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Week in Review: Waning credit crunch fears and attractive prices spur relief rally


The NCI  closed Sunday 9% above last week’s closing. The index’s performance was heavily influenced by Ethereum, up 13.5% , while Bitcoin rose by 7.3%

Crypto investors experienced a relief rally as news of the credit crunch contagion waned and prices became more attractive after mid June’s sharp sell-off. Bitcoin’s comparatively modest single-digit recovery was among the worse registered by the top ten largest coin caps, while tokens that suffered the sharpest price drops during the previous two weeks – like Solana (SOL), Dogecoin (DOGE) and ShibaInu (SHIB) –  bounced back, nearing early June prices.

While concerns regarding the FED’s ongoing battle with inflation, subsequent rate hikes and fears of a looming recession in the world’s largest economy remain, last week’s relief rally suggests some investors are still willing to speculate on tokens that dip into oversold territory.

Solana’s price recovery facilitated an important governance u-turn early last week. On Monday, Solend, a Solana-based lending platform, reversed a governance vote (SLND1) that would have given the platform “emergency powers” over a whale’s (large investor) investment that represented 95% of the DAO’s liquidity pool. 

If SOL’s price had dropped below the threshold of $22.30, 20% of the investor's position would have been liquidated and Solend “…could end up with bad debt. This could cause chaos, putting a strain on the Solana network”, read a community post authored by Solend Labs on Realms.

The original governance vote, that gave the go-ahead needed by Solend Labs to forcibly liquidate the position through an over-the-counter desk, drew strong criticism from the crypto community, which labeled the desperate act as a gross infringement of Crypto’s and DeFi’s decentralization ethos. 

Two consequent governance votes reversed the former decision, extended governance vote periods to one day (SLND2) , established a per-account borrow limit of $50M and temporarily reduced the maximum liquidation close factor from 20% to 1%(SLND3).

The reversal was made possible in part due to Solana’s price recovery, moving the token’s price away from the $22.30 liquidation threshold. Despite the reversal, questions remain about (i) how the original power grab received overwhelming support from the Solend community, (ii) how concentrated the SLND1 “yes” votes were and (iii) whether the DAO is truly autonomous or decentralized. 

While Solend users reevaluated their course of action, The Wall Street Journal disclosed that the Celsius Network has hired restructuring consultants from advisory firm Alvarez & Marsal to assist in a possible bankruptcy filing. The CeFi lending platform froze customer withdrawals earlier in June citing “extreme market conditions.” Goldman Sachs could lead efforts to buy up Celsius assets at a discounted price, alongside other financial institutions interested in distressed assets, according to a CoinDesk article.   

Three Arrows Capital, the other big name at the center of the ongoing crypto credit crunch, may still be failing to honor its financial obligations. Voyage Digital, a digital asset Broker, revealed that it had lent the beleaguered crypto hedge fund 15,250 bitcoins and $350 million of the stablecoin USDC, totalling $675 million at current prices. 3AC failed to meet its first payment deadline on Friday (06/24); the remaining balance is due today (06/27). Voyager Digital's stock prices have plummeted by 94% this year. 

Crypto’s liquidity woes caught the attention of European Central Bank president Christine Lagarde last week. Lagarde defended the need for greater regulation for crypto activities, such as staking and lending, during a speech delivered to the European Parliament. “Innovations in these unexplored and uncharted territories put consumers at risk, where the lack of regulation is often covering fraud, completely illegitimate claims about valuation, and very often speculation, as well as criminal dealings”, noted the head of the ECB. 

Circling back to traditional markets, Crypto made another unprecedented foray into the New York Stock Exchange (NYSE)  last week with the launch of another Bitcoin exchange-traded fund (ETF) – but not the one Bitcoin bulls were hoping for. ProShares Short Bitcoin Strategy (BITI) will give investors the opportunity to profit from Bitcoin’s woes with share prices that fluctuate in the opposite direction of Bitcoin. 

The launch of ProShare’s offering reignited the debate regarding the possible launch of the long-awaited spot Bitcoin ETF, yet to be approved by the Securities and Exchange Commission's (SEC), despite the availability of the two types of securities-based Bitcoin ETFs that allow investors to bet on futures or short the world’s most valuable crypto asset. 


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