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GM friends.
Hereâs what Iâll cover today:
đ Why did crypto crash?
đ Crypto chart of the week
đď¸ The latest DeFi news
đ Why did crypto crash?
The market has been pretty choppy over the past 1-2 weeks.
I think most of this weakness comes down to the current macro situation, although a few unfortunate events have also happened within crypto.
For example, Ledger, one of the most popular hardware wallet producers, recently discovered that devices sold by certain authorized resellers in Asia contained unauthorized hardware implants.
Some of these resellers are believed to have added the implants themselves.
Those implants then allowed attackers to see the seed phrases of people who bought them and steal their funds. While the exact amount lost is not confirmed, itâs estimated that a whopping ~$90M was stolen.
This incident really sucks because the affected people did everything right in theory:
They bought a hardware wallet to self-custody their assets more safely, yet their wallets were still drained. I guess the only lesson here is to buy hardware wallets only from official websites and avoid third-party resellers.
But this security breach is certainly a big setback for the entire industry.
Moving on to macro, several macro-related developments have also contributed to the recent market weakness in my opinion:
US CPI inflation data came in at 3.7%, above expectations - This triggered a correction across all major financial markets, including crypto
Many investors panicked because CPI data coming in above expectations makes it more likely that the Fed will raise interest rates again. Another rate hike would make borrowing more expensive and risk-on assets less attractive.
The South Korean stock market experienced a major crash - This matters because a lot of South Koreans have significant exposure to crypto, and this stock market crash could have prompted some of them to sell some of their crypto
The Russia-Ukraine energy ceasefire failed to hold - Trumpâs announcement of an energy ceasefire initially raised hopes of lower oil prices and lower inflation, which would have been bullish for markets. But within hours, the ceasefire broke, ultimately pushing oil prices higher instead of lower.
None of these events is catastrophic on its own, but together theyâve created a pretty unfavorable environment for risk assets over the past few days.
And I suspect thatâs why the market crashed.
The good news is that, according to Polymarket, thereâs still a 67% probability that the Fed will leave interest rates unchanged in October (instead of hiking them).
If the Fed doesnât hike rates, as many investors now expect, this could provide some relief for crypto and financial markets in general. And I think this is the most likely scenario at this moment.
But we still have ~2 weeks to wait for the next FED interest rate decision.
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Chart of the week
Jupiter Lend became the largest money market on Solana
Crypto meme of the weekđ
The latest developments in DeFi
Papertrade, a 1000x leverage app built on Hyperliquid, went live
Chainlink launched a solution that enables DeFi apps to accept 1-click deposits from any blockchain
INFINIT announced it will open deposits for APEX MS2, an institutional-grade trading vault, on Oct. 28
Bybit and Mantle introduced mStocks, an upcoming tokenized equities product backed 1:1 by real stock shares
Stacks revealed its plans for the next 3 years, which include launching self-custodial Bitcoin lending and compliant BTC privacy
Derive team proposed expanding Derive into US regulated markets
Solana network became 2x faster
Starknet launched Shadow Accounts for private DeFi interactions
Aave launched incentives for its new tokenized stocks market
Base launched an Earn & Borrow product for stablecoin yield
Pancakeswap proposed cutting CAKE token emissions by 69%
Pyth allocated 100% of its DAO revenue to buybacks
Plasma partnered with Visa to launch multi-currency stablecoin cards
Thatâs all for this week!
Until next time,
The DeFi Investor
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