Q9 Weekly | Behind the Curve

Q9 Capital
6 min readAug 3


3 August 2023

  • Curve DAO suffers $62mn exploit but damage contained
  • Tether and MicroStrategy release quarterly reports
  • The emerging “Bitcoin-native” VC landscape

DeFi is reeling from a spate of attacks on several platforms on Sunday.

Some $70mn was stolen in total this weekend, including from Curve Finance, a stablecoin-focused decentralized exchange (and one of the largest) where $62mn was lifted. Lending protocol Alchemix, yield platform Pendle and synthetic asset tool Metronome were all also hit, along with the decentralized NFT protocol JPEG.

By crypto standards this wasn’t a “big hack”. Curve is a massive DEX, and this hack only makes up about 4% of its Total Value Locked (TVL). But it was a black eye for the ecosystem and has caused a flight of assets from the sector. TVL on Curve DAO has fallen to $1.8bn post-hack from over $4bn a month ago.

TVL on Curve DAO Falls Following Hack

Source: DeFi Llama

DeFi lenders have been pulling funds out of other platforms including Aave, spiking borrowing fees. The hacks also caused the TVL on Ethereum to fall by 8% as investors pulled assets. To put this in context, the decrease amounts to $3.55bn unstaked on ETH, with Curve’s TVL on ETH comprising just a fraction of this figure.

ETH Total Value Locked Drops

Source: TheBlock Pro

The exploit could have been worse were it not for a number of white-hat hackers who came to the rescue and were able to remove assets from lending pools on Curve to prevent further theft.

Aside from the millions stolen, Curve’s hack revealed a surprising vulnerability in the Vyper code, a programming language used specifically to launch smart contracts on Ethereum. The programming language’s core team — which was backed by the Curve team — announced that older versions of Vyper were vulnerable to “reentrancy” attacks.

Volumes of Curve DAO Token Spike to All-time-high’s

Source: DeFi Llama

The exploit now raises question about how safe other blue-chip protocols like Aave, Compound or even Uniswap are and how long it will take to fix bugs in the Vyper code. It’s definitely a hit, but it’s not an ‘it’s all over’ moment and DeFi will build back stronger.

Bright Futures for ETH ETFs

Six asset managers have filed applications with the SEC for ETH futures-based ETFs in the past week. US asset managers including Grayscale, VanEck, Bitwise, Volatility Shares, ProShares and Round Hill Capital have submitted new applications to the securities regulator.

An ETF tracking Ethereum futures would essentially invest in futures contracts of the industry’s second largest cryptocurrency that are traded on the CFTC-regulated Chicago Mercantile Exchange (CME) rather than directly holding the underlying asset — but it’s a step in the right direction.


Source: TradingView

Birds of a Tether

Stablecoin issuer Tether reported a net profit of $850mn in the second quarter, significantly less than the $1.5bn it reported in the previous period, according to its latest attestation report. The Q2 profit brings Tether’s excess reserves to around $3.3bn and operational profit for Q2 stood at over $1bn, a 30% increase quarter over quarter.

The company’s consolidated total assets amounted to at least around $86.5bn as of June 30th, while its consolidated total liabilities amounted to $83bn, per the latest attestation report, reflecting excess reserves of over $3bn — a new all-time high.

The stablecoin has also disclosed its indirect exposure to US Treasuries and its exposure to the US Treasuries that are collateralizing its overnight repo for the first time.

Tether Discloses Exposure to US Treasuries

Source: Tether Quarterly Attestation

Despite the overall slide in stablecoin supply, Tether’s USDT remains the largest in the market, with a supply of over 84bn tokens.

Total Stablecoin Supply

Source: The Block

Macro Strategy

MicroStrategy, returned to profitability in Q2 2023 amid Bitcoin’s price surge and disclosed it now holds $4.4bn worth of the cryptocurrency.

MicroStrategy’s second-quarter earnings released Aug. 1 reported $22.2mn in net income — a stark comparison to the $1.1bn net loss recorded in Q2 2022.

MicroStrategy Share Price, YTD

Source: Google

“Our Bitcoin holdings increased to 152,800 bitcoins as of July 31, 2023, with the addition in the second quarter of 12,333 Bitcoins being the largest increase in a single quarter since Q2 2021,” said MicroStrategy CFO Andrew Kang.

MicroStrategy is planning a $750mn raise through a stock sale to buy more Bitcoin, according to the firm’s quarterly report. This would not only add to MicroStrategy’s BTC horde, but also the company’s strategy of stacking sats, which was typically done through bond sales and free cash flow.

Source: FactSet

Bitcoin-Native VC

A new report from Trammell Partners provides a look into the world of Bitcoin-native venture capital — that is, a “company founded with the first principle that bitcoin is the global monetary asset of the future and internet-native digital cash. The company builds a product the success of which is mutually aligned with the success of Bitcoin.”

2022 was a flagship year for the sector. Seed-transactions were 133% higher last year versus 2021. There was 70% growth in total companies funded. A select cohort of Bitcoin startups has “graduated” to the Series B stage or later, so the high growth in seed deals hints at potential early maturation of the ecosystem.

2022 in Bitcoin Startup Deals

Source: Trammell Partners

Source: Trammell Partners

Source: Trammell Partners

Source: Trammell Partners

The purposeful and conservative approach to making changes to Bitcoin’s Core has given rise to the narrative that “nothing is happening on Bitcoin,” but the data shows differently. Innovation across the Bitcoin stack has begun to accelerate in recent years.

Innovation in the Bitcoin ecosystem will flourish in the years to come, but for now, the market gap between it and crypto is large. Just 1.31% of total 2022 crypto venture funding was invested in Bitcoin startups. However, Trammell Partners believe entrepreneurs will increasingly choose to build their business on the most secure, decentralized, mature platform possible: Bitcoin.

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