A Reflection on Liquidity Dynamics Through the Contagion and GHO Stablecoin
Seeing the CeFi realm blowing up around us, it is perhaps pertinent to reflect and hammer the lessons into our collective crypto consciousness. Drawing from CeFi, DeFi and Everything in Between, it is clear now that Celsius, BlockFi, and Voyager Digital function as ‘CeDeFi,’ similarly to TradFi banking entities and are prone to the same weaknesses such as position opacity and human greed. These start-ups took in short-term customer deposits, lent to one another, and took on assets with longer durations[1] from their liabilities in an attempt to ‘generate yield’.
Since our last writing, Celsius completely de-levered their on-chain positions to retrieve their collateral, including ~10k in $wBTC in Compound and 416k in $stETH from Aave. Others who loaned funds to 3AC or who were exposed to those that did, have reported collateral damage as well. Genesis filed a $1.2b claim against 3AC, letting parent company Digital Currency Group assume the liability. The loans were partly collateralized with ~17.4m shares of $GBTC, ~447k shares in $ETHE, ~2.7m $AVAX tokens, and ~13.9m $NEAR tokens – all of which have been derisked by Genesis, per CEO Michael Moro’s tweet.
With Celsius reporting a $1.2b hole in its balance sh...Reports you may have missed
BRC-20 FEVER Ordinal transactions on Bitcoin have skyrocketed in the last few months, leading to an all-time high for daily transactions and pushing Bitcoin network fees to 2-year highs. The activity throttled BTC’s network so much that Binance was forced to temporarily shut down withdrawals and implement Lightening Network to service outflows without paying excessive fees. There are currently two types of Ordinal transactions on the network: 1) Ordinal NFTs...
FIGURE: PEPE UNSHETH-ING ITS ETH TO SOLVE MULTIPLE DEFI PAINPOINTS Since the Beacon Chain launch in Dec 2020, Ethereum users could stake bundles of 32 ETH to secure the network in exchange for priority fee rewards. While these staked ETH[1] are ‘productive,’ many have opted against staking given its operational complexity and illiquidity. Liquid staking projects solve for this by managing validator uptime and offering liquid staking derivatives (LSDs) to...
FIGURE: PEPE LEARNING ABOUT GHO AFTER BEING RUGGED BY UST Source: Fundstrat INTRODUCTION Founded by Stani Kuchelov, Aave (formerly LEND) is the largest DeFi lending market by TVL (~$8b across v2 and v3) and the fifth largest dApp overall. The protocol is currently live across five networks and 11 markets, hosting more than 30 assets across its platform. In July ‘22, Aave announced that they are launching their native stablecoin,...
Fundstrat’s recently launched Crypto Core Strategy offers subscribers a digestible tool to manage their crypto portfolio, with the goal of outperforming bitcoin. For those looking to amplify the returns of their long positions, this complementary issue of DeFi Digest strives to cast light on some of the best risk-adjusted yields. We first describe our methodology to filter for yield opportunities, then dive into the protocols offering the yields, and describe...