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The DeFi world, relatively quiet for too long, has lately jolted to life on the word that MakerDAO may buy around a billion worth of Ethena assets to back DAI. The community, still rattled by the collapse of Terra and FTX, remains on edge.
Why would Maker be interested?
Some in the space have been reacting forcefully. Aave flipped the table, with Stani speaking out in favor of offboarding DAI completely from the lending protocol.
The Aave Chan Initiative has gone even further, wielding a chainsaw in the debate
In a good discussion between Paper Imperium and Lemiscate, the results were more nuanced… the main issue seems to be not necessarily the move to back DAI with Ethena’s assets, but more the speed and process by which it’s happening.
Meanwhile, others in the space are just enjoying the show. Qi DAO, busy amidst plans to 5x revenue, took a minute to meme…
Not widely reported is that Maker has around 90% LTV for this, which reduces the risk. If you’re unsure what all the fuss is about, check out our review of Ethena’s launch:
How is Curve reacting to the chaos? Mostly by counting its money…
Newcomers may not realize this, but Curve has been built for years to capture its share of nearly any volatility in DeFi.
In fact, Curve has had a variety of Ethena pools on its site for some time, so veCRV stakers are celebrating a bumper harvest this month.
Meanwhile, the risk of contagion from any potential DAI fallout is not too rough. Curve fee emissions are processed in 3CRV which carries some exposure, but there’s been a lot of hype around moving from 3CRV to crvUSD anyway. A sudden collapse of DAI would probably just hasten the process, which is currently slowed primarily by the fact that it’s a lot of work.
As for crvUSD, DAI is not a peg keeper, so Curve’s big cash cow of late would be just fine.
In fact, Curve’s new Llama Lend launch on mainnet had sported an $sUSDe market from the get go.
The market had been relatively sedate for a while, but emissions were just approved and the market is starting to see ample supply. Worth watching…
Llama Lend
Whatever happens with the sUSDe market, Llama Lend has had a big week on Arbitrum. Yesterday we mentioned that Mich was directly subsidizing pool growth with gains from his $ARB investment.
His beneficence has paid off, as Arbitrum’s Llama Lend passed $10MM quite swiftly.
We wouldn’t be too surprised to see a flippening here… the sidechain outpacing mainnet. Mostly Curve has not focused on L2s, but even with Llama Lend being a bit cheaper than crvUSD, actively managing a loan on mainnet remains prohibitive. In the wake of Dencun though, L2s are a paradise.
Combine this with the robust DeFi offerings fluorishing outside of mainnet, and Curve may have finally hit its stride outside of mainnet…
As a reminder, Llama Lend does not earn any fees for Curve directly, but indirectly benefits Curve by serving as a supply sink for $crvUSD. Thanks to the recent growth in Llama Lend TVL, this is starting to become meaningful. There is about $150MM In total $crvUSD supply, and at the moment about 10% of it is tied up in Llama Lend.
The Death Spiral000r arguments against Curve have been growing increasingly far-fetched. A recent line of FUD questions if Curve will remain viable as emissions fall off. It’s rather hilarious given that a few years ago the FUD was “too much emissions,” but if that one didn’t hit, then perhaps its opposite has real concern?
At any rate, it’s a bit silly given that lending markets are rather sustainable business models without emissions (Aave has discontinued theirs for the most part), so use of incentives appears to be very much a short term strategy to kickstart growth.
Will Llama Lend in fact be able to get borrowers to pay a premium for soft liquidation protection? Worth watching…
Incidentally, since we know a lot of you care about token speculative price, here’s what the Curve Founder is thinking on the subject…
Pegs
Finally, a few quick items we’re following that we’re not going to get time to flesh out in depth. Some of the most interesting action over the past few months, when the mood was absurdly bullish, was the effect on wrapped $CRV pegs.
We don’t yet see any sign these wrappers are busted. We’ve historically used the depegs as opportunities to buy the dip, as we have a long-term outlook. To date it’s always been among our rare profitable trades. YMMV, NFA…
For its part, cvxCRV may even find its way into Llama Lend…
Meanwhile Stake DAO, whose sdCRV is holding peg best, is celebrating the launch of it’s much-anticipated Onlyboost
We covered Onlyboost in more detail back in 2023
Only Yearn’s yCRV may have much of a buying opportunity left.
We had a chance to chat with Wavey about it a bit on last week’s Llama Party.
Finally a few odds and ends… we’re always happy to see the protocols around the flywheel that suffered from hacks making their way toward recovery.
Yesterday Conic released info on the Conepaign, constituting Conic 2.1
While Prisma edges towards restarting operations.
Woolish!