Dispatch #135: The Divergent Possible Futures of DeFi

3 min read

In this patch of your weekly Dispatch:

  • Ethereum’s Shapella upgrade goes live
  • 2 US states pass Bitcoin “right to mine” bills
  • Why the latest BTC rally has been spot-driven

The Big Idea

DeFi: Best of Times, Worst of Times

When it comes to DeFi on Ethereum, it truly is the best of times and the worst of times.

On the one hand, Ethereum’s transition to proof of stake has gone off more smoothly than even the most optimistic observer might have imagined. On Wednesday, the dual upgrade known as “Shapella” was completed without a hitch, enabling withdrawals of staked ETH, meaning that to some, it was the culmination of the transition to PoS.

While skeptics had thought that enabling withdrawals would lead to a torrent of ETH being unstaked, that just wasn’t the case. Indeed, according to Nansen, the majority of the withdrawals were simply validators withdrawing the awards they had accrued. ETH’s price broke the $2,000 resistance immediately after the upgrade.

eth logo
Ethereum eth
Graph showing the currency price change

A day after the event, 62% of the withdrawal exit queue was stakers who needed to get out owing to a staking product being shut down by US regulators. And indeed, this gets us to the “worst of times” side of the equation.

Governments are putting lots of pressure on DeFi. About a week ago, the US Treasury released a “2023 DeFi Illicit Finance Risk Assessment” that baldly accused DeFi of enabling “cybercriminals.”. In Europe, France published a discussion paper about how DeFi would need to be folded into the MiCa framework.

Onerous regulation is by no means a foregone conclusion, but if anything, now is a good time to remember that the promise of truly decentralized finance is worth the fight.

The Latest In…

Bitcoin Mining

Ethereum isn’t the only crypto facing headwinds and tailwinds at the same time. Bitcoin mining has come back to the forefront of the discussion in the US with the publishing of a state-by-state campaign for “right to mine” bills led by folks like the Satoshi Action Fund.

Last week, Arkansas passed one of these bills and this week, Montana followed suit. Both bills are simply waiting for their governor’s signature. In Texas, however, State Bill 1751 is set to curtail many of the benefits that have made the state so attractive to miners, leading to a major advocacy campaign from both local advocates and miners and national US organizations. Truly, it’s progress and peril all around us.

The Latest In…


Despite much of the mainstream discourse writing the NFT space off as a fad and excess of the last cycle, that community seems stronger than ever. One needs to look no further than the happy tweets coming out of NFT NYC to understand that. Across multiple chains (including Bitcoin this time, thanks to Ordinals) NFT communities are thriving in this lower-price, lower-hype environment. And it’s not just events:

  • Reddit has dropped its third NFT collection (7.4m unique holders);
  • Adidas released Chapter1 of its ALTS Dynamic NFTs;
  • The companies behind Azuki and Line Friends are joining forces.

Looks like even the overpriced JPEGs side of crypto has that cockroach stickiness.

The Week’s Most Interesting Data Story

Is the Latest Bitcoin Rally Spot-Driven?

TL;DR Yes.Bitcoin’s great 2023 continued this week, with the crypto king surging over $30,000. Any time we see a rally like this, the natural question is to ask what’s driving it. From a markets perspective, that means asking how much it’s being driven by spot or leveraged trading.

Glassnode’s Checkmate looked at that exact question this week and found that post-FTX collapse, Bitcoin has massively de-leveraged. There’s less open interest and whatever leverage is left is long-dated. Indicators on the spot side, including new addresses, transfer volumes, and miner fees all are showing significant dynamism. The conclusion? This rally is good old fashion spot Bitcoin buying, baby.

Hot Topics

What the Community Is Discussing

Literally, this is fine.

Bear market vibes can be the best vibes.

There are officially more than $1M ordinals, resulting in $5M in fees.

What to Watch for Next Week:

  • Gary Gensler before the House Financial Services Committee?
  • Can Bitcoin stay about $30k?
  • Will Hong Kong and China continue to soften their stance on crypto?

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