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27th April 2024 > > Debt, growth, & LRTs.

Updated: Jun 13


US debt and growth prospects. Do yourself a favour and do not get involved with LRTs, one of the fastest growing DeFi applications.

Market Snap

Market Wrap

Three consecutive days of outflows from the ETFs is hurting the price of BTC, so let’s cheer ourselves up with an interview with Mark Yusko, CEO of Morgan Creek Capital:

His personal view is encapsulated in this statement:

“There’s going to be $300 billion, I believe — that’s 1% of $30 trillion — that comes into this space [within 12 months]. That’s actually more money than has ever [been] converted to Bitcoin in 15 years. That’s a pretty amazing thing.”

1% is too low an estimate, but anyways.

Curious Cryptos’ Commentary – US growth

I don’t think I need add anything more to this:

Except perhaps to reinforce the key point:

“Always more debt and always less growth, you can count on that”.

This is the dreadful, painful legacy bequeathed by the debt pile created by a succession of fiscally incontinent governments, encouraged by the lunatic fringe supporters of MMT, the least progressive policy known to humankind.

And you still don’t think BTC has value?

Curious Cryptos’ Commentary – Re-staking tokens

This is another one of those financial engineering scenarios that has gone horribly wrong, at least for some people.

If you own ETH, and it is simply sitting in your cold wallet, you are missing out. Since ETH moved to PoS you can stake your ETH for up to 5% p.a. staking rewards. In itself, though it buys a lunch or three, that return doesn’t change the dial. But if you are a long-term holder, and that 5% is compounded (compound interest is the eighth wonder of the world, if you don’t believe me a very simple spreadsheet model will convince you otherwise) then it starts to make a difference.

There are plenty of reliable staking options out there. If you have 32 ETH and a Ledger Nano (which I assume all holders of 32 ETH or more own) then head on over to Ledger Live, and stake directly with Kiln. If you have less than 32 ETH you can join a Kiln pool. Alternatively – which happens to be my second favourite option after staking directly – is to buy stETH whose equivalent value in ETH grows daily. stETH can also be traded, or used in DeFi.

Note that buying stETH, or staking via Kiln’s staking pool, does involve selling ETH to buy a new coin. This is a taxable event in the UK, however ridiculous a concept that is, a subject to which we will return.

With these three options I see no need to use any other staking service. But of course, cryptos do not work like that, leading to the rise of LRTs – liquid re-staking tokens, an extension of the idea behind stETH.

LRTs are aimed squarely at those who wish to leverage their crypto assets, a foolish approach in my opinion, but we are all consenting adults.

Amongst the cohort of LRTS is EZETH. Created by the Renzo Protocol, it has proved popular enough to attract a TVL of over $3bn, which is growing rapidly.

When EZETH is used as collateral for borrowing via DeFi platforms such as Gearbox and Morpho Labs, the biggest risk for the borrower is a de-peg from ETH. If your EZETH drops in value against the loan, you are at risk of liquidation, a common experience for those who use leverage.

On April 24th, EZETH dropped to $688 from around $3,200 because of liquidity issues. Owners of ETH who had swapped for EZETH, and borrowed more ETH against EZETH to rinse and repeat, got closed out. They were left holding nothing apart from an empty wallet, and large bags of regret when the peg was swiftly regained.

Some people refuse to learn the basics.

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