Daily Recap #3

Recent FUD, bearish market, and interview with CZ.

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1. Most important events that have happened in the bear market over the past couple of months

  • GBTC traded at a discount

GBTC is solely and passively invested in BTC, enabling investors to gain exposure to BTC in the form of security while avoiding the challenges of buying, storing, and safekeeping BTC, directly. They launched the first publicly traded Bitcoin fund in the U.S. They brought many people to the crypto, but everything turned around when Bitcoin started to fall And then:

  • Terra Luna Collapsed

TerraUSD is an algorithmic stablecoins. It tries to maintain the same value as the U.S. dollar by using a complex seesawing mechanism with a related Terra Luna. On May 7, 2022, Terra started the death spiral, the balancing act between TerraUSD and Luna broke. Billions of dollars were wiped out. Red and fear are all over the crypto market.

  • Celsius Network paused withdrawals

Celsius Network is a cryptocurrency lending platform and interest account. After the fall of the crypto market, Celsius had not handled their position either. As a result, on July 13, 2022, Celsius paused all withdrawals, including swaps between accounts.

  • Three Arrows Capital plunges into liquidation

Three Arrows Capital (3AC) is a crypto-focused hedge fund. 3AC has been ordered to liquidate, and they are now insolvent as a fund. Over-leveraged trading with uncollateralized borrowing led to their downfall.

  • Voyager Digital throws itself into bankruptcy

Voyager Digital is a major cryptocurrency lender. They were damaged by 3AC cause they issued a loan of 15,250 BTC and 350 million in USDC to 3AC, and 3AC wasn't able to pay this back.

  • Lido's Staked ETH (stETH) risk

stETH is a token representing staked Ether (ETH) in the Lido Finance platform, combining the value of an initial deposit + staking rewards. Basically, stETH can be redeemable for ETH 1:1 once Ethereum 2.0 goes live. But after these above events, investors began to de-risk. On June 23, 2022, stETH traded at a 95% discount for ETH. It causes fear of the next big crypto crash.

2. Interview Binance’s CZ on DeFi:

Bankless, a YouTube channel focusing on crypto and sovereign finance, interviewed Changpeng Zhao on how Binance has been holding up in the bearish crypto market. Here are some interesting takeaways from the conversation:

  • Binance has the largest cash reserves in the crypto industry, and some 25-30% of Binance’s income comes from stablecoin.
  • Binance is reaching out to 50+ companies with liquidity crunch problem to bailout.
  • Binance finds opportunity to hire talents in the bearish market as there is much less competition in the market.
  • The CEO of the biggest CEX in the world is stating that in the next 5-10 years DEXes will be bigger than CEXes. And DeFI will be bigger than CeFi
  • There are 6000+ employees working in Binance making it the biggest crypto company and it is aiming to hire an additional 2000 people by the end of the year.
  • Binance is heavily investing in blockchain development. It has invested in the biggest DEX PancakeSwap. As a part of the partnership users can access Pancake Swap through the Binance App, making their first interactions with DeFi.

Some side facts on Binance:

  • BNB Chain is the second largest chain in terms of TVL and dApps just behind Ethereum and the largest chain in terms of daily active users.
  • Binance is supporting builders with a $1b grant program. It is hard to imagine how many new builders and users will come to the BNB ecosystem and how much value will be acquired.

Binance is a cryptocurrency exchange which is the largest exchange in the world in terms of daily trading volume of cryptocurrencies. It was founded in 2017 by Changpeng Zhao. In 2021 Binance's cryptocurrency reached a market cap of more than 90 billion U.S. dollars twice.

3. BTC miner Core Scientific sold BTC holdings

Core Scientific sold more than 7,000 BTC in June at an average price of $23,000 to pay for ASIC servers, schedule debt repayments, and invest in additional data center capacity. The company had produced 1,106 BTC in June, with self-mining accounting for 57% of its data center capacity and crypto mining operations as of June 30 - more than 180,000 servers. Core Scientific aimed to expand its capacity to 30 exahashes/second by the end of 2022 while "taking advantage of distressed opportunities that may arise".

Core Scientific is a Blockchain and Artificial Intelligence hosting, transaction processing, and application development company. It is founded by Darin Feinstein and Mike Levitt in 2017

4. MakerDAO Members Vote On $100M DAI Vault for Bank:

The MakerDAO community is voting on whether to provide a DAI vault to Huntingdon Valley Bank. A governance proposal for the vault of 100M DAI went live on July 4 and will close on July 7.  The proposal is the latest move in MakerDAO’s pivot to embrace real-world assets. Before this proposal, the Maker community voted to allocate 500M DAI across various RWA investment strategies. Commenters in MakerDAO’s governance forum appear bullish on the proposal. They said the move  is a very important step for MakerDAO to take in connecting with the traditional financial system and utilizing DAI in undercollateralized lending.

On the other hand, some commenters expressed apprehension about the potential for a traditional financial institution to abuse a DAI vault on social media.

MakerDAO is a decentralized organization built on Ethereum to allow lending and borrowing of cryptocurrencies without the need for a middle man

5. Jason Choi’s next venture

Jason Choi announced his next venture: Tangent, a unique angel syndicate of crypto founders, for founders. Their principles: small checks, big impact, high conviction. Having scaled two of Asia’s largest crypto funds in the past 4 years, they came up with a model that combines the rigor of a fund and the flexibility of a DAO without their respective drawbacks.

Tangent is a collective of angels so we don't take outside capital nor charge fees. Co-investors can only get involved if they commit to pre-set weekly face time with our portfolio. They'll help founders find their lead VCs. Tangent aren’t incubators, while incubators are great for first time founders, the economics are usually aggressive (10-20% of a company pre-product). Tangent won't take more than 3% of your protocol between *everyone*. They also aren’t accelerators that are great at building networks, but the model requires spreading bets up to 400 companies a quarter. Tangent doesn't charge fees, and only works with 3-5 companies a quarter and has a bespoke program for each one.

Tangent offers hands on help and face time from founders who've built successful products across DeFi, NFT, and Web 3 gaming/consumer apps. Priority access to audit, hiring and legal partners.

6. Porter Finance is shutting down its bond issuance platform

Potter Finance is a Ethereum-based DeFi credit platform which provides DAO-enabled service of creating and managing bonds. Through Potter Finance, individuals and organizations can do fund raising by issuing simple or convertible bonds offering in cryptocurrencies (with or without the option to convert the bond to a specific amount of designated token), just like simple/convertible bonds in traditional finance.

By July 5, Jordan Meyer, Founder of Porter Finance, had announced the closure of the bond issuance platform. The decision was made due to the uncertainty about the demand of lending for fixed-income DeFi products, like Porter Finance. The reason behind was mainly the competitiveness of rates offered in traditional finance and the lack of institutional fixed income DeFi adoption over the past year. On top of that, Jordan also mentioned legal risk, which also made the product less appealing.

The last issuance on Porter Finance, Ribbon DAO, is not affected by the closure and will remain live until all Ribbon DAO lenders redeem or convert their bonds. Last month, Porter Finance issued 3,103,224 convertible bonds redeemable for 1 USDC with a maturity date of December 4, 2022. At the time, each bond was issued at a discounted price of 0.9667 USDC per bond with a yield to maturity of 7% after accounting for interest.

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