CeFi vs. DeFi
CeFi
We’ve always said, “Not your keys, not your crypto!”. If this is your first cycle, now you’ve seen why first hand. BlockFi, Celcius, Voyager, Vauld, and other CeFi’s have frozen people’s funds with risk of insolvency.
People easily confuse the types of CeFi institutions. Some are simply exchanges while others lend or stake customer’s deposits. We’ll call them lenders.
Last cycle, exchanges were going down when you needed them due to heavy load. Which is why we always recommended having a backup exchange account. Lenderss like BlockFi were brand new then, but this time they got wrecked. A lot of it stemming from relationships with Three Arrows Capital and exposure to Anchor and UST. Nexo did surprisingly well. Nexo has a real time audit showing $4B of loans but backed by 100% collateral.
Exchanges like Coinbase claim they don’t do anything with customer deposits (unless explicitly outlined). Although a member of the BitLift Community received this email from Coinbase this week regarding staked SOL tokens they never agreed to staking…
DeFi
While CeFi lenders got wrecked, DeFi hedl up incredibly well. dApps like Compound, Aave and Maker DAO had no issues since they’re fully collateralized with programmatic liquidation engines.
DeFi exchanges like Curve and Uniswap generated record fees for LP’s and token hodlers! But token prices plummet because TVL plummets. Check dashboards like TokenTerminal to compare protocol revenues and DeFiLlama for TVL.
I still feel like DeFi hasn’t had it’s moment yet. Probably because DeFi is complicated and many of the dApps and protocols are complicated and designed for professional traders and institutions which are all fairly new to crypto.
L1’s and L2’s
When comparing how different protocols hedl up after the drop, a pretty obvious pattern emerges. Bitcoin is in a league of it’s own, followed by Ethereum, and then everything else. Tokens on alt L1’s got hit the worst.
- Bitcoin (BTC) -75%
- Ethereum (ETH) -82%
- Monero (XMR) -81%
- Fantom (FTM) -94%
- Cosmos -(ATOM) -87%
- Avalanche (AVAX) -90%
- Curve (CRV) -92%
- Frax Shares (FXS) -91%
- Litecoin (LTC) -90%
- Solana (SOL) -90%
- Tezos (XTZ) -87%
Ethereum maxi’s and the Core team are constantly discussing “optimistic rollups” like Arbitrum (ARB) and Optimism (OP) as the next stage of scaling for Ethereum. They’re literally telling you where to look - but understanding how they work and the differences between rollup chains is complicated. Optimism has a governance token in the wild while there’s still rumors of an Arbitrum airdrop to people who bridge in and take Arbitrum dApps for a spin (ARB token launched March 2023!).
If roll-up tech hodls up, this could spell trouble for alt L1’s like Avalanche, Solana, Cosmos, Fantom etc. who are all positioned as “ETH Killers”. They’ll need to find their own unique value propositions to survive.
Rethinking Stablecoin Farming
As my brother said the other day, “chasing yields feels like picking up pennies in front of a steam roller”. I agree, but it also makes sense to me to have a component of my portfolio dedicated to income, rather than appreciation and speculation.
Generating passive investment income is suppose to act as a safe haven. Unfortunately I miscalculated the risk of stablecoins this cycle. The “pile”, or the principal, of a stablecoin farm is not as “stable” or safe it should be, yet.
That doesn’t mean that income opportunities are over, or even that stablecoin opportunities are gone, it just means we need to re-think them. For me, I’m still Snowball Farming to grow my crypto stack but I’m exploring investment strategies outside of the cryptoverse for cash on cash returns.
Stablecoin yields still exist. Compound has remained an extremely save dApp to generate safe/low yields on USDC (0.96% today). Surprisingly you can borrow USDC at 0.22% right now! As TradFi rates have been skyrocketing, crypto rates have fallen off a cliff. No one is borrowing.
Curve + Convex is still a great place for stablecoin yields although the 3Pool has been under pressure due to Tether FUD (which is nothing new). At the time of writing this, the 3Pool balance is out of whack with 20% DAI, 20% USDC and 60% USDT. Let’s hope this rebalances soon, especially because the 3Pool is paired with almost every other stablecoin pool on Curve. Frax recently launched a FRAX/USDC pool in an attempt to minimize exposure to Tether.
Curve Staking
I’m still a huge fan of Curve and am looking to increase exposure to CRV and staking it with Convex to earn trading fees. My current cvxCRV position earned 37% APR for the month of June. I use Convex - but i’ve been learning about StakeDAO as well lately. Curve is a complicated ecosystem, checkout Episode 10 for a deep dive into Curve and how it works
Conclusion
Everyone’s been asking me what moves I’m making right now, and the reality is, I’m not making many. I sold most of my shitcoins in May when Bitcoin dropped and m stable coin farm isn’t much of a farm right now, its just sitting in USDC. Really the only action has been CRV farming and Collecting Convex bribes.
The markets are indecisive right now. Global markets, not just crypto! People are waiting to see what the deal is with inflation. Waiting to see what the fed does next. Everyone is risk off, and crypto is a risk on asset class.
But if you’re truly orange pilled. And you’ve experienced the true power of crypto markets when things are GAME ON. Then you know it’s not over. Now is the time to do deep research and start placing bets on which crypto assets will replace government decreed money, and which corners of the cryptoverse will consume wall street to create a more open, trusted, permissionless, decentralized, global, financial system.
Written by: @gerbz Gerbz is the founder of BitLift and has been journeying down the crypto rabbit hole since 2013.