DeFi markets have experienced a rollercoaster of emotions the past 24 hours.
Over the past 48 hours, DeFi and Crypto Twitter have been on a wild ride. The rollercoaster initiated when CoinDesk reported that one of the co-founders of popular Avalanche-based automated money market (AMM) Wonderland, pseudonymous “Sifu” was revealed to be Michael Patryn.
DeFi sleuth, zachxbt, discovered 0xSifu was Michael Patryn.
Furthermore, popular co-founder, Daniele Sestagalli, knew who “Sifu” truly was and chose to give him a “second” chance, despite Patryn’s checkered past.
Co-founder of Wonderland and contributor to Abracadabra admits knowing of former life of fraudster.
However, members of the Wonderland community on Twitter did not share the same sentiment as Sestagalli.
Twitter followers scathe choice made about Wonderland’s co-founder.
Since the revelation, affiliated project Abracadabra (SPELL) has experienced harsh losses. Abracadabra’s stable coin, MIM, has experienced significant selling pressure, leading to its peg breaking.
MIM has floated below $1 for the past few days but is recovering.
Per Coingecko, MIM supply has dropped by 17% over the past 7 days.
MIM supply has dropped 17% since the Sifu incident.
Several theories have emerged as to why MIM is dumping, including large institutions like Alameda Research liquidating MIM. But, what appears to be driving the situation is the interconnectedness of Abracadabra’s DegenBox and Anchor Protocol. The President of Jump Crypto, Kanav Kariya, posted his thoughts on Twitter regarding the situation.
Interconnectedness of MIM and UST is likely driving demand down for the former and up for the … [+]
Exodus from MIM into UST is unlikely to continue according to Jump Crypto’s President.
Both stable coins, MIM and UST, have stabilized back near their pegs, which lends some credence to Kanav’s argument. Furthermore, the stable coin market cap is still $177 billion according to Coingecko; only slightly slower compared to the previous 7-day period.
DeFi has shown numerous times, reflexive feedback loops powered by hype inevitably reverse. But, the genuine demand that remains, e.g. strong market cap for stable coins, typically makes the system more robust in the longer term.
In particular, DeFi’s free market mechanics and self-policing nature by the community, allow for the continued removal of bad actors and increased anti-fragility of the ecosystem.
In DeFi, Schumpeter’s creative destruction applies to both innovation and lessons learned. I fore-one am excited to see these lessons put into action to forge a better DeFi.
Source: https://www.forbes.com/sites/christopherbrookins/2022/01/29/founder-misconduct-volatility-and-reflexivity–defi-chronicles/