2023-03-17 Weekly Market Highlights

🔎 Macro / TradFi
The shutdown of a few U.S. banks over the past week have fuelled concerns of a potential banking crisis. In response, the U.S. Treasury Department, the Federal Deposit Insurance Corporation and the Federal Reserve took action to protect the U.S. economy by strengthening public confidence in the US banking system. Interest rate hike expectations have fallen and traders are now expecting a 0.25% rather than a 0.50% hike in the Fed meeting next week.
Over in Europe, the European Central Bank stuck to its plan and raised interest rates by 0.5% as it remained focused on combating inflation despite recent market turmoil. Separately, investors heaved a sigh of relief after the Swiss National Bank pledged to support Credit Suisse. Credit Suisse announced it would borrow up to 50B Swiss Francs from the central bank.
🔎 Crypto
L1/L2:
Mark your calendars. The target date for the long-awaited Ethereum Shanghai hard fork has been set for 12 April. Ethereum validators are yet another step closer to being able to withdraw staked ETH on the beacon chain as the upgrade was previously executed on the Goerli testnet on Tuesday.
It’s here - Arbitrum, an Ethereum layer 2, is finally getting a token. $ARB is expected to be airdropped to eligible users on 23 March and marks Arbitrum’s transition into a decentralized autonomous organization as $ARB holders can vote on key governance decisions.
Cosmos Hub has released Replicated Security, allowing other chains in the Cosmos ecosystem to lean on its network security. Previously called Interchain Security, this will enable other chains in the Cosmos ecosystem to switch to Cosmos Hub’s security and rely on their validators.
DeFi:
Uniswap has gone live on BNB Chain. The expansion will enable Uniswap users to tap on BNB Chain’s high throughput and low fees to swap tokens. Considering the large DeFi community on BNB Chain, the expansion will also allow Uniswap to reach a new pool of users and liquidity.
Euler Finance, a decentralized lending protocol, suffered a ~US$197M exploit earlier this week. Based on an analysis by Slowmist, the attacker used flash loans to deposit funds and then leveraged them twice to trigger liquidation. The exploiter then donated the funds to the reserved address and conducted a self-liquidation to collect any remaining assets.
Stablecoins
Following a depeg over the weekend, USDC has since recovered its peg as regulators announced that Circle and other depositors of Silicon Valley Bank will have access to their funds to continue operations.
Considering recent market events, MakerDAO, the issuer behind DAI, has passed an emergency proposal to reduce the protocol’s exposure to USDC. Going forward, MakerDAO is also considering multiple proposals to limit the protocol’s exposure to centralized stablecoins. This includes the introduction of peg-stability-module market-price swaps and redemption curves that will slow down the 1:1 swaps, and switching a considerable portion of stablecoin reserves to money market assets.
NFTs:
Meta is winding down support for NFTs on Instagram and Facebook “to focus on other ways to support creators, people, and businesses.” The feature has been relatively short-lived, having only begun testing with select Instagram creators last May. Notwithstanding news from Meta, NFTs trading volume hit a high of nearly US$2B in February, primarily driven by the Blur marketplace.
Decentralized Storage:
The Filecoin Virtual Machine (FVM) has gone live on Mainnet. With the network upgrade, the Filecoin blockchain now supports smart contracts and user programmability
Others:
The EU parliament has passed a Data Act bill that encourages data sharing but would require smart contracts to include a kill switch “which can reset or instruct the contract to stop or interrupt the operation.” Informed observers, such as Prof. Thibault Schrepel of the Vrije Universiteit Amsterdam, said in a tweet that the act “endangers smart contracts to an extent that no one can predict.” Members of the Parliament will now negotiate the final form of the law with the European Council and individual EU members.