đWTF just happened in DeFi?
weekly valuable insights
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GM friends. Hereâs what Iâll cover today:
đAn overview of the Stream saga. And my advice
đ Crypto chart of the week
đď¸ The latest DeFi news
đWTF just happened in DeFi?
Itâs been a terrible week for DeFi.
And not only because the market crashed. This week:
Balancer, a top DeFi protocol, was exploited for $128M
Stream Finance, a protocol generating yield primarily on stablecoins, announced it lost $93M worth of user assets and is gearing up to declare bankruptcy
Moonwell lost $1M in an exploit
Peapodsâ Pod LP TVL declined from $32M to $0 due to liquidations
The most devastating one by far is Stream Financeâs loss.
Because it doesnât affect only its depositors, but also the stablecoin lenders of some of the biggest lending protocols in this space, including Morpho, Silo, and Euler.
In short, hereâs what happened:
CBB, a popular figure on CT, started advising people to withdraw their money from Stream due to its lack of transparency
Stream was allegedly running a âDeFi market neutral strategyâ, but there was no way to monitor its positions, and its transparency page was âcoming soonâ.
This caused a bank run, with a lot of ppl trying to withdraw their funds at once
Stream Finance stopped processing withdrawals as it secretly lost a huge chunk of the user funds ($92M) a while ago, and itâs not able to process all withdrawals
This caused the price of its xUSD, Streamâs yield-bearing so-called stablecoin, to collapse
It already sounds bad, but the story doesnât end here.
A huge issue is that xUSD was listed as collateral on money markets like Euler, Morpho, and Silo.
To make it worse, Stream was using its own so-called stablecoin xUSD as collateral to borrow funds against it using money markets for its yield strategy.
Now that the xUSD price collapsed, many USDC/USDT lenders on Euler, Morpho, and Silo who lent their capital against xUSD canât withdraw their funds anymore.
According to YAM, a syndicate of DeFi users, thereâs at least $284 million in DeFi debt tied to Stream Finance across major money markets!
A significant part of this money is unfortunately unlikely to be recovered.
And this way, many stablecoin lenders got wrecked.
What can be learned from this?
Iâve been personally heavily farming DeFi protocols for the last 2-3 years.
But after what just occurred, I am planning to take a hard look at my DeFi portfolio positions and become more risk-averse.
Yield farming can be highly profitable. I made some great gains from it over the past years, but events like this can cause you to lose a lot of your capital.
A few tips I have:
Always verify where exactly the yield is coming from
Stream is not the only DeFi protocol pretending to generate yield via âmarket-neutral strategiesâ. Always look for a transparency dashboard or a Proof of Reserves report where you can clearly see that the team is not gambling with your assets.
Donât just blindly trust a protocol regardless of how nice its team seems.
Consider whether the risk/reward ratio is good enough
Some stablecoin protocols offer 5-7% APR. Others might offer 10%+ APR. My advice is not to blindly deposit your capital in the protocol offering the highest yield without doing some proper research first.
If its strategies are not transparent, or the yield generation process seems too risky, itâs not worth risking your capital for a double-digit annual yield.
Or if the yield is too low (4-5% APR, for instance), ask yourself if itâs worth it.
No smart contract is risk-free, and weâve seen even OG apps like Balancer being exploited. Is it worth risking your money for a low APY?
Donât put all your eggs in one basket
As a general rule, I never deposit more than 10% of my portfolio in a single dApp.
This is regardless of how attractive the yield or its airdrop opportunity seems. In this way, if a certain hack occurs, the impact on my financial situation will be limited.
To sum it up, build your portfolio prioritizing survival over making money.
Itâs way better to be safe than sorry.
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Crypto chart of the week
Ethereum L1 + L2 transactions continue to surge
Crypto Memeđ
The latest developments in DeFi
AAVE approved a $50M annual buyback program
EtherFi DAO passed a $50M ETHFI buyback proposal
INFINIT announced the opening of a waitlist for early access to their upcoming Prompt-to-DeFi feature, with limited spots available
Monad scheduled its mainnet launch for Nov. 24
Arbitrum introduced StylusPort - a framework for Solana dApps to expand to Arbitrum L2
f(x) Protocol introduced fxMINT - allowing to mint fxUSD stablecoin against ETH/WBTC at a 0% annual interest rate
Folks Finance launched its token called FOLKS
Play AI released its token called PLAI
ZKsync underwent the Atlas Upgrade, which unlocks 1-second ZK finality and 15,000 TPS
Lighter launched FX trading and adopted Chainlink as the oracle solution for its RWA markets
Aster announced plans to use 70-80% of its fees for ASTER buybacks
MegaETH released its ICO allocation checker
Jupiter DAO approved the proposal to burn the JUP tokens it bought back
Polymarket launched the Polymarket Builders Program
dYdX announced plans to enter the U.S. market by the end of the year
Orderly Network started using 60% of its fees to buy $ORDER
GAIB released sAID - a yield-bearing token backed by AI infrastructure financings
Thatâs all for this week!
Until next time,
The DeFi Investor
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