Thanks to @dcfgod for the inspired title.
Having fun yet? Who’s looking forward to more rate hikes this week?
Following from Terra, Celsius appears to be the latest domino to plummet, further unleashing carnage across the cryptocurrency hellscape.
For the unfamiliar, Celsius is (was?) a major company in the crypto space. Their potential insolvency is a Big Deal™️, as your bags are now painfully aware.
In their heyday, Celsius had done good work to educate users about the benefits of cryptocurrency. They may now be delivering a final lesson at great expense.
It’s too early to speculate on the fate of Celsius, although it’s worth noting Nexo appears to have made a formal offer to acquire their assets.
Also worth keeping an eye on potential action to come at Maker…
The Celsius contagion is already bleeding into everything. Bitcoin, which had been fairly stable amidst the slump (a relatively stronk -40%) dropped hard.
This prolonged bear market we’re enjoying is starting to rival some of the worst drawdowns in the history of cryptocurrency. And we may well have >90% further to drop!
Even the ordinarily sunny El Salvador is experiencing some negative degrees Celsius.
Meanwhile the margin longs are… well… see for yourself
ETH is getting hammered particular hard, which also tends to cause ERC-20s to drop accordingly. Among the few charts I actually care about is ETH/BTC, which has dipped from 0.075 to 0.050 after months of near-stability.
You’ll hate me even more for this, but my extremely unpopular opinion is that I’m elated about the drop in ETH/USD price. With the merge coming up, I’m expecting to be able to spin up even more validator nodes at bargain basement prices.
Long term, I don’t have any real concern about the health and viability of Bitcoin or Ethereum, or even my beloved yet beleaguered flywheel assets ($CRV/$CVX). Yet for the sake of everybody’s safety, some crypto destinations are notably scary and deserve to be highlighted extreme caution.
In particular, if you have your money in CeFi, be aware the rug risk is extremely high at the moment. Celsius was worse positioned than most, but any service that has your private keys could steal your bags at any moment.
Smart people warned about Celsius for a few weeks heading into the crash. Pay attention to which other services they’re warning may be next to fall, and don’t hestitate to run away if you fear you’re in the crosshairs.
No promises moving forward, but thus far in the bear market, some of the more stable Curve pools have been extremely comfy places to ride out the storm — IYKYK.
However, many of you clearly don’t know what you’re doing, in which case you should stay out entirely. Not all Curve pools are built equal. Several Curve pools I’d consider to be extremely risky at the moment. In particular, always be wary of pools that frequently threaten to depeg under market stress. At the moment $USDD and $USDN are raising red flags:
Justin Sun has been deploying $USDD directly into a hot battlefield. If $USDD is still standing when the dust settles, it will have earned a good notch on its belt and its holders will enjoy a nice reward. Too big of a question mark for me thus far.
$USDN has a longer track record, but it hasn’t been tested against such a severe prolonged downturn to my knowledge. I cashed out my $USDN (at a rare profit!) some weeks ago and am still not looking to re-enter.
These sudden events cause so much chaos in such a compressed period of time that it’s difficult to keep track the action and all the lessons get so quickly forgotten. It’s one of several reasons I find it so useful to keep a daily log like this newsletter, and I strongly encourage everybody to also adhere to this practice if you want some insulation against your own cognitive biases.
Want to see a good prediction? I predict as soon as the bears stop roaring, people will forget this one simple fact on display right now: “concentrated liquidity” like Uniswap v3 is worthless when it’s needed most.
请再说一遍 for our frens in the east.
Literally every time the market dips suddenly, Uni becomes useless. Curve v2 pools survive as the only 24/7 resilient trading option. Curve mops up as the only viable market in the storm to print fees (another $1B trading day).
Then everybody immediately forgets as soon as markets go back up 🙄
The lesson people should (but sadly won’t) draw from the experience is how crucial good DeFi is for the health of the entire ecosystem. We’ve never seen anything like DeFi in human history — fully programmatic markets that are resilient to the worst crashes.
It will always be hilarious that most people don’t seem to understand this is the key lesson, and some people in fact draw the opposite conclusion despite all evidence to the contrary. Which suggests to me the entire cycle will continue again and again and again...
Thankfully some big brains understand. @NourHaridy has been on a tear:
Here’s a snapshot of other people I caught thinking along these lines… if I missed any drop them in comments!
We’ll save our further analysis about Curve for tomorrow (barring yet more crazy fallout). In truth, we’d already prepared a longer piece dissecting much of last week’s Curve FUD, yet we’re already updating it to include boasts about Curve’s antifragility amidst this latest crash.
For now though, we simply hope all of you are surviving with an emphasis on staying safe and sane. Everybody feels the impact when numbers on their screens are going down, just know this doesn’t matter in the long run. Focus on your health and make sure you are financially able to weather another massive drawdown, and we’ll celebrate together when we get through to the other side of this.
Disclaimers! Author remains a $CRV/$CVX maximalist.
You really are the best ser