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How Did the Market React to Curve’s $62M Exploit, After ~70% Returned?

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The Curve exploit, and the fear of a DeFi contagion took a toll on investor sentiment over the past week. In a quick turn of events, the hacker returned around 70% of the $62M they stole from one of the industry’s largest decentralized exchanges, exploiting code vulnerabilities in the programming language used by Curve. While Bitcoin and Ethereum fell by 0.19% and 1.63%, respectively, over the past week, the biggest gainer was indeed Curve (+7.57%) on the back of the returned funds. While it hasn’t fully recovered yet, a 25.47% jump in total value locked indicates that most stolen funds are back and haven’t been moved off-chain.

The Curve exploit, and the fear of a DeFi contagion took a toll on investor sentiment over the past week. In a quick turn of events, the hacker returned around 70% of the $62M they stole from one of the industry’s largest decentralized exchanges, exploiting code vulnerabilities in the programming language used by Curve. While Bitcoin and Ethereum fell by 0.19% and 1.63%, respectively, over the past week, the biggest gainer was indeed Curve (+7.57%) on the back of the returned funds. While it hasn’t fully recovered yet, a 25.47% jump in total value locked indicates that most stolen funds are back and haven’t been moved off-chain.

Figure 1: Weekly Price and TVL Developments of Cryptoassets in Major Sectors

Source: 21Shares, CoinGecko, DeFi Llama. Close data as of August 7, 2023.

3 Things to Remember in Markets this Week:

• Arbitrum Decentralizes its Validation Technology

Arbitrum, a leading scaling solution for Ethereum, has introduced Bounded Liquidity Delay (BOLD) software. BOLD decentralizes validation by enabling anyone to submit fraud proofs, contest transaction validity, and enhance dispute resolution. While Optimistic Rollup scaling solutions, like Arbitrum, introduce a 7-day validation challenge delay, they remain susceptible to flooding attacks due to the previous model’s central validator. A flaw that could sometimes lead to prolonged withdrawal delays is why BOLD significantly advances Ethereum’s scaling decentralization as it finally sets a fixed, not probable, upper bound of seven days on the time taken to contest transactions. Finally, Arbitrum recorded the most newly deployed contracts on the day of launch. Thus, we’ll closely monitor the true impact on Arbitrum’s ecosystem growth and its influence on similarly-designed scaling solutions.

Figure 2: Total of Arbitrum Contracts Created

Source: @HenryStats on Dune

• Tether’s Flight to BTC

The issuer behind the US-denominated stablecoin has become the 11th largest holder of Bitcoin. Following their announced plans to convert surplus profits into BTC, Tether has accumulated 55K units of Bitcoin, amounting to ~$1.6B in market value. Per its latest attestation report published last week, the company’s excess reserves increased by ~$800M over Q2, bringing the total to $3.3B. This is a significant development to watch closely, given that Tether’s decision boosts Bitcoin’s demand for corporate treasury management.

Conversely, Tether should convert surplus BTC and treasury profits into cash to fortify the company’s resilience against unforeseen challenges and furnish the necessary capital for swift deployment in potential bank run scenarios especially as their current cash reserves were significantly reduced to $90 million from $5.3 billion in December 2022, which is not preferable for a stablecoin with a $85B market cap, despite their access to several other liquid instruments like US treasuries, REPOs, and money market funds. Finally, although the address hasn’t been personally confirmed by Tether, the wallet holdings do match the quarterly holdings of the issuer.

Figure 3: Tether’s Potential BTC Holdings

Source: 21.co on Dune

• Worldcoin Under Scrutiny

On July 24, OpenAI’s CEO Sam Altman launched Worldcoin, a decentralized identity verification solution built on Optimism that requires users to scan their irises to obtain an online ID.

Worldcoin’s motive bodes well at first glance. However, collecting biometric data from the masses has been scrutinized by the community, especially since they started with users from developing countries like Kenya. Though, the country’s privacy regulations allow the data collection practices adopted by Worldcoin, which was how the company collected an undisclosed number of iris scans from Kenya out of the over 2.2M collected worldwide. On August 2, the Communications Authority of Kenya published a statement listing five privacy concerns, including questions on the security and storage of the collected biometric data and obtaining data subjects’ consent in return for monetary reward. The authority ordered Worldcoin to cease its data collection practices until further notice.

In France, the privacy authority told the media that it is aware that Worldcoin collected biometric data and has initiated investigations into the matter. Many other countries from the developed world, including UK and Germany, are closely monitoring the project; some have even been investigating it since November 2022. Despite the regulatory push-back, Worldcoin’s adoption is still on the rise, as shown below. Altman still hopes to work with regulators to expand Worldcoin’s services to governments and companies while reassuring that the data collected is preserved by a zero-knowledge (ZK) proof verification mechanism.

Figure 4: Worldcoin Adoption

Source: @21co on Dune

What You Should Pay Attention To

• More TradFi Web2 Players Are Entering the Stablecoin Space

Paypal partnered with stablecoin issuer Paxos to launch their USD-pegged stablecoin, PYUSD, built on Ethereum and fully backed by U.S. dollar deposits, short-term U.S. treasuries, and similar cash equivalents. According to the press release, eligible U.S. customers will be able to pay for their purchases using PYUSD in the same manner that Gnosis Pay announced it would empower European customers to pay for their purchases with Monerium’s euro-pegged stablecoin (EURe) via its Visa card, with a convergence mechanism running in the backend. This trend aims to boost mass adoption by solving two ailing issues stifling the industry by providing users with a familiar user interface while complying with regulations. Moreover, onboarding more traditional players from the second generation of the internet shows the institutional appetite for the stablecoin subsector, whose market cap is valued at $124.5B, with USDT dominating by 67%. More traditional players, especially those with existing tools to their advantage, will likely follow suit, aiming to topple this dominance in their favor. In the grand scheme of things, the more regulated players in the space, the healthier the market.

• The Ramification of the Curve Hack

The top stablecoin DEX was exploited, resulting in an initial loss of $62 million. The vulnerability, termed a reentrancy attack, stems from an Ethereum programming language named Vyper. This flaw enabled the attacker to repetitively trigger the withdrawal function, bypassing safeguards and ultimately draining all assets from the four impacted pools, leaving them fully depleted. The hacker has since returned 73% of the stolen funds while retaining $18 million tied to CRV/ETH, one of the four affected pools.

Figure 5: Curve’s Hacker Balance on CRV/ETH

Source: @21shares on Dune

Fortunately, the security bug was limited to three specific versions, so the damage was relatively contained. That said, despite the hack not severely impacting the DEX, it calls into question the reliability of DeFi’s risk management practices. For context, Curve’s founder Michael Egorosv, owned close to ~35% of the token’s circulating supply, which he then used to secure several loans on the three largest lending protocols. Thus, even though the hacker didn’t hold a substantial amount of CRV, his selling of the token, under last week’s thin liquidity conditions, would have triggered a chain of liquidations starting with Michael’s $85M loan backed by 168M units of CRV. Although Michael has been increasing his margin over the past week and raising it to ~$57M via selling CRV over the counter to dampen the market impact and help mitigate the contagion, the true market implications of the exploit will still linger.

Figure 6: Total amount of CRV sold via OTC by Curve Founder

Source: @0xramen on Dune

Thus, we anticipate lending protocols to reduce the debt ceiling for supplying CRV in order to avoid accruing bad debt in the interim and until the supply of CRV is further diluted. Finally, the broader lending segment could pivot towards a dynamic interest rate model that adjusts automatically to extreme market movement, inspired by Frax’s V2 design, combined with isolated lending markets which confine risk to singular assets.

Bookmarks:

• Our Dune dashboard, along with our researcher Tom Wan’s insights, was mentioned in The Block’s report about Tether. Read here.

• Check out our Dune dashboard, tracking Worldcoin’s airdrop and adoption metrics, here.

• Top 5 Trends in Crypto: User Experience Improvements, Scaling Solutions, and More. Watch here.

• Our latest issue of Cryptoassets of the Month: Find out the biggest gainers of July. Read here.

Next Week’s Calendar

These are the top 3 events we’re monitoring for next week.

• August 9th: Coinbase’s scaling solution, Base, goes live on Mainnet

• August 10th: Next US CPI print

• August 13th: Next deadline for SEC on ARK Spot ETF

Source: Forex Factory

Research Newsletter

Each week the 21Shares Research team will publish our data-driven insights into the crypto asset world through this newsletter. Please direct any comments, questions, and words of feedback to research@21shares.com

Disclaimer

The information provided does not constitute a prospectus or other offering material and does not contain or constitute an offer to sell or a solicitation of any offer to buy securities in any jurisdiction. Some of the information published herein may contain forward-looking statements. Readers are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties and that actual results may differ materially from those in the forward-looking statements as a result of various factors. The information contained herein may not be considered as economic, legal, tax or other advice and users are cautioned to base investment decisions or other decisions solely on the content hereof.

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En av världens största ETFer ordnar om sina innehav i Apple och Nvidia

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För närvarande upptar Microsoft, det största företaget i världen, 22 % av indexet, medan Apple står för 21 % och Nvidia bara 6 %. De senaste veckorna har det skett stora rörelser på finansmarknaderna, vilket tvingar en av världens största ETFer att omorganisera sin portfölj.

För närvarande upptar Microsoft, det största företaget i världen, 22 % av indexet, medan Apple står för 21 % och Nvidia bara 6 %. De senaste veckorna har det skett stora rörelser på finansmarknaderna, vilket tvingar en av världens största ETFer att omorganisera sin portfölj.

Apples aktier steg med mer än 10% efter presentationen av sin plattform för artificiell intelligens. Detta ledde till att teknikföretaget blev, återigen, om än tillfälligt, det största företaget på planeten, med en värdering på 3,30 biljoner USD.

Nvidia har å sin sida stigit med 170 % hittills i år och nått 3,27 miljarder USD. Därmed kunde den placera sig på tredje plats bland de mest värdefulla företagen, till och med överträffa Alphabet och Amazon.

Som ett resultat är den börshandlade fonden Technology Select Sector SPDR Fund (XLK), som följer utvecklingen för de ledande teknikföretagen på den amerikanska marknaden, på väg att balansera om sin portfölj för att följa reglerna, vilket kan påverka aktiekurserna. Följ kursen här.

För närvarande upptar Microsoft, det största företaget i världen, 22 % av indexet, medan Apple står för 21 % och Nvidia bara 6 %. Men snart måste Apples och Nvidias positioner bytas ut.

Flytten skulle innebära en försäljning på cirka 11,4 miljarder dollar för Apple, en total som representerar en hel dag med genomsnittlig handel, och köp på 10 miljarder dollar för Nvidia, ungefär en fjärdedel av den dagliga volymen.

Även om siffrorna bleknar i jämförelse med de två jättarnas börsvärden, är sanningen att de fortsätter att antyda ett flöde av pengar som kan ha en inverkan på priserna på deras aktier. Hur som helst kan de icke-professionella investerarnas frenesi dämpa effekterna av denna omstrukturering.

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D6RE ETF investerar i gröna företagsobligationer

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Deka iBoxx MSCI ESG EUR Corporates Green Bond UCITS ETF (D6RE ETF) med ISIN DE000ETFL615 strävar efter att spåra iBoxx® MSCI ESG EUR Corporates Green Bond Select-index. iBoxx® MSCI ESG EUR Corporates Green Bond Select-index följer eurodenominerade gröna obligationer utgivna av europeiska företag. Tid till förfall: 1,5-10 år. Betyg: Investment Grade.

Deka iBoxx MSCI ESG EUR Corporates Green Bond UCITS ETF (D6RE ETF) med ISIN DE000ETFL615 strävar efter att spåra iBoxx® MSCI ESG EUR Corporates Green Bond Select-index. iBoxx® MSCI ESG EUR Corporates Green Bond Select-index följer eurodenominerade gröna obligationer utgivna av europeiska företag. Tid till förfall: 1,5-10 år. Betyg: Investment Grade.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,25 % p.a. Deka iBoxx MSCI ESG EUR Corporates Green Bond UCITS ETF är den enda ETF som följer iBoxx® MSCI ESG EUR Corporates Green Bond Select-index. ETFen replikerar det underliggande indexets prestanda genom full replikering (köper alla indexbeståndsdelar). Ränteintäkterna (kuponger) i ETFen delas ut till investerarna (kvartalsvis).

Deka iBoxx MSCI ESG EUR Corporates Green Bond UCITS ETF är en liten ETF med tillgångar på 27 miljoner euro under förvaltning. ETF lanserades den 2 augusti 2023 och har sin hemvist i Tyskland.

Investeringsmål

Deka iBoxx MSCI ESG EUR Corporates Green Bond UCITS ETF är en UCITS IV-kompatibel värdepappersfond som replikerar resultatet av iBoxx MSCI ESG EUR Corporates Green Bond Select Index (prisindex). Hållbarhetskriterier beaktas vid sammansättningen av indexuniversum. Indexet består av företagsobligationer utgivna för att finansiera projekt som har en positiv inverkan på miljön.

Indexuniversum

Gröna obligationer som ingår i iBoxx EUR Green Bonds Select Index och klassificeras som sådana av Climate Bonds Initiative (CBI).

Inkluderar euro-denominerade obligationer från stora och medelstora företag baserade i euroområdet, Storbritannien, Norge, Sverige, Danmark och Schweiz

Lägsta obligationsrating på BBB-/Baa3 (Investment Grade Rating)

Handla D6RE ETF

Deka iBoxx MSCI ESG EUR Corporates Green Bond UCITS ETF (D6RE ETF) är en europeisk börshandlad fond. Denna fond handlas på Deutsche Boerse Xetra.

Det betyder att det går att handla andelar i denna ETF genom de flesta svenska banker och Internetmäklare, till exempel DEGIRONordnet, Aktieinvest och Avanza.

Börsnoteringar

BörsValutaKortnamn
XETRAEURD6RE

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Spotlight Stock Market erbjuder handel med ETPer och godkänner första emittent samt två instrument

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Spotlight Group AB meddelar att dotterbolaget Spotlight Stock Market från och med den 25 juni 2024 kommer att erbjuda handel med ETPer. Spotlight Stock Market har idag godkänt en emittent som utgivare av instrument samt två stycken olika ETPer för handel.

Spotlight Group AB meddelar att dotterbolaget Spotlight Stock Market från och med den 25 juni 2024 kommer att erbjuda handel med ETPer. Spotlight Stock Market har idag godkänt en emittent som utgivare av instrument samt två stycken olika ETPer för handel.

ETP (Exchange-Traded Products), eller börshandlade produkter, är ett samlingsnamn för olika typer av värdepapperiserade derivat som listas för handel på en marknadsplats. De första två instrumenten av denna typ som godkänts för handel är trackercertifikat på Core och HBAR (Hedera). Emittenten som ställer ut instrumenten är Valour Inc.

”Vår långsiktiga strategi är att utöka möjligheterna till handel på Spotlight Stock Market både när det gäller omfattningen av produkter som kan handlas och att underlätta för fler internationella aktörer att handla på marknadsplatsen. Under en lång tid har flera olika aktörer approcherat oss med önskan om att få notera ETPer på vår marknadsplats. När vi under föregående år handlade upp ny leverantör av handelsystem var också denna möjlighet en del av beslutet att byta från NGM till Nasdaq. Därför är vi glada över att nu ha godkänt vår första emittent och de två första instrumenten för handel”, säger Spotlight Groups koncernchef Peter Gönczi.

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