Friday hitting different—GM peeps! Yesterday, the chart of the day talked about ye good ol' 3pool. My theory was that lending pool LPs are withdrawing USDT and yeeting that into the pool as they wanted to avoid bad debt, which would change the composition of the pool quickly since liquidity is much lower than a few months ago. Well, it seems that my theory was, as today's youth like putting it, "not it." What seems to be happening instead is that wallets funded from Binance have been withdrawing mass amounts of USDT and swapping for DAI in the 3pool. In the middle of July, the USDT share was as low as ~20%, stabilizing around the ideal share at ~33% shortly after, but started rising around the 25th. At the moment, USDT makes up ~60% of the 3pool and the largest USDT pool on Uniswap v3, the USDC/USDT 0.01% pool, holds ~105M USDT against ~7M USDC. Historically, the Binance-associated wallets have received USDT, held it for a while, and finally sent the tokens forward to another address. However, around 100 days ago, the wallets started swapping incoming USDT to DAI. A question naturally arises here; are the wallets funded from Binance controlled by the CEX itself, and why would Binance and Tether start beefing? I guess this is one of those "time will tell" questions. Moving on to another CEX, Coinbase came in with a banger earnings report yesterday. Although total revenue was down ~12% QoQ to ~$708M, this vastly exceeded analyst estimates of ~$631M. Net loss decreased to ~$97M, which was also a beat compared to the expected loss of ~$173M. Another surprise was revenue shares, which have changed a lot during the past year. In Q2 2023, Coinbase earned ~51% of net revenue, or ~$335M, from subscriptions and services, the first time the category contributed more than transaction revenue at ~$327M, which has fallen by ~50% from a year earlier due to crypto volumes spiraling. OpEx, absent impairment, decreased by ~$111M QoQ to $773M, and the company's financial position is also strong, with almost $5.5B in cash equivalent assets on the balance sheet. With subscriptions and services increasing as a % of net revenue, I can't wait for Coinbase to start trading at SaaS multiples (disclaimer from Brick's legal team: this is a joke and not financial advice). And on that note, I wish you a great weekend. – Brick |
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Okay ladies and gents—Permissionless II is coming up in mid-September. We would love to see you all join the Blockworks family in Austin, TX, for the world's largest DeFi event of the year! Don't FOMO in before it's too late. FOMO in now.
More information and tickets can be found here.
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The CRV OTC deals continue. Late last evening, Egorov broke the 100M CRV barrier and has now raised just over $40M in stables. At the time of writing, ~106M CRV have been sold, and the Curve founder has decreased his loan positions significantly. The latest OTC buyers include Reserve Protocol and Wintermute. Just before the exploit occurred, Egorov's loans totaled over $100M, with notable positions including ~$70M from Aave v2, ~$17M from Abracadabra, and ~$10M from Fraxlend. The Aave loan has now been decreased to ~$43M, the Abracadabra loan to ~$5M, and the Fraxlend loan to ~$9M. It's increasingly looking like he'll survive the ordeal, but this doesn't mean that he's off the hook yet. The loans will continue accruing interest which he'll have to pay down at some point. crvUSD—Curve's stablecoin that can be borrowed against collateral such as wstETH and wBTC—has depegged since the hacks took palace. At its lowest, the price sank slightly below $0.995 but has rebounded ~$0.9991. The slight depeg likely derives from users selling large amounts of crvUSD due to there being uncertainty about what pools were affected by the hacks. To maintain the crvUSD peg, Curve utilizes dynamic borrow rates and Pegkeepers. The latter works by minting and burning crvUSD in its AMM pools. More tokens are minted when crvUSD trades above its peg, and the inverse applies when crvUSD is below the peg. The dynamic borrowing rate is calculated based on how far the crvUSD price is from its peg and the amount of Pegkeeper debt in the system. A decrease in the crvUSD price or Pegkeeper debt outstanding would result in an increase in the borrowing rate, and vice versa. This is because if the debt is close to zero, the protocol can't put a lot of upwards pressure on the crvUSD price by removing supply if needed. When the crvUSD price decreases, a higher borrowing rate forces stablecoin holders to redeem tokens. In other words, borrowing rates increase to encourage debt reduction and decrease to encourage borrowing. All in all, the mechanism seems to have worked relatively well. A ~0.5% depeg isn't bad at all, considering the circumstances. Nevertheless, it's worth noting that the crvUSD supply was only slightly below 100M tokens when the exploit happened, meaning that crvUSD hasn't yet proven its stability as a widely adopted stablecoin. Furthermore, before the hack, the difference between the crvUSD supply and the amount borrowed was 20M tokens, but the figures quickly converged on August 1. In other words, the Pegkeepers ran out of tokens to burn and could therefore not affect the price by restricting supply. The price could have dropped further if there was more sell pressure, but the peg floor would have probably still been quite high since crvUSD is currently overcollateralized by almost 1.5x, meaning that arbitrageurs would have swiftly stepped in. |
This emerging proposal is in discussion and regards to Synthetix's V3 deployment onto Base. This is the first step towards a cross-chain strategy for Synthetix, which will take its ability to attract users and capital to the next level. This is due to the ability to have collateral and positions open on any chain, being able to change and close them to any chain, all while updating the global debt pool. It allows Synthetix to be on any EVM chain and provide its total liquidity to any user. Arbitrum is rumored to be the next chain they target. Blockworks Research Analyst Westie is for the emerging proposal. All of this and more was first highlighted on GovHub for Blockworks Research subscribers. Be sure to check it out if you haven't already! |
MakerDAO is trying to find a balance between centralized and decentralized growth by accelerating RWA adoption while introducing Endgame—a plan to create the largest stablecoin project through an autonomous SubDAO economy. |
Vertex is a vertically integrated DEX on Arbitrum that supports cross-margined accounts across money, spot, and perps markets. The goal is to compete with CEXs by offering low latency and low fee trading for makers and takers by leveraging a hybrid-orderbook AMM architecture. |
Trader Joe will initially offer stablecoin pools, with plans to expand its offerings in the coming months |
Arbitrum's latest protocol will prevent delay attacks, making strides toward decentralization |
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The insights, views and outlooks presented in the report are not to be taken as financial advice. Blockworks Research analysts are not registered broker/dealers or financial advisors. Blockworks Research analysts may hold assets mentioned in this report, further outlined in the Firm's Financial Disclosures. |
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