$BALD on BASE | Curve Blows Up

A weekly recap of the largest crypto events and narratives, with an extra dose of insight.

Here’s what we have for you:

• $BALD | BASE

• Reducing emissions

• Nansen V2

• SEI Binance launchpool

• Aerodrome launching soon

• Curve gets hacked

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I hope you’re not balding. But I did hope you got into BALD and got out in time. If you missed what happened, over the weekend, a mysterious individual launched a token on Coinbase’s new L2, BASE.

The token had the ticker $BALD, named after Coinbase CEO Brian Armstrong’s bald shiny head. I don’t know about you but that has to be the shiniest scalp I’ve ever seen. The token deployer added over $60M in liquidity. Yes you read that right. The mystery man, which no one has figured out who it is yet, is definitely well off.

At one point, the token was up 4,000,000%. If you can’t convert that, that’s a meager 40,000x. The story doesn’t end there. The token deployer then proceeded to remove his liquidity, causing the token to nuke. He then added back some of the liquidity, resulting in the token instantly 8x’ing. And lastly, the DEX that the liquidity was deployed on was exploited. At the end of the day, everything went to zero.

So what’s the takeaway?

First of all, most of the time, if you want to be in on something seeking for good risk-adjusted returns, you truly have to be early. If not. you’ll be exit liquidity. There are very few cases where you can buy a token after a large run-up, and it is either not a scam or you aren’t exit liquidity.

However, there is always ample opportunity. Now that $BALD has set the scene for BASE, and the people know that there is an opportunity to degen there, assets and activity will likely flock there, even though there is more or less a guarantee of there never being an airdrop for BASE itself.

I would pay a large amount of attention to potential opportunities on BASE over the coming months.

Reducing emissions. The goal of a protocol to reach a stage of self-sufficiency where they no longer have to have token emissions and dilute token holders, while generating revenue.

Token emissions were used liberally throughout the bull market, but these days in the depths of the bear market, they aren’t that valuable anymore, and just don’t attract the same type of long-term capital that it used to.

That’s why there has been a recent slew of governance votes to reduce emisssions, including dYdX, Aura, and Aave.

dYdX is voting to reduce emissions for liquidity providers by 50%, Aura is proposing to reduce the baseline amount of AURA minted by BAL for all LPs by 60%, and AAVE is voting to reduce emissions by a few million annually.

These are all important proposals, and it will be interesting to watch the next bull market in the hopes that protocols think of more sustainable liquidity incentives, instead of just mindlessly printing tokens.

We’re doing something a little different this week. Normally you get a Dune dashboard and how to utilize it to give yourself edge. Today, we’re going to talk through a little event trading.

On Sunday, Curve got exploited through a reentrancy attack. Without going into too much details, there was something wrong with the Vyper compiler, and basically someone was able to call a contract without checking whether a state was updated or not. All in all, more than $50M was exploited from Curve, and since then, Curve’s TVL has nearly halved.

How could I have traded this?

So onto trading, cause I know you guys are degens and like trading. There were quite a few trading opportunities within the chaos. First of all, the most obvious short would have been the protocols whose liquidity pools got exploited, including JPEG and Alchemix. The next obvious short would be CRV itself, considering that Curve was the protocol getting exploited, and the CRV/ETH liquidity pool was one of the pools getting drained.

From there, there were similar obvious opportunities. As Curve is often held in large quantities by a few protocols that take part in the Curve war, if CRV goes down, these tokens should also act in a correlated manner and also go down. A few notable examples that come to mind are Convex, StakeDAO, and Yearn.

Lastly, if you are a true crypto degen, you would’ve known that Curve founder, Michael Egorov, had significant borrows on a few lending protocols. He borrowed nearly $100M against ~450M CRV, and there is simply not enough onchain liquidity if these borrow positions were to be liquidated. As a result, this means that these lending protocols would have been left with significant bad debt, and that to cover this bad debt, these protocols most likely would have to mint their native token and sell it on the open market. This means that protocols such as Aave, Abracadabra, and Fraxlend would have been obvious shorts given that these are the lending protocols that Michael had a position on.

Major onchain events are always a good opportunity for event trading. Most of the time, this manifests itself in trying to front-run news releases, or trading as a reaction to a large exploit (see LUNA/UST).