$65B Citadel Eyes Crypto Market Making

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In Today's Email:

• What Matters: Citadel Eyes Crypto MM 👀 

• Case Study: Stablecoin Regulatory Capture 🔎 

• Governance & Features: Strategy Buys $2B BTC 📉 

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TOGETHER WITH

Ethena Labs: Exchange Risk & Bybit Case Study

When chaos hit with the Bybit hack, Ethena transformed crisis into confidence. Ethena’s smart design kept all backing assets off-exchange, slashing counterparty risk.

In mere minutes, its liquidity buffer surged from $30M to $250M—enabling seamless processing of over $120M in redemptions and keeping USDe firmly pegged.

Transparent, agile, and resilient, Ethena proved that when the unexpected strikes, its innovative approach secures your crypto.

Here is why Ethena is the safest solution in volatile markets:

• Off-Exchange Custody: Ethena's design ensured all backing assets were held off-exchange, significantly reducing counterparty risk.

• Rapid Liquidity Boost: Minutes after the Bybit hack, Ethena increased its liquidity buffer in the mint redeem contract from $30M to $250M.

• USDe Peg Stability: Enhanced liquidity enabled flawless processing of over $120M in redemptions, keeping USDe firmly pegged.

• Commitment to Transparency: Clear, timely communication in the aftermath reinforced trust and confidence in Ethena’s protocol.

With off-exchange custody to mitigate risk, rapid liquidity enhancements that ensure stability, and a steadfast commitment to transparent communication, Ethena has proven it can safeguard your assets even when the market is at its most unpredictable.

In volatile times, Ethena isn’t just surviving, it’s setting the standard.

WHAT MATTERS

Citadel Eyes Crypto Market Making

State of play: Ken Griffin, the founder of Citadel LLC, is steering his firm into crypto trading by potentially entering as a market maker on major exchanges like Coinbase, Binance, and Crypto.com.

• Griffin is a former crypto skeptic who once derided Bitcoin as “a jihadist call” against the dollar.

• He urged the Trump administration to establish clearer crypto guidelines that would help curb fraud and enable institutional participation.

• Griffin expressed optimism that allowing tier-one players to participate in crypto markets could help stabilize and “clean up” the industry, despite maintaining some skepticism about crypto’s fundamental value proposition.

Why it matters: Citadel already dominates the US stock market by processing about 35% of all trades. It aims to replicate that influence in the digital asset space, potentially reshaping market liquidity and regulatory standards in crypto.

Our take: This is another strong signal that despite the market downturn, the new administration’s friendly stance towards crypto will still entice strong TradFi players to enter the crypto markets.

For builders and investors: The onchain market-making landscape will continue to become more professionalized over the next few years. Build your products with this fact in mind.

CASE STUDY

Regulatory Capture in Crypto: The Stablecoin Dilemma

Vance Spencer, the co-founder of Framework Ventures, highlights an emerging regulatory conflict in DC, focusing on a pending stablecoin markup that would restrict centralized international stablecoin issuers from accessing the US treasury market.

• He characterizes this move as excessively extreme and emblematic of regulatory capture—favoring a narrow group of domestic players at the expense of broader US national interests.

• Spencer argues that, given that the largest stablecoins are built overseas and global demand remains robust, such restrictions could limit access to hundreds of billions in treasury demand, thereby undermining US dollar hegemony.

• He draws a historical parallel to 2021 when the crypto industry united to combat toxic legislation pushed by FTX that nearly became law.

He believes the stakes are even higher with the proposed Stablecoin and Market Structure bills. Spencer warns that if the largest crypto players dictate terms that serve their interests, it will come at the expense of the broader industry and national interest.

• Spencer calls for a competitive and open regulatory environment that will enable a broader range of stablecoin issuers to flourish and ensure the US remains a leader in the crypto space.

• Nic Carter also jumps into the argument and criticizes crypto firms lobbying to kill competitors, comparing such tactics to those once associated with SBF.

• He also points out that the firms in question were never on Trump’s team.

Take a peek at our referral reward at the bottom of this issue. Share this newsletter and receive our list of 500 crypto VC individuals 👇

INSIGHTS

Bybit Vows "War Against Lazarus" After $1.4B Hack

In the wake of a $1.4B hack on February 21, identified as the largest hack in crypto ever and the work of North Korea-linked Lazarus Group, Bybit CEO Ben Zhou has vowed to take aggressive action against the perpetrators.

• In a recent X post, Zhou declared a “war against Lazarus” and announced the launch of a bounty program aimed at freezing illegally moved funds.

• The program offers a standard 5% bounty, with successful interceptions rewarded up to 10%, potentially totaling $140M.

• Bybit replaced the stolen crypto on February 23, assuring users that client assets are restored on a 1:1 basis.

• While such measures are common in the crypto industry to incentivize the return of stolen funds, Zhou’s hardline stance may also attract future attacks.

• The hack marks the largest exploit in crypto history, dwarfing previous incidents like the $600M Ronin Bridge hack.

• The hack comes amid a general decline in the number of hacks since 2022 despite high-profile incidents over recent years.

FEATURES & GOVERNANCE UPDATE

Strategy Buys $2B in Bitcoin as ETF Outflows Surge

Strategy (formerly MicroStrategy) has bolstered its Bitcoin treasury by acquiring an additional 20,356 BTC for nearly $2B, bought at an average price of about $97,514, bringing its total holdings to 499,096 BTC, now worth over $47B.

• This move follows the firm's recent $2B zero-coupon convertible note offering.

• Strategy continues Bitcoin accumulation, representing more than 2.3% of Bitcoin’s total 21M supply.

• In contrast, US spot Bitcoin ETFs experienced significant investor withdrawals on Monday, with net outflows totaling over $516M, the fifth-largest single-day decline since their launch.

• This marks a sustained trend, with a five-day outflow streak accumulating over $1B, reflecting short-term investor caution amid broader market reassessments.

• According to @0xGeeGee, The NAV premium on $MSTR is trading at about 2.3x its NAV—which implies that, as a pseudo-Bitcoin ETF, investors value Bitcoin at roughly $222,000 per coin, far above its current market price.

Other notable feature updates:

• USDT is now live on peaq.

• Monad Testnet is now live.

• deBridge launched dePort.

• Story Protocol launches $IP staking.

• Pyth Network integrated with Hyperliquid.

• Grayscale launched the Grayscale Pyth Trust.

• Hyper Foundation launched HyperEVM on mainnet.

• Jupiter has started accumulating USDC for JUP buybacks.

QUICK BITES

• Citadel eyes crypto market making.

• SEC drops Uniswap Labs investigation.

• Circle wants USD-stablecoin to register in the US.

• US spot Bitcoin ETFs see largest-yet outflows worth $1B.

• Bybit receives $600M in ETH deposits from Mirana Ventures.

• Polygon might lose $300M+ in TVL as Aave votes to halt lending.

• Ethereum Foundation's Aya Miyaguchi 'stepping up' as president.

• Bybit extends the bounty program, and offers 5% payments 'upfront.'

• GameStop CEO acknowledges proposal to convert $5B cash to Bitcoin.

NOTEWORTHY READS & MEME

• ASXN’s read on Unit Protocol.

• Grayscale’s read on DePIN bridging physical systems.

• Stanford Blockchain Review’s read on the path 10 ms block times.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.