For those who took a break from crypto for America’s Independence Day weekend, (probably a useful mental health break for all,) you may have missed out on the Great Lockening — a period of record setting Curve lockening.
The Hayes prediction of July 4th Fireworks had plenty of people forecasting doom for the broader crypto market on the holiday weekend, given that TradFi would be basically illiquid throughout the duration.
One thing most prognosticatoooooors missed would be the effects of stunningly low gas prices on DeFi. On occasion gas prices hit single digits. Combined with ETH prices close to 3 digits, and it turned out to be a wonderful weekend for the types of people who can no longer afford petroleum gas prices.
I was able to stake into Convex for just NINE CRISP UNITED STATES DOLLARS, and surely some others managed to score even lower.
Perhaps the final ingredient to the record-setting weekend has been the crazy high Curve fees. Granted, some of this is a temporary bump from finding several million dollars lying idle. We’ll have to see if this trend reverses midweek when this returns to earth.
Even controlling for the effect of the temporarily higher cvxCRV yield, Curve fees have benefited since the bear market began roaring in earnest. We hope traders have finally seen enough evidence of Curve’s antifragility to finally be willing to bury the asinine, unsubtantiated “Death Spiral” hypothesis.
To recap the action, people first observed the increased lockening on Friday, as money flowed en masse, heavily via Convex.
@DefiMoon was the first to note the potential to set a record.
The action would decline slightly off throughout the weekend, but persisted well above 100% locking rate to drive this to record heights.
Most curiously, the cvxCRV peg would not only tighten throughout the weekend, it would be reversed periodically.
In a rational market, nobody should be using this pool to trade $cvxCRV for $CRV when ratios are flipped. You can always mint 1 $cvxCRV for 1 $CRV directly through Convex. For these cases, when you get a worse deal going through the Curve pool, it would only makes sense for users who unwrapping $cvxCRV back to $CRV.
Curve factory pool 22 is the only major route for $cvxCRV back to $CRV, and as a result it usually carries an imbalance that gives $cvxCRV lockers a slight haircut on cashing out.
This weekend some degens were apparently so desperate to lock their $CRV on Convex they either didn’t know or didn’t care. The effect was short lived, and the YOLO energy quickly rebalanced.
Anybody playing in this space will inevitably make some mistakes that serve to dampen your overall yield. You can nonetheless do a lot to protect yourself by studying carefully before you ape.
On a long enough time horizon, DeFi is an engine to transfer money from the less educated to the more educated. So we recommend more education!
We’re lucky to have many great threadooors offering free education on Twitter:
Here’s another great thread covering the parallel lockening occurring over the past week: the mass relockening of $CVX. Over the weekend we saw an uptick of $CVX flocking to Badger’s $bveCVX.
One notable whale, Tetra, had briefly flirted with a $10 limit order to sell off some $CVX, but ultimately opted to relock the entire stash (worth about 2% of max supply).
For complete beginners seeking education, here are some nice recent threads to get you up to speed on basics:
Shortly after the bear market began, a lot of FUD got thrown at DeFi broadly and Curve more specifically. Most of this FUD proved to be bad faith and unsubstantiated. An honest parsing of the recent market events is that DeFi performed exemplary. It was fake CeFi services LARP-ing as DeFi that are still in the process of exploding. DeFi has moved on to the genesis of the next bull run.
Lately I’m seeing more commentators starting to make this distinction between CeFi and DeFi. You can do your part by educating people still trying to spread DeFi FUD.
Thankfully much of the Curve FUD has quieted down as the flywheel has enjoyed blockbuster weeks. Be careful about reading too much into the good fortunes though — some of the activity is being driven by temporarily inflated yields and will fall back to earth if nothing changes.
Given that we saw some people locking in less than optimum fashion, we believe this is driven largely by mercenary behavior. Yield chasers have no loyalty, and will flee for the next triple to quadruple digit yield that gets advertised. So you might expect the lockening to revert to mean in upcoming weeks.
Then again, the activity is picking up again today so who knows.
What’s most bullish from my vantage point is that this massive bonanza driven by a one-time error is not terribly far from Curve’s current daily volume. It’s a short distance between current activity and the windfall we’ve been enjoying lately.
Curve need only average $3 billion dollars in transaction volume per day to get to this mark. Curve is often clocking in north of a billion per day, so we’re close. To get there, Curve need only realize its potential as the most efficient trading platform.
This is why we’re so keen on bullish narratives like more aggregator integrations, Synthetix atomic transactions, Frax basepool launching, and the growing understanding of v2 pool superiority. Let’s go!
The beautiful thing with the crv locked to convex, regardless of whether the fad is temporary or not, is that it is locked forever, which gives cvx a massive boost in voting power… hopefully the volume on curve remains stable at these elevated levels, but if not, it’s still a boon to the flywheel overall! Flywheelooooors GMI :D