Polygon announcements multiple partnerships, ETH merge date soft committed, Celsius Bankruptcy disclosures and US CPI reaches all-time high

18th July 2022

and

Jul 17, 2022

1. Polygon rallies after a week of announcements

$MATIC the native token of Polygon, rallied 32% last week in wake of multiple high profile partnerships and announcements.

First, Polygon was chosen as one of the 6 companies and the only blockchain company, to be selected for Disney’s Accelerator program in 2022
Second, support for $MATIC withdrawals and deposits went live on Robinhood
Third, the team is all set to unveil and showcase its new zkEVM product during ETH Paris this week

Early Thoughts: While none of these announcements are a major product milestone or bring any change to the current network, they continue to highlight Polygon’s BD team as one of the most active amongst competition

2. ETH’s Merge projected for September, according to soft proposed timeline

Ethereum's Merge may take place on the week of September 19. The Merge will see Ethereum move from the energy-intensive PoW consensus mechanism to a more efficient PoS system. It is not expected to reduce Ethereum's fees and slow transaction speeds, but it will have a significant impact on the network's energy use. While the announcement gave a rare hard date for the Merge, the timeline is still very likely to change.

ETH is up +30% on the week , breaking $1,500 in London morning, whilst LDO is up 2.6x over the same period

Early thoughts: The wording is very soft “Suggested time-line for discussion” and going through the actual report it appears there is still a considerable amount of work to be done

3. Celsius Bankruptcy discloses details of shortfall and bad dealings

Bankruptcy fillings by Celsius Consulting Partners Kirkland & Ellis reveal new details about Celsius operations and balance sheet shortfall.

As of July 2022, Celsius holds $4.3 bn in assets and $5.5 bn in liabilities. ~$1.2 bn shortfall
Celsius used $750 mn of customer funds into its mining operations and has $576 mn of liabilities against it. It appears that it purchased a significant number of mining rigs (currently 80,850) and the value of these rigs have also dropped significantly
It lost 38,000 ETH in the Stakehound key debacle. A further $15 mn in the Luna crash and $40.6 mn liquidating its 3AC exposure
Tether liquidated a $841 mn loan to Celsius which incurred a further $97 mn loss to Celsius
Lastly, Celsius took a loan from EquitiesFirst, and when tried to repay, it was informed that the firm was unable to return Celsius’s collateral. Celsius continues to receive timely payments of over $5 mn each month, against this debt now turned to loan

Our Thoughts: With this latest disclosure, its seems like Celsius’s blowout was not caused by any single event like 3AC or Luna crash, but bad fund allocation and risk management practices across multiple unrelated trades

Quick insights - In the Charts

1. Public $BTC miners dumped almost 25% of their holding in June

Between January - April, miners sold only 20% of their production trying to ‘hodl’ as much as possible
The crashing prices forced miners to sell upwards of 100% production in May and almost 400% of the production in June
The reason behind the sales is likely to free up liquidity to better position for a prolonged bear market and the lack of lending capital available in the market

Some specific miners such as Bitfarms and Core Scientific have sold much bigger proportions compared to other

These miners had large bitcoin and machine collateralized debt positions. Falling $BTC price forced some these players to pay of their loans by selling more
Miners may continue to sell more due to decreased access to external capital, but overall pressure should slow down as holdings of many farms is already low

2. Q2’22 trends in Crypto VC

Insights from The Block research Q2’22 Private Funding and M&A recap

The reluctance of VCs to deploy capital can be seen with a 21% MoM decrease in deals from May to June

NFT/Metaverse and Gaming emerges as a dominant sector in investments, for 3 straight quarters

A notable trend with Solana shows that, NFT/gaming projects are attracting more funding than their DeFi counterparts. This is an interesting trend as DeFi on Solana was one of the biggest focus of the ecosystem, protocols like Serum and Pyth have some of the most high-profile backers and collaborators of Solana ecosystem

A guest post by

Chirag Budhdeo

Investor @ BH Digital

Aakash Gupta