Bitcoin Thrives In Chaos As Crypto & DeFi Crumbles In Real Time!

**Scott Melker** (0:01)
Bitcoin thrives in chaos. If you take a look, it outperforms in almost every instance of global uncertainty. But at the moment, we also have a bit of a crisis in DeFi and on the crypto side, leading many to believe that maybe Bitcoin is just the safer option at the moment. I have a feeling that not all of my guests will necessarily agree with that. Today, we've got Andrew and Tillman, of course, but we've got Sid Powell here from Maple, one of my favorites to join and help us break down everything that's happening in DeFi and the broader crypto market. Let's go.
Good morning, everybody, and welcome to the show. I hope you're all having a wonderful Tuesday. Happy Kedwarsh, Kevin Warsh confirmation hearing day to those who celebrate. I know that you'll all be watching very closely as if it was the Super Bowl like the rest of us. But I think right now, the main focus has been on, obviously, Bitcoin price here, kind of at a key area of resistance or support, depending on how you look at it. And of course, everything happening in DeFi. We got Sid, Andrew and Tillman here to unpack it all. Man, like we are the kings of the own goal. Like, you know, right when things always seem to be going good for us and we're kind of humming along, you got Charles Schwab. I don't know. I should bring it up. Did you guys see the Charles Schwab educational Bitcoin video with the guy with like the hair helmet? Really good. I'll find that. But obviously, at the same time that that happens, we have to be on the front page of Bloomberg for hacks.
Crypto hack sparks 9 billion outflows from top DeFi lenders. So this was yesterday years old, and I believe that number is much bigger now. Sid, is that correct? I read as high as 12 or 13 billion capital flight as a result of the KelpDAL hack. And then obviously the fallout across Aave and other lenders.

**Sid Powell** (2:01)
Yeah, I think that's right. Like we've seen pretty consistent outflows since the KelpDAL hack occurred.
And, you know, a lot of people are kind of sitting it out until they, you know, until, one, some of the lending markets need to unfreeze. They're at 100% utilization. And two, I think people are also looking for direction as to where the losses or the bad debts are going to be socialized. Would it, you know, would it help to kind of give a little bit of a give a little bit of a recap on like sort of what happened over the weekend?

**Scott Melker** (2:35)
Sure. Yeah, that would be great because I said this on my on my show on Yahoo! yesterday. Like my first reaction was $290 million hacked from Kelp Dow. What the fuck is Kelp Dow?
How is there $300 million to be stolen from something called Kelp Dow? I mean, what do we do here? But yeah, go ahead.

**Sid Powell** (2:55)
Well, it takes me back to the food coin days of 2020 Yams. Yeah. So what happened was over the weekend. So Kelp Dow is a is a staking protocol. So you put in ETH, it gets staked, you get an LST or a liquid staking token back that earns you yield. But what happened over the weekend was that Kelp Dow's bridge was compromised. So there was an exploit there that enabled the hacker to mint, call it roughly an extra 20 percent of RS ETH. So in effect, they were able to create more than the more LSTs in the backing of that Kelp Dow had. And then what the hacker proceeded to do was to put that into Aave and other DeFi lending protocols. So they could borrow weath and then take that and rinse it through tornado cash to try and offer it. So what it triggered, the key reason this triggered such contagion was that obviously Aave, Euler, these other lending protocols are really big and quite, you know, quite spread across DeFi. And so the issue that arose is the concept of bad debts. You have the hacker has deposited collateral that is now worth, you know, at least 20% less than what its face value was, and then proceeded to borrow ETH against it.
And they obviously have no intent of repaying that, and the collateral has a jump to default risk. So normally what would happen is that as the collateral value edges down on a DeFi protocol, you have liquidations. But here, it's just gone from 100 cents on the dollar to 80 cents on the dollar effectively.
And so that's kind of the state of play at the moment. The hack was to the tune of a bit under 300 million.