CeFi, DeFi, and Everything In Between
Over the past two weeks, we have seen the bear markets bringing out the worst in digital asset markets. Rumors of insolvency flew rampant in the face of volatility, affecting behemoths that were previously deemed ‘too sophisticated/large to fail.’
Celsius, which we covered in detail in The Tide Pulling Out, was one of the first to waver, fueling fears of contagion in this nascent space. We then wrote about 3AC’s unwinding in Three Arrows (Right to the Chest), noting how even behemoths in the space are susceptible to hubris and mental bias.
It is more important now than ever to discern the rumors from the truth, the guilty from the innocent. Only by continually identifying (ir)responsible actors and extracting learnings from each black swan event, can we advance the space towards mainstream adoption.
CeFi & DeFi
Before diving into the specifics, we attempt to define and outline the differences and similarities of these entities that are crucial infrastructures in digital asset markets. Centralized Finance (CeFi) encompasses intermediaries that work with other centralized service providers to offer financial products and services to their customers. Some prominent examples include crypto exchanges ...Reports you may have missed
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CORRECTION: IN THE FIRST DISTRIBUTION OF ‘DEFI DIGEST 14: A REFLECTION ON LIQUIDITY DYNAMICS THROUGH THE CONTAGION & GHO STABLECOIN’, WE INCORRECTLY REFERENCED VOYAGER INSTEAD OF CELSIUS AS HAVING A 1.2B HOLE IN ITS BALANCE SHEET. THE AMOUNT LENT TO 3AC BY VOYAGER WAS $350M IN USDC AND 15,250 IN BTC, WITH THEIR CURRENT ASSET-LIABILITY MISMATCH UNKNOWN. In last week’s DeFi Digest, the team discussed liquidity dynamics that were prevalent...
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