Bancor’s Approach to Handling Impermanent Loss Shows Financial Viability

Bancor has been working on a reliable method to address impermanent loss and it seems to have struck gold with its insurance-based approach

The Bancor Network has been busy trying to solve the issue of impermanent loss on its decentralized exchange. In a recent report, the protocol showed significant success with its approach, leading to the belief that it might be able to handle the protection of temporary loss of funds in the long term.

Impermanent Loss on DEXs

Yesterday, Bancor released a Protocol Health Report for its v2.1 decentralized exchange (DEX) upgrade.

The report covered the exchange’s financial and operational performance for the past quarter, showing significant liquidity and revenue gains.

As the report showed, liquidity across the DEX rose by 100 percent over the past three months, resulting in about 700,000 BNT (worth $1.12 million) in earnings from swap fees. However, the platform’s strategy on impermanent loss appeared to have faltered.

When Bancor launched the DEX late last year, it focused primarily on effective impermanent loss management.

Also known as divergence loss, the impermanent loss is a problem that affects mostly exchanges that run on the automated market maker (AMM) protocol. It occurs when liquidity providers (LPs) lose funds due to the volatility of a trading pair. It basically describes how much revenue an investor would have earned if they had held on rather than provide liquidity to the market.

The effect of this divergence is a loss of value, compared to the benchmark “buy and hold” portfolio.

The loss is termed “impermanent” because it could be reverted if the prices returned to their original state. However, even in the best scenarios, losses due to divergence will reduce liquidity providers’ profits from price swings.

Possible Long-Term Benefits

Bancor had initially tried to solve the problem with oracles, which reads token prices and render arbitrage virtually unnecessary.

However, front-running issues rendered this approach impractical. So, the exchange deployed an insurance mechanism to cover the cost of impermanent loss.

The project implemented a vesting schedule to incentivize LPs to stake their tokens in the long term.

The protocol’s strategy was to incentivize more altcoin holders to become LPs instead of adopting the buy-and-hold strategy. Another strategy Bancor plans to explore is to encourage projects to use their treasuries to provide liquidity to AMMs. Just like proof-of-stake (PoS) rewards, the method could allow projects with considerable token reserves to increase liquidity on token pairs and also get additional rewards.

The vesting schedule will see Bancor provide one percent coverage on liquidity capital for up to 100 days. However, LPs who make withdrawals before 30 days won’t get any compensation for losses in that period.

Bancor’s approach appears to be yielding benefits. As the company reported, the total impermanent loss associated with withdrawn liquidity amounted to 41,000 BNT ($64,000). On the flip side, the protocol also earned 350,00 BNT ($560,000) in fees.

Bancor added that some LPs withdrew their deposits before getting 100 percent insurance. These LPs got partial protection, which was paid based on their coverage level. The report pointed out,

“As the proportion of insurance policies with 100% protection increases over time, it stands to reason that the associated cost to the protocol will rise. However, various factors suggest the protocol is able to handle this insurance burden.”

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Author: Jimmy Aki

Canaan Reports a Q3 Net Loss $12.3 Million Despite the Crypto Market Comeback

Canaan Creative, a Nasdaq listed Bitcoin miner manufacturer, has reported another loss in Q3 according to the latest unaudited financials released on Nov 30. This time the number jumped to $12.3 million, which is around four times the $2.38 million reported for the previous quarter. Contrary to the BTC market performance, the firm appears to be struggling after its share price tumbled on the announcement of the Q3 results.

Revenues also dropped to $24 million compared to $100 million in Q3 of 2019; however, this was a 5% increase from Canaan’s Q2 revenues this year. The financial report quotes a figure of $26 million for cash equivalents, which is an 18% jump from its previous $22 million in Q2. It further highlights that Canaan has allocated $30 million into short-term financial products where it can withdraw liquidity conveniently at any time.

Canaan’s CFO, Quanfu Hong, defended the performance and attributed a big part of the loss to reduced activity at the onset of the COVID-19 pandemic. Hong noted that demand has started to increase, and they are set to be back on track with Q4 pre-sale orders,

“Demand for mining machines in the market continued to rebound in Q3 2020. We have received a large number of pre-sale orders scheduled for delivery starting in the fourth quarter.”

Nonetheless, Canaan is still taking a hit on its market share according to the latest stats; its terra hashes sales tanked to 2.9 million compared to 3.7 million in Q3 of 2019. On average, one T/H costs $8.27 this year, while last year’s price was well over $27 per T/H. Its competitors Microbt, Bitmain, and Ebaang, continue to capitalize on the shortcomings.

Currently, one Canaan share price is trading at $5, having lost 13% within the past 24 hours. Like Bitmain, the firm has also been a victim of internal wrangles, which saw some of its directors dropped from the registry back in July.

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Author: Edwin Munyui

Bitcoin Stock-to-Flow Models Point to Over a Trillion Dollar Market Cap in 2020-2024

  • Bitcoin ends 4Q20 with minus 10% loss while Chainlink (LINK), Tezos (XTZ), and Bitcoin SV jumped
  • S&P 500 dropped 19% in Q1 and correlation with BTC climbed to a high of 0.57 which Binance says “very unlikely to persist in the medium to long term”
  • History has shown, “hard money wins, always,” says PlanB and BTC over $55k

So, Bitcoin ended the quarter first of 2020 with losses of more than 10%, keeping up with the red quarters since mid-2019.

These losses have been the result of the crypto asset falling along with all other assets due to the COVID-19 pandemic and the global economic turmoil. The exception to this downturn has been long-maturity Treasury bonds, registering 23% quarterly return, which benefited from the decrease in long-term yields and expansionary monetary policies.

In the crypto space, a few of the digital assets still displayed positive quarterly gains. Due to idiosyncratic factors, the crypto assets like Chainlink (LINK), Tezos (XTZ), and Bitcoin SV (BSV). The low correlation of these cryptocurrencies with others could be because of the different timing for their respective price gains.

Quarterly returns in Q1 2020 for large-cap cryptocurrencies, Source: Binance

While Bitcoin was down 10% in 1Q20, the S&P 500 was hit much harder, recording negative 19% returns. This resulted in the correlation between bitcoin and stocks climbing to a high of 0.57.

“Despite Bitcoin displaying a significant positive correlation with US equities in the first quarter of 2020, this high correlation coefficient remains very unlikely to persist in the medium to long term,” states Binance in its latest report.

Meanwhile, BTC had no relationship with gold over these past three months. The price of precious metal rose 8% in the second half of March while Bitcoin dropped heavily in mid-March.

“Hard money wins, always”

This drop in price also saw the hash rate going from 123.29 ETH/S on March 7th to 94.16 EH/S on March 21st. This decline “corresponds to a drop of 23.6%, and was the largest drop over a two week period in history,” stated analyst Ceteris Paribus.

However, it wasn’t the largest “peak-to-trough in a year,” as in 2018 during the crypto winter, the hash rate dropped from 54.76 EH/s on October 1st to 34.84 EH/s on December 13th, recording a fall of 36.4% over a two and a half months period.

The mining difficulty which is based on the network hash rate and ensures miners continue to find new blocks every 10 minutes, also recorded its second-largest drop.

As we reported, a recent sudden crash in BTC price had the miners operating at a loss, this drop indicated that miners removed resources committed to mine Bitcoin.

This drop meanwhile came just around the halving, a scenario seen during the past halving as well.

Now, there are just 42 days left for the big event that will see miner flow halving from 1800 to 900 BTC per day. Also, the scarcity (stock-to-flow) will double from 27 to 54 years.

With this halving, Bitcoin S2F will reach close to gold’s level and as history has shown, “hard money wins, always.”

As we reported, the higher the SF, the higher the value of the asset and the next halving in 2024 will push Bitcoin even harder, the SF value of the world’s leading cryptocurrency will shoot past 100.

Source: @100trillionUSD – PlanB

“Both bitcoin S2F cross asset model (based on gold, silver etc) and S2F time series model (historical price path) point to $1T+ BTC market cap in 2020-2024 (red circle, where orange and blue line overlap). $1T+ market cap translates into $55k+ BTC price,” said PlanB.

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Author: AnTy

Bitcoin Records 2nd Largest Crash in History After Mt. Gox

  • More than half of Bitcoin’s circulating supply 9.8 million in loss, for the first time in a year
  • A buy the dip opportunity but investments in “extreme fear,” Time to be greedy when others are fearful?

Yesterday has been a day that turned out to be brutal even for the hardcore believers and HODlers. Bitcoin was in free fall as the price tanked to $3,850, the new 2020 low last seen in early March 2019.

In a matter of 4 hours, Bitcoin price went from $6,000s to $3,000s while it took 2 weeks for the price to have the same route in 2018.

In the opposite scenario, again in an hour, the price was back from $3,000s to $5,000s while last year it took a full week.

This heightened volatility also resulted in record volume on cryptocurrency exchanges.

Be greedy when others are fearful?

A spectacular ‘buy the dip’ opportunity came in after a single 1-day candle the price of the digital asset dropped 40% that hasn’t happened since 2014. However, with the crypto market in “extreme fear” with a reading of 10 on a 1-100 scale of Crypto Fear and Greed Index, investors are fearful of marching in and following Billionaire investor Warren Buffett’s

“Be fearful when others are greedy and greedy when others are fearful.”

For now, the price of the leading digital asset has climbed above $5,000 and hovering around $5,500, still down 30% in 2020 so far while managing $1.89 billion on top ten exchanges with real volume.

“Bitcoin just closed its largest daily range % & worst performing day since 2016. Taking the 10 largest daily ranges, next day range average out to 16.41% indicating high volatility following these extreme days. 1-2 day returns are + following down days & – following up days,” noted Market Science.

9.8 million BTC in Loss

Popular crypto derivatives exchanges BitMEX, that offers leverage of 100x, is reportedly the perpetrators behind this carnage. Amidst the cascading liquidations on the exchange, bitcoin found the bottom as trader Jonny Moe notes, “Literally -to the minute- of BitMEXgoing down, BTC immediately began its recovery. What a coincidence.”

In the traditional markets, a 7% drop in the price of the benchmark index triggers a halt which in the past few days have been hit several times but in the cryptocurrency market, it only means finding a new low after anther and getting REKT, highlighting the need for regulatory clarity and oversight in the space all the much more.

Besides the “true liquidations,” these extreme losses were also “100% driven by coronavirus (Covid-19)” and to some extent by US President Donald Trump, ECB, and the Fed that “delivered squat and crashed the market,” said economist and trader Alex Kruger.

This drop in Bitcoin’s price also puts more than half of the circulating supply of the flagship cryptocurrency, 9.8 million BTC in loss. This has been the first time in over a year that the percent of Bitcoin supply in profit is less than 50 percent, as per Glassnode.

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Author: AnTy

Dolomite Decentralized Exchange to Use dYdX for Margin Trading and Stop Loss Feature Integration

Dolomite Decentralized Exchange will add stop loss and margin trading functions within its ecosystem. The Non-custodial digital asset exchange is set to leverage the dYdX protocol to implement the two features.

As it stands, Dolomite’s fundamental model is built on the Loopring protocol and the new dYdX will supplement margin trading features set to be integrated. The exchange’s clients will benefit from this move given the 5x leverage on a long position and 4x on a short position embedded in the new design. In addition, Dolomite’s access to liquidity will increase according to the firm;

“Dolomite is building off of the dYdX margin lending protocol, giving it access to over $30 million in lending liquidity.”

The dYdX Protocol Advantage!

Corey Caplan, the CEO of Dolomite, has recently explained that dYdX protocol will enable them to integrate more trading platforms very easily. This will, in turn, improve the Dolomite ecosystem and assist the firm to capture relevant data from their clients. He added that dYdX modular infrastructure will give its users wider trading margins compared to their competitors while staking less collateral.

The Dolomite CEO further noted that they are the pioneering exchange to integrate dYdX protocol and will also leverage it for a stop-loss function. Clients operating within their decentralized exchange are therefore protected from the risk of having all their funds wiped out by dYdX Protocol;

“Dolomite is also uniquely offering Margin Protection which is a stop-loss function that will close your positions on Dolomite before they are liquidated by dYdX. This saves users from losing the entirety of their margin deposit when they open a position. We were only able to add this feature in because of the modularity of their protocol.”

DYdX protocol is also allegedly working with the Decentralized Autonomous Organization, DAI coin parent firm, providing its lending protocol service. Caplan said that if indeed the two have partnered then it’s good in terms of liquidity for both players.

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Author: Lujan Odera

Bitcoin Carnage: Price Drops Down to $9,345, $8,500 Coming this Weekend?

  • Bitcoin records the loss of 8.6 percent to $9,345 from today’s high
  • Now that everyone finally caught on, analyst says BTC going to $8,500 region
  • Bitcoin started its day above $10,000, going to today’s highest at $10,235 on Bitstamp. However, it couldn’t stay at this level and within minutes lost more than $500.

The leading cryptocurrency dropped down to as low as $9,345 and is currently trading around $9,400 with 24 hours loss of 4.09 percent while managing the daily trading volume of just above $1 billion.

Altcoins are following Bitcoin, with Bitcoin SV down the most by 7.94% among the top cryptocurrencies. While EOS is down by 6.44%, Ethereum and Litecoin are in the red by over 5%.

Market Analyst, Benjamin Blunts says this dump confirms that Ethereum is in w4 and will be making another 5th wave decline.

“If eth looks fucked, the rest are probably fucked as well,”

analyzed Blunts.

Recording The Loss Of 8.6 Percent

As we reported, Bitcoin has been primed for a drop for the past few weeks, coupled with the expiry of CME Bitcoin futures could have affected the prices.

Moreover BitMEX is recording a massive liquidations of more than $100 million worth of Bitcoin. Activity on the exchange, in the last few hours has grown significantly.

Bitcoin might have gone below $9,350, recording the loss of 8.6 percent from today’s high. However, it’s not the end of the decline.

A potential lower low according to Josh rager is at $8,975 while lower high is set at $10,190 where BTC faces weekly resistance.

“Now That Everyone Finally Caught On,” BTC is Going To $8,500

The current daily support has been present at $9,690 but Bitcoin didn’t pay heed to these levels, dropping down to $9,345.

“BTC- broke under the 4H decision point. I think we’ll see 8xxx this weekend after all,”

says CryptoGainz.

Analyst The Cryptomist says, “Now that everyone finally caught on,” the flagship cryptocurrency is going to $8,500 region. But again, it’s not the end of the pain still, she says, a drop to an even lower level wouldn’t be surprising.

In order to move upwards, Rager says a close above $10,190 would be a good start. Moreover, we have to have a strong weekly close for a bullish trend.

For him, to get truly bullish, Bitcoin needs to break and close above $10,854.

Failure to break the local resistance, Rager says would lead to another “local high,” this means a move back down to sub $9,000, that we saw today.

For now, in the short term, the trend remains bearish, with a possibility to drop down to below $8,000 for Bitcoin price.

All of Today’s Bitcoin Price Analysis, Chart Forecasts and Industry News

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Author: AnTy