Interest in DeFi Falls to Pre-Mania Level, Uniswap Volume on a Decline Despite CEX’s Issue

The DeFi market continues to see strong growth, with the total value locked (TVL) in the sector above $11 billion. While a record of almost 160k BTC is locked in DeFi, the locked Ether is also approaching the peak at 8.7 million ETH.

The mid of June was the “turning point” for DeFi finance, as per LunarCRUSH’s report confirmed by Google Trends when a steady upward trend in the US searches for the term DeFi was seen, which peaked in August only to fall sharply in September.

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Interest in term DeFi over time, Source: GoogleTrends

But the current scenario could further accelerate this growth.

The ongoing investigation into popular crypto derivatives platform BitMEX, and now issues at OKEx is likely to spur on further flow out of CEX and into DEX venues.

Already, as we reported, the trading volume on decentralized exchanges has rushed to new high thanks to DeFi and yield farming hype in Q3.

Monthly trading volumes for top 10 DEX increased 700% from July to $30.4 billion in Sept. while CEXs recorded $300 billion, the same as the previous month. The market share of DEXs that continues to increase is expected to grow further, that too, at the expense of CEXs.

The most popular DEX, which accounts for more than 60% of the volume, is Uniswap. The hottest trading platform was launched less than two years back and raised millions from venture capitalists, including Paradigm, Andreessen Horowitz, and Union Square Ventures LLC.

In the overall crypto space, it is the fourth-biggest exchange after Binance, OKEx, and Huobi. Paul Veradittakit, a partner at California-based Pantera Capital Management LP, which is considering investing in Uniswap’s governance tokens UNI said,

”It’s just phenomenal. We can really see decentralized exchanges make a huge dent in the market and potentially overtake centralized exchanges.”

Since dropping to half a billion dollars after its clone SushiSwap sucked the liquidity, the liquidity on Uniswap has been surging, surpassing $3 billion on Thursday. However, it is currently averaging a daily trading volume of $220 million, on a constant decline from Sept. 1st’s ATH of nearly a billion dollars.

Uniswap Volume
Source: Uniswap Info

It is rather a blessing for crypto projects as Uniswap, which generates revenue through transaction fees, doesn’t charge the issuers to list new tokens. Users don’t have to provide documents for KYC or AML measures as required by traditional crypto exchanges because of regulatory pressure.

Trading on Uniswap also means a bigger market to trade as it currently has 845 tokens listed while the leading spot exchange Binance only has 820 coins.

However, while Binance had over 15 million users at the end of last year, Uniswap is used by only 50k to 100k people, Kyle Samani, co-founder of crypto hedge fund Austin, Texas-based Multicoin Capital Management told Bloomberg. He said,

“This competition is just getting started. We are in the first inning.”

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Author: AnTy

PwC: “Large Crypto Unicorns to Become Increasingly like ‘Crypto Octopuses'”

The value of the M&A’s in the cryptocurrency world saw strong growth this year as it exceeded the total of 2019 just in the first six months of 2020, according to PwC’s latest report on the crypto merger, acquisition, and fundraising landscape.

Compared to last year’s $481 million, the first half of this year recorded $597 million in global deal value as tie-ups became less frequent but bigger.

In the first half of 2020, there were 60 tie-ups versus 125 in the whole of 2019, said PwC.

However, activity continues to shift away from the US as the volume in Asia-Pacific and Europe, the Middle East, and Africa was 57% compared to 51% last year.

The biggest deal of 2020 was made by Binance Holdings, which purchased CoinMarketCap for $400 million. PwC Crypto Leader Henri Arslanian said,

“We expect crypto M&A activity to remain strong for the coming months particularly with some of the larger or more profitable players acquiring firms that offer ancillary services to their current offerings.”

“We should expect the large crypto unicorns to become increasingly like ‘crypto octopuses’ by acquiring or investing in various ancillary businesses in order to remain dominant.”

Digital asset manager CoinShares also anticipates the materialization of a “more robust M&A market” but says significant industry consolidation is likely to come first to clean up the market fragmentation.

According to them, crypto companies need to demonstrate the ability to generate recurring revenue and stable cash flow, consistent delivery on growth metrics, low margin volatility and above-average margins, low revenue concentrations, and low founder involvement.

According to PwC, the first of the year also saw a spike in fundraising involving trading companies or cryptocurrency exchanges, which has been attributed to the rising digital asset prices, greater regulatory clarity, and increased institutional interest.

2020 saw legendary investor Paul Tudor Jones putting money in crypto, boosting demand from bigger players and MicroStrategy and Square making bitcoin a part of their Treasury.

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Author: AnTy

Blockchain Technology to Grow the Global GDP by $1.76T In the Next Decade: PwC Report

  • China set to benefit the most from blockchain technology growth in the next decade with a protracted $440 billion boost in its GDP during this period.
  • This represents 25% of the total protracted global GDP boost from the innovative technology – set at $1.76 trillion by 2030.

A research report from a ‘big 4′ accounting firm, PricewaterhouseCoopers (PwC), “Time for Trust,” explores blockchain technology’s global socio-economic impact in the next decade. Targeting 2025 as the tipping point for the technology. If adopted at scale, PwC experts and researchers see a $1.76 trillion impact from the technology by 2030. This represents 1.4% of the total gross domestic product (GDP) of the world.

The report focuses on blockchain’s practical use in five key areas – provenance, payments and financial instruments, identity, contracts, dispute resolution, customer engagement – and how they deliver value in building transparent and efficient solutions across all industries.

According to the report, Asia is set to witness blockchain technology’s greatest impact, China leading the growth with a $440.4 billion projection. Japan and India expected to witness a $72.3 billion and $62.2 billion increase, respectively.

The United States is expected to witness a $407.2 billion increase in GDP from blockchain innovation growth in the next decade.

PwC report further states blockchain’s role in enhancing transparency and traceability as the sector with the most growth potential – projected to grow by $$961.6 billion by 2030. Anthony Bruce, Partner, and Pharmaceutical and Life Sciences Leader, PwC U.K, praised the potential of blockchain innovation in providence and traceability in the healthcare industry, stating,

“For healthcare organizations, blockchain can ensure patient safety is at the heart of the pharmaceutical supply chain. It has the potential to give patients confidence in the authenticity and origin of drugs.”

Payments and securitization of wallets are also picking up the pace and is expected to grow by $433.2 billion in the next decade. The U.S is expected to lead global growth in this period and is expected to experience a $136.3 billion GDP growth from blockchain-based payment systems, with China coming in a close second at $104.6 billion.

“Blockchain has the potential to cut costs, speed up transactions and promote greater financial inclusion by streamlining cross-border and remittance payments,” Lucy Gazmararian, Crypto, and FinTech Advisory, PwC Hong Kong said.

“These powerful innovations will transform the payments infrastructure.”

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Author: Lujan Odera

MetaMask Active Monthly Users Grow 400% Thanks to Mobile App And ‘DeFi Revolution’

With a growth of more than 400% in the last year, crypto wallet MetaMask has reached the milestone of one million monthly active users on both mobile and desktop apps combined.

According to Talia Knowles-Rivas, Head of Marketing, Developer and Consumer Products at ConsenSys, the recent launch of MetaMask Mobile played an “important role” in bringing new users.

USA, India, Nigeria, and the Philippines are the top four countries in mobile users’ volume.

Just a couple of months back, the popular Ethereum wallet’s open-source code was taken over by ConsenSys.

On the Back of DeFi Boom

Over the last twelve months, significant growth in the adoption of Web3 games, DAOs, and the rapid consumer uptake of DeFi products and services further accelerated this growth curve.

“This 2020 curve parallels the trend in DeFi adoption, indicating that new users are coming to MetaMask specifically to participate in the decentralized finance revolution,” noted Knowles-Rivas.

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Instead of buying and storing ETH, MetaMask’s new phase of growth is powered by much more than just that. It was actually driven by providing the ability to invest, sell, lend, and borrow and use the popular DeFi protocols like Uniswap, Curve, Yearn, Aave, and Maker.

In the past few months, the Decentralized Finance (DeFi) sector has exploded into popularity, with more than $10 billion locked in it.

With most of the DeFi projects asking users to connect their wallets and MetaMask being the wallet provider the most used on them, it makes sense that just like DeFi bloom, activity on MetaMask also exploded.

With Metamask, users can not only purchase and store ETH but also browse DeFi protocols and exchanges and connect their wallets directly to start trading.

Be Careful!

MetaMask allows one to run Ethereum decentralized applications (Dapps) without running a full Ethereum node. As such, the DeFi boom especially helped in achieving this milestone.

But amidst this, one user, who professionally stops hacks from happening, shared the incident of getting hacked for $40,000 secured through his Metamask and Ledger.

He advised people to wake up and secure their funds as there are so many different easy to get hacked.

With the hackers always on the lookout to steal funds, to minimize the risk of getting your MetaMask hacked, secure it with hardware wallets like Ledger or Trezor, revoke access to apps used, and change wallets regularly.

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Author: AnTy

Over 100M Unique Users in the Crypto Ecosystem; University of Cambridge Digital Asset Study

The 3rd Global CryptoAsset Benchmarking Study, an initiative by Cambridge researchers to analyze the developing growth of the industry, has estimated that over 100 million people in the world currently hold BTC or alternative crypto assets. According to this publication, the number of new digital wallets increased significantly, with around 191 million accounts opened in Q3, 2020 alone.

Going by these stats, the number of new people who own crypto assets has skyrocketed compared to the 2018 estimates, which barely hit 36 million. The research attributes this growth to an increase in activity and awareness within the main functions of the crypto ecosystem. Other metrics highlighted include mining, off-chain service provision, regulatory compliance, and improvement in IT infrastructure.

A Vibrant Outlook

Despite taking a hit after the 2017 ICO boom, crypto onboarding has been at its highest post the bubble. More off-chain service providers have launched to on-ramp newbies through fiat-crypto ecosystems and vice versa. Notably, the usage demographics were found to vary between different regions greatly; for instance, crypto exchanges domiciled out of APAC emerged as more crypto-focused trading platforms. Reads the report:

“While North American and European firms primarily serve crypto asset hedge funds and traditional institutional investors …

a notable share of APAC service providers deals with miners (41%), in part explained by the high level of mining activities in the region, especially in China.”

Regulatory and Compliance

As for the regulatory scope, much still has to be done according to figures revealed by the research. Over 2 out of 5 firms surveyed have obtained a license or are in the process of doing so. This is despite the FATF Travel Rule coming in place last year, requiring all Virtual Asset Service Providers (VASPs) to comply with new KYC/AML standards.

However, the research also argues that general compliance has increased, and some of those who are not licensed are because their activities do not fall within current regulatory frameworks or established guidelines.

“However, the remaining 58% should not be perceived as the share of entities conducting unregulated activities or evading regulations: some surveyed service providers are engaged in activities that do not yet warrant any authorization process.”

IT Security

With scamming being prevalent in the crypto ecosystem, the research notes that at least 90% of the VASPs keep the entrusted assets in cold storage. Nonetheless, there’s always a downside risk attributed to insurance since this line of service is yet to make in-roads into the crypto market. Had it not been the case, ‘Those who do have insurance plans are primarily insured against cybercrimes, professional errors, hazards, and loss or theft of private keys.’

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Author: Edwin Munyui

BoE Governor Calls for Setting Global Standards for Stablecoins, Instead of Playing Catch Up

Stablecoins have been enjoying tremendous growth, and DeFi mania has only been pushing it further, so much so that these USD-pegged coins have been adding $100 million per day since mid-July.

“DeFi yields/interest rates are clearly a vacuum sucking in a lot of stablecoins,” shared Coin Metrics co-founder Nic Carter.

Source: CoinMetrics

As such, it makes sense these coins will continue to be under the increased scrutiny of regulators, which first came under their radar after Facebook unveiled its Libra stablecoin last year.

Now, Bank of England Governor Andrew Bailey is saying that financial regulators must avoid playing catch up with them. Bailey said in a speech to the Brookings Institution,

“If stablecoins are to be widely used as a means of payment, they must have equivalent standards to those that are in place today for other forms of payment types and the forms of money transferred through them.”

Calling for a clear G20 mandate for standard-setting bodies to clarify or refresh standards, he said existing regulatory standards must be examined and updated as necessary in the light of stablecoins. He said in the prepared speech,

“Regulators of global stablecoins must, and are, working with other regulators in other jurisdictions to ensure that they are appropriately regulated and gaps in coverage, opportunities for regulatory arbitrage, do not emerge.”

Any stablecoin which is based on the pound and launched in Britain should meet standards that are applied to banks, Bailey said. Also, the issuer of the stablecoin needs to be based in the country, he added.

“If a sterling retail stablecoin wishes to operate at scale in the UK, then we will strongly consider the need for an entity to be incorporated in the UK.”

Meanwhile, central banks have taken to work on their own state-owned digital currencies. China is already in the testing phase of its DC/EP, and Japan is also making digital yen its priority while both the BOE and US Federal Reserve have taken a cautious approach towards launching their central bank digital currency.

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Author: AnTy

Hunt for Yield Drives a Record Q2 for Genesis Lending

Genesis released its Q2 2020 report where it revealed a “very strong growth” in direct lending and liquidity mining or “yield farming” and believes this growth will continue into Q3.

The crypto lending service provider added more than $2.2 billion in new originations last quarter marking it the “largest quarter ever,” with a 324% increase from the same quarter last year. Active loans outstanding also surged past $1 billion, representing a 118% increase QoQ.

After decreasing in the previous three quarters, its BTC loan composition increased in this quarter, which came mostly from due to a decrease in USD loan composition over the same period. Combined, BTC and cash dominates the loan portfolio at 83.2%.

“The infrastructure, maturity, and general interest in BTC/USD markets relative to altcoin/USD markets is much greater, and we don’t see that trend redirecting any time soon.”

Since its launch, Genesis has originated over $8.4 billion in cryptocurrency loans.

In Q2 2020, Genesis traded $5.25 billion in spot trading, up from $4 billion in Q1, the majority of which traded on an OTC basis. In its first full month of derivatives trading, it recorded $400 million in notional value, with 80% concentrated in BTC/USD.

Insatiable Appetite

The Genesis report notes the major theme in Q2 was the demand for yield on digital assets, which continues to drive markets with the last quarter being ‘yield-centric.’ The most prevalent forms of yield generation are spot lending, call overwriting, and, most recently, liquidity mining with “an insatiable appetite for all of them.”

This hunt for yield in Q2 led to tremendous growth, especially in June, in the total interest paid to that pool of lenders and the number of unique institutional lenders on its platform, up 24% from previous months and 187% from last year and. The report reads,

“It’s not surprising DeFi yield farming has impacted our lending business, particularly on the demand side. The demand to borrow assets which have the most advantageous fee structures increases when the market is hot and rapidly decreases once the market is onto the next asset.”

Moreover, a jump was seen in call option overwriting,

“as an alternative to spot lending, many of our counterparties are selling out-of-the-money call options to generate yield via premiums.”

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Author: AnTy

DApp Q2 Market Report Shows Massive DeFi Impact in The Decentralized App Ecosystem

The DeFi realm has registered tremendous growth in the past quarter (Q2) with some products posting some impressive figures. $4.9 Billion was channeled through DeFi dApps, a stellar 67% increase from Q1’s figures.

Q2 Dapp USD Vol

Q2 Dapp Market
Source: Dapp.com

The Basic Attention Token (BAT) emerged as the most popular token in Decentralized Finance Q2 figures recording a transactional value of $930 Million. The token that is utilized by parties in the digital advertising sector, dwarfed Ethereum’s numbers by a cool $300 and more than Ether and Dai combined.

The Ether, on the other hand, saw their active user numbers soar to an All-Time High of 1,258,527 more than doubling Q1’s figures. Their daily average active users have also increased from the 7,682 in the first quarter to over 40% in the second quarter, mostly attributing the COMP governance token launch.

The COMP token, incentivizing debt and lending facilities, has perhaps posted the most notable growth following massive response from the market on launch. Their market capitalization is skyrocketing from $131 Million to more north of $3 Billion in just the second month. Daily user numbers also more than doubling 2,629 to 11,879 as their value of the token achieved an all-time high of $372.27 on 21st June.

However, the supply of the BAT has dipped steadily from $324 million to $155 million last week and now just at $24 Million. This happened as soon as Compound restructured their reward system to scrape off the incentives after the Compound community voted to change their COMP token issuance criteria on 30th June. Just a meager $67 Million BAT has been lent in Compound since the dawn of July.

Notably, after the Hive hard fork from Steem after Sun’s hostile takeover, some budding dApps have opted to move to Hive from Steem. With Steem failing to launch new projects recently, the active users in Hive have now surpassed Steem’s.

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Author: Lujan Odera

Another Bubble in the Making? The Case of Flashy DeFi with Fancy Interest Rates

DeFi space has been seeing explosive growth for the past few weeks. The total market cap of DeFi has reached $6.2 billion, as per DeFiMarketCap. Also, the total amount locked in DeFi has hit a new all-time high at $1.50 billion, according to DeFi Pulse.

This surge was the result of people jumping into DeFi tokens after COMP prices shot up over the announcement of its listing on Coinbase Pro, just a couple of days after the initial distribution of Compound Finance’s governance token COMP.

These tokens give the taken holders governance rights to the changes on the Compound platform. They can be delegated but, as of now, gives the holders no financial claim to any of the revenues generated by the project.

Every day 2,880 COMP tokens are distributed in each market 50/50 to both borrowers and lenders. 91% of these tokens are currently going to USDT suppliers and borrowers, said Nick Martitsch, Business Development at Compound. Tether (USDT) has “surpassed ETH to become the largest market on Compound.”

Currently, there is $120 million of outstanding USDT borrowed; this growth has resulted in a downward trend of “COMP earned per $1 borrowed.” The supply and borrow rates for USDT are 12% and 17%, respectively.

Liquidity miners, meanwhile, are compensated for both lending and borrowing. Which means, “the optimal strategy is to lend the highest interest rate asset, borrow as much as you can against your cAsset tokens (a claim on-lent assets) and then add the remaining assets back into the lending pool,” explained Nelson Ryan, Senior Associate at eblockventures.

Annualized returns are impressive at over 100%, but the interest rate is even higher on non-stablecoin assets, which caused the price of these assets to rise as people buy them to supply and then borrow against them, he said.

These yields are predicated on the market cap of COMP, whose only 25% supply is circulating in the market currently with “no borrow market to short the spot COMP market and 2880 new COMP hitting the market every day for the next four years.”

While COMP prices may have risen exponentially to $240 at the time of writing, COMP September futures on FTX is much lower at around $185.

It’s Just temporary arbitrage, or there are unstated risks

Besides the increase in DeFi tokens prices, last week, a new project, ‘BTC Yield Farming Pool’, was introduced by Ren, Synthetic, and Curve Finance together.

“The defi hunt for yield is nearing an interesting inflection point,” said Ari Paul of BlockTower adding that the incentives offered by DeFi projects are “too good to be true in that the high yields are ultimately coming from a future intrinsic value of tokens which can at most be worth the value that can be extracted as rent from future borrowers and lenders.”

Qiao Wang also chimed in with “if you are making a fuck load of money right now farming DeFi yields, be thankful for the poor souls who just got liquidated by Arthur.”

According to Ari Paul, DeFi may be a “classic bubble fueled by liquidity mining,” which would unwind when maybe the system maxes out on leverage, chasers reverse course fast after stake mounts and yield average start falling, or maybe a bug or a game theory attack at a moment of vulnerability. He said,

“As the tokens start falling in value, that virtuous cycle of increasing locked up capital becomes a vicious cycle of falling token price -> falling yield -> less staked assets -> lower intrinsic token value -> lower token price.”

Amidst this growing frenzy, even Ethereum co-founder sounded caution,

“I think we emphasize flashy DeFi things that give you fancy high-interest rates way too much. Interest rates significantly higher than what you can get in traditional finance are inherently either temporary arbitrage opportunities or come with unstated risks attached.”

Instead of optimizing yield, it should be improving the core building blocks like oracles, DEXes, privacy, stablecoins, and synthetic tokens for fiat, he said.

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Author: AnTy

Ripple Submits A Policy Framework To Guide Indian Lawmakers In Regulating Digital Assets

  • The lack of robust laws or policies to guide the growth of crypto in India leaves enthusiasts with frightening thought of the Parliament probably taking steps towards banning crypto altogether.
  • In a bid to prevent this, American startup, Ripple, and largest custodian of XRP released a policy paper to guide digital assets legislation in the country.

India’s blockchain and digital assets industry is currently in limbo as the uncertainty rises from the country’s regulators’ view on crypto assets. Despite the Supreme Court of India ruling in favor of lifting the “unconstitutional” draconian ban on crypto by the Reserve Bank of India (RBI), the authorities are yet to draft a legal document regulating digital asset ecosystems.

“The Path Forward for Digital Assets Adoption in India”

The paper (titled as above) proposes short and medium-term policy frameworks to lawmakers in India in a bid to boost the overall development of blockchain and digital asset solutions in the country. The paper is filled with Ripple settlement networks and XRP advertisements but still offers a clear path on India coming into the global play in regulating the digital asset taxonomy.

In a statement on the release of the policy framework Sagar Sarbhai, Ripple’s Head of Government & Regulatory Affairs in the APAC region said:

“India is currently presented with an opportunity to develop a regulatory framework for a native digital assets ecosystem. We are optimistic about that after careful deliberation and consultation with industry participants.”

The draft submitted to the Indian legislation employs a “technology-agnostic, principles-based, and risk-adjusted” framework to provide a crisp and clear guidance structure in India.

Short and Medium-Term Plans

Ripple’s paper also offered short and medium-term plans for the Indian legislators, including attracting talent to the Gujarat International Finance Tec-City (GIFT) by drafting a short term digital asset framework for service providers.

The proposal focuses on the development of enterprise use cases for digital assets such as XRP. The paper further touted XRP’s potential in solving the cross border settlement problems across the region.

Furthermore, the paper also calls for the removal of digital assets, cryptocurrencies, and services arising from the “negative listing” in the RBI fintech regulatory sandbox framework. This allows developers the needed freedom to innovate and test their networks within a safe, regulated space. Navin Gupta, Ripple’s managing director in Asia, said:

“Under a clear regulatory framework, individuals and businesses can confidently take full advantage of and operate within a safe environment that encourages the use of innovative technology.”

The digital asset field in India is begging for a regulated platform with exchanges in the country recently approaching the central bank regarding taxation clarity.

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Author: Lujan Odera