Market
Why is everything red?
As a millennial, I think this is like my 4th once in a lifetime crash. I'm tired boss.
Everything's BLEEDING red. I felt like I got punched in the stomach when I checked my TradFi portfolios (don't worry I'm not selling). Nothing was spared.
What happened? On April 2nd, Trump announced crazy high Tariffs.
(Btw, Tariffs are a tax or duty imposed by a government on goods or services imported into a country.)
A minimum 10% tariff on all U.S. imports (with limited exceptions). High tariffs were imposed on many other nations as well, ranging from 11% to 50%. The baseline tariff on imports from China is effectively 54%.
The US's trade-weighted average tariff rose from 2% to an estimated 24%. That's a figure not seen for over a century.
Everyone, from economists to market analysts, is generally against these high Tariffs.
Then, why is he doing it? Like any complex topic, multiple answers were given. We don't know for sure...we can only guess.
Reducing the trade deficits was the reason Trump gave in his "Liberation Day" speech. (If you live under a rock, "Liberation Day" refers to the day he announced these tariffs")
The primary reason is to support domestic manufacturing. Bring the industries and jobs back to America. A noble pursuit actually.
There are other idiosyncratic reasons as well. Geopolitical power struggle in the case of China. A way to hold Mexico & Canada responsible for their drug-related shenanigans. And so on.
But those are beyond the scope of this article.
But how did he get those crazy high numbers? "Reciprocal tariff" policy.
According to Trump, these numbers should be equal to the monetary and non-monetary trade barriers imposed by other countries. Many factors, like existing tariffs, exchange rates, and trade balances, were included to come up with this number.
But this formula used by the Trump team to calculate "reciprocal tariff" was criticized by James Surowiecki. He found out that the formula had little to do with trade barriers and more to do with reducing bilateral trade deficits.
What do these mean for macro and crypto?
Short answer? Pain for TradFi stocks. As for crypto, BTC is looking fine. But the alts will get massacred.
#1. Billions were wiped off in markets.
On the day of the announcement, stock markets all over the world crashed.
There are more data points to use. But the point stays the same.
#2. US Trade wars have started with multiple countries.
After April 9, 2025, the baseline tariff on imports from China is effectively 54%. Chinese retaliated with a 34% tariff on the US. Trump went on to threaten an additional 50% tariff. The situation is evolving.
These trade wars are bad for both economies. Combined economic productivity will drop drastically. This is obviously bad for macro and by extension crypto.
#3. Fed Interest Rate speculations.
As I shared before, all the economic indicators are falling. Yield from various US Treasury Bills are also falling.
In order to address the economic impact, people are expecting the Fed to decrease the interest rate.
Fed printing money is good for BTC. Fiat prints money = BTC digital gold pumps.
#3. BTC looks looks good.
Since the announcement, BTC only fell from $84k to $79k. Considering the TradFi crash and crypto volatility, this ~6% drop is impressive. We've seen 20% crashes for weaker reasons.
So the BTC seems to have finally become an asset uncorrelated with TradFi. Some even see this as evidence of becoming an independent store of value.
Most analysts are viewing these Tariff moves as reckless. The US Gov & Donald Trump is running through massive goodwill created by America over centuries.
From Trump's perspective, he's doing all the hard painful things first to set everything correct. And in a few months, he should be able to get the benefits of this.
Last week, I'd already shared what I'm doing in the market. Sit tight. We'll see light at the end.
Sponsored Deep Dive
csUSDL: The Secure, High-Yield Stablecoin Strategy
In the current market, Stablecoin farming is one of the best things you can do. And today, I want to introduce one of the best stablecoin strategies.
For our strategy, we'll use csUSDL. It's from Coinshift, an asset management, payments, and accounting platform. Tiger Global and Sequoia led their Series A and it already has $1B+ in AUM.
What's csUSDL? It's a safe, high-yield stablecoin. Technically, it's a "liquid lending token".
It's backed by USDL, a yield-bearing stablecoin from Paxos that's regulated by FSRA in Abu Dhabi Global Markets. To mint it, you need to get USDL first. Then USDL should be deposited into the Coinshift Vault to receive csUSDL.
The vault curator, Steakhouse Financial, will strategically allocate wUSDL to blue-chip collateral assets such as cbBTC and wstETH. This additional yield is given to csUSDL holders.
Just holding csUSDL will give you better returns than many stablecoin farms. Conservatively, you'll make at least 12.5%. Let's look at the yield sources:
- USDL Base APY (+3.5%): This represents the yield passively generated by USDL from Paxos International Reserves like US T-Bills.
- Lending APY (+0.5%): Yield generated from lending wUSDL within Morpho.
- Morpho Rewards (+1%): Additional returns from participating in Morpho's lending market. Its value will fluctuate based on market conditions.
- SHIFT Rewards (+7.5%): They're token rewards provided by Coinshift for USD deposits. It'll be airdropped during $SHIFT TGE. It's currently scheduled for mid-June 2025.
The APY number is based on the assumption that SHIFT will be launched at a $150M FDV at TGE, which was Coinshift's last Series A valuation led by Tiger Global and Sequoia.
If you're an onchain ninja, you can't just sit around with this yield. You can use the looping strategy to earn more yield. We'll use the csUSDL/USDC morpho vault to do that.
- You can use csUSDL as collateral on Morpho to borrow USDC at a 90% Loan-to-Value (LTV) ratio. (The LTV ratio refers to the percentage of value you can borrow against the total value of your collateral.)
- The borrowed USDC should be converted to USDL and redeposited into the Coinshift Vault to receive additional csUSDL. The additional reward from a single loop will be the difference between csUSDL yield and borrowing cost. (I'm ignoring the gas fee for now.)
- If you want to increase the APY even more, you can repeat this looping multiple times.
Liquidation is the danger of using a looping strategy. But this csUSDL strategy is much safer than looping with some random assets.
#1. No price volatility. Both the collateral asset (csUSDL) and the borrowed asset (USDC) are stablecoins. So you don't have to worry about collateral assets suddenly falling in value and liquidating you.
#2. Highest liquidation threshold. Liquidation loan-to-value (LLTV) is the LTV value at which you will be liquidated. The LLTV of csUSDL is 96.5%, the highest on any collateral asset on Morpho.
This high LLTV is due to its highly secure treasury assets reserve of USDL and blue-chip collateral. Our strategy is limiting our LTV to 90% due to the Morpho front-end borrowing limit.
#3. Oracle security features. Lending protocol/vaults use oracles to know the asset prices. If they can be manipulated, your collateral can be liquidated.
But the vault we use has low Oracle risk. The csUSDL/USDC market uses a NAV oracle. This means price determination is entirely onchain and mathematical. This setup eliminates any oracle manipulation risks and depeg risks.
#4. Other mechanisms. There can be other theoretical exploit risks like inflation attacks or abusive borrow rate spikes. But there are mechanisms to protect users even in those cases as well.
Even in extreme scenarios, such as mass lender withdrawals, borrow rates can only rise in a controlled manner, and Steakhouse can inject liquidity to stabilize the market.
#5. Liquidations aren't automatic. Instead, Steakhouse manually manages them via Curve or the Paxos dashboard. This should give better settlement for users.
This is a relatively safe looping strategy.
Now, let's look at an example that shows how we can improve the native 12.5% to over 38%. Let's start with 11k USDC. (I'm ignoring the gas fee to simplify the calculation.)
- Initial deposit: Convert 11,000 USDC → 11,000 USDL → approximately 10000 csUSDL. Btw, you can directly do this swap via CoW Swap.
- First borrow: Use 10,000 csUSDL as collateral on Morpho and borrow 9,000 USDC (90% LTV)
- Reinvestment: Convert 9,000 USDC → 9,000 csUSDL using CoW Swap.
- Total csUSDL after one loop: 19,000 csUSDL.
- Yield Calculation:
- csUSDL Yield: 12.5% APY on 19,000 csUSDL = 2,375 USD/year.
- Borrowing Cost: 6% APR on 9,000 USDC = 540 USD/year.
- Net Yield after one iteration: 1,835 USD/year (18.35% APY).
The above example shows a single loop. You can keep looping with the new csUSDL. This will keep increasing your csUSDL exposure and yield.
The image below tracks the changes with each loop.
As shown above, looping this strategy over 8 times provides an insane 38.32% APY.
Now, this doesn't mean you don't have to pay attention to this position at all. You can still get liquidated by accruing interest from USDC borrows.
The utilization rate refers to the percentage of a lending pool's funds that are currently borrowed. Our csUSDL/USDC vault has a target utilization rate of 90%. If the pool crosses it, the borrowing rate will increase rapidly.
As of writing, we've reached the target utilization rate. If people continue to borrow from the pool, we'll have to pay a much higher interest rate. When the borrowing rate crosses the potential return from csUSDL, this strategy will be ineffective.
To rebalance the interest rate, Steakhouse would then inject more USDC liquidity from the Smokehouse USDC vault.
So make sure to keep an eye on utilization and borrow interest rates.
csUSDL is a safe high-yield stablecoin. If you can track borrow rate and liquidity conditions, you can massively increase the returns with the looping strategy.
This strategy is one of the most capital-efficient stablecoin yield models in DeFi.
🚀 DeFi Catalysts
Ethereum scheduled the Pectra upgrade for May 7th. Regarding the number of EIPs, it's the biggest ETH upgrade in history.
HyperLane has started its $HYPER airdrop. If you have an allocation, you can now claim it.
Morpho Labs introduced Morpho Prime. It's a new product vertical catering to curators and advanced users.
ParaSwap rebranded to Velora. It'll be an intents-based crosschain protocol designed for fast and efficient DeFi.
Pump.Fun introduced PumpFi. It's a financial product that provides immediate, manageable financing for ANY digital asset.
Ethena has expanded USDe and sUSDe to BNB Network. Users can now swap, lend, and earn yield with Ethena assets.
Lens, the crypto SocialFi network, has gone live on the mainnet. It combines chain, protocol, and storage networks into a single product.
EigenLayer's slashing will go live on April 17th. It'll be their first feature-complete iteration. It's already live on Holesky testnet.
Offchain Labs, the team behind Arbitrum, has launched Onchain Labs. It's a program designed to accelerate app development in the ecosystem.
0xbow launched Privacy Pools on mainnet. ETH users can now achieve on-chain privacy, while still dissociating from illicit funds.
📰 Industry News
DoubleZero introduced 2Z tokenomics. It'll underpin the utility, efficiency, and security of the economy.
Chainlink announced Payment Abstraction is officially live on mainnet. The user fees can theoretically be converted into LINK.
Babylon Foundation released the tokenomics guide of $BABY. It'll be the governance token of the BTC restaking project.
🐦⬛ X Hits
- Deep dive on Kaito.
- GTM strategies for East Asia
- Ray Dalio on how tariffs work.
- The state of yield-bearing stablecoins.
- Did BTC hit the bottom?
😂 Meme
Until next time,
Edgy "thought he was going to be tired of winning by now"
p.s. I've been through so many crashes in my lifetime. Here's what I'm working.
1. Not selling. You should've sold months ago by this point. I'm referring more to long-term assets like Bitcoin or your retirement funds.
2. Accumulate Bitcoin and other long-term projects. I don't care of this is the exact bottom. Having exposure is more important than trying to catch the perfect entry.
3. Keep leveling up. Generate cashflow. Learn more.
We've been through worse. It's easy to say "buy when there's blood in the streets," not to easy to do it when the blood's here.
Today's email was written by Edgy and Yayya.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
Whenever you're ready, here's how we can help you:
- ⚙️ The DeFi Edge PRO - Designed for busy people who want to stay ahead of the curve. Leverage our research to save you hours each week, and to see what we're personally investing in. Join today.
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