Cryptoassets had another lackluster week, with the price of Bitcoin dropping below $29,000 to its lowest level since the end of June amid low spot trading volumes. BTC found strong buyers around the $28,500 threshold and has so far held this level. Bitcoin spot volumes have dried up recently and trading experienced some of their thinnest volumes on US-based exchanges this year. Apart from seasonal effects, there are currently several other factors at play that are likely to cause this such as investors waiting on the sidelines ahead of a potential Bitcoin ETF decision next week. The SEC last extended its review period for the prospective ARK 21Shares Bitcoin ETF until August 13. However, derivatives data such as the Deribit forward volume curve does not imply that investors are positioning themselves for a short-term ETF decision by the SEC. Elsewhere, confidence in the DeFi sector was severely shaken this week following a large exploit on Curve Finance, which not only resulted in substantial financial losses but also exposed unexpected vulnerabilities. In macroeconomic data releases, US jobs growth slowed more than forecast in July to 187,000. While the unemployment rate fell to 3.5%, slower hiring could take some of the heat off the Fed. Irrespective of the non-farm payrolls data, Fed Governor Michelle Bowman stressed this week that the US central bank may need to raise rates further in order to fully restore price stability.
Last week, the DeFi community faced a significant challenge when Curve Finance’s liquidity pool was exploited, resulting in the theft of more than $70 million in funds. While it is now mostly contained, the incident shed light on systemic risks within the DeFi ecosystem, as the attack exploited an unexpected vulnerability in the Vyper code, impacting several liquidity pools. Interestingly, just before a white hat rescue mission to secure the funds, millions of Curve DAO (CRV) tokens were stolen. The attack also raised concerns about the safety of DeFi platforms in general and may discourage institutional investors from depositing more capital in the sector. Curve Finance, a decentralized exchange (DEX) optimized for stablecoin trading, was targeted in the hack. The automated market maker (AMM) protocol offers various pools for trading tokens, primarily stablecoins with low fees and slippage.
Notably, Michael Egorov, the founder of Curve Finance, had a significant loan position on Aave, collateralized by a large amount of CRV tokens. About $60 million was borrowed in stablecoins backed by $180 million in CRV, according to on-chain data prior to the attack. To mitigate the risk of liquidation, Egorov sold a considerable number of CRV tokens. So far, he has sold a total of 106 million CRV tokens for $42 million. In addition to the 72 million Curve DAO (CRV) tokens he sold to several entities up until Friday, he offloaded another 34 million CRV to a diverse group of investors in apparent over-the-counter (OTC) deals, according to data by Nansen.
On a positive note, the exploiter behind the attack has returned some funds to the Curve Finance protocol, as revealed by on-chain data. One of the main takeaways from this incident is that DeFi protocols compiled with Vyper code could be vulnerable, raising broader concerns about the security of these platforms and potential implications for the broader DeFi space and institutional investor involvement.
Market Overview
The global cryptoasset market capitalization currently amounts to $1.2 trillion – down from the $1.24 trillion one week ago, with bitcoin accounting for 46.8%. Among the Top 30 cryptoassets by market cap, Shiba Inu (SHIB) outperformed, gaining more than 21% over the week. The price of bitcoin (BTC) decreased slightly by 1% to $29,034 and the price of ether (ETH) fell by 2.3% to $1,833. The total value locked (TVL) in DeFi is sitting at roughly $40.6 billion – the lowest level since January 2023. Ethereum (excluding Layer 2s) currently accounts for about 57% of TVL.
This Week’s Headlines
- Coinbase Q2 revenues beat estimates, despite a drop in USDC interest income
- Coinbase cites Ripple case in motion to dismiss SEC lawsuit
- ProShares and Bitwise file ETF applications with the SEC that offer exposure to both bitcoin and ether
- Grayscale’s has generated $278 million in revenues YTD from its flagship bitcoin and ether funds
- Tether reports $850 million net profit for second quarter in latest attestation report
- HashKey obtains first license in Hong Kong under new licensing regime to offer crypto retail trading
- Cash App‘s bitcoin sales jumped 34% in Q2 to $2.4 billion
- Crypto staking rewards must count as taxable income in the US, according to IRS
- Tech entrepreneur and husband plead guilty in connection with the 2016 Bitfinex hack
- Curve Finance exploiter returns stolen funds worth about $13 million
- SEC sues Richard Heart of Hex and Pulsechain for allegedly selling unregistered securities
- Uniswap delists HEX token from interface after SEC allegations
- GameStop to remove crypto wallets citing “regulatory uncertainty”
Notable Deals and Fundraising
- HashKey aims to raise $100 million for new digital assets fund
- Metaverse Project Futureverse‘s co-Founders start $50 million venture fund
- Ethereum MEV firm Flashbots raises $60 million in a round led by Paradigm
- Privacy preserving protocol zkPass raises $2.5 million in a seed funding round
