Sebastian Sinclair

<div id="highlights-block_63564bea7db36" class="highlights">
 <ul>
 <li>Freeway claims a total of $161 million in so-called &#8220;Superchargers&#8221; currently reside within its ecosystem</li>
 <li>Users have been barred from withdrawing funds with no timeline offered for when services will restart</li>
 </ul>
 
</div>



Crypto investment startup Freeway has suspended service in response to “unprecedented” volatility in foreign exchange and crypto markets, again calling into question the long-term viability of centralized platforms offering high yield.



The Seychelles-registered platform tweeted Sunday it would not be buying back users&#8217; Supercharger Simulations — financial products that offered users up to 43% yield — until further notice.



“Freeway has therefore decided to diversify its asset base to manage exposure to future market fluctuations and volatility ensuring the long term sustainability and profitability of the Freeway ecosystem,” the platform said in its <a href="https://twitter.com/FreewayFi/status/1584213303399567361" target="_blank" rel="noreferrer noopener">tweet</a> and via a website <a href="https://freeway.io/" target="_blank" rel="noreferrer noopener">notice</a>.



Freeway’s native token FWT dropped more than 75% following its decision to suspend its platform, now down 96% since its peak last May. 



No further information was provided with regard to exactly how Freeway would diversify its asset base. A spokesperson for Freeway was not immediately available for comment.



The move echoes those made by now-bankrupt crypto lenders <a href="https://cms.blockworks.co/celsius-banks-on-future-with-new-name-kelvin/" target="_blank" rel="noreferrer noopener">Celsius</a> and <a href="https://cms.blockworks.co/voyager-seeks-strategic-alternatives-following-pause-to-withdrawals/" target="_blank" rel="noreferrer noopener">Voyager</a> — some of the largest in the space — as they went into a tailspin earlier this year. 



Typically, users stake crypto or fiat with Freeway and buy so-called “Superchargers,” which can then be sold back at a later date, unlocking yield and the initial funds. The IOUs are meant to emulate crypto and fiat currencies such as bitcoin and USD.



Now, users are unable to sell their Superchargers back to the platform, which is still in beta. Freeway claims $161 million in Superchargers currently reside within its ecosystem.



Under the platform’s <a href="https://freeway.io/wp-content/uploads/2022/04/Freeway-TCs-non-US.pdf" target="_blank" rel="noreferrer noopener">terms and conditions</a> for non-US users, Freeway advises new signups that the platform “may be down for a limited or extended period of time,” such as maintenance and upgrades.



<h3>No clear road for Freeway</h3>



Freeway is yet to give a timeline for when it might reinstate services, leaving users stuck without much recourse. Prominent crypto commentator <a href="https://twitter.com/FatManTerra/status/1584247387941351424?s=20&amp;t=rmKZZXFVD2fRhnvJJ574hQ" target="_blank" rel="noreferrer noopener">FatMan tweeted</a> to highlight that Freeway had also scrubbed team member names from its website.



A representative on Telegram told users they did not know if they would be able to withdraw funds and advised them to submit a support ticket.



“Freeway collapsed and I&#8217;m just wondering if I will still manage to be one of the last to withdraw. People here are still in denial that they lost everything and should face it straight away,” one disgruntled user said.



At the beginning of this month, the project’s co-CEO, Sadie Hutton, said in a <a href="https://www.youtube.com/watch?v=Nopr5boES34&amp;ab_channel=Freeway" target="_blank" rel="noreferrer noopener">YouTube presentation</a> that a looming global recession and high levels of inflation had dogged markets, but Freeway stood poised to end 2022 “with a bang.”



Hutton said the platform had posted a net positive growth of $1.8 million in users’ Superchargers in the third quarter of 2022.



“When you consider the price of bitcoin dropped over 30% in the month of June alone, is a very strong signal to our community and to anyone looking for projects standing strong amid the bear market turmoil…Freeway has a very clear runway ahead.”



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Crypto Yield Platform Freeway Halts, Token Tanks 75%

Bessie Liu

<div id="highlights-block_62eabd6f0e0f2" class="highlights">
 <ul>
 <li>MNYe will have a streaming fee of 0.95% (95 bps)</li>
 <li>Token holders will be able to benefit from the opening of the perpetual short position</li>
 </ul>
 
</div>



<a href="https://indexcoop.com/about-index-coop" target="_blank" rel="noreferrer noopener">Index Coop</a> has launched a new token on Ethereum’s Optimism layer-2 network that gives holders access to USD-denominated yields.



The Market Neutral Yield token (MNYe) utilizes basis trading, also known as cash and carry arbitrage, by plugging into derivatives platform Perpetual Protocol and Uniswap V3.



Under the hood, the MNYe token will automatically open a futures position on Perpetual Protocol while buying an offsetting position from <a href="https://cms.blockworks.co/tag/uniswap/" target="_blank" rel="noreferrer noopener">Uniswap</a> V3, creating a market-neutral position.



<a href="https://www.linkedin.com/in/allan-gulley/" target="_blank" rel="noreferrer noopener">Allan Gulley</a>, product manager at The Index Cooperative, explains that there will be no price exposure regardless of what the price of ether (ETH) happens to do because “we are short ETH in Perpetual Protocol and we are long ETH with the assets we get from Uniswap, and those two ETH positions offset each other.”



This kind of trading strategy is most commonly performed by hedge funds and experienced financial professionals in traditional finance.&nbsp;



“It’s not familiar to most people,” Gulley said. “But now it’s fairly safe and accessible to anyone who wants to understand it and wants to experiment with it, and that’s what gets us really excited.”



By owning MNYe, token holders will be able to benefit from the opening of the perpetual short position as they will be paid a funding rate — or what Gulley describes as dollar-denominated payments — multiple times a day.



“What we’re doing is farming that funding, so we maintain that short, perpetual position, and there’s a spot position to offset it,” Gulley said. “That’s what causes the value, or the interest, to accrue to the value of the token.”



Margin requirements for the perpetual position are automatically managed by the token, Gulley said. “USDC is deposited as collateral and used to open the short ETH perp position, the token maintains a conservative collateralization ration to avoid liquidation.”



MNYe will be Index Coop’s second yield bearing product, after the Interest Compounding ETH Index (icETH) — that enhances staking returns with a leveraged liquid staking strategy.&nbsp;



Token holders will be charged an annual streaming fee of 95 basis points, or 0.95%, for owning the token. The fee will be revenue for Index Coop to continue building and sustaining its products.



US IP addresses are currently restricted from buying the MNYe token from the Index Coop app — a nod to regulatory uncertainty around the securities implications for such a token — but non-US persons can access the cryptoasset on secondary markets from Uniswap or decentralized exchange aggregators, Gulley said.



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<hr class="wp-block-separator">

Earning Yields Just Became Easier With Index Coop’s Latest Token

Jocelyn Yang

<div id="highlights-block_62b19d97ac78c" class="highlights">
 <ul>
 <li>USD Coin interest rates are lower than four-week Treasury bills amid the crisis</li>
 <li>Despite a bear market, analysts think going forward the rates of DeFi will come closer to being in-line with, if not above, traditional markets</li>
 </ul>
 
</div>



The DeFi space has seen a sharp drop off as the market continued to be battered following <a href="https://cms.blockworks.co/celsius-withdrawal-halt-reveals-run-risks-on-other-crypto-banks/" target="_blank" rel="noreferrer noopener">Celsius</a>&#8216; liquidity crisis and the butterfly effect going on this week. The ability to generate low-risk yield in DeFi (decentralized finance) has fallen, followed by an outflow of liquidity, hitting stablecoins&#8217; interest rates in the lending market. 



USD Coin (USDC) interest rates on money market protocol <a href="https://app.aave.com/markets/" target="_blank" rel="noreferrer noopener">Aave</a> stand at 0.76% and on <a href="https://compound.finance/markets" target="_blank" rel="noreferrer noopener">Compound</a> at 0.24% as of Tuesday at 6:00 am ET — both lower than the latest 1.18% yield on <a href="https://ycharts.com/indicators/4_week_treasury_bill_rate#:~:text=4%20Week%20Treasury%20Bill%20Rate%20is%20at%201.16%25%2C%20compared%20to,long%20term%20average%20of%201.15%25." target="_blank" rel="noreferrer noopener">four-week Treasury bill</a> — reversing the scene from the bull market. 



“Some people called it a utopian virtuous cycle. Others just called it greed,” analyst Ben Giovo <a href="https://newsletter.banklesshq.com/p/is-defi-ded" target="_blank" rel="noreferrer noopener">wrote</a> in Bankless’ newsletter. “The thing is: reflexivity cuts both ways.”



On-chain activity fell as prices dropped, which made deploying capital in DeFi less attractive as returns are lower, he explained in the post. 



In May, the top four stablecoins market capitalization <a href="https://cms.blockworks.co/top-stablecoins-shed-7b-in-may-as-traders-redeem-tokens-en-masse/" target="_blank" rel="noreferrer noopener">fell by nearly $7 billion</a> as investors looked to redeem their tokens for cash. After all, why take the risk of holding stablecoins at all, if there’s nowhere to generate a safe yield in excess of the traditionally risk-free rate?



Yet, Giovo wasn’t overly concerned, arguing that “DeFi lenders are intersecting with meatspace businesses to get this jack out of its box.”



Dustin Teander, research analyst at Messari, agreed, thinking the lower deposit rates compared to traditional markets are due to a smaller serviceable market rather than a structural shortcoming of the protocols. 



“At its present state, the business of DeFi lending is largely limited to funding shorter-term, speculative trading leverage,” he told Blockworks. During a bull market, borrowers were willing to pay up for leverage. But now, <a href="https://cms.blockworks.co/crashing-prices-expose-bitcoin-mining-industrys-addiction-to-leverage/" target="_blank" rel="noreferrer noopener">deleveraging is de rigueur</a>.



<blockquote class="wp-block-quote">“As we have seen prices decline, the demand for leverage and borrowing has significantly pulled back, ultimately lowering deposit rates in the process.”</blockquote>



Teander believes that going forward, the rates of DeFi will “come closer to being in-line, if not above, traditional markets&#8221; along with the expansion of serviceable markets. He highlighted protocols have already built lending businesses that are more integrated with traditional markets, such as MakerDAO’s real-world asset lending and <a href="https://cms.blockworks.co/aave-arc-to-provide-30-financial-institutions-access-to-private-pools-of-defi-liquidity/" target="_blank" rel="noreferrer noopener">Aave’s Arc</a> protocol. 



“Over time, this will open the door for DeFi deposit rates to decouple away from being purely driven by speculative trading demand and move to be more commerce-driven as seen in traditional markets,” he said.



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Is There a Silver Lining in DeFi Yield Inversion?

<div id="highlights-block_620edea50be2c" class="highlights">
 <ul>
 <li>Crypto payments firm BCB Group has debuted its yield product aimed at professional investors</li>
 <li>Clients can choose to lock up either crypto or fiat for a 2% return when denominating in euros</li>
 </ul>
 
</div>



Crypto payments and trading firm BCB Group debuted its dual fiat and crypto yield product Monday in the EU, a day after BlockFi was forced to pay $100 million in fines to regulators over its lending product in the US.



The company said its BCB Yield product offers clients &#8220;multiple options&#8221; to earn a return on their balance via its BCB Securities Fund, according to a press release on Monday. The fund, BCB claims, is a &#8220;first of its kind&#8221; investment vehicle providing investment options on a range of currencies for up to 2% annual percentage yield when denominating in euros.



Lending products within crypto are hoping to fill the void left by low interest rate returns in traditional finance which have been pushed below or to near zero by centralized institutions aiming to buoy excessive inflation. As an alternative, crypto lending is seeking to lure investors in search of greater yields.



<blockquote class="wp-block-quote">&#8220;Corporate treasuries parked in cash or cash equivalents are getting a raw deal in most currencies,&#8221; Oliver Landsberg-Sadie told Blockworks in an interview on Thursday. &#8220;Crypto market dislocations between spot and futures continue to provide profit opportunities that only sophisticated traders are able to monetize.&#8221;</blockquote>



He said his company&#8217;s product offers a &#8220;market risk-neutral return&#8221; that draws upon arbitrage strategies executed by sophisticated traders in a way that also seeks to address counterparty credit risk that, while well established in traditional finance, was not widely understood or applied in crypto. 



&#8220;This is the only risk-neutral trade that can outperform true inflation in most currencies and is attracting great interest from those stuck in negative interest rate territory.&#8221;



Clients of the fund may choose to lend out in either fiat or crypto over a 30, 60 or 90 day period which are accompanied by corresponding notes resembling bonds, the company said. Returns can jump up to 8% when denominated in US dollars.



The investment vehicle provides multiple strategies for EUR, GBP, USD, CHF and crypto, according to the company&#8217;s <a href="https://www.bcbgroup.com/yield/" target="_blank" rel="noreferrer noopener">product page</a>. BCB said in its release its latest product marked the &#8220;first step&#8221; in a broader range of yield options that will be launching this year with a focus on solutions that leverage decentralized finance protocols and products.



<h3>Retail versus institutional lending in EU, North America</h3>



The launch of BCB&#8217;s lending product comes at a time when US regulators have been pushing for <a href="https://cms.blockworks.co/cftc-chair-asks-congress-for-greater-oversight-on-crypto-market/" target="_blank" rel="noreferrer noopener">greater oversight</a> of both crypto and accompanying lending products. 



Earlier this week, BlockFi paid $50 million to the Securities and Exchange Commission in addition to a further $50 million to state regulators over allegations it failed to register its <a href="https://cms.blockworks.co/crypto-lender-blockfi-to-pay-100m-in-fines-to-us-regulators/" target="_blank" rel="noreferrer noopener">high-interest securities</a> offered to retail clients.



Decisions over how to regulate crypto lending across the border in Canada fair marginally better as they fall under the purview of the country&#8217;s provinces, though the regulatory prerequisites for such products can only be achieved via <a href="https://cms.blockworks.co/is-a-regulatory-fight-over-crypto-lending-brewing-in-canada/" target="_blank" rel="noreferrer noopener">patience and time</a>, according to one local exchange.



But when it comes to the EU, BCB&#8217;s Chief Product Officer Chris Aruliah told Blockworks the company&#8217;s product differs significantly from BlockFi&#8217;s offering and uses a structure known as an Open-Ended Investment Scheme governed by Luxembourg securitization law.



<meta charset="utf-8">&#8220;This law governs how the fund operates and how the fund is structured,&#8221; said Aruliah. &#8220;Under the terms of the fund, the fund manager can use a number of agreed [legal] strategies to generate a return for investors.&#8221;



<blockquote class="wp-block-quote"><meta charset="utf-8">&#8220;The fund does not participate in the retail lending market like BlockFi&#8230;the nature of this product differs considerably to BlockFi and cannot really be compared,&#8221; he said.</blockquote>



The strategy utilized by BCB&#8217;s fund is based on allocations lent to &#8220;recognized&#8221; institutional firms within the crypto industry, Aruliah added.



Under the fund&#8217;s terms, investors and companies need to qualify for professional status and be able to post a minimum of 125,000 euros ($142,000), while passing necessary KYC and onboarding processes. The fund is only available to select European customers and is not available to US customers.



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BCB Group Launches Yield Product in EU Amid Regulatory Scrutiny in US

Liz Coyne

Blockworks&#8217; <a href="https://youtube.com/playlist?list=PLvER9nHSRN3wZX2tI3JrCLOAzMBgUJtBo" target="_blank" rel="noreferrer noopener">Forward Guidance</a> podcast host Jack Farley sat down with Chris Harmse, managing director of BVNK, at Blockworks&#8217; <a href="https://cms.blockworks.co/events/das-london/" target="_blank" rel="noreferrer noopener">Digital Asset Summit in London</a> to talk about generating yield in crypto and DeFi.



Harmse has a decade’s experience in analyzing and trading financial markets to identify investment and commercial opportunities across multiple asset classes for corporate and private clients. 



In that time, he has held trading, analyst and fund management roles with BNP Paribas, Centaur Asset Management, Excelsia Capital and Asymmetry Asset Management. Harmse began his career as an equity trader at Renaissance Capital, before joining the buy-side team of Rezco Asset Management, where he focused on preserving clients’ capital while creating wealth.



As an equity analyst Harmse has focused on deep analytical research, equity valuation, and financial modeling. His experience as a buy-side equity analyst highlighted how digital asset infrastructure can be applied to reduce the inefficiencies of traditional financial services and improve on incumbent business models.



Watch the full interview below.



<figure class="wp-block-embed is-type-video is-provider-youtube wp-block-embed-youtube wp-embed-aspect-16-9 wp-has-aspect-ratio"><div class="wp-block-embed__wrapper">
<iframe loading="lazy" title="BVNK Managing Director on Generating Yield in Crypto, DeFi" width="1024" height="576" src="https://www.youtube.com/embed/DJbDvNNehz8?feature=oembed" frameborder="0" allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture" allowfullscreen></iframe>
</div></figure>



<hr class="wp-block-separator"/>



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