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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 vecka för historieböckerna…

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Det senaste vecan var den värsta veckan för världens aktiemarknader sedan covid-lockdown-kollapsen i mars 2020. Det var dessutom den värsta vecka för amerikanska aktier sedan covid-lockdown-kollapsen i mars 2020.

Det senaste vecan var den värsta veckan för världens aktiemarknader sedan covid-lockdown-kollapsen i mars 2020. Det var dessutom den värsta vecka för amerikanska aktier sedan covid-lockdown-kollapsen i mars 2020.

Det amerikanska referensindexet NASDAQ gick tillsammans med i Russell 2000, ett amerikanskt aktiemarknadsindex för småbolag i björnmarknadens territorium när dessa båda index fallit med över 20 procent från sina toppnoteringar. Samtidigt föll amerikanska Dow Jones med 2 200 punkter under fredagen.

Den grupp av företag som kallas för Mag 7 och har drivit börsuppgången på den amerikanska aktiemarknaden, tappade 1,4 biljoner dollar i börsvärde under veckan – det mest någonsin.

Fredagen den 4 april såh den högsta volymsessionen i historien på den amerikanska aktiemarknaden mätt som det totala antalet omsatta aktier på alla börser.

Det amerikanska VIX-indexet, känt som ”fear and greed-indexet” såg sin största veckorörelse sedan februari 2020. Det var också den värsta veckan för USAskreditmarknader sedan covid-lockdown-krisen, till och med värre än under SVB-bankkrisen.

Oljepriset kraschade med 11 procent under veckan, det största fallet sedan mars 2023 (SVB-kris / tillväxtskräck). Samtidigt rapporterade guldpriset den andra nedgångsvecka i år. Fredagen kursfall var den värsta dagen sedan november 2024. Priset på koppar såg sitt största fall sedan Lehman-kraschen i oktober 2008. Kryptovalutan Bitcoin rapporterade små vinster under veckan.

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VGCF ETF investerar i korta företagsobligationer denominerade i euro

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Vanguard EUR Corporate 1-3 Years Bond UCITS ETF EUR Accumulating (VGCF ETF) med ISIN IE00BH04FZ00, strävar efter att följa Bloomberg Euro Corporate 500 1-3Y-index. Bloomberg Euro Corporate 500 1-3Y-index följer eurodenominerade företagsobligationer. Betyg: Investment grade. Tid till förfall: 1-3 år.

Vanguard EUR Corporate 1-3 Years Bond UCITS ETF EUR Accumulating (VGCF ETF) med ISIN IE00BH04FZ00, strävar efter att följa Bloomberg Euro Corporate 500 1-3Y-index. Bloomberg Euro Corporate 500 1-3Y-index följer eurodenominerade företagsobligationer. Betyg: Investment grade. Tid till förfall: 1-3 år.

Den börshandlade fondens TER (total cost ratio) uppgår till 0,09% p.a. Vanguard EUR Corporate 1-3 Years Bond UCITS ETF EUR Accumulating är den billigaste och största ETF som följer Bloomberg Euro Corporate 500 1-3Y-index. ETFen replikerar det underliggande indexets prestanda genom samplingsteknik (köper ett urval av de mest relevanta indexbeståndsdelarna). Ränteintäkterna (kupongerna) i ETFen ackumuleras och återinvesteras.

Denna ETF lanserades den 11 mars 2025 och har sin hemvist i Irland.

Fondens mål

  • Fonden använder sig av en passiv förvaltning – eller indexering – investeringsmetod, genom fysiskt förvärv av värdepapper, och strävar efter att följa utvecklingen för Bloomberg Euro Corporate 500 1-3Y Index (”Indexet”).
  • Fonden investerar i ett representativt urval av obligationer som ingår i indexet för att nära matcha indexets kapital- och inkomstavkastning.
  • Indexet är utformat för att återspegla universum av eurodenominerade företagsobligationer med fast ränta som har ett nominellt utestående belopp som är större än eller lika med 500 miljoner EUR.
  • Obligationer i indexet har en löptid på mellan ett och tre år och är i allmänhet investment grade.
  • I mindre utsträckning kan fonden investera i obligationer utanför indexet där risk- och avkastningsegenskaperna för sådana obligationer mycket liknar dem hos indexets beståndsdelar.
  • Fonden försöker förbli fullt investerad utom under extraordinära marknadsförhållanden, politiska eller liknande förhållanden där fonden tillfälligt kan avvika från denna investeringspolicy för att undvika förluster.
  • Även om fonden förväntas följa indexet så nära som möjligt, kommer det vanligtvis inte att matcha resultatet för målindexet exakt, på grund av olika faktorer såsom utgifter som ska betalas av fonden och regulatoriska begränsningar. Detaljer om dessa faktorer och fondens förväntade tracking error finns i prospektet.

Handla VGCF ETF

Vanguard EUR Corporate 1-3 Years Bond UCITS ETF EUR Accumulating (VGCF ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra och London Stock Exchange.

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

Börsnoteringar

BörsValutaKortnamn
Borsa ItalianaEURVSCF
Euronext AmsterdamEURVSCF
SIX Swiss ExchangeCHFVSCF
XETRAEURVGCF

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CBUV ETF satsar på Metaverse

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iShares Metaverse UCITS ETF USD (Acc) (CBUV ETF) med ISIN IE000RN58M26, försöker följa STOXX Global Metaverse-index. STOXX Global Metaverse-index spårar företag från hela världen som har affärsverksamhet i metaverse-ekosystemet. Aktierna som ingår filtreras enligt ESG-kriterier (miljö, social och bolagsstyrning).

iShares Metaverse UCITS ETF USD (Acc) (CBUV ETF) med ISIN IE000RN58M26, försöker följa STOXX Global Metaverse-index. STOXX Global Metaverse-index spårar företag från hela världen som har affärsverksamhet i metaverse-ekosystemet. Aktierna som ingår filtreras enligt ESG-kriterier (miljö, social och bolagsstyrning).

Den börshandlade fondens TER (total cost ratio) uppgår till 0,50 % p.a. iShares Metaverse UCITS ETF USD (Acc) är den enda ETF som följer STOXX Global Metaverse-index. ETF:n replikerar det underliggande indexets prestanda genom fullständig replikering (köper alla indexbeståndsdelar). Utdelningarna ackumuleras och återinvesteras.

iShares Metaverse UCITS ETF USD (Acc) är en liten ETF med tillgångar på 88 miljoner euro under förvaltning. Denna ETF anserades den 7 december 2022 och har sin hemvist i Irland.

Investeringsmål

Fonden strävar efter att uppnå en avkastning, genom en kombination av kapitaltillväxt och inkomst, som återspeglar avkastningen från STOXX Global Metaverse Index.

Handla CBUV ETF

iShares Metaverse UCITS ETF USD (Acc) (CBUV ETF) är en europeisk börshandlad fond. Denna fond handlas på flera olika börser, till exempel Deutsche Boerse Xetra och London Stock Exchange.

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
gettexEURCBUV
Borsa ItalianaEURMTAV
Euronext AmsterdamUSDMTAV
London Stock ExchangeGBPMTAV
SIX Swiss ExchangeUSDMTAV
XETRAEURCBUV

Största innehav

KortnamnNamnSektorVikt (%)ISINValuta
NVDANVIDIA CORPInformationsteknologi7.79US67066G1040USD
COINCOINBASE GLOBAL INC CLASS AFinans7.15US19260Q1076USD
LOWLOWES COMPANIES INCSällanköpsvaror7.10US5486611073USD
METAMETA PLATFORMS INC CLASS AKommunikationstjänster5.96US30303M1027USD
SHOPSHOPIFY SUBORDINATE VOTING INC CLAInformationsteknologi5.00CA82509L1076USD
ADSKAUTODESK INCInformationsteknologi4.25US0527691069USD
ADBEADOBE INCInformationsteknologi3.28US00724F1012USD
EAELECTRONIC ARTS INCKommunikationstjänster3.12US2855121099USD
RBLXROBLOX CORP CLASS AKommunikationstjänster3.10US7710491033USD
7974NINTENDO LTDKommunikationstjänster2.65JP3756600007JPY

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