Shaurya Malwa writes about Conic Finance, whose new tool for capturing high yields from stablecoin swapping service Curve has attracted over $60 million from depositors since its unveiling March 1. But at least one analyst questions whether it can deliver on its promise.
Prices: Bitcoin inched down to its lowest level in more than three weeks. It regained some ground to trade at about $21.7K.
Insights: Conic Finance aims to offer its users yields as high as 21% on three separate omnipools, which diversifies exposure across the Curve ecosystem. But can it deliver?
Bitcoin Falls to Lowest Level in Nearly a Month.
Asia. Here’s what’s happening in markets.
U.S. Federal Reserve Chairman Jerome Powell talked tough for a second consecutive day. Banking giant JPMorgan ended its relationship with crypto exchange Gemini, as CoinDesk’s Ian Allison first reported. Crypto-friendly bank Silvergate will shutter operations.
Bitcoin absorbed it all and then inched downward to its lowest level in nearly a month. The largest cryptocurrency by market capitalization was recently trading at about $21,750, down more than 2% over the past 24 hours. BTC sank below $21,600 at one point after largely teetering over $22,000 for much of this month. Investors have been wrestling with worrisome jobs and price data that has prompted Powell and Fed governors to rekindle their monetary aggressiveness as an inflation prescription.
The prospect of a 50 basis point (bps) interest rate hike now rests about 70% after heavily favoring a more dovish 25 bps increase in previous weeks.
“After celebrating disinflation greenshoots the past two months, the Federal Reserve has had to restart its hawkish positioning by talking tough on rate hikes,” Quinn Thompson, head of growth and capital markets at blockchain-powered capital markets platform Maple, wrote CoinDesk in an email. “I think it’s interesting to note that they were parading their hikes as having a substantial impact on inflation, and then it became clear that inflation has proved to be more stubborn than had been anticipated. A 50-basis-point rate hike is basically inevitable now.”
Thompson added that “barring any breakage in the system, such as a credit event of some sort, it seems increasingly likely that there won’t be any rate cuts until next year.”
Ether fared similarly to bitcoin and was also down about 2% to change hands just above $1,530. That level was well off its late February highs over $1,700. Other major cryptos were mostly in the red with SOL, the token of the Solana blockchain off more than 9% and APT, the native cryptocurrency of layer 1 blockchain Aptos Labs down over 6%. The CoinDesk Market Index, a measure of the broader crypto market’s performance, was down nearly 3%.
The Nikkei rose about 0.5% as trading in Asian equity markets opened. U.S. indexes were flat with the tech-heavy Nasdaq and S&P 500, which has a heavy technology component, climbing slightly but the Dow Jones Industrial Average (DJIA) declining a couple of ticks of a percentage point.
IMaple’s Thompson was wary about the cryptos’ prospects amid the Fed’s apparent hawkish turn, which has historically sent prices of crypto and other riskier assets tumbling.
“I suspect that we could again test the lows that were reached last year as a result of hiked rates, but also because of the Fed’s ongoing monetary tightening regime that is draining liquidity out of the markets,” he wrote. “A lot of this tightened monetary policy is being priced into the fixed income markets. But risk assets have yet to price in the potential for downside spillover, and this could spell trouble for equities and crypto.”
Conic Finance’s Big Promise, but Will It Deliver?
An earlier version of this story appeared separately on CoinDesk’s website.
A new tool to capture yields from prominent stablecoin swapping service Curve has attracted over $60 million from depositors just over a week after launch.
Conic Finance, which went live on March 1, allows users to deposit tokens into its omnipools, a new product that diversifies exposure across the Curve ecosystem while increasing rewards.
Each omnipool allocates liquidity of a single asset into different Curve pools. All Curve liquidity provider (LP) tokens get staked on Convex to boost curve (CRV) rewards earnings. Convex (CNX), another Curve ecosystem token, is also rewarded, and so is conic (CNC), Conic’s native token.
Conic users can earn up to 21% annualized yields on the three omnipools for dai (DAI), frax (FRAX) and USD coin (USDC). The USDC pool has attracted over $50 million in liquidity alone, as Conic is currently providing one of the highest available yields in the crypto market for USDC. Deposits of frax and dai are considerably lower at $7 million and $5 million, respectively.
Holders can lock their CNC tokens for vlCNC to participate in Conic governance and directly control how liquidity is allocated across Curve pools by participating in Conic’s Liquidity Allocation Votes (LAV) – which determine the share of an omnipool’s liquidity that a Curve pool can receive.
In the coming weeks, Conic’s demand among traders for its yield-generating products could ultimately generate value for its own CNC token.
As such, CNC tokens currently trade at $8, losing 4% in the past 24 hours with a market capitalization of $32 million.
To be sure, not all DeFit observers are fully embracing Conic’s approach. Colin Johnson, the CEO and co-founder of tokenized art investment platform Freeport, called Conic “an interesting new avenue to access yield within the Curve ecosystem,” yet added warily that “we’ve seen historically what happens with promised returns of 20% or more (Terra).”
“They either rapidly fade – which is most likely to happen here – or they build up an amount of stress that the system cannot handle, and we get an implosion,” Johnson wrote. “Users should always beware when yield is delivered in a token that represents the very system they’re interacting with. When that token falls out of favor, its price tends to plummet.”