October Alpha Dump

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TLDR;

• SmartCon 2023, starting on October 2nd, has historically impacted the price of $LINK.

• Arbitrum’s incentive scheme will help the overall $ARB ecosystem, with several tokens - $RDNT, $DODO, $GMX, and $MAGIC well placed to benefit.

• Several BTC ETF deadlines are fast approaching, with the SEC due to respond to Blackrock, Bitwise, VanEck, Wisdomtree, and Investco between the 16th-19th October.

• Radiant Capital (RDNT) launches on the Ethereum Mainnet on 3rd October 2023 and we estimate this move could add $2.75bn-$7.15bn in TVL to the protocol.

• Worldcoin ($WLD) Market-Maker agreements are set to expire on October 24th. This could provide a significant structural catalyst to $WLD.

• Yearn Finance ($YFI), a leading decentralized finance (DeFi) protocol, has announced that it will be launching its voting token, $veYFI on October 19th at 00:00 UTC.

• Apecoin ($APE) unlocks 4.23% of the circulating supply, equal to $17.47.

• Axie Infinity ($AXS) unlocks 11.26% of the circulating supply, equal to $65.41m

• CyberConnect ($CYBER) unlocks 11.43% of the circulating supply, equal to $6.57m.

Smartcon 2023

SmartCon 2023, founded and run by the Chainlink team, is a popular event for the Web3 community, bringing together developers, entrepreneurs, and investors from around the world to learn about the latest innovations and trends in the space.

This year, the event will be held in Barcelona from October 2-3, with pre-conference workshops and activities taking place on September 30th and October 1st. The conference will feature a keynote address from Chainlink CEO Sergey Nazarov, as well as talks from other leading figures in the Web3 industry.

In the build-up to prior SmartCon events, $LINK experienced strong price performance in anticipation of major announcements. The most recent - 2022, saw around a 35% move in the price of $LINK into the keynote speech, as traders front-ran a staking announcement, before rolling over afterward.

This year, it is possible that $LINK will experience similar price action in the lead-up to SmartCon 2023. We’ll be looking to fade any major prepositioning in the absence of unexpected announcements and expect volatility to remain high until the event.

Arbitrum Odyssey / Incentive Program

Arbitrum Odyssey, a community event that introduces users to the Arbitrum ecosystem, was relaunched on September 26, 2023. The event was originally launched in June 2022 but was paused due to network congestion.

The relaunched campaign will last 7 weeks and feature 13 Arbitrum projects. While there will be no airdrop or other financial rewards for participating in the Odyssey, the participating projects are likely to see increased TVL and activity over this period.

The program comes at a time when the Arbitrum Foundation is also pushing short-term incentive schemes, aiming to distribute up to 75 million ARB tokens from DAO-funded incentives to active protocols on the Arbitrum network.

Key Goals of the Arbitrum Odyssey and Incentive Schemes

The Arbitrum Odyssey and incentive schemes are designed to achieve the following goals:

• Support Network Growth: Accelerate the distribution of incentives to Arbitrum decentralized applications (dApps) to foster network and ecosystem expansion.

• Experiment with Incentives: Uncover new incentive strategies to boost user engagement, transaction volume, and liquidity.

• Find New Models for Grants and Developer Support: Generate maximum activity on the Arbitrum network.

Overall, both approaches aim to increase volume, transactions, users, and liquidity in the Arbitrum ecosystem, and tokens are well-positioned to benefit from these flows, notably $ARB, $GMX, $RDNT, $DODO, and $MAGIC. Traders should watch these tokens closely through October.

Spot ETF Deadlines

On August 29th, the U.S. Court of Appeals for the District of Columbia ruled in favor of Grayscale Investments in its lawsuit against the Securities and Exchange Commission (SEC). The court found that the SEC had not adequately justified its decision to deny Grayscale's application to convert its $16.2 billion Bitcoin Trust into an ETF.

However, the rally was short-lived. Just 2 days later, the SEC announced that it would delay its decision on whether to approve spot Bitcoin ETFs from iShares, Bitwise, VanEck, Wisdomtree, and Investco. This news has pushed back the timeline for any imminent approval, with some commentators now predicting that decisions will not be made until later this year or even early next year. This pushes the potential approval timeline out to between October 2023 - March 2024.

There are several approval deadlines approaching this month between the 16th and 19th of October. Around these dates, the market will likely see increased volatility, with options pricing already reflecting increased volatility around the deadlines. Given the SEC's current approach to these filings, we estimate the odds of an ETF approval before year-end at around 75%.

Radiant Capital to Launch Mainnet on Ethereum

Radiant Capital (RDNT) launches on the Ethereum Mainnet 3rd October 2023 and we believe this move could add $2.75bn-$7.15bn in TVL to the protocol. Overall, this move will make the protocol more accessible to a wider audience and open up a larger pool of assets, making it a significant opportunity for Radiant Capital to grow its user base and TVL.

Our thesis published in September outlined this event in more detail, but we believe Radiant Capital's launch on Ethereum Mainnet on October 3rd is a major milestone for the protocol, that is not yet being priced in and is likely to result in increased volatility around the event.

Worldcoin Market-Maker Agreement Expiries

In our September 21st report, we explained this in more detail. To summarise:

Worldcoin's predatory tokenomics and questionable business model have made it a target for short-sellers, who are betting that the price of $WLD will fall. As a result, over $50 million in short positions have been built up in the token.

Market-making agreements signed on the $WLD USDT-Perp launch are set to expire at call prices significantly higher than the current price. This provides a massive incentive to push the market higher into the agreement expiry date - October 24th.

In this context of consensus short positioning and a structural catalyst, we believe that $WLD could push higher in the coming weeks leading up to the October 24th agreement expiry. If short-sellers are forced to cover their positions, this could lead to a major medium-term squeeze.

Yearn to launch veYFI on October 19th

Yearn Finance, a leading decentralized finance (DeFi) protocol, has announced that it will be launching a new token called veYFI on October 19th at 00:00 UTC. veYFI is a vested version of the YFI token, and it will be used to govern the Yearn protocol.

To earn veYFI, users will need to stake their YFI tokens. The longer the YFI tokens are staked, the more veYFI tokens the user will earn. veYFI holders will have voting rights on the Yearn protocol, and they will also be able to earn rewards for their participation.

The launch of veYFI is expected to have a significant impact on the price of YFI, and we believe the launch could bring volatility in the build-up to, during, and after the event.

Unlocks

Given the weak price action, tokens with significant unlocks have traded heavily throughout 2023 due to the imbalance between supply and demand being accentuated. These environments are characterized by the lack of a "next marginal buyer," and therefore the increased supply offered by unlocks tends to have a large relative impact on prices.

There are several large unlocks coming up this month which could bring traders to specific markets. In order of event, $APE, and $AXS will all release a significant amount of tokens from mid-month. This is likely to increase volatility and action within these names. The market has begun pricing in this increased token supply, punishing these names on a relative basis.

15th October - 01:00 UTC

CyberConnect ($CYBER) unlocks 11.43% of the circulating supply, equal to $6.57m. It’s worth mentioning that just 12.3% of the total supply is circulating at present, with close to 70% due to hit the market over the next 6 months. This large inflation is likely to cause price volatility as the unlocks get priced in, so the token is worth keeping an eye on should the wider market stay soft.

17th October - 01:00 UTC

Apecoin ($APE) unlocks 4.23% of the circulating supply, equal to $17.47. The last major unlock saw 11.02% of circulating supply hit on 17th September, and since $APE’s inflation rate began to tick higher with supply, the token has underperformed significantly.

20th October - 02:10 UTC

Axie Infinity ($AXS) unlocks 11.26% of the circulating supply, equal to $65.41m. The last major unlock saw 2.61% of circulating supply hit on 22nd July, and since then, $AXS has underperformed the market by over 18%. It’s worth mentioning that the July event was made up of almost 100% of staking rewards.

The October unlock is close to 10 times the size, with team tokens accounting for $25.42m of the total supply due to hit the market. In our opinion, this fact alone makes $AXS vulnerable to a sell-off should the core team sell their allocations, making it a core market to monitor until 20th October.

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