CRYPTO MOVERS AND PRICES
CRYPTO STORY OF THE DAY
We recently got our first example of what decentralized finance (DeFi) unwind has the potential to look like. This past weekend saw precipitous price declines among DeFi tokens in what had otherwise been a consistent month-long bull-run in the subsector. Ethereum for its part is down nearly 30% over the last 7-days, the lowest levels since July. Among notable DeFi decliners was SushiSwap which was down 88% at its most depressed. There the protocol's anonymous founder and lead developer, Chef Nomi was seen to cash-out approximately USD 15 million worth of tokens before executives at crypto-exchange FTX took over the platform. Other DeFi protocols such as Ampleforth and DFI.money saw their tokens decline similar amounts. BTC, though only loosely associated with DeFi, wasn’t able to avoid declines with the coin down approximately 15% over 7-days.
In spite of all the layered complexity, the DeFi, value proposition for traders right now is relatively simple. Traders invest in carry-trades that earn DeFi tokens. So long as spreads maintain and the tokens being earned continue on their upward trajectory participants are fine. However, when these trades begin to unwind the exits are very small and you can have 90% declines as was seen over the weekend. The idea that an anonymous founder can create something called SushiSwap and in a month see it reach a USD 1 billion valuation are the kind of stories that are detrimental to long-term idealists in the space. Opportunistic lawyers are already trying to wrangle together class-action suits. This wave of DeFi continues to seem alive but this weekend gave a preview on how ugly things could get.