How Are Circle & USDC Adapting to the Current Market Conditions?
Revelo Financial Reporting | Crypto Hedge Fund Research | Hyperledger Foundation | Current Market Conditions | Kraken Chief Legal Officer
GM Intels, this is your Daily Bolt briefing.
In today’s edition we bring to you thoughts on Circle’s latest partnership, the cornerstones of crypto VC investing, how Revelo Intel aims to provide financial reporting info to help investors perform their due diligence, and more.
Today we also just released our breakdown on Euler Finance: complete with the most recent findings on how Euler was exploited, and the latest messages from the exploiter.
You can check out the full breakdown here. While this breakdown is available for premium members, we have 2 breakdowns available for FREE members, with more coming soon…
Over and out.
Key Discussions Happening Today
1/ Coin Bureau - Crypto Hedge Fund Research
Preview: Guy talks about Forteus research, talent, infrastructure, hedge fund landscape and more. Click here to listen to the full episode.
Length: 23 mins | OUR NOTE: 4 mins
There are 3 broad categories of funds that invest in digital assets which are hedge funds, venture capital funds and passive funds.
Assets under management in the industry have grown from just over $10B in Q4 of 2018 to a peak of over $70B in late 2021.
There are more than 800 active crypto funds where the liquid investing strategy takes up at least more than half of that AUM.
In 2015 to 2017, over 40% of those getting into funds were doing so with virtually no experience in finance.
2/ Drake On Digital - Defi Top Signal Ep.5 With Nick Drakon
Preview: Drake on Digital is joined by Revelo Intel Founder Nick Drakon to discuss Revelo Intel, the current macro environment, Bitcoin, and more! Click here to listen to the full episode.
Length: 100 mins | OUR NOTE: 5 mins
Here are some key takeaways:
Revelo Intel recently hired Souvlaki, an experienced financial reporting professional, to build out a financial reporting business.
Standardized reporting and reliable information will become more important as the DeFi space grows.
An accommodative macro outlook is required for DeFi projects to perform well.
3/ CryptoCoinShow - Introduction of ApeX Protocol
Preview: Daniella Barbosa, the Executive Director of the Hyperledger Foundation joins to discuss the foundation's role in the enterprise market and its collaboration with various companies and organizations in the industry. Click here to listen to the full episode.
Length: 27 mins | OUR NOTE: 3 mins
Here are some key takeaways:
Hyperledger was founded in 2016 to provide a collaborative space for companies to build code projects related to distributed ledger technology and smart contracts.
The decentralized identity in the blockchain space, especially in the context of self-sovereign identity will be a interesting development for the future.
Barbosa emphasizes the importance of creating easy-to-use, interoperable digital wallets that can work across different networks and use cases, including traditional payments.
4/ NEAR - Current Market Conditions and VC Investments
Preview: Ben from Crypto.com Capital, Kendall from Proximity Labs, will.crypto from Pantera Capital, Igor Pertsiya from Hypra Fund and Vincent Pun from Metaweb VC discuss the current market, recent investments of VC and the features they are looking for. Click here to listen to the full episode.
Length: 61 mins | OUR NOTE: 4 min
Here are some key takeaways:
There was a general consensus that the current cycle is a promising time for builders and investors, with the increasing utility and adoption of Web 3 technologies.
The previous cycles of the space have experienced scams and challenges more than today.
VC firms are primarily interested in infrastructure projects, including L1 and L2 solutions, RPC nodes, and other technologies that power the Web 3 ecosystem.
5/ The Scoop - Marco Santori, Kraken's Chief Legal Officer
Preview: Frank Chaparro is joined by Marco Santori, Chief Legal Officer for Kraken to discuss how recent regulatory actions in the U.S. have caused banks to become hesitant to accept crypto companies as new clients. Click here to listen to the full episode.
Length: 37 mins | OUR NOTE: 2 min
Here are some key takeaways:
Fallout from FTX negatively impacted the crypto landscape, similar to Mt. Gox.
Return to "chilly times of 2013" with banks being cautious about opening accounts for crypto companies and innovators struggling to gain access.
Current bank account holders with crypto have not created outsized risk to the banking system over the past 10 years.
On the Revelo Intel platform, we’ve summarized these 5 episodes and in total, would have saved you: 3 hours and 50 minutes!
To get access, you just have to sign up for a FREE plan.
Note of the Day
What’s On My Mind Ep. 10 - Circle’s New Partner Cross River Bank
In this episode, Nick Drakon and Souvlaki talk about the new partner of Circle, Cross River Bank, safe alternatives and more.
Read our notes below to learn more.
Circle
Circle announced recently that they have had $3B in net outflows since Monday reducing the market cap of $USDC by a little under 10%.
They announced their new banking partner, Cross River Bank, that will be assisting them in minting and redemptions.
Cross River Bank
They are registered in New Jersey.
They launched in 2008.
They did a lot of work in 2020 when Covid was around to support small businesses across the country.
They supported more than 480,000 small businesses which had a total of $13B.
They have a product called real-time payment system which is a bank to bank transaction that happens in seconds through the RTP network.
The articles about them over the last 4 or 5 years say that they are strongly fintech focused.
Some of their customers are Stripe, Affirm and Upstart.
Coinbase has been their customer for many years.
They have a lot of concentration on the next generation fintech industry.
Their total assets at the end of December 2022 is $9.1B and the liabilities are $8B.
Most of their assets are from domestic deposits.
A lot of their income is coming from interest income which was around $585M last year.
Their asset base is very small compared to the banks Circle has used and is using.
It is 35 times smaller than Silicon Valley Bank.
It is potentially problematic that Circle is in this position.
They found out that the majority of the ownership is under the CRB group which is a publicly traded company that holds a lot of financial institutions.
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Finding Information about Private Banks
Souvlaki used the Ibank website that shows a data feed that comes in from the FDIC, SEC and other organizations.
Ibank has a widget, which is added to the Revelo Intel website, that allows you to search any information about any banks’ financial information and others.
Regulations allow people to find some very helpful information on organizations.
There are benefits to regulations if you know where to look.
Leverage Ratio
Their leverage ratio was 15.7% in December 2022.
The FDIC defines the leverage ratio based on the quality of assets and the equity available at the bank.
The leverage ratio is a calculation that indicates the bank’s financial position regarding its debt and capital or assets.
The minimum number the ratio should be at is 9% as per FDIC’s framework.
In Q3, there was a capital injection of $250M into Cross River Bank from what seems to be CRB group which helped them push up to a high 15% in terms of leverage ratio.
In March 2022, they raised $600M led by a16z.
Circle’s Announcement
Jeremy Allaire put out a tweet that said $USDC operations will resume Monday including a new automated settlement via their new partnership with Cross River Bank.
On Tuesday, March 14th, they went live with a new transaction banking partner for domestic U.S. wires in and out and they went live with the same partner for wires in 19 more countries.
They have never mentioned Cross River bank again in their recent announcements.
From a financial standpoint, Circle didn’t face any damages from the recent events.
It seems Circle has refrained from naming their banking partnerships moving forward.
As a customer, you would want to know who the banking partners are.
The markets in general want more disclosures.
Banking Options and Alternatives
It seems like they are diversifying to create more on and off ramps.
There’s a lot of uncertainty in this environment and it is very important to have multiple options.
Cross River Bank is not operating internationally.
The management of Circle is very cognizant of diversifying their banking relationships, having multiple avenues by which they can transact and fully expecting that some of those may fall out.
Credit Suisse is on the brink of collapse.
It’s good business to have options.
When businesses fail, lawsuits are filed.
In some cases, directors can be held liable for the decisions they made.
Circle is doing the correct move.
Overall, the assumption is Circle will be a lot more resilient and stronger over the coming weeks and months.
Tether and other stablecoins
When $USDC depegged, $USDT started trading on a premium.
Some people assumed that $USDT was safer.
People don't have any visibility on what’s going on with Tether.
$USDT trading on a premium is not an indication that it is safer, it’s just the alternative stablecoin that people traded their $USDC for during the depegging event.
It took the entire industry to go out of the safety net of $USDC to look for alternatives.
Decentralized stablecoins displayed some characteristics that are quite fragile over the weekend.
Centralized stablecoin issuers can move fast during dire events.
$USDC is one of the core factors of $DAI’s peg stability model.
$DAI wasn’t able to make fast moves because everything had to go through governance first.
Protocols that rely on governance processes will now look at their governance framework and think what they can do if similar events were to happen in the future.
Decentralized protocols’ communities need to elect a small group of smart individuals that would decide on what to do with the protocol during dire situations.
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