The last week in crypto has been a particularly long decade. Things are bad, and we suspect it gets worse before it gets better (not financial advice, of course).
As promised yesterday, today weβre doing a deeper dive on how the latest market nuke played out on Curve. Most notably we focus on effects on $USDT and $MIM.
Broadly speaking, Curve is following the exact same playbook it has followed in every disaster. Fear ramps up. Prices go down. Curve prints money in trading fees. Justin Sun grabs some attention.
The only thing missing so far is Death Spiral00000rs (I give it a week).
As always, DeFi TVL and Curve TVL charts are near perfect mirror images. The only open question at the moment is how much more will DeFi TVL plummet as contagion from the FTX collapse slowly ripples through TradFi.
Unlike all these opaque centralized exchanges that keep exploding, Curve and DeFi continue functioning flawlessly.
Most importantly, Curveβs focus on quality control is paying off yet again. Lucky for Curve LPs, weβve not seen any major depeg events causing massive losses. Most of those who happen to be sitting in Curve pools are riding out the storm feelinβ comfy. Unlike the UST depeg, the tokens whitelisted by the Curve DAO have all held up quite well.
$USDT
Like clockwork, weβre seeing Tether FUD reassert itself.
In this case it appears to be Alameda trying to make it all back in one big trade. If you can still afford popcorn, you can even join a Telegram channel and enjoy the spectacle.
Weβre not going to spill too much ink on this one, because old-timers shouldnβt be forced to read reruns every time we see a βblack swanβ VC-Fi firm collapse.
If you fear $USDT depeg, weβd recommend this article from six months ago.
Last time around it would repeg in about 2 months, during which time the βdepegβ was negligible.
For today⦠$2 billion in volume sloshing through 3pool⦠providing nearly 300% liquidity utilization. Not too shabby.
Overall, Curve at over $3B in volume today. Yowza!
If thereβs a narrative for Curve this cycle, it should be how remarkably prescient is the underlying math. Other βAMMβ liquidity is inaccessible because itβs off-price, giving a big middle finger to traders.
Curve is proving extremely efficient and resilient through the harshest turbulence. Absolutely the rock-solid cornerstone of DeFi.
$MIM
In the heat of the moment, the more interesting depeg threat was $MIM.
For some context, the Curve Factory $MIM pool has spent most of the year slightly off its rocker, in that way serving as a microcosm for 2022 more broadly.
Given that the $MIM pool was already very close to the edge, some users feared a collapsing $FTT could push a teetering $MIM over the brink into a depeg.
Even before $FTX would go under, $MIM was already starting to see heavy withdrawals.
So MIM would indeed see a quick flash crash as $FTT tanked, but fortunately the effect was brief.
The major repercussion was therefore to cleanse $MIM of any possible stain from $FTT association. $70MM quickly dropped to $22MMβ¦
It would drop swiftly by increments of millionsβ¦
Down to $80Kβ¦.
Touchdown!
Weβve watched in awe as the $MIM tokenomics have proven resilient through multiple crises this year, especially the collapse of Wonderland. Bigger brains have told us several time how its tokenomics are resilient, and by now we believe it.
And so we move to reviewing the aftermathβ¦
Want another spin on the carousel? Shall we continue with FRAX?
Disclaimers! Author has some exposure to $FRAX, $CRV, $MIM, and 3pool and its underlying assets