on longer tail pairs as well. Why not use a delta neutral instrument to take the short side of ALL perps markets? That could help unlock short interest in long tail tokens within DeFi, thereby enabling more long capacity. Expect the Ethena model to penetrate DeFi in many different, surprising ways over the next year.
- Shipyard CEO, Mark Lurie
Below DEX
Clipper underwent a major facelift!
Driven by findings from Shipyard’s 2023 LP Report, we implemented a series of significant updates to Clipper’s UI!
While the update includes obvious cosmetic changes, our real focus was on architecting a more intuitive, efficient, and user-focused platform. This initiative included adding a brand new LP dashboard, simplifying $SAIL transactions, streamlining the $SAIL staking process, creating more streamlined access to research and reward data, and including community-driven updates based on input from Discord and user surveys. Explore Clipper's enhanced app environment for yourself and share your thoughts and suggestions with us in Discord!
Around DeFi
- Uniswap v4 to tentatively launch in Q3, following Ethereum’s Dencun upgrade.
- Perps DEX Avantis launches natively on Base.
- Sky Mavis to cut Ronin DEX LP rewards by 50%.
- Portal raises $34M to build a BTC-based DEX.
Community Updates
- New blog: The DEX User’s Guide to MEV
- AdmiralDAO passed a proposal to expand Clipper to the BSC Network.
- A proposal to implement a lock-up period for veSAIL tokens was passed by the DAO.
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