USDT Risk: Tether’s Financial Leak

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Good Morning,

I don’t often start a newsletter issue with a tweet, but this one is just too good. Anyways, markets are down over the past few days, but BlackRock saved us slightly by filing for a spot Bitcoin ETF. Booyah!

In Today's Email:

• What Matters: Tether’s financial leak 🕵️

• Founders-Investors Highlight: Michael of Compound VC 📈

• Deal Flows: Connext $7.5M Strategic Round 🔗

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WHAT MATTERS

Tether’s Reserves Leak & Curve 3Pool Imbalance

State of play: USDT de-pegged slightly as Curve's 3Pool became heavily imbalanced. CoinDesk has reportedly received Tether’s financial documents from the NY Attorney General’s Office.

• CoinDesk successfully sought public disclosure of materials relating to the first of Tether’s quarterly reports.

• Tether said the documents are outdated.

• 3Pool's intended balance is 33.33% for each USDT, USDC, and DAI, but USDT's share has surged to 70%. This indicates a significant amount of USDT being exchanged.

Curve’s founder, Michael Egorov, has around 60.7M USDT borrowed against CRV. This position represents over 30% of the total CRV token supply.

• The crypto community fears the risks to the broader DeFi sector were the position to be liquidated.

• CRV dropped 12% on June 15 after reports surfaced of risky loans taken by Egorov.

• Egorov deposited 431M of CRV (~$246M) and borrowed $101M of stablecoins, this accounts for 50.5% of CRV’s circulating supply.

Why it matters: 3Pool’s imbalance also happened when FTX collapsed and the Terra ecosystem’s crashed. This could be a warning sign of what is coming.

For builders and investors: Read the following thread to understand the game theory and morality of Michael Egorov’s action.

• While it’s not black-and-white, both builders and investors in crypto need to understand this key dynamics that is arguably the core difference between a web3 and web3 project.

BUILDER-INVESTOR HIGHLIGHT

Michael Dempsey, Managing Partner of Compound

Michael Dempsey is the Managing Partner of Compound, a thesis-driven and research-centric investment firm that focuses on a variety of emerging areas.

• Compound is focusing on 3 main fields: Automation, Health-Tech & Biotech, and Crypto.

• Compound has been investing in crypto since 2016.

• Compound backed some of the largest protocols in the world at the earliest stages including The Graph, Compound, Arbitrum, Dapper Labs, Blockstack, Livepeer, Kadena, and others.

Previous backgrounds: Michael graduated from NYU in December 2011 with B.A. in Economics. He jumped straight into the investment and research field as an Investment Analyst at Crane Partners and a Research & Data Analyst at CB Insights.

The big idea: Compound publishes private and public research in order to innovate on the frontier of thinking within the broader crypto industry.

• They also work with founders to develop novel mechanisms and primitives for long-term value accrual in their projects or protocols.

Take a peek at our new referral reward at the bottom of this issue. Share this newsletter and receive our list of 100 smart crypto investors' wallet addresses 👇

INSIGHTS

Celsius Dumping Altcoins

Bankrupt crypto lender Celsius has announced its plan to sell altcoins from its customers starting July 1st.

• The total selling pressure is ~$215M.

• CEL and MATIC tokens are the largest holdings, $70M and $52M respectively.

• Celsius plans to convert these alts into BTC and ETH.

DEAL FLOWS

Connext $7.5M Strategic Round

Deal flows slowed down this week 📉 — we saw $85M+ in deals.

$7.5M to connect blockchain networks. Connext is building the “HTTP of Web3", a communication layer across different blockchain networks.

The goal is to facilitate simultaneous interaction of applications with funds and data across multiple networks.

• Connext just raised $7.5M at a $250M valuation.

• The funds will be utilized to establish Connext Foundation, which will provide development grants and funding to initiatives built on Connext.

• Investors in the round include Polychain Capital and Polygon Ventures.

Deal flows in the past week:

• Ironforge, $2.6M, Pre-Seed Round

• BoomFi, $3.8M Seed Round

• Poko, $4.5 Seed Round

• Mnemonic, $6M Seed Round

• ResearchHub, $5M Series A Round

• Gensyn, $43M Series A Round

• Connext, $7.5M Strategic Round

• Bit2Me, $15M Venture Round

• Decentralized Gaming Venture, Undisclosed $ Seed Round

• eZKalibur, $1.14M Public Token Sale

QUICK BITES

• BlackRock filed paperwork for spot Bitcoin ETF.

• CoinDesk received Tether’s financial documents from NYAG.

• Abra accused in Texas of securities fraud.

• Blockchain Association asks the SEC about Prometheum.

• Coinbase bought back $45.5M of its debt.

• SEC wants 4 months to respond to Coinbase’s rulemaking request.

• Delio and Haru Invest halted withdrawals.

• Tether wobbles as Curve 3Pool became imbalanced.

• Gauntlet advises the Aave community to freeze CRV tokens.

• Binance reminds staff not to talk about offices location.

MEME & NOTEWORTHY READS

• Joel John’s read on a new internet.

• Matti’s read on the art of ROMO (relief of missing out).

• Arthur Hayes’ read on the return of Chinese crypto trader.

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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.