|March 14, 2023||View Online|
Bitcoin is surging as the Fed shows mercy while Euler Finance gets hacked for $200M. Plus, Binance sells $1b of BUSD for native crypto tokens.
We've got all that and more in today's newsletter.
Let's dive in!
Bitcoin takes off on signs of Fed mercy
Some mornings the air feels fresher, the sun feels warmer, and that first cup of coffee tastes better - I wonder why that is...
On an unrelated note, Bitcoin was up nearly 10% yesterday, with over $160M in shorts liquidated!
Since the Fed announcement bailing out bank depositors on Sunday afternoon, Bitcoin has been riding a high and is now up over 20% since its March 10th lows of $20k.
Why all the excitement?
Technically, by bailing out depositors and creating the Bank Term Funding Program (BTFP), the Fed is injecting liquidity into the markets again.
Every investor's two favorite letters are coming back - Q and E (for quantitative easing of course).
This is a significant change from the QT (quantitative tightening) we've been having for some time now and means, hopefully, the Fed is done removing liquidity from the economy.
People are excited to see this liquidity get pumped into major assets like Bitcoin, and some are going as far as to say we won't have a rate hike in March.
That's all just guessing games though...
The Fed has two paths to consider for the upcoming March meeting:
We can all speculate on the outcome, but at the end of the day, it's up to Jerome Powell and friends to pull the trigger and live with the consequences.
In the meantime, investors will be sitting tight and hoping for a nice little rate adjustment of 0.00%, along with green prices in bitcoin and other assets.
Euler Finance Takes a $200M Hit
It's common knowledge at this point that building DeFi protocols is a complicated task.
Imagine creating a safe securing millions of dollars - left in the town square for anyone to crack. One slight mistake and boom, the contents of your safe are available to the public.
Monday's safe manufacturers were Euler Finance, an Ethereum-based non-custodial lending protocol.
What was taken?
A whole variety of crypto assets were extracted from Euler's smart contracts:
For a grand total of (drumroll please) $196.9M! Marking the largest hack of 2023.
In all seriousness, this hack is devastating for the team, VCs and protocol users of Euler Finance. The Euler team has spoken out and mentioned that they are working very closely with law enforcement and that their number one priority is to reclaim funds for their users.
We wish them the best of luck on this journey.
Now who has the mind, will, and resources to bring such a successful DeFi app to its knees in a few quick transactions?
A black hat with experience.
ZachXBT, a prominent blockchain analyst and crypto firm Meta Sleuth both noticed that this hack looks highly similar to an attack on Binance Smart Chain just last month.
In both cases, the funds were immediately sent to the newly sanctioned app, Tornado Cash - making them extremely difficult to trace.
As for logical next steps, everyone is diving into exactly what happened so that protocols can protect themselves from this kind of attack in the future.
Blockchain security firm SlowMist gave a prompt breakdown of the situation stating:
"The attacker used flashloans to deposit funds and then leveraged them twice to trigger the liquidation logic, donating the funds to the reserve address and conducting a self-liquidation to collect any remaining assets."
That's a mouthful.
The hacker borrowed money (legally) from Aave and then deposited it into Euler. The trouble began when the hacker borrowed even more from Euler to the point of triggering his liquidation.
After claiming millions from Euler, he could repay the initial loan from Aave and pocket the change ($196.9M).
Not a bad day at the office.
Binance sells BUSD for native crypto
Is leaving money in a bank riskier than holding crypto? Binance CEO and crypto icon CZ seems to think so.
He announced early Monday morning that he would "convert the remaining of the $1 billion Industry Recovery Initiative funds from BUSD to native crypto, including BTC, BNB and ETH" after this weekend's bank worries.
After a 15-second transaction and $1.29 in fees, the transaction was completed before the banks had even opened for the day.
This whole crypto thing may be useful after all.
For some context on the "Industry Recovery Initiative," it was set up in November 2022, after the FTX collapse, to help other crypto projects struggling in a liquidity crisis.
How nice is that?
But there's more to the story...
This transaction comes after Paxos, the issuer of BUSD, has been hit by a lawsuit from the SEC. Since then, Paxos has announced that it is ending its relationship with Binance and halting the minting of BUSD.
Seems like crypto-native options were the only way to go for safety from the big bad SEC and bank run worries.
What else is sprouting
That's all for today!
Hope you have a great day and we'll be sliding into your inbox tomorrow 🙂