DeFi DeBrief #16: BlockFi files for bankruptcy 📖

TL;DR:

• Chapter 11 protection for BlockFi
• DCG can’t dump Greyscale holdings
• Curve to launch a stablecoin

Onwards 👇

BlockFi is the latest domino to fall in 2022 🤕

BlockFi, which offers a trading exchange and an interest-bearing service for tokens like bitcoin and ether, has filed for Chapter 11 bankruptcy protection in the United States following the implosion of its once-saviour FTX.

The filing shows the company had more than 100,000 creditors. Its liabilities and assets ranged from $1 billion to $10 billion (not forgetting an outstanding $275 million loan to the now-defunct FTX US).

Rumours had circled for some time, and this one felt imminent. Eyes will now turn elsewhere to see who could fall next.

Why should you care?

Some of the industry’s most prominent investors trusted BlockFi with their assets, with one client holding nearly $28 million on the platform. That had helped it claim a valuation of $3 billion just eighteen months ago.

But the sudden downfall of Three Arrows Capital squeezed liquidity at the lender before FTX promised to swoop to the rescue. FTX’s hero status lasted all but a few months as it also toppled into bankruptcy.

This left BlockFi with few options but to file for Chapter 11 protection, and the decision is yet another indication of the challenges facing lending desks.

DCG can’t just dump Greyscale Bitcoin Trust Shares 💭

Digital Currency Group (DCG), the parent company of distressed lending desk Genesis, is also facing a reported liquidity crisis. Now, DCG has bought nearly $800m worth of Greyscale Bitcoin Trust (GBTC) since early 2021.

It also took possession of roughly 5% of the GBTC trust following 3AC’s liquidation in Q2, which puts some 10% of the trust’s shares on DCG’s books. This has led some to question whether the firm may dump its holdings.

The reality is: GBTC’s structure prevents DCG from dumping its shares on the market, likely protecting the trust in the near term. Any suggestion otherwise is likely untrue, check this thread to understand why.

IN THE HEADLINES

Curve Finance reveals white paper its stablecoin 👀

Curve Finance, an automated market maker (AMM), has released official documents for its soon-to-launch decentralised stablecoin. The repository on GitHub suggests it will be a crypto-backed stablecoin that’s soft-pegged to the US dollar.

crvUSD will work like DAI, with users minting it by depositing excess collateral, a mechanism called a collateralised debt position (CDP). The stablecoin will also deploy a novel algorithm called Lending-Liquidating AMM (LLAMMA).

This will work to continuously liquidate and sell the deposited collateral to mitigate collateralisation risks.

Five short reads catching our eye this week:

1. A sneak-peek at a blockchain’s finances
2. WBTC slips from peg and unnerves investors
3. Binance rescue funds save investors from losses
4. A primer on why WETH can never de-peg from ETH
5. Even in in a bear market, a BAYC sold for $1m

TEMPERATURE CHECK 🔥

• BTC: $16,898.91 (2.29%, 7 days)
• ETH: $1,271.11 (9.35%, 7 days)
• TVL in DeFi: $42.32bn (2.07%, 7 days)
• Fear & Greed: 29 (fear)

*Data last updated at 08:00 on 30th November.

TWEET CHECK 🐦

smart contracts already feel more tangibly real to me than a corporation or a citizenship does

— foobar (@0xfoobar) November 29, 2022

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