Welcome to Hvbris, a crypto-focused newsletter.
In today’s edition, I share my thoughts about Curve (CRV) and also some fun bits and bytes worth your time.
DISCLAIMER: This content is not financial advice and only represents my personal opinions.
Crypto is high risk. Always do your own research.
Let’s dive in!
Curve.
Curve is a decentralized exchange based on Ethereum. According to the project’s documentation, its main goal is:
To let users and other decentralised protocols exchange stablecoins (DAI to USDC for example) through it with low fees and low slippage. Unlike exchanges out there that match a buyer and a seller, the behaviour of Curve is different, it uses liquidity pools like Uniswap. To achieve this, Curve needs liquidity (tokens) which is rewarded by those who provide it.
Curve is non-custodial meaning the Curve developers do not have access to your tokens.
In other words, Curve is a money market that facilitates the trading of stablecoins and rewards CRV stakers with a fraction of the total trading fees generated by the platform. CRV stakers also get “boosts” on the liquidity they provide to the different liquidity pools on Curve.
There’s a number of things I like about Curve.
The CRV token looks undervalued. It’s only trading at around x4 above all-time-low price and hasn’t gone through an insane hype cycle like other DeFi projects yet.
The Curve protocol has experienced tremendous growth in terms of aggregated volume and on-chain liquidity:
Liquidity providers face very little risk of impermanent loss since capital pools all consist of stablecoins pegged to fiat currencies.
CRV stakers can participate in the governance of the protocol and 50% of all fees charged for swaps [are distributed] to participants in governance who lock CRV.
Stablecoins are going through a period of hyper-growth because DeFi users would rather transfer and trade in a stable currency than in volatile assets like ETH or BTC.
Nation-states are building Central Banks Digital Currencies which could one day inter-operate with public blockchains like Ethereum and trade on decentralized and neutral money markets like Curve.
Curve is reasonably Lyndied as a DeFi network. The protocol launched in January 2020 and has never been hacked.
Now, there are things that I don’t like about Curve.
The supply schedule of CRV forecasts high inflation for the next 3-4 years. This inflation explains why CRV has underperformed BTC and other DeFi coins and could continue underperforming for a while in BTC terms
CRV ownership is still extremely concentrated which means that a few actors can collude to sway the project’s governance easily. This is both good and bad. It keeps the project nimble and agile which is important in the short term. In the long run, high CRV concentration will undermine the neutrality of the project which would be very bearish in my opinion. I hope to see CRV ownership disperse overtime.
To sum-up, Curve is a bet that the stablecoin phenomenon will continue to grow and eventually absorb nation-state currencies. In a hyper-stablecoinized world, Curve could become this fundamental piece of infrastructure that underpins most of what we know today as the ForeX market.
Fiat currencies don’t have supply caps so, as a CRV holder, you’re buying exposure to a virtually unlimited amount of future crypto-native ForeX trading fees.
On the flip-side, you’re exposing yourself to the risk of governance capture by large token holders and of being outperformed by Bitcoin.
Curve looks to me like a decent asymmetric bet and a good addition to any DeFi portfolio.
If you have an opinion about Curve, please drop it in the comments, I welcome constructive criticism and the possibility that I might be completely wrong.
Bits and Bytes.
BlockFi Chief Risk Officer Rene Van Kesteren explains how crypto lender and brokerage BlockFi engages in risk management. While I believe that nothing beats self-custody, there’s nothing wrong with getting a little yield on a fraction of your coins.
Urbit will soon release its much-awaited Bitcoin wallet. Go Urbit!
Cambridge University science historian Patricia Fara talks about the life of Isaac Newton and the history of scientific progress on Tyler Cowen’s podcast.
ex-USB investment banker Brian DeChesare breaks down why he thinks SPACs are complete SCAMs. Great stuff as usual.
The mack is back! Arthur Hayes breaks down how to create a future-proof portfolio in his latest piece, Pumping Iron (SPOILER: he’s long crypto and positive real rates in government bonds)
Allen Farrington on why Bitcoin is Venice, this (very) long piece also includes a surprising bit about Bitcoin and Islamic finance, really enjoyed it!
Tether settled with NYAG and we can all move on now. Congrats to everybody who dumped their BTC at 20k because IT’S MANIPULATED BY TETHER!!!
You’ve heard of Aave, you’ve heard of Tamagotchis, but have you heard of Aavegotchis?! The DeFi space is getting weirder by the day.
Absolute must-listen conversation between Balaji and Demetri Kofinas on techno-utopianism (I hope I spelled that right!)
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See you soon for more insights.
Until then,
Hvbris.