[Daily] Circle isn’t out of the woods yet

Good morning! Welcome to The Daily Moon. A federal judge in Florida has served a legal notice via NFT. This person lost his money and sued the anonymous hackers. Judge ruled in the victim’s favour, using the same on-chain addresses that stole from him. A use case right there, who are the people who said NFTs were useless?

As of Wednesday, 8PM IST

The crypto market's bull run hit pause. Bitcoin's rally was halted by investors booking profits. Ethereum fell with the Shapella buzz over for now. S&P 500 and Nasdaq slid on a selloff in technology stocks. Back home, Sensex and Nifty had another bearish session on FII selling.

Shapella Is Done, But…

ETH’s Shapella upgrade is done and dusted. But it wasn’t a smooth switch for everyone and a handful of people were not able to withdraw Ether.

But why?Remember the instructions? Validators were asked to modify their nodes to test Ether withdrawals. Some didn’t. So when Shapella was launched, there were glitches. Old nodes were unable to unstake but it was fixed soon after. Ethereum’s core developer Tim Beiko claims that some validators chose to stay put because there wasn’t any incentive attached to it.

FYI Shapella is just a testnet so validators don’t earn any rewards to take part in trials.

Did the buzz work?The second-largest crypto is already up ~10% in a week. It also attracted whales who’ve been buying the dip since February. Whales with 1,000-10,000 ETH added Ether worth $600 million in a month. Even the recent pump hasn’t tempted them to sell.

But there’s a small hiccup. A technical metric called NVT Signal is trading at a high premium, which means that ETH is overpriced.

What’s next?The Shanghai mainnet is expected to launch in a few weeks, we don’t know the exact date yet. Once that happens, Ether withdrawals will kick-start officially. About ~$28 billion in staked Ether can be unstaked, but not all at once.

Post-Shanghai, 1,800 validators will be allowed to withdraw all their ETH (plus rewards) every day. They’ll be chosen at random to ensure that the network isn’t drained. By the time all stakers withdraw their tokens, ETH will move on to its next upgrade, Cancun.

Stablecoins Need Stability

USDC’s depeg on Friday sent shivers down investors’ spines. It felt like the Terra crisis all over again, especially in the wake of Silicon Valley Bank’s collapse. The stablecoin regained its peg, but the market’s still wary.

What’s the status?Circle, the issuer of USDC, will transfer its $3.3 billion reserves from SVB to BNY Mellon. SVB hasn’t found a buyer yet and funds in excess of $250,000 are locked. As a consequence, two things have happened:

1. Investors have swapped USDC for “safer” crypto such as ETH

2. There is a rush to sell USDC on exchanges.

A second degree was that some borrowers in Aave and Compound also quickly repaid loans using USDC.

When will it recover?If you go by crypto investment expert Jeff Dorman, USDC will see massive redemptions. It can be as high as $20 billion. His estimate, not ours. But once USDC passes this stress test, it’ll be business as usual.

EU’s Smart Contract Kill Switch

The European Union voted in favour of new rules that may require smart contracts to have a kill switch. It’s not very good news.

What is this about?Smart contracts are an important part of the crypto world. They execute transactions if certain criteria are met and eliminate intermediaries. The bill, among other things, proposes that smart contracts have access controls and protect trade secrets and have functions to stop or reset, without specifying who would be responsible for this “kill switch”.

Not the best ideaMany people argue this is bad for a decentralised world. People have begun to step up. A few have offered to mediate between lawmakers and national governments to help them draft a final law.

A Resistible Offer

What do you do when someone steals hundreds of millions from you? Ask them to keep $20 million and return the rest. Or that’s what noncustodial lending protocol Euler Finance is trying to do.

Wut?Well, it’s their way of cutting a deal. Here’s what happened. The platform was hacked on Monday and the hackers stole nearly $200 million. Investors were obviously not happy, it wouldn’t have helped when Euler sent the hackers a message that was, erm, underwhelming. So they decided to change the game.

Now what?Well, it is a pretty low stake ultimatum. Nobody seems to be impressed. At the larger level, hacks such as these lower the faith in the overall system. And Euler’s response is nowhere near as serious as it should be.

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