ETH staking deposits > withdrawals; Credit fintech Pagaya $75MM for acquisitions; Nigerian AI lending platform Kredete

Hi Fintech Futurists — 

You’re the best, today’s agenda below.

1. PROTOCOLS: Shapella, a week later: Deposits start outpacing withdrawals as Ethereum's burn-rate increases (link here)
2. CREDIT: Pagaya Receives $75 Million from Longstanding Investor Oak HC/FT to Accelerate M&A Strategy (link here) and Pagaya Technologies Weighs Takeover of Sunlight Financial (link here)
3. AI: Kredete Launches AI-Powered Lending Platform to Deepen Credit Access for Nigerians (link here)
4. LONG TAKE: Is Apple's Goldman-powered 4.15% yield account the fintech apocalypse? (link here)
5. PODCAST CONVERSATION: Building a decentralized exchange and appchain for perpetual contracts, with dYdX CEO Antonio Juliano (link here)

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Short Takes

CRYPTO: Shapella, a week later: Deposits start outpacing withdrawals as Ethereum's burn-rate increases (link here)

Ethereum’s Shanghai upgrade was implemented on April 12th, ending the wait for an upgrade that allows staked ETH and its rewards to be withdrawn, as well as completing the transition from proof-of-work to proof-of-stake. Since the introduction of ETH staking in 2020, nearly $35B ETH has been staked, now yielding between 4-5%. One question that many have tried to answer is whether there would be a significant outflow of ETH into secondary markets as the staking became unlocked.

Fears of an ecosystem-wide sell-off have not come to pass, even though Kraken has been forced to unstake its program as a result of SEC enforcement action. One week since the upgrade, deposit volumes outnumber withdrawals of staked ETH with 92K ETH deposited and 65k ETH withdrawn on April 18th. The ability to move money in and out of staking is a major risk reduction for investors, even if the unstaking process can take several days and require processing through a queue depending on demand.

However, only 15.5% of the circulating supply of ETH is currently staked, which is low compared to other proof-of-stake networks, like Polygon (38%), Solana (72%) and Cosmos (70%). We expect Ethereum’s percentage of circulating supply staked to increase, though perhaps regulatory pressure and a lack of large-scale institutional DeFi access is a barrier. Third party policies also matter. Different staking solutions may have different unlock times and different user profiles — for example, Coinbase may unlock staking rewards for several months.

Still, a 4% real interest rate is a meaningful improvement over a nominal 4% interest rate. ETH also has significantly more utility as a token than some of the other blockchains being farmed, so perhaps it will find a “savings equilibrium” at a lower level.

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CREDIT: Pagaya Receives $75 Million from Longstanding Investor Oak HC/FT to Accelerate M&A Strategy (link here) and Pagaya Technologies Weighs Takeover of Sunlight Financial (link here)

Pagaya, a public credit AI underwriting company, raised $75MM from longtime investor Oak HC/FT. The funds will be used for strategic investments, including acquisitions, as the company looks to consolidate horisontally across the fintech industry while valuations are down. Oak’s investment comes as a convertible perpetual preferred security and the preferred converts at $1.25, a 36% premium on Pagaya’s closing price at the time of the news.

Pagaya’s core product is AI-powered credit analysis integrated into other lending footprints, helping people get credit approvals by assessing their consumer credit risk and predicting whether they can get access to loans before they apply. Its used by lenders like Klarna, SoFi and Ally to help provide access to BNPL, auto loans, home loans and credit cards. The company generates $750MM in revenue on $7B in volume.

Pagaya is looking to use new funds to acquire Sunlight Financial Holdings, a fintech helping homeowners finance rooftop solar panels. While both firms have already gone public, Sunlight’s share price has been doing poorly, with a value of $79MM and down 90% since listing, compared to Pagaya’s $672MM market cap.

For Pagaya, Sunlight’s business is a niche application of the company’s core underwriting technology and access to the capital network, while enabling it to expand into renewables financing. The more transactions, the better. We are impressed by Pagaya’s strong revenue generation and potential path to profitability, as well as its aggressive growth. Notably both underwriting and capital markets revenues tend to be cyclical (which is down right now), so it is a surprise the business has been doing so well in the current environment.

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Credit AI: Kredete Launches AI-Powered Lending Platform to Deepen Credit Access for Nigerians (link here)

Speaking further on this theme, Nigerian fintech Kredete is launching an AI lending platform to help provide access to funding for entrepreneurs across Africa. The core business is credit scoring, providing users with the ability to view their score, and access financial education and insights on how to improve it.

Kredete’s lending solution is the first step towards a holistic lending experience, including leveraging a user’s credit history and financial profile, such that lenders can better assess risks and reduce non-performing loans. Currently, there is a $360B credit gap in Nigeria — 82% of Nigerians don’t have access to formal credit. To that end, providing loans with lower risk and helping users with free credit scores, monitoring tools, and reports on financial decisions is a win-win.

Kredete has established partnerships with over 25 financial incumbents, including CRC Credit Bureau (the largest African credit bureau), and attracted 70,000+ users. We like seeing AI and financial education combined to provide a lending solution that can help business and people thrive sustainably.

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Long Take: Is Apple's Goldman-powered 4.15% yield account the fintech apocalypse? (link here)

We look at Apple launching a Savings account powered by Goldman Sachs, offering a 4.15% interest rate.

Our analysis puts this into context relative to earlier launches of big tech neobanks — in particular the experience of Google, PayPal, and Ant Financial. Further, we look at the psychology and importance of high interest rates, and whether there is anything actually exceptional about that yield. We briefly cover the Ethereum Shanghai upgrade and its inflation / yield mechanics to highlight the difference between real and nominal returns.

👉 Read Long Take

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Podcast Conversation: Building a decentralized exchange and appchain for perpetual contracts, with dYdX CEO Antonio Juliano (link here)

In this conversation, we chat with Antonio Juliano, founder and CEO of dYdX - a crypto derivatives trading platform that caters to professional traders outside the U.S. It averages roughly $2 billion in daily trading volume (Coinbase does about $5 billion)

After obtaining a computer science degree at Princeton University in 2015, Antonio started working at Coinbase as a software engineer, where he learned about cryptocurrency and the world of blockchain. He was fascinated by the new technology, especially after listening to some of the most prominent people in the space give talks at Coinbase, such as Vitalik Buterin and Polychain Capital founder Olaf Carlson-Wee.

👉 Listen on Apple Podcasts

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Rest of the Best

Here are the rest of the updates hitting radar.

• NEOBANK - Allianz considers selling N26 stake at steep discount - sources
• NEOBANK - Rakuten Bank Jumps 33% After Japan’s Largest IPO Since 2018
• CREDIT - ‘Amex-meets-SecretNYC for Gen-Z’ startup raises $15.4M equity round to expand globally
• CREDIT - Yonder raises £62.5 million
• INVESTING - Vesey Ventures closes on $78M debut fund to back early-stage fintech startups
• INVESTING - Ex-President of FTX Launches New Trading Platform
• ROBOADVISOR - Robo-Advisor Betterment Settles Tax Charges With SEC For $9 Million
• OPEN BANKING - UK regulators deliver roadmap for future of open banking

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Later this week, we will share our Short Takes on the latest Web3 and Digital Investing news, reviewing several companies. If you’d like us to look at any specific item, feel free to share your thoughts in the comments below. We will provide our best analysis in response to your requests.