This Week in DeFi – June 17
To the DeFi community,
This week Circle stablecoin transmitter announced the launch of Euro Coin (EUROC), a new stablecoin pegged to the euro. The new token will be available from June 30, starting with an ERC-20 token on the Ethereum network and expected to expand to other blockchains later this year.
1/ CIRCLE LAUNCHES EURO COIN: Today we announced our 2nd major fiat-backed stable coin, Euro Coin, which has gone live on the Ethereum mainnet, and will be available for minting and trading. exchange on June 30. https://t.co/vPZkItL0Fu
— Jeremy Allaire (@jerallaire) June 16, 2022
Celsius centralized lending platform froze user withdrawals this week, citing turbulent market conditions. The move sparked widespread concern across the ecosystem, due to the company’s known liquidity issues and Celsius’ large size. CEO Alex Mashinsky said the company was working “non-stop” to resolve the issues, while regulators in several states have launched investigations in the business.
JUST IN: Regulators in Alabama, Kentucky, New Jersey, Texas and Washington have launched investigations into the Celsius Network.
—Watcher.Guru (@WatcherGuru) June 16, 2022
Crypto hedge fund Three Arrows Capital (3AC) is the latest large-scale entity facing solvency problems, as the firm would not respond to margin calls on positions across multiple platforms. Sources say FTX, Deribit, and BitMEX all have 3AC positions liquidatedwhile the fund is said to have hired legal and financial advisers to help with creditor repayment plans.
One of the BIGGEST crypto venture capital firms:
Capital of the Three Arrows.
They become insolvent.
With potentially $18 billion under management, this could spell disaster for Crypto.
Here is a timeline of what is happening and the possible consequences:
— The DeFi Edge 🗡️ (@thedefiedge) June 16, 2022
ETH staked lido (stETH) keep worrying as its value deviates from ETH, while liquidity continues to dry up for the token. Both Celsius and 3AC have been recognized as large stETH holders, which could lead to something of a self-reinforcing downward spiral for stETH if other holdings were to be liquidated.
Why the breaking of the stETH and ETH “pegs” should worry you.
— degentrading (@hodlKRYPTONITE) June 11, 2022
The crypto market cleanup appears to have reached critical mass, as the cracks begin to appear in over-leveraged and mismanaged businesses across the industry. They are not small entities either – first TerraUSD, then Celsius, now Three Arrows. All three are multi-billion dollar mammoths whose problems reverberate throughout the ecosystem – affecting several other market players along the way. The market has already witnessed an incredible sell-off with strength, while more pain may be yet to come as stETH price discovery develops.
A key question arises for investors and traders alike: has the market ever oversold, pricing in the potential damage? Or is the worst yet to be felt since the giants have not yet finished falling? Bitcoin and Ether are already down around 70% and 80%, respectively, from all-time highs with little to no relief in terms of near-term rallies. How much downside is there in the short term? How many insolvent projects are there left to squeeze?
Despite the pain, this market clearing was probably necessary, necessary to weed out the unsustainable and dangerous pieces of the crypto puzzle. Lessons will be learned, systemic risks will cause their chaos and then eventually fade away. It may take a while, but we will end up with a cleaner, more honest and more resilient ecosystem for the next phase of web3.
Among the rubble we will find new opportunities, real value and real innovation. The only question is who will stay to build it?
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[Ezra Reguerra – CoinTelegraph] – USDD Stablecoin Drops to $0.97, DAO Inserts $700M to Defend Peg
[Samuel Haig – The Defiant] – MakerDAO votes to freeze direct borrowing of DAI by Aave
[Andrew Hayward – DeCrypt] – Solana’s new gas fees won’t make the network “expensive”, says co-founder
[Andrew Rummer and Adam Morgan McCarthy – The Block] – Babel Finance suspends withdrawals, citing ‘unusual liquidity pressures’
Alejandro is a blockchain writer and consultant who has been involved in the space since early 2016. Extremely passionate about this emerging technology, he has written content for a myriad of projects and media outlets.