🦄 Recap: DeFi Week of June 12
Well, this was the kind of week Defiers have long feared, a brutal selloff triggered by not one but two major projects going sideways.
First, there was the fallout from the decision by Celsius, the CeFi lender, to suspend withdrawals by its 1.7M depositors. Jason Levin covered the crisis and reported how a bank run threatened to drain the firm of capital.
No sooner had the market absorbed this sobering news than word came that Three Arrows Capital, the multi-billion crypto hedge fund that’s been such a huge supporter of DeFi projects, was facing serious margin calls. Aleksandar Gilbert reported how Three Arrows sold $40M of Lido’s staked Ether and dug into the significance of this liquidation. Jason followed later in the week with a story on how Three Arrows taste for leverage was sowing fear in the broader market about its potential collapse.
Meanwhile, Sam Haig unearthed an important development with two of the most influential DeFi projects: MakerDAO and Aave. Sam reported how MakerDAO members voted to freeze Aave’s ability directly borrow the former’s stablecoin, DAI. The move showed how one of the OGs in DeFi is being super careful with its exposure, and it’s the type of detail we love reporting at The Defiant.
Cami Russo and Robin Schmidt both served up incisive takes on the action. On Cami’s podcast, she spoke with the irrepressible Mati Greenspan, the CEO and founder of Quantam Economics, to get his dive on the state of play in the market. And Robin and his crew produced a series of Market Updates on Celsius and stablecoin pegs, as well as the news that Coinbase was shedding a fifth of its workforce.
Still, for all the fire and brimstone, the crypto market (in tandem with stocks) did stage a relief rally after the Federal Reserve raised rates 0.75% on Wednesday yet signaled it wasn’t committing to such sizeable hikes in the future.
We’re also excited about two new series at The Defiant. Yyctrader delivered the second column in our NFT Roundup franchise with a doozy of a story: Truth Labs revealed itself as the creators of the Goblintown collection. And Claire Gu debuted on The Defiant with our inaugural Bear Market Survival Guide. The first piece focuses on metrics investors should be eying in the market. We can’t wait for her next one!
The open economy is taking over the old one. Subscribe to keep up with this revolution. Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button below ($15/mo, $150/yr).
🙌 Together with:
Eden Rocket RPC, providing the fastest private transactions on Ethereum (90%+ hashrate). Trade better anywhere on Ethereum with Eden Rocket RPC.
ZetaChain is the first public L1 blockchain that natively connects with any chain and layer including Bitcoin and Dogecoin without wrapping or bridging assets. Dive into the docs to start building the future of multichain.
dYdX Grants is powering the future of dYdX through community grants. Join us to build on top of the largest decentralized perpetuals exchange!
Bancor, the only DeFi trading and yield protocol with Single-Sided Liquidity & 100% Impermanent Loss Protection. A safer, more sustainable way to earn DeFi yields on your favorite tokens - start earning now!
⍺ DeFi Alpha Newsletter
Check out and subscribe to DeFi Alpha, a weekly newsletter by The Defiant and DeFi Dad, packed with tutorials and tips on how to earn yield in DeFi.
This week on The Defiant Podcast we speak to Mati Greenspan. Mati is the CEO & founder of Quantum Economics, a crypto research and advisory firm. Mati believes we’ll keep seeing pain in the market, with crypto and stocks remaining highly correlated, as long as inflation persists. He says most sectors of crypto will be hit by this crash, because of reduced liquidity from dwindling token treasuries, or because demand for their platforms and apps will dry up.
Only those well funded and committed teams will make it through, and any project that survives a bear will see huge gains in the next rally. Still, he remains as bullish as ever on crypto, and believes staking is nothing short of the future of finance, and that DeFi will continue experimenting with different economic models. While most will fail, those that succeed will change the world.
A heads up that this interview was recorded last week, right before the Celsius debacle, in case you’re wondering why we didn’t speak about the elephant in the bear market.
In which Aleksandar Gilbert digs into how staked ETH played a role in Celsius’ troubles.
Lido’s stETH, a derivative token representing staked ether, has traded roughly at par with Ether since its inception. The reason was simple: each stETH token represents one staked ETH token and can be redeemed for ETH in the future, after the Ethereum network completes its transition to the proof-of-stake consensus mechanism and withdrawals on that updated network are enabled.
That so-called “peg” broke in dramatic fashion last week, as the value of stETH relative to ETH began to plunge. stETH began trading at about 97 cents to every dollar of ETH in May. Early Friday morning, it fell to 95 cents on the dollar. On Monday morning, it was trading just above 93 cents on the dollar, according to data from Dune Analytics.
The nosedive in the value of stETH prompted Lido, the protocol that issues it, to quell fears of a broken peg and comparisons to Terra’s failed UST stablecoin.
Three Arrows Report
Details on Debt Woes in $10B Crypto Fund Are Hard to Come By
In which Jason Levin takes stock of the jitters around the stories fund…
The fear is palpable. Six weeks after Terra collapsed and one week after Celsius, the embattled crypto bank, suspended withdrawals, investors are anxiously watching a $10B hedge fund cope with serious stress.
Three Arrows Capital is sitting on what are believed to be billions of dollars worth loans secured by cryptocurrencies. With the market down 56% this year in its worst bear market since 2018, investors believe the collateral no longer supports the loans. Now the fund is on the hook to start paying them back, and everyone is wondering whether it will default.
On Wednesday, The Defiant reported that Three Arrows sold at least $40M worth of staked Ether as part of an apparent liquidation. It is widely believed that co-founder Su Zhu has been aggressive in using leverage to maximize his potential investment returns.
NFT Roundup: Traders Look to Offload JPEGs in a Wild Week
Goblintown captured the imaginations of NFT collectors over the past month even as crypto markets burned. Now the team behind the project has unmasked themselves to be Truth Labs, whose previous NFT collections include the Illuminati Collective and The 187.
Of the 1,000 goblins that were retained by the team “because they wanted to”, 900 will be raffled to holders of the existing Truth projects over the next six months at the rate of five per day. And 50 goblins will be retained by the team and the remaining 50 will go to the llluminatiDAO.
The team also revealed that a “McGoblinburger truck” will make an appearance at NFTNYC, and shared plans for merchandise including “goblin sauce”.
Guest writer Li Gong says Web3 needs to get its act together on diversity, now.
A trickle has become a torrent in crypto venture capital. Despite rapid inflation and a bear market, VC investment in blockchain grew to $10B globally in the first quarter of this year. This marks the largest quarterly sum ever at more than double one year ago.
And yet, even as investors stampede towards crypto projects, women will not benefit from the funding bonanza. Less than 5% of crypto founders and less than 10% of crypto fund partners are women. And the numbers aren’t improving.
As one of the few women funding crypto projects, I can tell you that this diversity gap is evident in my day-to-day. For example, out of the roughly 50 DeFi startups that I talk to, just one founder was a woman. This gender skew is now so baked into blockchain — in both funding and founding — it will take many years to undo.
NFT Fund Starry Night Goes Dark on SuperRare In another sign of distress at Three Arrows Capital, an affiliated fund that had scooped up dozens of high-priced NFTs has moved much of its multimillion dollar collection into a single wallet, prompting speculation of an upcoming fire sale.
Two Traders Targeting 3Pool Poleaxed Terra: Report The fall of Terra may feel like ancient history now. Two more major crypto ventures — Celsius and Three Arrows — have seized the attention of investors as they struggle to avoid Terra’s fate.
Merge Update: Devs Advance Closer to Eth2 With Major Step Next Week Despite the bear market, the Ethereum community still has The Merge to look forward to. And Ethereum’s devs are making significant progress.
USDC Issuer Circle Announces Euro-Backed Stablecoin Circle, the issuer of USDC, will launch a new stablecoin pegged to the euro, the company announced Thursday.
MakerDAO Votes to Freeze Aave’s Direct Borrowing of DAI MakerDAO is taking no chances. As doubts about crypto credit rock the digital asset landscape, MakerDAO, the protocol behind the DAI stablecoin, voted on June 15 to temporarily disable Aave’s DAI Direct Deposit Module (D3M).
Crypto Liquidations Spike to $480M in Last 24 Hours In a sign of the magnitude of the crypto crash, more than $1B worth of digital assets were liquidated on June 14, according to data from Coin Glass.
Nansen Bets Web3 Messaging Will Deter Hacks and Spa Competition to become the go-to crypto native messaging platform is intensifying with data analytics platform Nansen joining the race.
Crypto Markets Sustain Rally After Monster Rate Hike Crypto markets sustained the rally triggered Wednesday when the Federal Reserve raised benchmark interest rates 0.75%, the biggest hike since 1994.
DEX Trading Volume is About to Drop Below CEX Volume for the First Time in Over a Year Decentralized exchanges have been one of the success stories of DeFi, beating out their centralized counterparts last year.
Bear Market Survival Guide: The Metrics You Need to Know in a Tough Market Yes, it’s a bear market, and everything looks grim. But that doesn’t mean investors should despair. Indeed, there are number of steps you can take to evaluate the crypto market at this juncture.
Rumors Swirl About Financial Stress at Three Arrows On-chain data has prompted speculation that Three Arrows Capital, a crypto-focused, Singapore-based hedge fund, is insolvent and may become the latest high-flying company to crash in the bear market.
Coinbase Leads Wave of Layoffs as Crypto Girds for Rough Stretch First came the market collapse. Now come the layoffs. When Coinbase announced it was laying off almost a fifth of its staff, or 1,100 employees, on Tuesday it was clear a tough period for the young cryptocurrency industry is about to get a whole lot tougher.
OpenSea To Slash Gas Fees by a Third With Shift to Seaport Protocol Well, finally! For months now, NFT collectors have been chafing at a raft of issues bedeviling OpenSea’s platform, from high gas fees to its inability to let buyers bid on collections and multiple pieces instead of just individual images.
Uh-oh! Tron’s Stablecoin USDD Slips its Peg as TRX Tumbles Tron’s algorithmic stablecoin USDD appears to be in trouble despite recent moves from the Tron DAO to overcollateralize the token.
Celsius Freeze on Withdrawals Craters Crypto Market Crypto lending platform Celsius has frozen accounts of its 1.7 million users, further undermining trust in the digital assets space on a day with double-digit losses for Bitcoin and Ether and just weeks after the Terra collapse.
One Group Doing Just Dandy This Week: MEV Extractors While the bear market has wreaked havoc for many traders, there is one group in crypto that is doing just fine. They’re deploying an obscure tactic involving blockchain mechanics that’s paying off handsomely.
Crypto Investors Dig In For Long Winter as Market Erases Two Years of Gains It happens in every bear market — total capitulation. For months, investors hang on to the hope that the market will shake off a short-term funk and get back to its bullish ways. Then bam! Something happens and the market knows… This is going to be a long-term bummer.
Thanking all the amazing Defiers for the support and love this week (and always)!
🧑💻 ✍️ Stories in The Defiant are written by Owen Fernau, Aleksandar Gilbert, Claire Gu, Samuel Haig, Jason Levin, and yyctrader, and edited by Edward Robinson, yyctrader and Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access, while free signups get only part of the content.Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button above ($15/mo, $150/yr.