Weekly DeFi Digest - July 15

Market: Hot Take

BTC dipped below USD$20k this week with ETH coming down close to the USD$1k mark. Both assets have recovered, although BTC is still down from the previous week. Of the two, ETH comes out stronger this week – both in price action and dominance.

Ethereum’s second testnet launch gave cause for celebration last week. Signs that things are on track for the Ethereum 2.0 merge later this year are likely factoring into ETH’s impressive 11% rebound on last week’s figures. Meanwhile, for BTC, a combination of high energy prices and slumped prices have translated into a fall of 5.4% in hash rates compared to June 12th and the lowest figures for revenues paid out to miners in over a year.

Despite the red in today’s charts, there are signs of optimism with metrics such as the Mayer Multiple, the Puell Multiple and the MVRV Z-score suggesting that we might be out of the woods with the bear market. Here's hoping!

News of the Week

Contagion Woes: Celsius Caves and Files for Bankruptcy

Another Friday, another contagion update. One month on from its initial move to pause withdrawals, lending platform Celsius Network officially filed for bankruptcy in New York. Celsius released a statement on Wednesday confirming that voluntary Chapter 11 proceedings have been set in motion. The exchange stated that it has USD$167m “in cash on hand” and that, under the Chapter 11 petition, it will be able to continue to operate as it addresses outstanding obligations to indebted parties. A USD$1.2bn hole has since been discovered in Celsius' balance sheets.

Celsius Network was considered to be amongst the heavyweights in the crypto lending space. In October 2021, it was valued at USD$3.25bn.

Ex-ripple Advisor Selected as Fed Vice Chair

The US Senate overwhelmingly voted in favor of former Ripple ($XRP) advisor, Michael Barr, becoming vice chair for the supervision of the Federal Reserve on Tuesday. In a comment made last year, the Fed’s chair, Jerome Powell, revealed that the vice chair would be “charged with setting the regulatory agenda” for the Fed. With extensive experience in both crypto and traditional finance, Barr is well-placed to understand how the two sectors interact. Among the recently-elected vice chair’s priorities will be regulating cryptocurrencies and the stablecoin ecosystem.

USD$4.5M Raised in Seed Funding for Derivatives Trading Protocol, ZKX

ZKX, a decentralized derivatives trading protocol built upon the Layer 2 StarkNet network, raised USD$4.5m in seed funding this week. Investors include Starkware, Alameda Research and Crypto.com as well as individuals associated with Polygon and DragonFly Capital. ZKX aims to make decentralized finance (DeFi) more widely accessible and is particularly focused on emerging markets. The protocol sees an opportunity to combine innovative governance processes with gamification and lower gas-fees to lower barriers to entry for people around the world.

Analysts Bullish on Building in a Bear Market

Crypto analysts, Chainanalysis, revealed in an interview published on Thursday that the bear market presents an important growth opportunity for businesses who seize it. The analytics firm based its findings on ever-evolving regulatory frameworks which, it recognizes, are important for bolstering consumer confidence in the space.

Chainanalysis’ country manager for Australia and New Zealand commented “We’ve always said when there’s downturns in the market that’s our chance to grow.” Responding to questions about compliance, he added “Certain firms will do this better and more effectively than others and those that are able to adapt will, in many cases, thrive.”

Disney Accelerator Program Goes All-in on Web3, AR, AI and NFTs.

The Layer 2 Ethereum scaling solution, Polygon, tweeted on Wednesday that it has been selected to take part in Disney’s Accelerator Program. Polygon is one of six successful candidates who will receive mentorship as well as additional funding under the program. Two other web3 brands made it into the cohort, which will focus on Artificial Intelligence, NFTs and Augmented Reality. The price of $MATIC rallied shortly after the announcement, increasing by over 21% within a 24-hour period.

Disney’s Bonnie Rosen, General Manager of the Disney Accelerator program, commented in a statement, “For nearly a century, Disney has been at the forefront of leveraging technology to build the entertainment experiences of the future. We look forward to furthering our commitment to innovation and continuing to bring magical experiences to Disney audiences and guests for the next 100 years.”

Crypto 101 - Decentralized Autonomous Organizations (DAOs)

We’re going to use the word decentralized a lot in the next paragraph, so we would like to preface it by saying we’re sorry...

With smart contracts enabling decentralized applications to operate on decentralized networks, the ability to decentralize the organization and decision making process (“governance”) for a group or community was required. And the need for that ability is where we will pick up on today’s topic, the Decentralized Autonomous Organization (DAO).

A DAO is an organization formed by and whose rules are enforced through the usage of smart contracts. Membership to the organization is provided through tokens which are issued by the smart contracts. These tokens may have been directly issued or purchased on a secondary market and are used to vote on organizational polls or proposals. The outcomes of the polls and proposals provide sentiment and consensus without the need for a centralized leadership structure. It should be noted that voting can occur both on-chain (like staking) and off-chain.

So how could a DAO be used? Socially, a DAO is able to bring together any group of like-minded or goal oriented individuals just like any club or association. Commercially, due to the member-owned nature, a DAO is often viewed as the technological evolution of the cooperative business model. In the US, you are able to register a DAO as a limited liability company (LLC) in Wyoming or you could create an investment club.

Regardless of its application, the DAO’s purpose is to provide greater transparency and accountability among those involved, which is why we feel it is an exciting new technology that will certainly impact our lives more and more as we move forward!

If you haven't done so yet, head over to the Cybrid blog to check out our latest articles!

• Fintechs: Why Crypto Should Be On Your 2022 Roadmap: Crypto-as-a-Service promises to shake up the financial sector. Here's why the 2022 bear market is a golden opportunity to build before the next rally.

• Why a Crypto Bear Market is the Time for Fintechs to Build: While the “crypto winter” is officially upon us, now is not the time to abandon crypto but rather to build in prep for the next bull run.

• Making your card “top of wallet” for your customers: Why you should add crypto rewards to your card program. This piece explores why you might want to rethink your standard cashback offerings in favor of a far more exciting - yet accessible - alternative.

Helpful Guides

You might find the following two guides helpful on your learning journey in Crypto.

• Crypto Tech Primer: Get an understanding of the basics of blockchains, cryptocurrency and decentralized finance

• Fintech Guide to Crypto Products: This is the "Hitchhicker's Guide to Crypto" for fintechs looking to launch cryptocurrency based products

How Cybrid Can Help

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