Kavita Gupta, Consensys former leader shares her reaction from a macro standpoint to all the embattled crypto lenders like celsius blockfi and highly leveraged hedge funds like three arrows capital and their backer voyager which was exposed to 3AC and what’s happening in space right now. She thinks this is like a cascading effect, we are still leading the cascading effect from the lunar side where it basically come down to other financial institutes that gett paid for by celsius then which led to 3AC.
Furthermore, she doesn’t think it’s over yet. Kavita Gupta believes that we are going to slowly learn about a lot of other hedge funds that have just not announced publicly how much we have affected now, and when it comes to platforms like blockfi she says that people have been talking about where they over-leveraged or whether were there like different schemes for money that were submit, we have to also remember that they always have this risk compliance unit of 40 to 60 percent and they’re always with the changes of price have moved.
Some more Info
Speaking of now, she thinks now a really big creditor completely disappears on you, and then at the same time, you have this crypto bloodbath where the prices are so low. She thinks the whole match changes for the bigger platform and the same happened with blockfi. Of course, we also know about them not being able to do the lending of products and also all the fines which they paid recently to sec. Kavita Gupta thinks one thing led to another thing just adds up, especially when the market is not great and the valuations cannot be that high.
It’s interesting because it kind of exposes this problem with centralized entities offering interest fractionalizing investor funds to invest in riskier platforms with better returns that investors may have even avoided being conservative. Moreover, have that bubble up to unsustainable yield models like terra’s anchor protocol which blew up and dominated into or cascaded as you say today’s crypto woes. It shows how interconnected these platforms and DeFi are. She says that we just recognize that we are not ready for a programmatic stable point but on top of all that stuff one of the biggest problems she would say is to look at how the recent report is that institutions are shorting.
Right now this is a market and this is an open market once your product is out how you get short and how the market move and speculates those prices is also beyond your control. So, moving from a pragmatic stable coin we are also talking about getting short on a coin which is which has been trying to peg 101 to USD
Kavita Gupta Views
According to Kavita Gupta, Consensys former leader, one of the biggest lessons is how much transparency of liquidity and exposure with respect to both a DeFi protocol and stable points. On top of it, the leverage or the buying and lending which is happening in the space needed, and does that belongs to the only investor on an investor update site, or does that belong to the public who’s also making decisions?
That’s again dependent upon some are not registered entities and going with outside us so like in case of if celsius goes down where do you really bring the case against like 3AC investors who are all over the world where do you bring the case again the same thing with luna where do you really bring the case against so and it’s interesting because at least in blockchain platforms you can actually see the movement of money much clearer than in traditional wall street firms but she wants to also go into a story that we broke on coindesk which is that morgan creek they’re looking to raise 250 million dollars to counter FTX is offered to buy a block and have some sort of acquiring an interest there.
She states that nobody has actually confirmed that FTX does have that disclaimer that they can literally buy without having any of these investors from seed all the way to d round uh having any rights on it and completely wipe them out that is definitely concerning if that is true or is that just something one of the really worst legal options.
What she Believes !
Kavita Gupta believes that having a rotating capital is not new for block fights even when we did a very early investment at the 5 million dollars we had galaxy coming in providing them an operational capital or rotating capital to use it. Also, she thinks that is just the part and parcel of how these lending businesses work they always need their treasury to have the liquidity to be able to support it.
Thus, she thinks we should read more into having it as a bailout versus having a good amount of capital to make sure if the market prices go down they are still able to or if they are not able to recoup their money from any of the other defaulters they are still able to rotate the capital said that it’s still yet to be measure that in the preliminary uh accepted term sheet does that really take away all the investors or the investors comes together and figure out a middle ground from what our standing so far is that FTX will this deal will wipe out equity holders versus morgan creek which they seek not to prevent that from happening and it raised this conversation over crypto Twitter that you know investors take the risk they should bear the responsibility of the downside as well as the upside.
What she thinks?
She thinks this is a very unique situation because if you look at the traditional market of coming if the company is calling bankrupt or doing a down round is that when it comes to the investors to think about it but actually having a new investor which comes and says hey we are completely preferred or we are completely gonna wipe out everybody beyond before we came is something a very unique situation and most of the time unheard.
Let Us hear about her Ideas
The idea is mention in the same report that okay at least this will help depositors not to be secondary to the lenders or the creditors to come so there are your customers whom you have to take care of and then you have in investors and if you have to choose between the two it is a very tough call and there is no surety if there is an alternative but maybe Morgan Creek is looking for an alternative and she is pretty sure most of the investors, especially who came in the last two rounds at a really high valuation definitely want to save their equity out of it. She emphasizes that there hasn’t been an official acknowledgment of that clause from block five or from MTX.
How She started
Gupta first heard of Bitcoin mining while working at the World Bank in Cairo in 2013. This drew her into mining, but “not seriously.” However, the 2016 ICO craze convinced her to leave her full-time job at Eric Schmidt Foundation Fund, resulting in the launch of Consensys in 2017.
She said that self-regulation in any field had failed in the past, but that excessive regulation without even knowing how to use the technology would fail as well. Citing encryption as an illustration, she said that function is now present in every programme, but in the past it was completely prohibite.
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