Try Quests to earn cryptoThe Impact of FTX Bankruptcy on Velodrome
Introduction
What is Velodrome?
Velodrome Finance is the platform for the liquidity base of the entire Optimism ecosystem. Launched in June 2022, the program focuses on attracting liquidity for DeFi protocols. The importance of liquidity for DeFi protocols is getting more attention day by day. For a DeFi protocol to work properly, it must have some form of liquidity. However, several problems are associated with generating and incentivizing liquidity in the DeFi space. To address these issues, Velodrome introduces several solutions to the Solidly ecosystem. These solutions include: Strapping Rewards to Emission, White-Glove Support
You can read more about Velodrome here.
What was FTX?
FTX exchange was the most popular centralized cryptocurrency exchange because of leveraged trading. Founded in 2018, FTX offers a wide range of trading products including derivatives, options, volatility products, and leveraged tokens.
In recent weeks and after the Coindesk report, this exchange suffered a liquidity crisis and a series of events caused it to collapse like a domino. The FTX bankruptcy had considerable collateral damage and affected the entire crypto market.
Now, in this dashboard, we want to answer the question of whether the aftershocks of this crisis have reached Veladrome or not.
Methodology
After all the negative news about the FTX and the withdrawal of a large amount of liquidity from it, this exchange declared bankruptcy and caused irreparable damage to the crypto world. Investigating the effects of this incident on the rest of the market is of great importance, therefore, in this dashboard, we will examine the effects of this disaster on the Velodrome.
The key questions that we answer in this analysis include:
- Has the volume of swaps on the FTX platform changed significantly during the last 3 weeks?
- How have users behaved in the face of this incident and what activities have they done more on the Velodrome platform?
- What are the most important coins that users have swapped on this platform and how has their swap volume changed on a daily basis?
- What have been the changes in the liquidity on the Velodrome platform and which liquidity pools have experienced the most changes?
- What changes have been made in the staking activity of users and on which pools have users been more active?
To answer the above questions, Tables optimism.velodrome.ez_swaps, optimism.velodrome.ez_lp_actions and optimism.velodrome.ez_staking_actions were used, the data provided by Flipside.
Also, in each part, the impact of the news on the mentioned activity is examined.
Timeline of News related to FTX
- November 2, 2022: CoinDesk reports that a big chunk of Alameda Research’s assets were held in FTT, and Bloomberg earlier reported that the FTT-Alameda relationship would have been prohibited in traditional equities markets.
- November 7, 2022: Binance decided to sell its FTT holdings, triggering an FTX liquidity crisis — triggering an 80% drop in FTX’s stock. source
- November 9, 2022: Binance considered acquiring all of FTX, but abandoned the idea because FTX allegedly mishandled customer funds. source
- November 11, 2022: FTX filed for Chapter 11 bankruptcy protection. source
- November 12, 2022: FTX hacked. source
- November 14, 2022: Softbank, the venture capital firm that backs Pax8, wrote down a $100 million investment in FTX. source
- What have been the changes in the liquidity on the Velodrome platform and which liquidity pools have experienced the most changes?
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How have users behaved in the face of this incident and what activities have they done more on the Velodrome platform?
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Has the volume of swaps on the FTX platform changed significantly during the last 3 weeks?
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What are the most important coins that users have swapped on this platform and how has their swap volume changed on a daily basis?
- What changes have been made in the staking activity of users and on which pools have users been more active?
Key Insights:
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With the publication of the CoinDesk report, the volume of swaps on Velodrome increased to reach its highest value on November 4 compared to the previous few days.
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A significant increase in swap volume occurred when Binance announced plans to sell its holdings in the FTT token. As a result of which swap transactions grew greatly and a kind of fear happened in the market, which is also clear from the chart.
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On November 9th, Binance first announced its intention to acquire FTX, but in a new announcement, it announced the withdrawal of this decision.
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On November 9, the volume of swap transactions reached $37.93M. After that, on November 11, FTX declared bankruptcy, after which a large volume of swaps entered Velodrome, and the number of users on this date was the highest compared to the previous days.
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The next most important event was the hacking of FTX. It seems that the market became suspicious during this news, and the number of swap transactions decreased sharply due to the fear of this news and reached its lowest number on November 13.
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On November 14, with the announcement of Softbank's investment in FTX, the volume of swap transactions, as well as the number of users and the number of transactions, increased and reached $14.31M, 4842, and 34.9K, respectively.
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- In the lower left graph, 5 currency pairs with the largest swap volume in every day are shown.
- The most important of them are OP-USDC, WETH-USDC, and sUSD-USDC.
- As it is known, until November 7th, most of the swap volume is related to the OP-USDC pair, and then from November 8th, the volume of the WETH-USDC swap has also increased significantly.
Key Insights:
- The change in the net volume of liquidity on the Velodrome platform has been negative since November 8 and reached $-4.12M on this day, which occurred following Binance's announcement regarding the FTT token.
- Then, with the announcement of the acquisition of FTX and then its rejection, the net amount of liquidity was still negative and if we want to say cumulatively, it reached -$6.68M.
- The most negative cumulative volume of net liquidity was on November 14 and was equal to -$9M.
- After this date and with the announcement of Softbank, the net amount of liquidity has become positive.
- According to the side chart, the largest outflow of liquidity from the Velodrome platform was related to stablecoins.
- On November 8, the high volume of outflows from the USDC-SNX pool is notable.
- Since November 15, and with the positive net liquidity, the largest volume has been related to stablecoins.
Key Insights:
- The highest growth in the number of unstaking transactions was related to the publication of the CoinDesk report, which reached its maximum number on November 6.
- After that, we don't see any particular growth, and only on November 10th, when Binance announced that it has abandoned its acquisition of FTX, the number of unsticking transactions surprisingly decreased.
- As it is clear from the graphs below, the largest number of unstacking transactions are related to stablecoin pools, and the USDC-DAI pool is at the top of them.
Conclusion
- It seems that the Velodrome platform is not separate from the crypto market and has been affected by the bankruptcy of FTX.
- With the announcement of news from Binance, a large volume of tokens have been swapped and stablecoins have the largest share of swap pairs.
- Considering the decrease in the number of transactions and the increase in their volume, it seems that users with more assets have been more active than others, and in other words, it can be said that the whales have allocated more volume.
- Over the past 3 weeks, nearly $3.69m have been withdrawn from Velodrome's liquidity pools, most of which were related to stablecoins. This value is a large number on the scale of this platform.
- Among the mentioned news, the two news related to Binance, which was tweeted by its CEO, had the greatest impact on the number of activities on Velodrome, and the news about the complete bankruptcy of FTX, which was published on November 11, had the greatest impact on the number of users.
- The highest number of transactions was related to the swap activity that occurred on November 9, and the highest number of users swapped their tokens on Velodrome on November 11.
- On November 10, both the number of transactions and the number of users related to liquidity provision and staking activities have decreased significantly.