Q9 Weekly: TypeError: Object is Undefined

Q9 Capital
6 min readApr 20


20 April 2023

  • Futures open interest picking up
  • ETH unstaking requests taking up to 17-days
  • Gensler refuses to state whether ETH is or isn’t a security

The big question last week was whether Ethereum’s Shapella upgrade would cause a rush for the exits and crash the price. It didn’t happen. On the contrary, the hard fork seems to has galvanised institutional interest in ETH.

Open interest in CME Ether futures (considered a proxy for insto activity) has risen to the highest level since March 2022. Since April 10th, the number of open ETH futures contracts trading on the CME has risen 39% to 6,248. In USD terms, open interest has increased by over 70% to $633mn.

Activity on other exchanges has also picked up pace post-Shapella, suggesting institutions are not the only ones flocking to the market right now.

CME Ether Futures Open Interest & Volume

Source: CME

ETH Futures Open Interest on All Exchanges

Source: CoinGlass

The futures basis, or the spread between prices in futures and spot markets, has widened, with the annualized rolling three-month premium doubling to over 4%. The combination of rising open interest and widening basis suggests the leverage has been allocated to the bullish side.

A rising premium often draws carry traders to the market. Carry trading involves setting up a market-neutral strategy by selling futures and simultaneously buying the underlying asset in the spot market to pocket the price differential between the two markets.

Brokerage firm Bernstein released a report stating the biggest crypto bull cycle is upon us and that macro catalysts are lining up for Bitcoin. The demise of FTX cleaned up the final tranche of “toxic crypto leverage” and taught digital-asset investors the importance of decentralization and self-custody wallets, the report said.

According to Bernstein, the new crypto cycle is still not fully appreciated, with a number of positive factors lining up. These include macro catalysts, a new BTC mining cycle, the continued successful upgrades of the Ethereum blockchain and the success of Ethereum scaling products such as Arbitrum.

Inflows continued this week for crypto investment products, with $104mn being allocated to funds. This 4-week run of inflows now total US$345m.

Weekly Crypto Investment Product Flows (US$mn)

Source: CoinShares

Exit Through the Giftshop

Ethereum validators that have put in withdrawal requests following last week’s Shanghai upgrade will have to wait upwards of 17 days to get their staked ether (ETH) back, according to data from the blockchain analytics firm, Nansen. That’s up from about 14 days late last week.

Source: Nansen

Source: Token Unlocks

There are a total of 575,359 validators on the Ethereum blockchain, according to analytics firm Nansen, so roughly 5% of validators are choosing to leave Ethereum’s staking process. Validators are responsible for proposing and adding blocks of transactions to the Ethereum blockchain as part of the validation process. In return, they are eligible for rewards of newly minted ETH and a share of associated transactions fees.

Source: Nansen

According to Niklas Polk, an analyst at Nansen, validators first send a voluntary message to exit, involving a 25-minute wait. Then these validators join the exit queue, which now sits at 11.7 days. Once they move out of this phase, they are faced with a withdrawal delay of about 27 hours. Finally, withdrawals are processed and deposited after another 4.25 days.

In short, this means that if a validator decides to join the exit queue today, it will be 17 days by the time their ETH is returned.

On the other hand, partial withdrawals only take about 4.27 days to process and are automatically deposited into validator addresses if their unstaking credentials are set up. A partial withdrawal means the validator is only withdrawing a portion of their staking rewards while keeping their staked ETH in play as part of the validating process.

The length of the Ethereum exit queue has provided a stark reminder of just how long it can take to get the crypto back at a time of high demand — especially in fast-moving digital-asset markets where prices can and often do move by double-digit percentages in a single day.

Unclear and Present Danger

SEC Chair Gary Gensler testified before the House Financial Services Committee yesterday and declined to say whether he considers Ether a security. “It depends on the facts and the law,” Gensler said repeatedly, refusing to say yes or no.

You can watch the clip here.

Over the course of the marathon hearing, Gensler fended off questions about whether his agency was pushing too hard on proposed rules, providing too little time for public feedback on these rules, and how it was approaching crypto companies hoping to operate in the US.

Gensler defended his position on crypto saying that he had never seen an industry so routinely break securities laws. “I’ve been around finance for 40 years, in one way or the other… I’ve never seen a field that is so noncompliant with laws written by Congress and confirmed over and over again by the courts.”

However, many lawmakers pushed back. Rep. Patrick McHenry, chairman of the House financial-services panel, called Mr. Gensler’s approach to crypto “regulation by enforcement”. “You’re punishing digital-asset firms for allegedly not adhering to the law when they don’t know it will apply to them. That’s nonsensical.”

Congressman Tom Emmer went further. “Your regulatory style lacks flexibility and nuance, and as a result, you’ve been an incompetent cop on the beat, doing nothing in protecting everyday Americans and pushing American firms into the hands of the CCP.”

Tom Emmer attacking Gensler over his record on crypto. Watch it here.

Crypto firms need clearly defined regulation rather than punishment by enforcement. They need to know what the parameters are so they can innovate within them. Lack of clarity combined with hostile enforcement in the US will push firms offshore. Besides, has their approach actually protected any consumers? Coinbase CEO Brian Armstrong said he might consider relocating their headquarters outside the US unless the country changes its approach to regulation.

Meanwhile, cities like Hong Kong are ramping up efforts to woo crypto firms back. Mainland Chinese officials for the first time are publicly endorsing Hong Kong’s moves, with senior directors at the Cyberspace Administration of China (CAC) and the Liaison Office of the Central People’s Government in Hong Kong praising the city’s efforts during appearances at local tech conferences last week.

Its crystal clear that the US needs clear and defined rules to maintain its position as a leader in digital assets whilst properly protecting its consumers.

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