Welcome to the latest edition of Index Insights! This week we’ll take a look back at a significant time in the history of DeFi, staking tokens, and icETH. Along with a walkthrough of how the FLIs and our automated products have performed in Q1 2023.
In this edition, you'll learn:
— The Index Coop team
As the cryptocurrency market experiences a significant surge in interest, Ethereum (ETH) and Bitcoin (BTC) have seen remarkable year-to-date (YTD) returns. Their corresponding FLI products, ETH2x Flexible Leverage Index (ETH2x-FLI) and BTC2x Flexible Leverage Index (BTC2x-FLI), provide amplified exposure to these digital assets. Ethereum's 76% YTD return is driven by the growing popularity of decentralized finance (DeFi) and the successful Ethereum 2.0 upgrade, while its ETH2x-FLI has a YTD return of 169%.
Bitcoin, the original and largest cryptocurrency, has an 88% YTD return, bolstered by being seen as a safe haven during the recent bank closures and growing acceptance as a digital store of value. Its BTC2x-FLI outperforms with a 208% YTD return. FLI products present an attractive opportunity for traders to optimize their exposure to these leading digital assets.
On Tuesday, Gary Gensler, the SEC Chair, faced questions from the House Financial Services Committee about his aggressive stance on the crypto industry. Gensler defended his position, stating that he has never seen a field as non-compliant as crypto, and argued that the SEC has provided clarity on crypto custody, exchanges, and asset definitions.
Under Gensler's leadership, the SEC has issued 130 enforcement actions on crypto businesses, including a recent crackdown following the collapse of exchange FTX.
U.S. Rep. Patrick McHenry, chairman of the House Financial Services Committee, questioned Gensler on whether he views ether (ETH) as a security or commodity.
Yield Products' icETH has shown a steady growth of 1.15% in ETH terms since February, reaching 1.05 ETH per icETH. The supply cap, a global limit on the total units of icETH, currently stands at 69% utilization, with 10.4K units in circulation.
No parameter updates have been made recently, but an update to the supply cap is anticipated in the coming months as the circulating supply approaches 80%. Meanwhile, the stETH:ETH price has remained relatively stable, with liquidity on the Curve stETH:ETH pool increasing by over 50% to almost $1.5B.
ETH2x-FLI has experienced a 25% growth since February, with a price rise of 19% for ETH. The current supply cap for ETH2x-FLI is at 58% utilization, with 1.44M units in circulation.
No parameter updates have been made in this period, and ETH2x-FLI relies on the UniV3 ETH:USDC pool for daily rebalancing. The price impact for rebalancing trades has been less than 0.1%, and the NAV vs DEX premium has remained between -4% to 4%.
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