Credit/Macro/Crypto Analyst, Former Credit/MA PM

Rose Choy

Crypto

AAVE is a decentralised Finance (DEFI) protocol that allows users to borrow and lend crypto. Holders of AAVE get discounted fees on the platform and are allowed to vote on the future of the protocol

<ul>
<li>In the latest inning of the crypto credit crisis, real world banks like Silvergate was shuttered making the on-and-off ramp of crypto to fiat more challenging.</li>
<li>Crypto lenders have already been decimated in the centralised lending space while DeFi lenders seem to trudge along - but are they the bastions of success? </li>
<li>We analyse what the current landscape means for the crypto lending industry and have a regrettable conclusion.</li>
</ul>


In the latest inning of the crypto credit crisis, real world banks like Silvergate was shuttered making the on-and-off ramp of crypto to fiat more challenging.
Crypto lenders have already been decimated in the centralised lending space while DeFi lenders seem to trudge along - but are they the bastions of success? 
We analyse what the current landscape means for the crypto lending industry and have a regrettable conclusion.


Crypto Lending Series #4: The Waste Land of Lending

<ul>
<li>The crypto lending market has been decimated with casualties from both lenders and borrowers after the FTX fallout and credit crisis. </li>
<li>Most centralized lenders have been annihilated while DeFi platforms withstood the shock. The demand for lending has cratered and this will test the viability of existing platforms given lower volumes.</li>
<li>However, we will likely see new platforms emerge that have the necessary lending, trading and risk management expertise from traditional finance that could propel further institutional participation in crypto. </li>
</ul>


The crypto lending market has been decimated with casualties from both lenders and borrowers after the FTX fallout and credit crisis. 
Most centralized lenders have been annihilated while DeFi platforms withstood the shock. The demand for lending has cratered and this will test the viability of existing platforms given lower volumes.
However, we will likely see new platforms emerge that have the necessary lending, trading and risk management expertise from traditional finance that could propel further institutional participation in crypto. 


Crypto Lending Series #3: Light at the End of the Tunnel?

Virtual currencies are decentralized, math-based digital assets in which transactions can be performed cryptographically without the need for a central issuing authority. The first specification and proof of concept of Bitcoin, the first widely used virtual currency, was published in 2009 based on a paper published pseudonymously by Satoshi Nakamoto.

<ul>
<li>Recent concerns on Genesis’ solvency arose after the broker/dealer halted redemptions on its lending unit and was reportedly looking to raise $1 billion of loans from investors.</li>
<li>Contagion fears have extended to Genesis’ parent company, DCG, and its wholly owned Grayscale subsidiary, which has a steady fee generating business via its Bitcoin and ETH trust products.</li>
<li>We analyze the potential arbitrage opportunity for the controversial GBTC convergence trade with its 42.7% discount to NAV.</li>
</ul>


Recent concerns on Genesis’ solvency arose after the broker/dealer halted redemptions on its lending unit and was reportedly looking to raise $1 billion of loans from investors.
Contagion fears have extended to Genesis’ parent company, DCG, and its wholly owned Grayscale subsidiary, which has a steady fee generating business via its Bitcoin and ETH trust products.
We analyze the potential arbitrage opportunity for the controversial GBTC convergence trade with its 42.7% discount to NAV.


An Arbitrage Opportunity? Evaluating the GBTC Convergence Trade

FTT is the native token of the FTX Trading Platform ecosystem. FTT allows holders to receive discounts on trading fees as well as other benefits

<ul>
<li>FTX filed for bankruptcy on 11/11 after halting client withdrawals in the previous week, despite SBF (the ex-CEO) tweeting 2 days prior that it had $1 bn of excess cash.</li>
<li>With over 130 affiliates included in the filing and no first day documents in the Delaware Court, the bankruptcy filing seems disorderly. The fallout is far-reaching in the industry.</li>
<li>As we await the top 50 creditor list and more details, we have compiled a hit list of some of the major affected players in the industry. </li>
</ul>


FTX filed for bankruptcy on 11/11 after halting client withdrawals in the previous week, despite SBF (the ex-CEO) tweeting 2 days prior that it had $1 bn of excess cash.
With over 130 affiliates included in the filing and no first day documents in the Delaware Court, the bankruptcy filing seems disorderly. The fallout is far-reaching in the industry.
As we await the top 50 creditor list and more details, we have compiled a hit list of some of the major affected players in the industry. 


<ul>
<li>On Nov 3, it was leaked that Alameda seemed to have a weaker than expected balance sheet with $7.6 bn of loans and a relatively illiquid portfolio of assets.</li>
<li>Alameda, a large proprietary crypto trading firm, did not officially comment but its CEO Caroline stated on Twitter that most of the loans were repaid. </li>
<li>The potential linkages between Alameda and FTX, a large crytpo exchange, both controlled by Sam Bankman-Fried, are of utmost concern and has riled the crytpo market.</li>
</ul>


On Nov 3, it was leaked that Alameda seemed to have a weaker than expected balance sheet with $7.6 bn of loans and a relatively illiquid portfolio of assets.
Alameda, a large proprietary crypto trading firm, did not officially comment but its CEO Caroline stated on Twitter that most of the loans were repaid. 
The potential linkages between Alameda and FTX, a large crytpo exchange, both controlled by Sam Bankman-Fried, are of utmost concern and has riled the crytpo market.


FTT/FTX- Another Inflection Point in the Crypto Market Waiting to Happen?

I have 20 years experience in credit and global macro both sell side (banking and trading) and buy side. Most recently managed multi asset and fixed income strategies. Crypto is my latest focus given huge inefficiencies and lack of quality research and insight. My crypto research will be through a trad-fi lens but with intimate knowledge in the crypto trading ecosystem.

Rose Choy
Credit/Macro/Crypto Analyst, Former Credit/MA PM

Crypto Lending Series #4: The Waste Land of Lending

With the shutter of Silvergate bank, the on-off ramp for crypto to fiat is severed. While the crypto lending space is already challenged, we...

Rose Choy

Crypto Lending Series #3: Light at the End of the Tunnel?

The crypto lending market has cratered after lender failures and FTX's collapse. Some platforms may find themselves struggling, but we are not far...

Rose Choy

An Arbitrage Opportunity? Evaluating the GBTC Convergence Trade

Contagion fears have extended to Genesis and its parent DCG and subsidiary Grayscale recently. We examine the arbitrage opportunity for the GBTC...

Rose Choy

FTX Fallout - A Quick Update

In a stunning move last week, FTX filed for bankruptcy along with FTX.us and 130+ affiliates. The fallout is far reaching and we compile a hit list...

Rose Choy

FTT/FTX- Another Inflection Point in the Crypto Market Waiting to Happen?

Alameda Research's leaked balance sheet seems to be weaker than expected. The linkages between FTX and Alameda is now under the microscope as...

Rose Choy