Highlights from the week
- Global crypto market cap has shrunk to US$997 billion from US$3 trillion in November ‘21
- Reasons for the decline – 75bps rate increase by the Fed, which was the highest since 1994
- Equity markets world over have also declined on added fears if a looming recession
- Rising rate of inflation across the world due to supply issues, fuel costs and the Russia-Ukraine war
Celsius – Reasons why the panic and price collapse
A typical decentralized finance (DeFi) lending platform wherein anyone can lend and borrow money (loan which have to be overcollateralized). Celsius offers over 7% returns on stablecoins such as USDC and Tether, 7.25% for Polygon, 6% for Ethereum, and 6.25% for Bitcoin. The funds are then loaned out at higher rates to borrowers, in-protocol lending and Bitcoin mining. It has assets worth $20bn on the network with millions of retail investors depositing their life savings.
Last week we discussed the topic of liquid staking and one of the major players in the segment Lido; the process where in ETH staked on the Ethereum 2.0 beacon chain is tokenized (stETH) and can be used on other DeFi platforms. The underlying condition being, it be pegged 1:1 to ETH. In the recent week’s meltdown with price of ETH crashing there was heavy selling pressure which lead to stETH losing its peg and trading up to a 7% discount. Trouble for Celsius has started a year ago with they lost keys to the 38,000 ETH of client funds that they had deposited on Stakehound, followed by another $22mm lost due to a Badge DAO hack. Last month, with the crash of LUNA – Celsisus did have some exposure however the exact extent of the loss suffered is still not known.
Celsius in order to prevent a liquidity crunch stopped all withdrawals on the platform – this gave rise to suspicion of liquidity crunch will lead to the collapse of the CEL token. A failure of Celsius could be catastrophic for the industry – with many comparing LUNA to Bear Sterns and Celsius to be the industry’s Lehman Brothers. Celsius has now hired restructuring attorneys from a law firm to help advise on possible solutions. Investors who had backed the firm in the latest Series B funding round have also declined to infuse more funds into the company. Celsius may also be seeking help from Citibank to help evaluate the options to raise capital and evaluate options available. Meanwhile, its rival – Nexo has expressed interest in buying out its collateralized loans.
Other firms facing the heat due to the crypto melt-down
- Three Arrows Capital (3AC)
Has received liquidations in excess of $400 million. Faces risk of loans being liquidated. The firms has been aggressively selling assets to maintain which includes $40 million of stETH to prevent liquidation of the loan. However, they have recently received margin calls and have some of their positions being liquidated by partners like BlockFi.
- USDT – The company behind Tether is re-shuffling it portfolio to hold more of US Treasuries with short maturities instead of commercial paper (CP). They plan to gradually decrease the holding in commercial paper to zero. There are claims that 85% of the commercial paper holdings are backed by Chinese and Asian companies and are trading 30% off.
Web 5.0 – Being built by Jack Dorsey The Block Head (TBH)
Former Twitter CEO Jack Dorsey recently announced his vision for a new decentralized web platform that is being called Web 5.0 and is being built with an aim to return “ownership of data and identity to individuals”. Web 5.0 is aimed at “building an extra decentralized web that puts you in control of your data and identity”.
Talking about the idea on its website, the TBH says: “The web democratized the exchange of information, but it’s missing a key layer: identity. We struggle to secure personal data with hundreds of accounts and passwords we can’t remember. On the web today, identity and personal data have become the property
of third parties.” Dorsey argued that Web 3.0 isn’t truly decentralized or owned by its users, but is instead controlled by various “venture capitalists and limited partners”.
What are the use cases for Web 5.0?
- “Alice holds a digital wallet that securely manages her identity, data, and authorizations for external apps and connections. Alice uses her wallet to sign in to a new decentralized social media app. Because Alice has connected to the app with her decentralized identity, she does not need to create a profile, and all the connections, relationships, and posts she creates through the app are stored with her, in her decentralized web node. Now Alice can switch apps whenever she
wants, taking her social persona with her.”
- Bob, is a music lover who hates having his personal data locked to a single vendor as it forces him to regurgitate his playlists and songs over and over again across different music apps. “Thankfully there’s a way out of this maze of vendor-locked silos: Bob can keep this data in his decentralized web node. This way Bob is able to grant any music app access to his settings and preferences, enabling him to take his personalized music experience wherever he chooses,” it adds.
Cube – New Layer 1 public Chain
A new, modular, permissionless and EVM-compatible public chain with a design based on multichain and layered architecture It is capable of supporting multi-chain and cross-chain architecture. It offers technologies such as proprietary collaborative rollups, chaos consensus, non-linear infinite storage, and an innovative Time Crossing protocol for Web3 – focused infrastructure to give users the next-generation multi-chain experience. The token (CUBE) increased from 0.3 USDT on its launch day to 15 USDT, a 50-time increase, in just seven days, the testnet addresses also exceeded 1,500,000 and while the number of on-chain transactions exceeded 200,000 since its launch.
Companies securing Funding & investing in Crypto projects
- zCloak Network – Raised US$5.8mm – pre-Series A funding
- (ZKP) Zero-knowledge proof-as-a-service company for public blockchains
- Users can prove that their identity has certain attributes without sharing private data for use in DeFi, identity and biometric applications. The major blockchains have these proofs available via its oracle service.
- Funding – Coinbase Ventures was a major participant | Others Ventures included – Bixin, Matrixport, DFG, Sancus, KuCoin, Sanctor Capital, Hash Global and Jump Capital.
- SKNUPS – $3.5 million – Pre seed round funding
- Blockchain game collectibles and unveiled a partnership with Italian fashion house Dolce & Gabbana. SKNUPS is a digital collectibles platform for metaverse streetwear and beauty brands.
- Funding – Redrice Ventures, Blue Wire Capital and Adelpha, among others.
- True Global Ventures 4 Plus (TGV4 Plus) | $146 million funding round
- Led by a group of 15 general partners, committed a total of $62 million Investments will go into Web3 companies within TGV’s portfolio and other late-stage Web3 projects.
- Ivy Blocks Investment Arm of Digital asset exchange Huobi
- To deploy over $1 billion in crypto assets under management in Decentralized finance (DeFi) and Web3 projects in their seed or growing stages. An incubator and research service will also be part of Ivy Blocks.
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