BTC Outflows Hit ATH, Aave Decides to $GHO, Curve's Resiliency in an Evolving Market

JUL 12, 2022 • 6 Min Read

Yun Heng Lin

Disclosure: Delphi Ventures and members of our team are invested in BTC, LDO, and stETH. Members of our team are also invested in ATOM, OSMO, AAVE, CRV, veCRV, CVX, and FXS. Members of our team may own tokens related to the projects mentioned here and may participate in the upcoming governance voting proposals. The authors & editors have not purchased or sold any token for which they have material, non-public information during the research and drafting of this report. These statements are intended to disclose any conflict of interest and should not be misconstrued as a recommendation to purchase or sell any token, or to use any protocol. This content is for informational purposes only and you should not make decisions based solely on it. This is not investment advice.

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Chart of The Day: BTC Outflows From Exchanges Hits All-Time High

  • Since the start of 2020, BTC outflows from exchanges have far outpaced BTC inflows, with a sharp increase between June and July 2022.
  • On June 26th, we saw the largest outflow of BTC, with 153k BTC (worth approximately $3.2 billion) scurrying for an exit from centralized exchanges. Presumably, these withdrawals were to eliminate custody risk after multiple centralized brokers and lenders halted client withdrawals and filed for bankruptcy.
  • On June 12th, Celsius announced that it had paused all withdrawals, swaps, and transfers while allegations of client fund mismanagement made headlines. One month after the announcement, withdrawals from Celsius remain frozen. Meanwhile, former Celsius employee @0x b1 filed a lawsuit against Celsius, alleging a failure in risk management and accounting practices.
  • On July 1st, Voyager Digital temporarily paused all withdrawals and trading activity before filing for Chapter 11 bankruptcy protection on July 5th. Voyager Digital had previously announced that its exposure to the insolvent Three Arrows Capital (3AC) consists of 15,250 BTC and $350 million USDC.
  • For more on Voyager Digital’s bankruptcy, you can read a previous Delphi Daily report here.

Aave Decides to $GHO and Cosmos Interchain Security Becomes A Reality

[Excerpt from a Delphi Insights Report]

  • Cosmos has decided to bring liquid staking and defi to the Cosmos Hub with Interchain Security. To do this, they are using 150k ATOM from the community pool to fund applications looking to leverage this new feature. They are allocating 50k ATOM for developing the DeFi Hub and 100k ATOM for projects launching on the DeFi Hub or their own consumer chain. At a high level, this should help facilitate consumer chains to launch on Cosmos as they can offload bootstrapping security to the Cosmos Hub validator set.
  • Lido is voting on a proposal to cap the insurance fund and redirect revenues to the DAO treasury. The DAOs insurance fund currently receives half of the 10% protocol fee that Lido leverages. The insurance fund currently holds 4565 stETH, and the proposal estimates it would hold around 5500 stETH once the cap goes live along its proposed timeline. Any revenue beyond that will then begin flowing to the DAO treasury.
  • Mstable is going through a significant restructuring process utilizing four separate snapshot votes. The first has already passed, with the community currently voting on two more (TDP 45 and TDP 46), with another forthcoming. The first vote gave the team the mandate to go forward with the restructuring. It also consolidates its asset management and treasury subDAOs, and created a Builder subDAO dedicated to developing new products. The two live votes propose an election process for multi-sig members and consolidates the ‘Grants’ and ‘Community subDAOs’ into a single Ecosystem DAO. Restructuring could signal some level of distress in a DAO, no different than a business. This is purely speculative on our part, but restructuring efforts is something that readers should consider when assessing DAOs.
  • Merit Circle has also voted to restructure its DAO. This proposal formalizes the relationship between the $MC Purpose Trust, Merit Circle Limited, MCDAO Ltd, and Orange Pill Ltd. Orange Pill is a contracted company with no ownership in the DAO, which will carry out the day-to-day operations.

  • Osmosis has recently passed two proposals that should reduce the amount of OSMO emitted by the protocol. Proposal 273 reduces emissions to small ‘Other’ pools, leading to a minor (.28%) reduction in token emissions. Meanwhile, proposal 274 reduces OSMO emissions to ‘Minor’ and ‘Other’ pools by 9% and redirects them to the community pool.
  • For more information, Delphi members can see the full Delphi Insights report here.

Curve Finds Firm Footing in an Evolving Market

[Excerpt from a Delphi Pro Report]

  • One of Curve’s key features is its StableSwap invariant design, which allows for more efficient trading when it comes to pegged assets relative to a constant product AMM.
  • Trading efficiency is achieved by reducing price slippage with the use of an “amplification coefficient” (A) to the constant product equation. The use of leverage with A is dynamic and provides either:
    • Infinite leverage when there is a large price divergence between asset x and y, or
    • Zero leverage when the price is 1 to 1 (essentially functioning like a constant product AMM).
  • A higher A implies the pool is more tolerant to slippage when an imbalance exists, as a greater amount of leverage effectively simulates deeper liquidity. The performance of the StableSwap invariant is best demonstrated by this chart, where dx is the change in price for coin x.
  • The effectiveness of this design and the lower price impact it enables is reflected by the vast amounts of stable swap volume directed to Curve from liquidity aggregators like 1inch, Matcha (0x), and Paraswap.

  • The average lock rate of veCRV is often a good sentiment indicator for Curve. Because veCRV is held by those with a long-term interest in the protocol, monitoring the accumulation of veCRV and significant unlocks will often bring insight into CRV price movements. In the first week of July, the rate of locked CRV saw a significant increase – as did the price of CRV by 40.7%. This is likely attributed to a recent proposal from Frax.
  • In the past, CRV farmed by Frax was sold to FXS. The proposal, if passed, will:
    • Lock all CVX as vlCVX
    • Lock at least 5% of CRV as veCRV
    • Use the remaining CRV to acquire cvxCRV
  • This will substantially reduce the selling pressure on CRV in the long term and create an even deeper symbiotic relationship between the two protocols.
  • For more information, Delphi members can see the full Delphi Pro report here.

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