As news emerges that Bulgaria-based crypto lender Nexo is set to buy collapsed rival Vauld, the centralised finance (CeFi) landscape shows signs of consolidation as big-ticket lenders continue to topple.
The chain effect first started when premier lending platform Celsius froze billions in users’ funds on June 14, followed by similar asset freezes in the following weeks by BlockFi, Voyager, Babel Finance and, now, Vauld.
With major players in the CeFi space continuing to topple, trapping huge sums of users’ cash with them, stakeholders now ask themselves: Is CeFi a model broken beyond repair?
A revival of trust in CeFi will undoubtedly require a shake up of how these platforms operate, particularly in regards to unsustainable yield offerings and the ways in which custodial funds are used.
Sam Bankman-Fried, founder of trading platform FTX and private equity fund Alameda Research, has put $750mln worth of skin in the game by extending hundreds of millions in revolving credit lines to Voyager and Babel Finance.
Bankman-Fried’s lending spree could be perceived as a way of shoring up or shaking down the distressed fish in the crypto pond, depending on one’s degree of general scepticism.
Nexo and Bankman-Fried are poised to become central figures in the CeFi consolidation; former Whitehouse director of communications Anthony Scaramucci went as far as likening the latter to John Pierpont Morgan in an interview with CNBC.
If a positive is to be gleaned from the ongoing CeFi crisis, it’s that Celsius looks to be in a position of recovery, as the lending platform continues to chip away at its nine-figure debt, even if user withdrawals are yet to resume.
But with more and more bad press emerging from the CeFi market, crypto contagion could be a self-perpetuating downward spiral at this point, and customers continue to bank run on the platforms lucky enough to still be in the black.