Digital credit under duress

The DeFi sector has a summery vibe heading into the weekend. At the moment that mainly owes to DAO facilitation protocol DeXe. Its native DEXE token had gained 12% in the past 24 hours as of 8:10 a.m. (EST). Nary a digital asset of any varietal finds itself shading green today.

It’s actually been a tough week for DEXE (-22%) but the DeFi camp generally has has been fortified these past seven days by the likes of LAB (+50%) and UNI (+20%). Among the largest 20 coin-type categories tracked by CoinGecko, only one of them has recorded a significant gain over the past week. DeFi-related coins (there are more than 1,600) as a sector gained 7% in the seven-day span through Friday morning.

DeFi tokens together represent 3% of total crypto assets, which stand at $2.24 trillion, according to CoinGecko. This year marks the sixth anniversary of “DeFi summer” when yield farming became a thing.

A pair of popular credit instruments connected with Bitcoin treasuries endured an alarming intraday pummeling on Thursday.

Strategy’s STRC and Strive’s SATA, both Nasdaq-listed, high-yield perpetual rate preferred stocks designed to trade near a par value of $100, tumbled harrowingly before staging rebounds. STRC fell to a record low of $82.53 but wound up closing the session at $88.59. As for SATA, it dropped to as low as $92.90 but finished the day at $97.71, per The Block.

Yesterday was described by Strive CEO Matt Cole as “the most difficult day in the history of digital credit.”

Cole last night wrote on X that “what happened today was a leverage liquidation event, not a deterioration in underlying credit quality."

Investors will have a long weekend to ponder fundamentals as markets are closed today in observance of the Juneteenth National Independence Day federal holiday. It’s also known as Freedom Day and marks the historic day in 1865 that a large enslaved population in geographically isolated Galveston, Texas, was finally given freedom via a Union Army order more than two years after the Emancipation Proclamation.

Getting back to these two kindred companies, Strategy and Strive, it's worth emphasizing how each uses their digital credit instruments to buy more BTC. When STRC or SATA trades above its $100 par value, the companies issue new shares to raise additional capital. Strategy has increasingly relied on STRC issuance to fund BTC purchases, The Block noted.

That Strategy’s and Strive’s vehicles each saw a sharp rebound from intraday lows suggests buyers stepped in aggressively as prices declined, CoinDesk said.

Broad quantum resistance by the end of next year — that’s the declaration just put forth by layer-1 blockchain Algorand.

The network, recently singled out by industry researchers for its exemplary quantum-era resilience, announced it is planning new accounts and consensus mechanisms designed to be resistant to the cryptography-breaking threat, Cointelegraph said. 

Researchers at the California Institute of Technology have theorized that a functional quantum computer may require far fewer resources than previously believed, and that one could be deployed by 2030. 

Ethereum and Solana each are said to be actively exploring preparedness solutions. Google has set a resiliency deadline of 2029.

Meanwhile, Tezos, said Cointelegraph, just launched a prototype chain for payments designed to resist quantum computing attacks. Stablecoin issuer Circle a few months back issued a roadmap for its Arc blockchain to become quantum-ready.

“Governments, standards bodies, and security experts around the world are already preparing for a future where quantum computers may break many of the cryptographic systems that protect today's digital infrastructure,” said Algorand Foundation technology head Bruno Martins.