This Week In DeFi – June 17
This week, Circle announces a new euro-pegged stablecoin, while Celsius and Three Arrows battle solvency issues – also involving stETH.
To the DeFi community,
This week stablecoin issuer Circle has announced the launch of Euro Coin (EUROC), a new stablecoin pegged to the euro. The new token will be available as of June 30, beginning as an ERC-20 token on the Ethereum network and expected to expand to other blockchains later in the year.
Centralized lending platform Celsius froze user withdrawals this week, citing turbulent market conditions. The move has triggered widespread concern throughout the ecosystem, due to the company’s known liquidity issues and Celsius’ significant size. CEO Alex Mashinsky says the company is working “non-stop” to address the issues, while regulators for several states have launched investigations into the firm.
Crypto hedge fund Three Arrows Capital (3AC) is the latest large-scale entity facing solvency issues, as the firm reportedly fails to meet margin calls on positions on multiple platforms. Sources say that FTX, Deribit and BitMEX have all liquidated 3AC positions, while the fund has reportedly hired legal and financial advisors to assist with plans to repay creditors.
Lido Staked ETH (stETH) continues to cause concern as its value deviates from ETH, while liquidity continues to dry up for the token. Both Celsius and 3AC have been recognized as large holders of stETH, which could result in somewhat of a self-reinforcing downward spiral for stETH if further holdings must be liquidated.
The crypto market cleanse appears to have reached critical mass, as the cracks begin to show in over-leveraged and mismanaged firms across the industry. These are no small entities, either – first was TerraUSD, then Celsius, now Three Arrows. All three being multi-billion dollar mammoths whose issues are being felt across the entire ecosystem – affecting several other market participants along the way. The market has already witnessed an incredible sell-off with force, while some more pain may be yet to come as stETH price discovery develops.
One key question arises for investors and traders alike: Has the market already oversold, pricing in potential damage? Or is the worst yet to be felt as the giants are yet to finish falling? Bitcoin and Ether are already down around 70% and 80%, respectively, from all-time highs with little to no relief in terms of short-term bounces. How much short-term downside is left? How many more insolvent projects are there left to be squeezed?
Despite the pain, this market cleanse was likely necessary, needed to remove unsustainable and hazardous pieces from the crypto puzzle. Lessons will be learnt, systemic risks will cause their chaos then finally burn out. It may take some time – but we will be left with a cleaner, more honest and more resilient ecosystem for the next phase of web3.
Among the rubble we will find new opportunities, true value and true innovation. The only question is, who will stick around to build it?
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DAI Savings Rate: 0.01%
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Total Value Locked: $38.49B (down 21% since last week)
DeFi Market Cap: $35.2B (down 28%)
DEX Weekly Volume: $30B (up 172%)
[Ezra Reguerra – CoinTelegraph] – USDD stablecoin falls to $0.97, DAO inserts $700M to defend the peg
[Samuel Haig – The Defiant] – MakerDAO Votes to Freeze Aave’s Direct Borrowing of DAI
[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'