Fed Chair Says Money Printer Will Go Brrr Faster; Bitcoiners Not Surprised
Also, yield farmers decide to fund public goods, stablecoin index reached $3M cap hour after launch, SEC's new accredited investor rules are laughable
Hello Defiers! Lots going on in decentralized finance,
- Fed will let inflation run faster, which is good, but not surprising for Bitcoin
- Yield farmers are more than degen gamblers; they’re using part of their cash to fund public goods
- The SEC broadened accredited investor rules to include not just the rich, but the rich and their friends
and more :)
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Money Printer Will Go Brr Faster; Bitcoin Not Impressed
What every Bitcoiner warns against happened today: Federal Reserve Chairman Jerome Powell said the U.S. monetary authority will let inflation shoot above its 2% target to privilege the labor market.
The obvious argument to make is that “this is good for Bitcoin.” It’s a tired meme, but right now it seems to be especially appropriate. And sure enough, Bitcoin jumped 2% after Powell’s speech to ~$11,550. Traditional markets also reacted, with the S&P 500 rallying to new highs, while yields on longer-maturity U.S. bonds climbed.
But while markets are still rallying on the unexpected policy shift, Bitcoin quickly lost most of its gains, a sign the news was already incorporated in the price. The fact that the Fed can and will make the money printer go brrrr even faster isn’t surprising to the crypto market and only deserved a knee-jerk reaction.
Image source: Coingecko
Still, Powell’s statements point to a trend that should support cryptocurrencies in the long term.
Faster inflation means there is more money in the economy to buy the same amount of goods, increasing consumer prices and eroding the currency’s value. When price increases in the U.S. climb over 2%, the Fed hikes rates to incentivize the market to stash some of the money in savings. But now Powell and 11 other policymakers decided behind closed doors the world’s most powerful central bank will change its policy; it won’t act when this happens and will just let inflation run higher.
Here’s what’s troubling about the statement:
- It’s a reminder that a small group of people has absolute power over the direction of fiat currency, in this case, the world’s reserve currency.
- The Federal Reserve has the dual mandate to protect the labor market and to keep consumer prices at bay. The problem is that two goals are often opposed and in a world that’s increasingly leaning towards populism, central banks will choose to privilege the job market over keeping inflation targets. This means the currency loses.
The statement is good for Bitcoin because it may prompt people to hold the largest cryptocurrency after realizing the following:
- Bitcoin has a predictable issuance schedule and a cap on the coins that will ever be issued, set at 21 million.
- Monetary policy follows the rules coded on the Bitcoin protocol, and can’t be changed by a small group of people calling the shots behind closed doors. Any changes are made by broad consensus.
- The price of bitcoin will be volatile because of free-market forces, but it won’t be devalued because a centralized entity decided more coins will start to flood the market.
Decentralized finance is about an alternative infrastructure for money, that’s based on global, distributed, transparent and open networks. Ethereum is the layer for many of the more complex financial applications, but let’s not forget Bitcoin’s role in this space: it’s crypto’s hard money. DeFi’s digital gold. An alternative to financial systems that are often reckless, populist and unpredictable, sometimes corrupt, and always centralized and opaque.
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Yield Farmers Show They’re Not Just Degen Gamblers
Yam Finance - a yield farmers paradise which aggregated $600M in TVL in less than 48 hours - will direct 1% of its future treasury to Gitcoin Grants public goods funding upon its forthcoming V3 migration.
Inspired by a community tweet, Gitcoin CEO Kevin Owocki took to the governance forum to propose that Yam’s bountiful treasury, which had previously aggregated $500k in V1 before being lost to a bug, “pass it along” to the Tech Grants category.
It wasn’t obvious that the community would decide to funnel part of the treasury to Gitcoin grants, as early voting results were against the proposal. After some peer pressure, willingness to contribute to the common good prevailed.
ΞWoki; Ξxplorer of the🌈 Quadratic Lands 🌈 @owockiWe'll PROVE to DeFi that contributing to public goods is *positive sum*; & they’ll get in more than they put out (zero sum). I'm bummed @YamFinance community likely won't be first mover here. The proposal is losing rn. 😕 If you're a 🍠🐋 , pls vote ⬆️! snapshot.page/#/yam/proposal…
1:45 PM ∙ Aug 26, 202085Likes12Retweets
yEarn Finance also stepped up to support the initiative by hosting its own governance poll, passing a vote which would direct 1% of the TreasuryVault’s rewards to the Gitcoin Grants Wallet.
Andre Cronje @AndreCronjeTechDon't worry @owocki over at @iearnfinance its not a question of will it be included, its a question of how much will be included, voting resoundingly positive so far; vote.yearn.finance/yearn/proposal…
ΞWoki; Ξxplorer of the🌈 Quadratic Lands 🌈 @owockiWe'll PROVE to DeFi that contributing to public goods is *positive sum*; & they’ll get in more than they put out (zero sum). I'm bummed @YamFinance community likely won't be first mover here. The proposal is losing rn. 😕 If you're a 🍠🐋 , pls vote ⬆️! https://t.co/dxahxaqehm https://t.co/i5JwNQxuNc2:02 PM ∙ Aug 26, 2020274Likes33Retweets
Users of Ethereum’s multi-billion dollar ecosystem rely on many layers of composable open source repos, Kevin Owocki, Gitcoin CEO said.
“It is very important to these stakeholders that we continue to harden this digital infrastructure,” Owocki told The Defiant. “By properly funding the infrastructure, the YAM/YFI stakeholders are contributing to the public good of the Ethereum ecosystem, responsibily contributing to the public good, and increasing the chances we can get ‘to the moon’ :tm:, without another existential disaster like the DAO hack or the infamous heartbleed bug.”
Popularized for its CLR Matching Rounds which leverage Quadratic Funding, Gitcoin Grants provide matching funds to projects which receive the highest number of unique donations, rather than the total aggregate amount of those donations. This method of funding has led to 846 grants with more than $2.5M of funding allocated since January of 2019.
This shift in narrative goes to show that yield farming can be more than a degen zero-sum game. The DeFi community is now banding together to help support public goods funding, a problem which has plagued open source development since inception.
Changes to Accredit Investor Definition Are Laughable
When SEC Commissioner Hester Peirce said yesterday “Why should I, as a regulator, decide what other Americans do with their money?” in the context of changes to the accredited investor definition, I was encouraged: maybe the US will finally adopt a more reasonable stance and lower barriers of entry to profitable investments beyond the rich.
I was wrong.
While the new rules broaden the definition a tiny* bit, the accredited investor definition continues to leave the large majority of the population out.
As a reminder, anyone who has at least $1M in assets or at least $200k in income / $300k in household income can participate in any market, private or public —why the wealthy are supposed to be more trustworthy with their investment decisions than the rest is anyone’s guess.
Now, the SEC expanded its rules to add those who already are in the financial industry and to companies with millions of dollars in assets, which continues to reduce some of the most profitable investments, like early-stage venture funding, to the same old club. Here are the new rules.
DefiDollar Reaches Debt Ceiling Within Hour of Launch
DefiDollar - a new stablecoin index behind DUSD - has hit its $3M debt ceiling within an hour of launch this morning.
DefiDollar @defidollarWe've hit the TVL cap of $3mn 🤯 Humbled by the amazing response! Will update the community when we revise the TVL cap. Please note that DUSD minting is paused for the time being.2:38 PM ∙ Aug 27, 202021Likes2Retweets
“Security of user funds is the topmost priority for us at DefiDollar.” CTO Siddharth Jain told The Defiant. “Hence we decided to do a TVL capped launch despite having not one but two formal audits.”
DefiDollar offers a hedge against stablecoin price fluctuations by using a volatility cushion. Users can mint DUSD 1:1 using DAI, USDT, USDC, and sUSD while the underlying assets are routed to Curve’s sUSD pool. The interest captured from lending is partially routed to a reserve which is used to rebalance and maintain the peg in the event any of the assets in the basket diverges from $1.
Unlike most recent launches, DefiDollar has been professionally audited by PeckShield and Quantstamp, giving yield farmers confidence the smart contracts are secure.
The protocol is built on top of Curve, giving it a unique advantage over stablecoin projects like mStable which operates in its own ecosystem.
DefiDollar differentiates between two key actors, DUSD LP’s and DUSD Stakers. DUSD LP’s earn CRV & SNX liquidity mining rewards while stakers earn both the governance tokens and fees from Curve and DUSD redemptions.
Jain said the team hasn’t decided when to raise the cap.
“We will now be monitoring the system parameters before adding to the TVL cap. This is to ensure that the system is stable and we proceed in a slow but safe manner” said Jain.
Akropolis Launches A Yield Farming Aggregator
Akropolis launched Delphi, a yield farming aggregator that offers different investment options according to users' risk appetite. The product allows users to invest in low-risk stablecoin pools, volatile pools, dollar-cost-averaging strategies and staking. The project will distribute 95% of its governance token, ADEL, through liquidity mining to the product's users.
Akropolis @akropolisioDelphi Open Beta is live 🎉🎉🎉🥂🥂🥂 Mainnet - delphi.akropolis.io P.S. Final audit report pending. Delphi is Beta. Please use at your own risk.
7:23 PM ∙ Aug 24, 2020405Likes147Retweets
With Delphi, less sophisticated can invest or rebalance their position, across various pools by performing one single transaction, instead of different transactions to allocate assets in each pool, a much-needed approach in the Ethereum space, where gas costs continue to skyrocket with the continuous growth of DeFi.
Low transaction fees and dollar-cost averaging
The project’s Dollar-Cost Averaging feature, which is not live yet, lets investors allocate similar amounts of capital to the same asset regularly to reduce the impact of price volatility. Used by centralized exchanges such as Coinbase, this is the first time that it will be available in a decentralized platform on Ethereum.
This is the second product launched by Akropolis on its AkropolisOS, a framework for creating profit DAOs, and it is still undergoing an audit.
Governance of the system
Delphi's governance token, ADEL, has a similar narrative to other governance tokens and is said to have no intrinsic value and can only be obtained via Delphi's liquidity mining. The token has a cap of 60M and will have a shared claim of Delphi's future fees.
In a context where platforms such as 1inch are being criticized for their uneven token distribution favoring investors, Delphi will distribute 95% of its supply to the community.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access at $10/month or $100/year or 70 Dai/year, while free signups get only part of the content.
About the founder: I’m Camila Russo, author of The Infinite Machine, the first book on the history of Ethereum. I was previously at Bloomberg News in New York, Madrid and Buenos Aires covering markets. I’ve extensively covered crypto and finance, and now I’m diving into DeFi, the intersection of the two.