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Curious on what happened to #BTC and #ETH? What is #CryptoLending? Interested in #DeFi? Check out our new #BIS Bulletin on DeFi lending: bis.org/publ/bisbull57…. Key takeaways👇

#DeFi lending aims to intermediate lending and borrowing solely by overcollateralisation. The lack of real identity prevents efficient screening and leads to financial exclusion.

#DeFi lending is by design #procyclical. The reliance on collateral results in price spirals and excessive volatility, amplifying boom-bust cycles.

Lending can dry up quickly, leading to platform runs (as shown in the collapse of #Anchor)

One reason why we're seeing lots of busts in crypto is the emphasis on *collateral* in DeFi. Since you don't really know who you're lending to, you typically ask for extra protection. But the focus on collateral means bigger busts when prices go down. bis.org/publ/bisbull57…

The BIS Quarterly Review is out #BISQuarterly bit.ly/3xwry6J

CHART OF THE DAY: The Bank of International Settlements has taken a look at commodity markets (and its financial and physical traders). Report here: bis.org/publ/qtrpdf/r_… And below an interesting chart 👀📈on leverage across the trading houses (with some highly leveraged)

What are the implications of persistently high #energy prices? Check out our new #BIS feature: bis.org/publ/qtrpdf/r_…, joint work with Fernando Avalos

Key #commodity prices have been on a pronounced upswing since early 2021, first by the rapid recovery of the global economy and then by the #war in #Ukraine, leading to disruptions the related financial markets

#NaturalGas markets saw elevated #prices and extreme #volatility. As #EU storage levels ebbed and flowed after the Covid outbreak, gas prices swayed

A few key #interactions in #commodity markets discussed in the #BIS special feature on "Commodity markets: #shocks and #spillovers": bis.org/publ/qtrpdf/r_…

One less obvious link between #oil and #agricultural products is #biofuels such as #ethanol and #biodiesel. In the past 20 years, use of #corn in ethanol production has increased materially

#NaturalGas is a major dispatchable source for #electricity generation, especially in Europe. Elevated #gas prices could transmit to high electricity prices for end-users, a major headwind for manufacturing

What happened in the #UK #gilt market is exactly what we discuss in a #BIS article on the CCP-bank nexus (bis.org/publ/qtrpdf/r_…). Seems this time #MarginCall were trickled down from LCH to banks, to #LDI managers and finally to pension funds, and spill back via fire sales.

Wow, how many more they are going to bring down?

A new #BIS working paper provides a framework for measuring #LiquidityCost in #FX market. When #dealers face intermediation #constraints, their #LiquidityProvision becomes more expensive, and their #LiquiditySupply becomes less elastic.

Join us for the semi-centennial edition of the EFA Annual Meeting on 16-19 August 2023 at the Vrije Universiteit Amsterdam (inactief). Register now through this link. efa2023.efa-meetings.org

New #BIS article on #CCP #liquidity holdings, which have reached $1.3 trillion as of mid-2023. Joint work with Iñaki Aldasoro and Fernando Avalos. Full article here: bis.org/publ/qtrpdf/r_…

#Bitcoin's hitting record highs 🚀, but what's the buzz with #DeFi? 🤔 Dive into the latest #BIS paper exploring DeFi borrowers' #leverage behaviours. Quick scoop: they take much lower leverage than allowed. Joint work with Lioba Heimbach