A Reflection on Liquidity Dynamics Through the Contagion and GHO Stablecoin

Jul 22, 2022 • 9 Min Read
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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...

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