MAY-DAY: UST implodes, Silver Linings

As everyone is looking at (or trying to look away from) the UST collapse, the contagion to the wider crypto market is making headlines. We remain cautious on the future of the Terra-Luna project, amidst proposals of the Luna Foundation Guard to increase the supply of LUNA in circulation. We are of the view that, although a sound proposal to reclaim the peg, the cost that would be transferred to the underlying trading system (miners) makes it non-viable. We do see a silver-lining in the depth of the market turmoil. As chain-tokens and NFTs have been under substantial price pressure, opportunistic demand for crypto-assets remains a backstop. This is particularly true for virtual land assets such as Sandbox, Decentraland or Otherdeed that have seen above average units being transacted over the last 3 days. Finally we see DEX emerging as an ever stronger competition to CEX, such as Coinbase and Circle. As the market unfolds, daily trading activity on major DEX has reached nearly USD 9bn marking an all-time high. 1inch Limit Order Protocol has particularly benefited from this land-slide moment, which could be attributed to arbitrage opportunities across DEX (see for example indicative pricing for UST from this morning with a 10% discount on 1inch compared to uniswap)

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