And the liquidity crisis carries on
Seems like Buddha was right – life is just a perpetual suffering. Jokes aside, crypto ecosystem will have to bear with these tough times for a while now. First of all, the biggest ongoing news of the web3 ecosystem is no doubt – Celsius Network. So, let’s start with that.
Celsius, as known amongst the web3 circles, is a CeFi platform that promotes itself as a bank app with a fixed interest rate and a custodial solution for investors. Behind the curtains, Celsius takes investors’ money and plays it like a true DeFi degen seeking highest yields across various DeFi protocols.
Well, one of the avenues where Celsius was reaping a glorious yield was none other than Anchor Protocol. Does that ring any bell? Yes, the same Anchor Protocol from the Luna ecosystem that collapsed last month. Before it went burst, Anchor was offering 20% fixed interest on stablecoin.
And Celsius, who promised strong rates on stablecoins, was exposed to the Terra Luna collapse by holding $UST on Anchor. And, that’s when the house of cards started falling. Right after that, Celsius felt another punch in the gut, that came in the name of Lido staked ETH (stETH).
Apparently, Celsius was promising 6-8% in interest for ETH deposits to its retail investors. Meanwhile Celsius was staking that users’ ETH on the Proof-of-stake Ethereum Beacon chain via Lido Finance.
Since until the merge, staked ETH on Beacon chain are locked up and can’t be withdrawn, Lido Finance, in exchange for staking ETH, offers a liquid derivative token stETH to solve the liquidity troubles and can be traded against ETH. It’s worth noting stEth can be redempted to ETH in 1:1, but that will only happen after the Ethereum merge.
Well, here’s the trouble. Ever since Luna collapsed and we all officially stepped into bear market, the retail investors of Celsius started withdrawing their ETH. Since Celsius can’t unstake their ETH, they started selling their stETH to make the users whole. With this grand selling and resulting imbalance of stETH/ETH pool on Curve Finance, the market price of stETH started falling down. As of now, stETH is being traded at 0.93 ETH.
That puts Celsius in a tricky spot. As of now Celsius is facing a liquidity crisis, if it tried to match its liabilities, the prices will spiral down even more, making it even harder to match its remaining liabilities, or even pushing it down the insolvency path.
As per latest announcement, Celsius has suspended all the withdrawals while its retail investors are stuck with their funds locked. Let’s hope Celsius will get an external capital influx and users will be made whole.
This week in web3 Wednesdays
- 😲 Twitter’s founder and former CEO Jack Dorsey announces Web5, a decentralized web platform built on the Bitcoin blockchain
- 😊 Deloitte: 75% of retailers eyeing crypto payments within 24 months
- 🎉 Ethereum testnet Ropstein network successfully merged
- 😟 Tron’s USDD stablecoin in trouble
- ⛏️ MEV after The Merge
- 🌉 Bridgedex: Cross-chain bridge search
😲 Twitter’s founder and former CEO Jack Dorsey announces Web5, a decentralized web platform built on the Bitcoin blockchain
Please don’t ask me the whereabouts of web4, I’m as clueless as you.
Ever since Jack moved on from Twitter, he’s been rallying online crowd to build on Bitcoin. He even set up TBD, an open source platform with a vision to make the decentralized financial world accessible – for everyone.
Recently, Dorsey’s TBD announced the launch of a decentralized web platform built on the Bitcoin blockchain and calling it web5. Dorsey states that Web5 is a combination of Web3 and Web2. Check out the complete presentation about web5 here.
If you’re wondering ftw happened with web4, I’m as clueless as anyone else.
😊 Deloitte: 75% of retailers eyeing crypto payments within 24 months
Well, here’s a ray of hope amidst the market terror. According to a survey published by Deloitte, 75% of United States retailers plan to accept crypto or stablecoin payments within the next two years.
It’s worth noting that the survey polled 2,000 senior executives at U.S. retail organizations between December 3 and December 16, 2021, when crypto prices were still riding high, but the results have only just been revealed.
The executives were distributed equally among the cosmetics, digital goods, electronics, fashion, food and beverages, home and garden, hospitality and leisure, personal and household goods, services and transportation sectors.
Read the complete survey here.
🎉 Ethereum testnet Ropsten network successfully merged
Last week on June 8th, one of the Ethereum’s last testnets successfully merged with Beacon chain. With this important step, Ethereum "Merge" to proof-of-stake got one step closer to its expected August completion.
For the uninitiated, The Merge is a much-awaited upgrade that is anticipated to be the largest milestone of the Ethereum network. The Merge means that Ethereum will transition to a new proof-of-stake (PoS) consensus mechanism from the traditional proof-of-work mechanism.
Meanwhile, if you’re as excited as me about the merge, check out this merge song – “No more electric surge, merge merge merge!”
😟 Tron’s USDD stablecoin in trouble
Let’s just say that the past couple of months have not been good for algo stablecoins. Earlier this year, Tron network, launched it’s algo stablecoin copying the idea from Luna-UST model.
However, with UST collapse, Tron quickly pivoted and claimed its stablecoin USDD to be over-collateralized. Though it’s problematic how it claims to be collateralized since one of its collateral its TRX, i.e., network’s own token.
In the past week, USDD has depegged multiple times, currently hovering around $0.98. To defend the peg, TRON DAO, responsible for managing the peg, has been continuously injecting funds. Recently, it seems 700 million $USDC has been injected into the Tron DAO reserve to defend the $USDD peg. Let’s see whether it turns out to be another falling knife, or does it save itself. Only the time will tell.
⛏️ MEV after The Merge
Since we all are anticipating and patiently (maybe not so patiently) waiting for the Ethereum merge, here’s a thread explaining how MEV extraction will work post merge.
For the noobs, Maximal extractable value (MEV) refers to the maximum value that can be extracted from block production in excess of the standard block reward and gas fees by including, excluding, and changing the order of transactions in a block.
🌉 Bridgedex: Cross-chain bridge search
If you’re one of those multi-chain chad, bridging funds from one chain to another, well, here’s a tool for you – bridgedex.
Bridgedex a simple tool to search for bridges based on a source and destination chain. Check it out and try for yourself at bridgedex.xyz