Covid-19, crash of markets and a first DeFi bailout

The Covid-19 pandemic is currently the omnipresent topic. Conferences are cancelled, people started working from home and eventually the Covid-19 shutdown led to a huge financial market crash. Governments quickly offered trillions of USD to bailout the economy and markets started recovering. While businesses had to start laying off employees, people started caring about the most important things in life: Health & family.

Bitcoin, often called a „safe haven“, experienced a rapid sell-off just on March 13th and the price plummeted to as little as 4106 USD (See Coinmarketcap). During the following weeks, some correlation was initially visible between traditional markets and crypto markets. In times of an unprecedented crisis, many investors move into cash positions in the first place before readjusting their portfolio. Long-term correlation and effect of Covid and economic countermeasures have yet to be seen.

Aave and Set protocol are two DeFi products that took a slight hit and have overall continued their growth throughout March. The nature of these DeFi protocols partially explains why they were not that much affected. With Aave you can earn interest on deposits and borrow assets, and with Set protocol you can make use of automated asset management strategies and follow expert traders and investment sets. Positive news was announced by BAKKT which secured a 300 million USD series B round in the middle of this financial crisis.

Interesting research

The results of Covid-19 and this financial crash are devastating. Similar to the bailout of banks in 2008 and 2009, governments are printing money and preparing a big bailout. Hence, we’ll share some insights to money & crypto, financial crashes and investing.

• Blockchain-Comparison: „An introduction to money and cryptocurrency“
• The Pomp Podcast: „Peter Schiff on Why The US Dollar Is Unsustainable and The Fed Has to Print Infinite Dollars“
• „The institutionalisation of Bitcoin“ report explains rising correlation between crypto & Fiat.
• A good insight to the bailouts: „Corporate America knows the bailout is baked in“
• An insight to the „Great Depression“ (1929-1933)
• „Paradigm shifts“ by Ray Dalio

Updates about protocol & blockchain solutions

We’ll provide important updates from all layer 1 protocols once we are live and in regular communication with project leaders. Similarly, we’ll present a few selected interesting blockchain solutions per month after “officially” launching.

Top News

• Covid-19 has become a global problem – a global pandemic. As you can see in this report from WHO from the 29th of March, WHO and local governments monitor the pandemic and have taken various countermeasures to reduce the risk of spreading the disease. Currently, countries are making different tradeoffs among economy, security of the people and privacy. More testing and data is needed.
• Due to Covid-19 most people in blockchain have started working from home and most crypto conferences have been cancelled for the next 2 months – some go online. On March 13th, financial markets crashed and similarly a huge crypto market sell-off happened. This crisis seems especially bad since most sectors are effected, the health crisis is indefinite and we don’t know when markets can be opened again, and because there is also an oil crisis and a huge debt crisis. Due to governments quick offering of trillion USD bailouts, markets slightly recovered – the end of this crisis is not in sight though.
• Maker protocol‘s MKR price dipped 58% in one day. Since Ethereum’s network was congested Maker collateral auctions received only a few bids, and some parties bid nothing for collateral. Borrowers on Maker were caught on the wrong side of an unstable market as millions of dollars worth of collateral was auctioned off for $0. MakerDao’s stable coin DAI is among the most important components in DeFi and a large number of project builders and supporters started the first Crypto/DeFi bailout and organized a Maker Backstop Syndicate. This showed that protocols can run smoothly for years but not do account for all black swan events. It also showed the strong community collaboration in this case.
• In the middle of this financial crisis, BAKKT announced a 300 Million USD series B round. Bakkt received investment from Microsoft’s M12, PayU, Boston Consulting Group, Goldfinch Partners, CMT Digital, Pantera Capital and Intercontinental Exchange.
• Celo – a VC backed blockchain protocol – has announced the „Alliance for prosperity“, onboarded 50+ well-known partners and is about to challenge Libra with the issuance of stable coins.
• After the IOTA Trinity Wallet attack on February 12th, IOTA quickly paused the Coordinator and stopped the network transactions. Shortly after IOTA provided an updated version of Trinity wallet and guides for a safe recovery and restart of the network. A seed migration tool was released and for few special cases, a global snapshot of the network was taken to bring stolen tokens back to the affected users. On 10th of March the network was relaunched.
• After Tron’s Steemit acquisition, the community elected representatives were afraid that the new management might use the stake to govern the network. Justin Sun and supporting exchanges replaced the top 20 witnesses. Justin Sun explained that an initiated soft fork had frozen 65 million STEEM tokens legally owned by Steemit, which was a criminal activity and resulted in the need to control the network for a short period of time. After lots of community backlash, Justin Sun, centralized exchanges and their proxies gave up their witness roles and original Steemit witnesses have claimed their roles back.
• Tron also announced the launch of a stable coin lending protocol. DJED is a lending platform using Collateralized Debt Positions (CDP). Users must pay a stability fee as an interest rate on their loan – this project has similarities to MakerDAO on Ethereum.
• Bitcoin was created as an alternative to central bank money and to not depend on the government’s monetary policy. Bitcoin has predictable inflation and was created for a time like this – in fact, Bitcoin’s inflation is going down after the next halving in May. While Bitcoin is not yet a real alternative for users compared to USD, EUR or JPY it is becoming more and more mainstream.

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