DeFi’s Speculative Frenzy Subduing Ethereum; Users Approaching 500k

During the bloody red Monday, Ether lost about 10.6% of its value; currently, it is trading around $340.

These levels were last seen earlier this month, but another small lower and Ether will get back to July level.

“Weekly time frame still looking like a bearish retest of the previous range ($390s). Bitcoin looking better on the weekly, but also pulling back from daily resistance,” noted trader Cred.

With a lull in price came the opportunity to make cheaper transactions on the second-largest network. Not that the sky-high fees prevented users from doing that, as evident from the drastic congestion seen last week.

DEX Extravaganza

Currently, the average transaction fees on Ethereum is around $3.56, down from $11.6 on Sept. 17, the day popular DEX Uniswap airdropped its governance token UNI.

Uniswap is the project that accounts for the highest gas spent. In the past 30 days, Uniswap V2 was responsible for spending $12.7 million in gas.

It is also the largest decentralized exchange by trading volume that generates nearly $1.5 million in fees per day, less than Ethereum’s $5.2 million but more than Bitcoin’s just over $500k, as per TradeBlock.

The trading volume on DEXs overall has also been hitting a new all-time high. More than $17 billion in notional volume has already been transacted so far in September, double the August’s volume and an increase of 400% since July.

DEXs have seen explosive growth in recent months on the back of increased capital flows in DeFi tokens, which don’t need a formal listing process. All this speculative frenzy of activity results in driving up ETH gas fees.

With traders desperate to get ahead of their peers and willing to pay outrageous prices for a confirmation, the Ethereum fees proved to be inelastic, which has some projects even abandoning the network as it makes their project economically unviable.

Can even ETH 2.0 handle it?

The overwhelming demand for Ether has been going on for the past three months, which saw the daily transactions on the network hitting a new peak at 1.4 million, up from 1.34 million set at the height of last bull run, in early Jan. 2018, as per Etherscan.

This is why ETH continues to flow out of centralized exchanges and into smart contracts. Since August 15th, the balance of ETH has decreased by 11.6%, with 2.2 million ETH withdrawn from exchanges while the amount of Ether in smart contracts increased by 3.4 million.

DeFi currently has nearly 8 million ETH locked compared to 16.6 million on centralized exchanges, as per Glassnode.

The innovation in DeFi space is also drawing users in like crazy, currently just under 500k, up from 98k at the beginning of 2020 and a mere 8,325 on January 1st, 2019.

This raises the question of whether ETH 2.0 will really be able to handle this growth.

“(ETH 2.0) starts with 64 shards at first, so it should be able to handle at least 64x more usage (potentially even more if we get some L2 adoption as well),” said David Lach.

Although the first step towards ETH 2.0 has been taken, the path to launch is long and arduous, as such layer-2 applications present another solution with Ethereum co-founder Vitalik Buterin himself endorsing the likes of OMG, Loopring, and Zk-sync.

With high gas fees also burning the profits of exchanges, with Coinbase now passing this directly onto users, an increasing push towards these solutions has been seen. Tether is already implementing Zk-roll ups; many apps are also turning to side chains such as xDai.

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Author: AnTy

Green Shots Emerge in DeFi Following the Painful Unwinding of the Crowded Space

During the recent correction, the DeFi market pulled back hard, so much so that the seven days percentage returns are still in the negative by 20% to 40%.

Except for a handful of top DeFi tokens, all of them plunged 70% to 95%.

But the market seems to be gaining momentum yet again. While in the past hour, DeFi tokens are slowly turning red, in the last 24 hours, significant gains have been made.

Notable mentions include Cream (81%), Swerve (81%), Hydro Protocol (44.3%), bZx Protocol (30%), YFI (17%), Loopring (12%), Aave (10%), Bancor (6.3%), Chainlink (5.6%), Serum (5%), Synthetix (3.8%), and CRV (2.5%).

Total Value Locked (TVL) in DeFi has also climbed to $7.95 billion after falling to the $6.78 billion low today from the high of $9.5 billion on Sept. 2nd.

Uniswap, with $1.47 billion in TVL, is now dominating the DeFi space, a position juggling between Aave, Curve Finance, and the long-standing leader Maker.

Another Vicious to Resume

The market correction was actually the domino effect of DeFi positions unwinding after the head chef of SushiSwap decided to call it a day by pulling a Litecoin’s Charlie Lee, or you could say Ethereum’s Vitalik Buterin.

“The uber-crowded trade in US equities is nothing compared to the crowded nature of DeFi space,” said Denis Vinokourov of London-based brokerage service Bequant.

When DeFi tokens started going down, “the spillover effects turned out to be significant,” which makes sense given that almost $10 billion worth of capital was splashing in the ecosystem. Vinokourov said,

“Going back to the recent price action and as demonstrated in the past, crowded trade unwinds are extremely painful and broad-based but eventually green shots emerge.”

And this is what we are seeing in the market currently. Also, with a considerable reduction in Ethereum gas levels and potential interest from China, another vicious circle will soon resume.

An Opportunity for Competitors

During the DeFi craze, network fees being too darn high also came back in the light. Ethereum miners made a killing from transaction fees, pocketing a total of $113 million in profit in August, up over 3,660% from the meager $3 million earned just four months back.

This means the Ethereum network has all to gain from this DeFi craze and to lose as well.

So, what the second-largest network needs, according to Vitalik Buterin, is nothing but “drastic increase in scalability” – which involves only sharding and rollups, and that has been coming for years.

This makes it a big opportunity for Ethereum competitors such as Cardano, Tezos, and EOS. But while Cardano has just released its mainnet, EOS is not seeing much traction, recording $1.74 billion volume compared to Ethereum’s $5.64 billion.

But according to Brendan Blumer, CEO of Block.one, the company behind EOS, “EOS will unleash DeFi… EOS has the performance, liquidity, and developer community to support DeFi applications that aren’t possible anywhere else.”

Polkadot is another one that jumped the ranks thanks to a denomination – crypto’s version of the stock split.

In the meantime, market participants acknowledged Ethereum’s layer2 solutions like the OMG network and Loopring, resulting in these tokens outperforming.

But Vinokourov says, Ether contenders “command significant financial firepower and a competing platform to rival Ethereum’s DeFi is likely a matter of time.”

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Author: AnTy

Ethereum (ETH) to Repeat 2017? Supply Sink & Buy Pressure Coming

Ether outperformed Bitcoin during the ICO mania of 2017, as it was the most popular platform on which these projects were built on.

Now, during the DeFi mania, ETH is again surpassing Bitcoin, the largest digital asset with a fixed supply. In 2020 so far, ETH has recorded 238% positive returns compared to BTC’s just 56.05%.

According to on-chain analyst Willy Woo, Ethereum is actually “very close to BTC in terms of risk-reward.”

Bitcoin Risk Adjusted Returns vs Other Assets
Source: charts.woobull.com

Thanks to the DeFi craze, Ether’s supply has also been shrinking as a record 6.4 million ETH is already locked in the sector. Now, Ether’s supply is going to be even more contracted thanks to DeFi darling Yearn Finance.

The project has finally added yETH vault along with yWETH and other digital assets. Obviously, these debt-based vaults carry extremely high risk like any other DeFi project and also charges a 0.5% withdrawal fee, not to mention the record transaction fees on the second largest network.

In simple terms, lock in your ETH in a vault and take out more than you put in thanks to the 65% APY.

The community is extremely excited about this development, with some calling it “the world’s first autonomous on-chain hedge fund.”

“Could be a block hole for ETH, super bullish,” said another trader.

“YFI yETH vault will lead to a supply sink from ETH deposited to mint DAI, but also ETH buy pressure from yield farming earnings converted to ETH. Another timely benefit is that gas costs are pooled,” stated Alex Gedevani, who handles research at Delphi Digital.

With ETH leveraged in DeFi, staking coming in Phase 0 of ETH 2.0, and yETH vault here, the supply-side liquidity crisis is coming for Ethereum, which is expected to send the digital asset’s prices higher.

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Author: AnTy

Tezos (XTZ) Class-Action Securities Lawsuit for the $232M ICO Sees $25M Settlement Pending

A class-action lawsuit against Tezos during its 2017 ICO may end in a $25 million settlement. The lawsuit was filed against Tezos for the illegal raising of over $232 million worth of Ether during its ICO.

Filed back in November 2017, the lawsuit by Block & Leviton on behalf of investors that participated in the ICO, claimed that Tezos violated several security laws. The Tezos Foundation also announced its settlement proposal on Mar 20th and stands strong on the belief that the lawsuit itself is baseless.

Block & Leviton informed all investors that participated in the Tezos ICO between July 1, 2017, and July 13, 2017, that they might be eligible for a share of the $25 million settlement offer.

ICO investors were asked to submit the claim of their settlement via [www.TezosFoundationSettlement.com]. Investors have until Aug 6th to object to the settlement offer and until October 16th to submit their claims.

The lawsuit accuses Tezos of being an unregistered security offering and might be the reason why Tezos has decided to settle rather than prolong the case. If Tezos is found to be an unregistered security, it may cost them up to $150 million in direct fines.

United States District Judge Richard Seeborg approved the settlement offer proposed by Tezos on April 30th. In addition, during the final hearing – scheduled for Aug 27th – will determine the legal procedure for initiating the settlement to investors. The court statement approving the settlement offer read:

“The court will likely be able to approve the settlement, subject to further consideration at the Settlement Hearing.”

Looking at recent cases like Telegram and Kik ICO’s, which were deemed as unregistered security offerings. Telegram, which conducted one of the biggest ICOs back in 2017, raising billions of dollars in the process, are now unsure if they will ever be able to launch their blockchain Gram token.

Tezos, meanwhile, wants to try and avoid falling into that same legal quagmire and appears to be considering the settlement offer.

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Author: Rebecca Asseh

Libra Would Help Usher In ‘Higher Prices’ for Facebook Ads, Says CEO Mark Zuckerberg

During Facebook’s annual shareholder meeting on May 27, 2020, the founder, Chairman, and CEO of the social media giant, Mark Zuckerberg talked about how Libra benefits the company financially. Zuckerberg said,

“Not just Libra, but all of the commerce work that we’re doing is that you should really think about it in terms of our ads business.”

He explained how the auction is an important property of the ads business which means, they don’t set a price, rather every business can just bid for themselves what an ad is worth to them.

This means they can offer the lowest possible price.

It also means those businesses will be interested in bidding more because they will get more and the idea behind offering additional tools, whether it’s around commerce like Facebook Shops or around payments like Libra or Facebook Pay, is to make commerce be more effective for businesses. Zuckerberg said,

“When they run an ad, somebody who clicks on that ad is now going to be more likely to buy something because they actually have a form of payment that works that’s on file, then it basically becomes worth it more for the businesses to bid higher in the ads than what we see are higher prices for the ads overall.

So that’s broadly the strategy around going deeper on commerce and payments.”

Updating the core infrastructure of payment

During the call, he also shared that the payment is an area where the core infrastructure hasn’t been updated in a very long time.

Transferring money or paying for things between countries is still often very difficult as such,

“there are a lot of opportunities with Libra to make the process of commerce and payments helpful — a lot easier.”

This, he believes, isn’t good for people around the world but also the economy overall. He said,

“And we will be able to participate in some amount to that value creation ourselves through higher prices in ads if businesses are succeeding using these tools.”

Just this week, Facebook renamed the wallet Calibra to Novi — a combination of two Latin words: Novus which means “new” and Via meaning “way,” to distance it from the Libra digital currency.

“People were confusing Libra and Calibra all the time,” said David Marcus, Facebook’s head of blockchain. “In hindsight, it’s hard to blame them.”

Libra digital currency was first announced in June 2019 as a global currency that would be nearly free to send across borders. However, since then the project has faced many hurdles.

The fiat-backed digital currency would be governed by the Libra Association made up of 27 companies and nonprofit organizations. Its first chief executive officer, Stuart Levey, was also named earlier this month.

The Association hopes to launch the Libra currency by the end of this year.

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Author: AnTy

BitMEX Aims to Achieve ‘Near-Zero Downtime’ with ‘Aggressive’ Hiring After Major Outage

BitMEX has released the postmortem of the downtime it suffered on May 19 ensuring that “at no point during this event were any customer funds at risk,” and that no liquidations occurred while the exchange was offline.

The event resulted in 38,437 cancel-order instructions just 17 minutes before the resuming full functionality of the platform. Also, all the pending and new customer withdrawals were processed within 90 minutes of coming back online.

Working on improvements

As per its report, the exchange’s trading engine server “unexpectedly restarted” because of underlying hardware issues, which took the platform offline. After being recovered partially, it restarted a second time prompting the team to trigger a recovery procedure that utilized a new failover mechanism introduced earlier this year.

The whole ordeal took less than 2 hours while withdrawal wasn’t processed until an hour and a half after the trading resume successfully.

The crypto derivatives platform says it is taking steps to minimize the risk of any downtime which involves making architectural improvements so that the impact of hardware/software failures on the platform is reduced.

They have already replaced the technology behind its primary database that improves recovery times 4x and opens opportunities to scale it 15x over the next few months.

BitMEX is also growing its teams “aggressively” with most of its positions that involve data engineer, developer, analysts, and AML operations managers among others for primarily Hong Kong, Singapore, and San Francisco locations.

Trying to live up to the expectations

BitMEX’s market share has been declining ever since the March sell-off when the crypto derivatives platform reportedly suffered two DoS attacks and the price of bitcoin went down to $3,600 on it and could have crashed to zero, compared to $3,800 on other exchanges.

But still when BitMEX that offers 100x leverage went down, the market felt the effects as Crypto Twitter came alive.

“The burden of being on top. And no guarantee it lasts forever. This is just complacency,” said trader Ledger Status.

While Binance has been capturing its market share, BitMEX’s BTC balance also took a hit and diminished by 32% since then, although exchanges’ bitcoin balance has been on a downtrend on almost all the exchanges.

“The cryptocurrency industry has come a long way in a short amount of time. We know that the expectations on us have risen and we’re working 24/7 to further improve the resiliency of our platform,” said the company which aims to achieve “near zero down-time.”

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Author: AnTy

Bitcoin Stolen in 2016 $72 Million Bitfinex Hack Moving

Some of the stolen BTC during the $72 million hack of crypto exchange Bitfinex in 2016 has been just moved.

Whale Alert that tracks large movements of top cryptocurrencies reported that 28.3 BTC worth more than $255k has been moved to an unknown wallet.

Four years back, Bitfinex lost 120,000 BTC worth $72 million, when the price of bitcoin was about $600. Today, with each BTC at $9,160, this stash is now worth more than $1 billion.

This isn’t the first time that these hackers are moving their funds. Back in June, last year about 185 BTC were transferred to unknown addresses, at that time BTC price was up over 60% YTD at around $10,000. Then in August, 30 BTC were also moved.

Now, just as happens with large transfers, the crypto community fears the worst.

One twitter user said, “If btc does not crash to sub 4k in 1 month, I’ll delete my twitter.”

Large amounts of Bitcoin on the move surely affects the price as happened on May 10. The BTC price fell about 16% that day after a large deposit took place on Gemini; but that deposit was “abnormally” large at 2,500 BTC unlike just over 28 BTC.

Such kind of big deposits result in heightened activity on the exchange where they were made but also triggers market sell on other exchanges as well. This causes a significant increase in trade volume across all exchanges, resulting in a drop in Bitcoin’s price.

However, at times, relatively small and few orders can also have a significant impact on liquidity across many major exchanges.

Just this week, there was speculation led sell-off that resulted in a brief decline of about 7% in BTC price.

It was after Whale Alert reported that 50 Bitcoin had been moved from a wallet dormant since February 2009. Whale Alert suggested it might have been bitcoin’s pseudo-anonymous creator Satoshi Nakamoto who moved the coins, triggering the panic among the market, but as we reported it was very unlikely.

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Author: AnTy

New Institutional Money in CME Bitcoin Futures Hits Peak Since Launch

The open interest on Bitcoin futures has hit an all-time since they were launched during the peak of the 2017 bull run.

On May 14th, OI jumped to 10,792, coming at a total of 53,960 BTC, a new peak. This OI is more than double the 2019 high of 26,260 BTC in July.

According to Investopedia, open interest is the total number of outstanding derivatives contracts, not settled. Increasing open interest meanwhile represents new money coming into the market.

The open interest on CME bitcoin futures has been increasing for over the past month and made a new ATH on May 19 at $532 million.

Trading volume has also jumped in May, the average daily volume is keeping around $500 million, hitting $914 million on May 11, the day of halving.

A year back, in May 2019, the average trading volume climbed to 68020 BTC contracts and jumped $1 billion in notional volume as well, the month that saw the price of bitcoin jumping over 45%.

“Bitcoin adoption continues,” tweeted Gabor Gurbaccs, digital asset strategist at VanEck. “More regulated ways to go long for institutions that otherwise can’t get exposure.”

May is expected to be a record month because of the ongoing surge in activity the regulated platform is seeing after macro investor Paul Tudor Jones bought bitcoin via CME.

The billionaire hedge fund investor called bitcoin the “fastest horse” and the best bet to win “The Great Monetary Inflation.” Tudor Jones also revealed that 1 to 2% of his assets are in the “inflation hedge.”

CME’s “Exchange for Physical” BTC options

Recently, CME global head of index and alternative investment products, Tim McCourt shared that traders prefer cash-settled bitcoin products over physical-settled ones.

“So far, clients have expressed a clear preference and priority for a cash-settled product,” McCourt told Cointelegraph.

The introduction of CME bitcoin futures just about a year and a half ago helped investors better manage the price risk. Currently, the platform is seeing an average of 42,500 BTC traded per day, he said.

However, options that allow one to settle long positions with actual bitcoin is also gaining interest from traders, highlighted Jeff Dorman, CIO at Arca.

CME’s little known “Exchange for Physical” option makes it possible to settle in actual bitcoin and ahead of the April 2020 expiry, 284 bitcoin contracts were interested in this trade type.

Interestingly, the OI on CME’s bitcoin options is also making records, hitting $174 million on May 19, as per Skew Markets. But it is nowhere near Deribit, the leader in the options market whose open interest touched $1bln for the first time.

CME launched its bitcoin options product in January this year and since then it has traded 5,000 of these contracts, 25,000 BTC in total.

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Author: AnTy

Bitcoin Halving Effect: Miner Revenue Tanks 60% But Fees Compensating with 168% Spike

Bitcoin halving is past us and during this time there have been some changes in the network.

As expected, the hash rate of the network crashed 40% from the all-time high put on the halving day as smaller and less profitable miners turned off their machines after being unprofitable.

A decline in hash rate means reduced network security as well. But the long term trend is intact and we have started seeing recovery with the hash rate currently at 99.6 Eh/s.

Actually, bitcoin is still three times more secure than the Ethereum network, its closest runner up. Also, this falling hash rate is expected to be temporary.

Miner revenue takes a hit

In line with the 50% reduction in the bitcoin block reward, total miner revenue has also fallen.

According to the data provided by Blockchain, miners’ revenue crashed nearly 60% to just $7.63 million on the halving day, from two days back.

The violent sell-off in March caused the miner revenue to tank at $6.9 million which peaked on May 6th to $20.6 million only to be hit by halving.

As such, now the percentage of revenue from fees has hit a high of 17.25% that is not seen since January 2018, as per Medio Demarco, co-Founder of Delphi Digital.

Source: Coin Metrics

With block rewards set to halve every four years or 210,000 blocks, “PoW chains will be increasingly at the mercy of transaction fee revenue as the dominant source of funds for the SB (Security Budget).”

The recent reduction in miner reward pushed the BTC fees to revenue percentage higher, which instead of more transactions has been the result of a jump in the average cost of a transaction fee.

The average bitcoin transaction fee has climbed to $5.16, a spike of 1223% in the past month, which was last seen in June 2019, as per Bitinfocharts.

Mining bitcoin getting difficult

Meanwhile, the current average block time is 80% above the target level. This combination of high fees, reduction in mining power has led to longer wait times in between blocks, as such causing mempool to be more backed up.

As the waiting for the transactions to be confirmed by miners continues to add up, people pay higher fees to get their transaction confirmed faster.

Source: Mempool Transaction Count

But difficulty adjustment is there to make it all balance which takes place about every two weeks.

Early in the next week, the estimated negative difficulty adjustment of just under 1% will make it easier to mine bitcoin and bring back its current average time of 18 minutes to back at the target 10 minutes.

This would also result in more mining power coming back online.

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Author: AnTy

Stablecoin Printer Goes Brrr… Signaling an Early Bull Run in the Crypto Market?

During the past few months, stablecoins have seen immense growth which has led the total issued stablecoins surpassing $10 billion last week and their free float supply exceeded this figure this week.

According to analyst Permabull Niño, this surge in stablecoin supply might be giving off some signals.

He points out how during the 2017 bull run, there was “extremely active printing” of stablecoins. During the bear market of 2018, this printing “flatlined” only to have semi-regular new supply during the chopping of 2019.

Now, in 2020, USD-pegged stablecoins’ printing is “picking up steam” which could signal that we are in an “early bull” market.

Total Stablecoin Supply 7-day % Change, BTC market cap

Tether accounts for 90% of total stablecoin supply

Most of this stablecoin growth comes from Tether (USDT), the popular USD-pegged coin accounts for about 90% of the total stablecoin supply.

As per Tether’s transparency page, more than $9 billion worth of USDT is currently in supply, out of which $5.7 billion are on Ethereum blockchain, $2.1 on Tron blockchain, $1.3 billion on Omni blockchain, and the rest on others like EOS, Liquid, and Algorand.

Tether’s largest markets by traded volume are Asia-based Binance and Huobi. According to a recent Coin Metrics report, USDT-ETH transfers are concentrated during Asian and European market hours.

“Stablecoins are a crucial part of the crypto ecosystem, and will only keep growing in prominence,” states the report.

Since the Black Thursday crash, while most non-stablecoin assets saw a drop in their market capitalization, stablecoins have experienced a surge in demand.

This demand could be from the increase in the number of investors holding stablecoins as “dry powder” in anticipation of a new bull run or Asian OTC traders pouring money into stablecoins, as an onramp to crypto markets or a general rush to safety.

It is also speculated this surge in demand could be a reaction to the shortage of US dollars.

US Dollar shortage

In a 2019 Asian Development trade finance curve, banks from about 50 different countries when asked about the largest barriers to expanding trade financing operations, 30% identified US dollar liquidity as the obstacle.

The global reserve currency US dollar is the lifeblood of international trade as “a lot of borrowing and commerce and investing is done in dollars.” And they have been running in shortage amidst the coronavirus pandemic that has wrecked the businesses and economies.

The US Federal Reserve expanded its balance sheet by more than $2 trillion since the February end. But this is tackling America’s shortage of the US dollar, not the world’s.

Out of this $2 trillion, only about $600 billion was for new emergency loans to address the global shortage of dollars.

Foreign central banks also borrowed over $200 billion from the Fed via swap lines by the end of March. At that time, the Fed allowed them to swap any Treasury securities they held in exchange for cash.

The Importance of the US dollar can be understood from the fact that “when you have a dollar crunch, it can turn a recession or contraction in activity into a financial crisis very quickly because the dollar shortage can trigger defaults and deleveraging,” Julia Coronado, a former Fed economist told Bloomberg.

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Author: AnTy