JZL Capital Blockchain Industry Weekly Report No. 21

JZL Capital

特邀专栏作者

2022-05-17 09:46

This article is about 14507 words, reading the full article takes about 21 minutes

A quick look at the important market information of the week.

This week's summary:

This week's summary:

- What was the reason behind the collapse of LUNA? After the tragedy, what chance does it have?

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1. Industry dynamics last week

Last week may have been a restless week for the vast majority of crypto investors. Affected by the Luna incident, not only LUNA itself was reduced to Meme Coin, but the entire market was also brought down by this seed ecology that used to have the 7th market value. The global encryption market value once fell to 1.13 billion US dollars, and BTC fell as low as around 26,350 US dollars, falling beyond the lowest point in 2021 of around 28,800.

Of course, there are also extreme speculators who made a lot of money in the market last week. Luna even once rose from 0.5 US dollars to a maximum of 8.5 US dollars, but after the waterfall fell, I don’t know how many speculators have been harvested. Detailed explanation of Luna’s recent events See page 19.

As of writing time, Bitcoin closed at 29914.8, rebounding nearly 12% from the lowest point. The current correlation between BTC and U.S. stocks is still around 0.9, and U.S. stocks also rebounded and closed up on Friday, but the market generally believes that it has not yet bottomed out, so For investors, it is still a time to wait and see cautiously.

In fact, apart from UST, the entire stablecoin circle was full of crises last week. Except for USDC, which is as stable as Mount Tai, some stablecoins have been unanchored to varying degrees. In the past, USDN, which had a mechanism similar to UST, had a maximum unanchor of nearly 30%. The big stablecoin USDT once fell to 0.95 US dollars, and the de-anchor of USDT also caused a certain degree of market panic.

On May 12, the asset ratio of the 3 pools on Curve with a value of US$1.9 billion was seriously skewed. The ratios of DAI, USDC, and USDT were 6.87%, 6.87%, and 86.26%, respectively. 3 pool is the cornerstone stablecoin pool on Curve. Most stablecoins including UST have to stabilize their own currency prices (including UST) by forming a pool with 3 pool. The pool has a value of 1.6 billion USDT, only about 300 million of liquidity available for exit.

According to Curve, if USDT accounts for more than 87%, it will accelerate the decoupling of USDT. Tether then launched a redemption measure to execute USDT redemption at a price of 1 US dollar. In addition, the data on the chain shows that TetherTresury also destroyed nearly 3 billion USDT, making USDT stable. Compared with UST, USDT's unanchoring is more worrying, but the effective mitigation of this and several short-term unanchoring in history still gives investors a lot of confidence.

In fact, the market has never stopped questioning the assets behind USDT. Since 2015, after USDT was launched on Bitfinex and Poloniex, it has experienced several unanchor events. There are different opinions on whether it is overissued. In the first half of 2017, USDT only printed more than 10 million pieces, but by the end of 2017, USDT quickly increased to 1 billion. Looking back at the crazy bull market at the end of 17 (Bitcoin rose half a year 8 times), it is not difficult to see that it has a great relationship with USDT's crazy money printing.

The current market value of USDT exceeds 75 billion US dollars, covering all trading pairs across most chains. Its binding with cryptocurrencies is a form of both prosperity and loss. We believe that even if Tether fails to save the market by itself, the major exchanges It will also prevent USDT from unanchoring by pulling out the network cable. Tether has been questioned by the market about its payment ability and business ethics every now and then, and it has become a must-have item in the currency circle. But it's like a wolf coming -- even though we're all numb to it, we still can't let our guard down.

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2. Macro and analysis

The market was frustrated by the collapse of LUNA, which led to the collapse of the entire digital currency. We judge that in the short term, the digital currency will rebound with the rebound of Nasdaq, and will stabilize in the future. The short-term impact of LUNA is already small.

At the same time, we judge that with the collapse of LUNA, part of the funds of Defi will flow into BTC, ETH and other currencies with strong consensus, so we judge that BTC has stabilized in a short time, and the current characteristics of BTC's risk aversion are more prominent.

BTC has already fallen through the previous box. If it cannot be recovered and stabilized above 30,000 USDT in the short term, then there may be no support below, and it will continue to fall. If it is recovered and stabilized, it will go sideways at around 30,000 USDT.

ETH did not fall below the previous box, and the overall trend was more optimistic than BTC.

The Nasdaq index rebounded from the short-term oversold, but the trend is still downward.

1) Ahr999: 0.51, at this position we suggest that price investors can buy gradually, and the probability of making a profit after holding it for 1-2 years is very high.

2) MVRV: 1.253, the cost performance is the same as Ahr999.

4) Changes in the number of ETH addresses: the number of addresses holding less than 10 coins has risen steadily, but the number of addresses holding more than 10 coins is generally stable.

2. Summary:

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3. Summary of investment and financing

3. Summary of investment and financing

1. Overall review of the market

• During the reporting period, 38 investment and financing events were disclosed, with a financing of approximately US$669 million. In terms of specific tracks, the Web 3.0 track accounted for nearly 50% with 18 projects, and other tracks accounted for a relatively average proportion, with Infrastructure 5, NFT & Games 6, Defi 5, and Cefi 4.

• During the reporting period, there were 4 projects that raised more than 100 million dollars, including Talos' $105 million Series B financing, Chainalysis' $170 million Series F financing, Kucoin's $150 million Series B financing, and Naetion's $150 million financing.

2. Introduction of key events

1) Talos –a16zz continues to participate, and traditional banks deploy encrypted payment infrastructure

• Talos, an institutional-level digital asset trading platform that provides digital asset trading technology for financial institutions, completed a valuation of US$500 million led by General Atlantic, with participation from Citigroup, Bank of New York Mellon, Wells Fargo, a16z, PayPal Ventures and Fidelity Investments $105 million in Series B financing.

• In May 2021, Talos completed a US$40 million Series A financing, led by a16z, followed by PayPal and Fidelity. Justin Schmidt, former head of digital asset markets at Goldman Sachs, joins Talos as head of strategy.

2) Naetion – Web 3.0 Liepin (recruitment) + CIIC (manpower outsourcing)

• Web 3.0 start-up company Naetion announced that it has received US$500 million in investment from digital asset investment company GEM Digital Limited. The financing will be used to promote the development of products, native Token NTN and NFT.

•At this stage, Naetion's social networking site and on-chain data are both in their infancy, Discord has 300+ people, and Twitter has only 5,810 fans.

•Naetion provides 3 services including HAELP, Paeyroll and Monaey:
HAELP creates display and sales channels for content creators and skill providers, and enables them to obtain all labor income;
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4. Encrypted ecological tracking

4. Encrypted ecological tracking

1）Otherside：

1. Metaverse

•Otherside, a metaverse project under Yuga Labs, recently released a demo clip of the project, which is technically supported by Improbable. But at the same time, it also caused concerns about its production cycle. If Otherside insists on such a production level, its launch must be far away.

•Improbable is a metaverse technology company located in the UK. It started with the production of online multiplayer games, and has its own game engine. It is committed to creating a rich multiplayer game ecosystem. On April 7, it completed a financing of US$150 million led by a16z and Softbank. The funds will be mainly used to establish an interoperable metaverse network MSquared. Otherside may be the first metaverse projects to use its technology.

2）Roblox ：

•The CEO of Improbable also said some time ago that Otherside has successfully completed 15,000 people's online content interaction at the same time, which will be an open platform that subverts ideas.

• Metaverse concept stock Roblox's revenue of US$537 million in the first quarter fell short of expectations, with a net loss of US$160 million. Bookings, which include revenue, deferred revenue and other adjustments, fell 3% year over year to $631.2 million, compared with analysts' consensus estimate of $633.3 million, the data showed.

• Although DAU reached a record 54.1 million in the first quarter, the year-on-year increase of 28% was lower than that of the previous period, and it was also lower than the double growth during the new crown epidemic. Roblox said that the time players spend playing games on the platform has grown at a slower rate than before and during the new crown epidemic, and emphasized that this trend was also true in April. Due to the significant relief of the overseas epidemic, players chose to spend less time on the game process, which also caused Roblox's revenue to fall short of expectations.

2. NFT digital collection

2. NFT digital collection

1) NFT dynamic summary:

• Social, Metaverse, Game, Art, top five rankings in the market

2) Major overseas NFT events:

NFT marketplace OpenSea is adding NFT plagiarism detection and verification features aimed at reducing plagiarism and fake items. OpenSea stated that the new features launched this time will improve the authenticity of the digital market. The main updates include the introduction of a new system to detect and delete counterfeit NFTs, adjustments to the account verification process, and more. In addition, OpenSea also revealed that they are deploying a brand new copy detection system that can use image recognition technology to scan NFTs on the platform and compare them with real collectibles, looking for flips, rotations and other variants. OpenSea's human reviewers will also be involved in detection and will review removal recommendations. OpenSea said they have already started removing the offending content and will expand the removal process and scope in the coming weeks.

On May 10, ZAGABOND.ETH, the founder of the well-known NFT project Azuki, published a blog titled "Builder's Journey". In his article, he revealed that he had created three NFT projects, CryptoPhunks, Tendies, and CryptoZunks. Those projects were abandoned, and Azuki was eventually created. The original intention of ZAGABOND.ETH is to introduce his own journey of continuous entrepreneurship in Web3, and to express that his previous failures taught him valuable experience, which in turn contributed to Azuki’s success. However, after this article spread to the encryption community, it caused people to criticize it. Some people questioned that ZAGABOND.ETH is a liar, thinking that he "betrayed the community" and participated in three Rug Pulls projects. "Rug Pulls" refers to the malicious behavior of the project party to lure early investors to inject funds and then abandon the project. Affected by this, the floor price of the Azuki NFT series dropped from nearly 20 ETH to 10 ETH at one point, which was cut in half. As of Sunday, the floor price of Azuki has risen to 14.3 ETH, which is still about 25% lower than the high point.n0b0dy.etResold for 625 ETH on Otherdeed#59906 of Yuga Labs metaverse project Otherside (buyer is

), or approximately US$1.58 million, setting a record for the highest transaction in this series. Currently, the floor price of Otherdeed is 3.42 ETH, and the total trading volume is 237,300 ETH.

• "Metaverse Seoul City Hall" opened to the public on May 9th. According to the Seoul Metropolitan Government, the "Metaverse Seoul City Hall" is an experimental service that provides citizens with the opportunity to experience "Metaverse Seoul" in advance. The Seoul Metropolitan Government plans to provide the "Metaverse Seoul City Hall" service, solicit opinions from citizens freely, find out the deficiencies in platform operation, and actively reflect their content on the "Metaverse Seoul" platform project officially launched this year.

1) Major domestic NFT events:

•The complete picture of "Dream of Red Mansions" hand-painted by Sun Wen, a master of traditional Chinese painting in the Qing Dynasty. With the help of blockchain technology, a limited number of dynamic digital art works are launched, making the culture of "Dream of Red Mansions" closer to the public. The first batch of 13 dynamic digital collections, including "Yu Village Attached to Daiyu to Beijing", has been launched on Ali Assets, and will be released successively from May 9th to 20th. It is understood that after obtaining the authorization, Experience Technology Company began to create 4K high-definition dynamic digital art works for "The Complete Picture of a Dream of Red Mansions" in 2016. Before the creation, the creator invited Red Studies experts to consider every detail in Sun Wen's drawings, and then designed the movements of the characters to ensure that the words and deeds of the characters in the dynamic works are all well-founded and truly reflect the culture of the Qing Dynasty. In terms of creation, the creator digitizes the original painting with spectral scanning technology, restores the original color, and then uploads, stores and confirms the rights on the "new version chain" to generate a dynamic digital art work on the chain. "Shu Zang" official store release.

• CICC believes that compared with overseas markets, the development stage of the domestic NFT market is relatively early, and Internet platforms have entered the market one after another after the market has gradually become popular. 2021 will become the first year of the domestic NFT market. On the other hand, due to the relatively strict domestic policy environment, the primary transaction of PGC digital collections is still the core at present, and the commercial marketing attribute is strong. CICC believes that the current domestic market is relatively insufficiently open, and there is a large room for expansion. Looking forward to the future, regulation will gradually regulate the healthy development of the industry. On the basis of legal compliance, the industry is expected to achieve various application scenarios such as improved transaction liquidity, diversified content sources, and real-world confirmation of rights.

• The process status of the “Taobao Yuan Universe” and “Ali Yuan Universe” trademarks applied for registration by Alibaba Singapore Holdings Pte. Applications for registration are due in September 2021.

4) NFT-related financing:

• NFT infrastructure startup Co:Create completed a $25 million seed round of financing led by a16z. Other investors include Tom Brady’s NFT platform Autograph, Packy McCormick’s Not Boring Capital, FTXVentures’ Amy Wu, VaynerFund and NFT segmentation platform Fractional. Art and NFT studio RTFKT acquired by Nike. It is reported that Co:Create is an encryption startup that builds an infrastructure protocol to help NFT projects launch tokens and manage DAOs.

•Highlight, an NFT platform focusing on community building tools, completed a $11 million seed round of financing, led by Haun Ventures founded by former a16z partner Katie Haun, with participation from 1kx, A_Capital, SciFiVC, Floodgate, Coinbase Ventures, 35 Ventures, and PolygonStudios. Highlight is a minting tool for creators without a coding or crypto background. On Highlight, creators sell NFTs to earn rewards and access to a community of collectibles. Highlight does not charge Gas fees and charges a 3% fee on all tokens sold. Users only need to use their email addresses and credit cards to purchase NFTs. NFTs minted on Polygon-based Highlight can be supported by OpenSea, Rarible, and other Polygon-enabled NFT marketplaces.

3.GameFi：

1) Investment and financing and on-chain data

• During the reporting period, there were 6 investment and financing events in NFT & Games, including two NFT platform projects Co:Create ($25 million financing), Highlight ($11 million financing) and IreverentLabs ($40 million financing) independent game projects .

• It is worth noting that the above three projects with an investment and financing scale of more than US$10 million have direct or indirect connections with a16z. A16z participated in Co:Create’s $25 million financing and IreverentLabs’ $40 million. Highlight’s $11 million financing was led by a16z’s LP Haun Ventures.• Since 2022, except for AxieInfinity, the top game projects since 2022Number of participants and transaction size

Maintain a positive trend and have not been affected by the downturn in the market and their respective currency prices.

1) Highlights – Animoca Brands

• Following the "Play to Earn" and "Move to Earn" concepts, YatSiu, co-founder of AnimocaBrands, said in an interview that he plans to enter the field of education and bring "Learn To Earn" or "Teach To Earn" to students and teachers .

• As of now, the leading "Learn To Earn" has Let me speak (project token: LSTAR) deployed in the Solana ecosystem, and its Twitter has more than 1 million followers.

•The main way to make money for Let me speak is to buy NFT (teacher courses) in the LMS marketplace and learn English through the app. LSTAR token rewards can be obtained during the course study period, and players can convert them into USDC in the LMS market; in addition, Let me speak also has

a) Scholarship mode, that is, participants purchase a large number of NFT (teacher courses), and share learning rewards and course appreciation benefits by inviting other participants to learn and purchase courses; b) Create mode, that is, issue NFT in the LMS market (Faculty Courses) Sell or implement the Scholarship model.

1) Agency Tracking – HaunVentures

•HaunVentures was established by Kathryn Haun, a former partner of a16z, and all team members are from a16z.

•According to Pitchbook data, the only LPs disclosed by HaunVentures are a16z and Marc Andreessen.

4.Platform public chain

1) Dynamic summary of the public chain:

•Affected by the overall market, the overall lock-up volume of the public chain (including Staking) dropped from US$161.6 billion to US$103.1 billion last week, a drop of more than 36%. The top five TVL are MakerDAO, Curve, AAVE, Lido, and Hex. Both Lido and Anchor, which were ranked top in the week, were greatly affected by Terra’s stablecoin zero event, with a drop of nearly 50% and 100% respectively.

•The TVL of Dapps related to the Terra ecology is clearly cleared. We will review the whole event in detail below and give a prediction:

• Judging from the Ethereum Gas Fee data, since last week's panic selling time, the activity on the chain has stabilized, but the market is still panicking.

• Comparing the lock-up volume of each public chain horizontally, the proportion of Ethereum has increased significantly, from 54.43% last week to 61.09%. Except that Terra almost fell out of the top ten and Waves made up for the vacancy, the ranking of public chains remained unchanged.

•The total TVL of the public chains except Tron suffered a reduction of more than 20% respectively:

• In the top ten TVL rankings, Tron and Polygon continued to rise steadily last week, and Tron's monthly growth rate even reached +10%.
On May 10, TRON DAO Reserve tweeted that in order to protect the entire blockchain industry and the encryption market, it purchased 595,729,832 TRX at an average price of $0.07661, with a total cost of $45,641,630. TRON DAO Reserve is the custodian of TRON’s ecological algorithm stablecoin USDD, which stabilizes USDD prices and decentralization through the pledge of reserve assets. At the beginning of its establishment, the TRON Fed will save and host $10 billion of high-liquidity assets raised by blockchain industry promoters as an early reserve, and all reserves will enter the TRON joint reserve in the next 6-12 months;

This week, we will explain in detail the USDD mechanism and the market situation of algorithmic stable coins at this stage in the stable currency column.

2) Summary of public chain and infrastructure investment:

• SO-COL (Social Collectibles), a Web3 social platform founded by Irene Zhao, is financing at a valuation of US$100 million, led by Blockchain Capital. The platform is a social platform that helps creators issue NFT, and is committed to creating a decentralized alternative to Discord, Snapshot and OnlyFans. Previously, on February 8, SO-COL announced the completion of a $1.75 million seed round of financing. DeFianceCapital and AnimocaBrands led the investment, and Sanjian Capital and others participated in the investment.

• In 2021, Irene made her mark in the crypto space by serving as the CMO of Konomi Network. The story of the IreneDAONFT craze began in October 2021 when 28-year-old cryptocurrency influencer and model Yuqing, Irene Zhao and her business partner Benjamin Tang came up with the idea of "So-Col". Tang and Irene launched a sticker pack for Irene's Telegram community to use on the messaging app. The stickers superimpose a photo of Irene with slang words used by members of the crypto community, such as "gm," "wenBinance," and "yes ser." They tokenized these stickers into 1106 NFTs on the OpenSea marketplace. These NFTs are described as “access passes” to the DAO’s “Genesis Tribe.” They are currently trading at a minimum price of 0.24 ETH with a total transaction volume of 2.6K ETH.

• Web3 development platform Moralis announced the completion of $40 million in Series A financing, with participation from EQT Ventures, FabricVentures, CoinbaseVentures and Dispersion Capital. Moralis provides developers with the infrastructure to build and publish cross-chain applications, games and NFTs. This round of financing will be used for product development, improving user experience and scaling to increase its customer capacity and support larger customers.

• Encrypted market monitoring company Solidus Labs completed a $45 million Series B round led by Liberty City Ventures, with participation from Evolution Equity Partners, Declaration Partners, former U.S. Acting Comptroller of the Currency Brian Brooks and former CFTC Chairman Christopher Giancarlo. It is reported that Solidus Labs provides a set of tools to analyze blockchain data for more than 50 different types of security threats, such as wash transactions, spoofed transactions, and pump and dump schemes.

•ComputecoinNetwork, a provider of Web 3 infrastructure, completed a strategic financing of US$6.2 million, led by Aves Lair. At the same time, Dave Moellenhoff, co-founder and founding architect of Salesforce, and Mitch Kennedy, head of Dell's global loyalty strategy, joined the company's advisory team. It is reported that Computecoin is an infrastructure provider that builds Web3 native products by providing low-cost and low-latency computing services, and supports Web3 developers and pioneers to create Metaverse applications. It complements local computing power by aggregating decentralized cloud services such as Ethereum, Filecoin, Swarm, and Arweave and offloading computationally intensive tasks such as real-time 3D rendering and motion capture data processing to adjacent networks.

3）Terrra

• Berners-Lee, the inventor of the World Wide Web, said in an interview that he believes that the metaverse will be part of the future, and buzzwords such as Web3 and NFT are crucial to reorganizing the most important function of the Internet in the future of democracy. Last year, Berners-Lee's original source code for the web was sold as an NFT at Sotheby's for $5.4 million. Additionally, he is the co-founder and CTO of Inrupt, a company that developed a decentralized data storage system called Solid. Berners-Lee calls the product "the successor to Web 2.0" and hopes to interact with VR and metaverse technologies in the future. According to reports, Solid is like a "USB drive on the cloud", but the difference from a cloud computing platform is that it provides a personally owned data storage "pod", and can choose to grant access to any user.

• Last week, Terra experienced a death spiral. LUNA fell from $80 to basically zero, a drop of more than 99%, and the algorithmic stablecoin UST fell to $0.2. The approximate path is: the decline of the Nasdaq led to the decline of the encrypted market → LUNA fell, and the market value was close to UST → giant whales dumped UST and caused panic, resulting in unanchor → LFG failed to use BTC to stabilize UST → the death spiral was triggered, LUNA experienced hyperinflation, and the price was close to zero .

We review this event:

i) Timeline review

•May 6th: The Nasdaq plummeted 5%, BTC then plummeted from $40,000 to about $36,000, and the entire encryption world immediately started a downward trend; LFG announced that it had purchased $1.5 billion in BTC reserves through OTC transactions.

•May 8th: The attack on Curve started, Terra withdrew 150 million liquidity from UST-3pool in preparation for 4-pool; a giant whale (this address was enabled on that day) sold 84 million US dollars of UST in 3pool pool, LFG In order to maintain the balance of the pool, 100 million US dollars of UST will be withdrawn again. Subsequently, the two giant whale addresses withdrew 360 million UST deposits from Anchor, and at the same time began to sell UST on the centralized exchange, causing a short-term decoupling and panic among users.

•May 9th: LFG announced to use BTC to support UST, but due to the market environment and the sell-off of BTC, the price of LUNA continued to fall around $60, but the price of UST was relatively stable; the market value of LUNA and the market value of UST were inverted, panic spread, and death The spiral begins.

• May 10:

Even after absorbing more than 580 million UST, LFG's efforts to anchor UST on Curve still failed. UST continued to be decoupled from DEX, and the focus of rescue turned to centralized exchanges.
At the same time, the drop in the price of LUNA led to the liquidation of a large number of leveraged DeFi loans (the critical line is about 42 US dollars), which caused the price of LUNA to fall to about 30 US dollars.

There are rumors in the market that Terra is seeking to raise US$2 billion. At the same time, LFG used BTC to save the market, prompting UST to return to US$0.9, but its BTC reserve address shows zero.

• May 11:

There are rumors in the market that Terra’s financing failed, and UST dropped sharply, falling as low as $0.3. ØDo Kwon posted on Twitter, announcing that the arbitrage mechanism between LUNA and UST will make UST return to anchoring, that is, give up LUNA and keep UST. LUNA will start hyperinflation while the price will plummet, and the death spiral will start.

At this stage, LUNA began to mint a large amount of coins, and the arbitrage mechanism led to the purchase demand for UST, which once caused the price to rebound to around US$0.75.

•May 12th: The UST deposit on Anchor was reduced to 2 billion, and the arbitrage mechanism of burning UST to mint LUNA and sell it reduced the total amount of UST to about 11.2 billion, but the price of LUNA fell below $1, resulting in the marginal minting of arbitrage The amount is too high, and the supply of LUNA has increased to a scale of 150 billion+ pieces, so far the death spiral is irreversible.

• May 13:
The Terra blockchain stopped producing blocks for a short time, and after recovery, new delegations were suspended to prevent governance attacks; a few hours later, it stopped briefly again, and transactions on the Terra blockchain were suspended after this recovery, but coins can be withdrawn to the centralized exchange.

So far, due to the closure of the arbitrage mechanism, the circulation of UST and LUNA has no longer changed. The price of LUNA once fell below 0.0001, with a total of 6.5 trillion pieces. The price of UST fell below 0.2 US dollars, but there are still 11.2 billion pieces that cannot be destroyed; It has become a meme coin and has entered the spot inventory game stage in major exchanges. The 24-hour transaction volume on Binance exceeded 3.8 billion BUSD.

ii) Cause speculation

The vulnerability of the algorithmic stablecoin itself is the root cause of this incident, but the weakening of the market and the precise timing of UST bears also accelerated the death of LUNA. In just 3 days, the Terra project with a total market value of about 40 billion U.S. dollars almost returned zero.

This incident does not rule out the possibility of careful planning by an organization. There are rumors in the market that there are top hedge funds behind the scenes. After LFG announced the purchase of BTC as foreign exchange reserves, it is targeting Terra and the opportunity to short BTC.

Possible methods of operation are:

• Borrow BTC and sell (the counterparty may even include LFG)

•Seize the early stage of 4pool pool deployment, smash the UST-3pool pool to an imbalance, and spread panic and public opinion at the same time

• Selling of UST on centralized exchanges caused panic

• After UST unanchored, absorb chips at a low price and sell them again during the LFG bailout

• The death spiral was triggered, and LFG's BTC selling pressure also further led to the overall decline in the encryption market • BTC short positions were closed, and profits left the market

It is worth noting that Citadel Securities (founded by Ken Griffin and Citadel LLC) received a total investment of US$1.15 billion from Sequoia Capital and Paradigm in January this year, with a post-money valuation of US$22 billion. Paradigm, an encryption venture capital firm, is one of MakerDAO's investors.

In addition, on May 12, in the 3pool pool on Curve, the liquidity of USDT was also drained, accounting for more than 87% at one time. The lowest price of BTC dropped to about 26,000 US dollars, and the method was exactly the same as that of attacking UST.

It is rumored in the market that the short seller used 100,000 BTC to create this attack. Assuming that the opening cost is US$40,000, that is, a short position of US$4 billion. Assuming that the closing price is US$30,000, the profit of this attack can reach 1 billion Dollar. At the same time, because it only used 84 million UST to smash the market on Curve at the beginning, and can participate in selling high and buying low after the UST unanchored in the later period, its final attack cost may be extremely low, and the risk is low during the bear market and there are many opportunities.

iii) reflection

In addition to the mechanism of LUNA&UST itself, the following mistakes made Terra officials miss the opportunity to save:

• After the imbalance of the UST-3pool pool on Curve, Terra chose to withdraw UST instead of replenishing assets, which made the liquidity of the UST-3pool pool more vulnerable, causing users to question and panic on Twitter, and in subsequent attacks crash

•After the UST de-anchored, high-profile announcements to save the market, but users doubted the stability of UST, resulting in a run

•Use BTC prematurely to save the market and run out of bullets (especially when everyone knows that the reserves are insufficient), and abandon the original arbitrage mechanism when the price of LUNA is high, so that not enough UST can be destroyed.

• After the reserve was exhausted (the whereabouts of BTC is temporarily doubtful), financing was announced. At this time, LUNA has fallen sharply and financing is not feasible.

• After the failure of financing, Do Kwon tweeted that the arbitrage mechanism between LUNA and UST would play a role, prompting UST to re-anchor, but it was too late.

• Capital controls were not used, and the UST in Anchor was always allowed to escape, causing a lot of selling pressure and hyperinflation of LUNA

iv) Review of investment opportunities in the event

1) Short LUNA until defi leveraged liquidation occurs

On May 9th, when the market values of LUNA and UST were inverted, they shorted LUNA. The returns and risks were high. If LFG raised funds to rescue the market, there was a risk of liquidation. The main source of income was the defi leverage liquidation caused by the decline of LUNA, and the opening price was 42 USD or more.

2) Short Altcoins

On May 10th, it was found that UST stabilized at $0.9, but the price of LUNA stabilized at $30 for a short time, which means that LFG may be using BTC to undertake the selling pressure of UST. USDN with a similar mechanism), with lower risks and higher potential returns

3) LUNA&UST circular arbitrage

On May 11, Do Kwon tweeted that after abandoning LUNA, small funds participated in LUNA&UST circular arbitrage, that is, buying UST at a discount, withdrawing cash to the Terra chain (or Ethereum cross-chain bridge) to cast LUNA, and withdrawing cash back to the exchange to sell for cash; but risk Extremely high, chain lag, exchange deposit and withdrawal restrictions, and long time may lead to the disappearance of profits during the process of UST rising/LUNA falling.

4) LUNA stock game

On May 13, Terra resumed block production but closed on-chain transactions. Binance resumed the LUNA/BUSD spot trading pair. You can try to buy LUNA to participate in the pure capital game.

iv) Future deduction

The future development of Terra may:

1) Burn the super-issued LUNA

At present, the arbitrage mechanism of LUNA and UST has been closed, and the main trading volume is concentrated in Binance LUNA/BUSD spot trading. There may be the possibility that the exchange will continue to absorb funds during the market-making process. If the exchange can absorb enough There may be a possibility of cooperating with the Terra team to restart the project in the future. The difficulty lies in the fact that the supply of LUNA has reached 6.5 trillion pieces, and it is distributed in many exchanges, so there is a great risk of failure to absorb huge amounts of chips.

2) Repurchase at a discount and destroy UST

Find a funder, repurchase at a discount and destroy the overissued UST, reduce the anchor of UST (such as 0.5 US dollars), restore the arbitrage mechanism with LUNA, but increase the handling fee, mortgage assets and capital control, and limit the upper limit of UST and LUNA's additional issuance , slowly recovering the use cases and consensus of UST. The difficulty is that UST still has 11.2 billion in circulation, and the required amount of funds is huge. In addition, in the case of Anchor Ponzi collapse, the usage scenarios of UST are also limited.

3) Abandon UST and LUNA, restart the Terra ecology, and release new LUNA

On May 14, Do Kwon released a rebuilding plan on the Terra Forum, proposing to issue 1 billion new LUNA tokens, which will be distributed to holders of LUNA and UST before breaking the anchor. But Changpeng Zhao said that the fork of Terra will not generate any value, and at the same time questioned the flow of LFG's BTC reserves. No matter what method Do Kwon uses to rebuild the project, most users have lost confidence in UST.

The incident has attracted the attention of regulators. U.S. Treasury Secretary Yellen said that UST is a real example of stablecoin risk. The Treasury Department is stepping up the development of a stablecoin risk report. Although the risk has not yet reached the scale of a systemic threat, she said that a comprehensive framework for stablecoins needs to be developed by the end of the year. She also said that the emergence of stablecoins is a demonstration of the central bank's digital currency (CBDC). The central bank's digital currency may weaken the diffusion of stablecoins, but it is more likely that the central bank's digital currency will rely on financial companies. The SEC also said that stablecoins may be regulated in light of the collapse of UST.

Summarize:

Under the background of strengthened regulation, USDC-type fiat currency stable currency controlled by supervision will become the mainstream, and the market share of USDT and decentralized stable currency may gradually decrease, and even more unanchor events will occur; the cryptocurrency market becomes a volatility An enlarged version of the Nasdaq index, under the condition of perfect supervision, more professional financial institutions will also enter the market. The development of the encrypted world and the decentralized vision may lead to the birth of more decentralized algorithm stable coins, challenging the dollar hegemony in the encrypted world.

4） Juno

On May 15, the Juno community released a proposal to provide incentives for smart contract projects migrating from Terra to Juno. The proposal proposes to provide the community with 1 million JUNO (approximately $7 million) for project migration and continuous development. This shows that even if LUNA is zeroed, Terra, as a layer 1 blockchain ecosystem, has great value for projects and developers deployed on it. It currently looks like the proposal will be passed.

5.DAO Decentralized Autonomous Organization

TheCafeDAO

5.DAO Decentralized Autonomous Organization

Last week, a DAO organization called TheCafeDAO opened a pop-up coffee shop in Seattle. Through this test, TheCafeDAO hopes to become the first entity to operate entirely through a DAO structure.

TheCafeDAO bills itself as a "cafe for everyone," with customers and employees being awarded "coffee tokens" that grant governance permissions and discounts on every coffee purchase. The token itself is still in alpha stage and has not yet been connected to any blockchain, TheCafeDAO uses this temporary coffee shop as a test run for its token economics.

The coffee stand is located outside the NFT Museum in Seattle and only sells coffee for $5. The model is the latest in a series of DAO experiments, inspired by the founding members' idea of building a "decentralized Starbucks."

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5. JZL team news

JZL Capital is a professional organization registered overseas, focusing on blockchain ecological research and investment. The founder has rich experience in the industry. He has served as the CEO and executive director of many overseas listed companies, and has led and participated in eToro's global investment.

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