CBDC Is A “Better” Alternative to Stablecoins, Which Are Unlikely to be Regulated Money: BoE Governor

CBDC Is A “Better” Alternative to Stablecoins, Which Are Unlikely to be Regulated Money, says BoE Governor

Andrew Bailey, the Governor of Bank of England, yet again shared his criticism of stablecoins as he said that he did not believe that stablecoins are likely to evolve into safe, regulated money, which means central bank digital currencies (CBDCs) will more likely be the future for electronic payments.

“I think we have two choices broadly,” Bailey told lawmakers in the upper house of Britain’s parliament as part of an inquiry into the future of digital payments.

“Is it going to evolve to some world of (asset-) backed stablecoins which has money-like features which could be regulated? I must say … I am sceptical about that. Or … is the better contribution, particularly to financial stability, to say the better alternative to that may be a central bank currency of digital form?”

Commenting on stablecoins, Bailey said out of the $2.5 trillion crypto market cap, which is around the level of the FTSE 100, “95% of it is unbanked crypto-assets,” and the other 5% are stablecoins, “some of which are more stable than others.”

He also warned that crypto-assets do have “all the potential to be a threat to financial stability, which is why we think we do need to take action.”

This month, the BoE and Britain’s Treasury said they would hold formal consultations next year on whether to move forward with a CBDC, which, if approved, would be introduced in the second half of the decade.

On Tuesday, Bailey said he would not expect the BoE to offer digital bank accounts directly to savers.

“We do not see this as the Bank of England moving into the retail bank account business through a central bank digital currency,” he said while speaking to the Lord’s Economic Affairs Committee.

The BoE would instead provide the means of settlements to a regulated platform on which banks and even alternative digital wallets holders would operate. The central bank, Bailey said, would need power over these firms on the platform to protect privacy.

According to him, work on a CBDC was intended to solve cash and retail transactions problems and not as a tool to implement unconventional monetary policy such as a negative interest rate.

Bailey further warned that allowing the private sector to manage the shift toward digital currency could result in the bank regulating big tech firms. “The question we’re going to face is… would we try to regulate” private tech firms creating digital money, he said.

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Author: AnTy

Chivo Implements Measures “Against Money Laundering,” El Salvador’s Largest Bank Accepts Bitcoin Payments

Chivo Implements Measures “Against Money Laundering,” El Salvador’s Largest Bank Accepts Bitcoin Payments

There is also “no tax” – income or capital – on profits from Bitcoin investment in the country in order to “encourage foreign investment,”

Bancoagrícola, the largest bank in El Salvador, will be allowing its customers to pay their credit card bills and loans in Bitcoin. The cryptocurrency can also be used to purchase goods and services from the bank’s merchant network.

Founded in 1955, Bancoagrícola is partnering with New York-based payment network Flex to enable the payments in BTC via its mobile app.

Flexa announced that the bank’s customers will be able to pay US dollar-denominated loans and credit card balances with BTC at “the exact fair market rate, without any additional fee or spread.”

Bancoagrícola merchants that are accepting payments through the bank’s Wompi payment gateway can also make use of Flexa-powered bitcoin payments.

Earlier last week, El Salvador became the world’s first nation to adopt Bitcoin as legal tender alongside the US dollar. The adoption also saw multinational chains like McDonald’s and Starbucks accepting BTC as a form of payment.

Adopting Bitcoin also means the nation won’t be levying any tax on cryptocurrency investment.

“If a person has assets in bitcoin and makes high profits, there will be no tax. This (is done) obviously to encourage foreign investment,” Javier Argueta, legal adviser to President Nayib Bukele, told AFP.

“There will be no taxes to pay on either the capital increase or the income.”

As for the fears over the potential for Bitcoin’s illegal use, Argueta said the wallet called “Chivo” allows Salvadorans at home and abroad to buy and spend the cryptocurrency as implemented “relevant mechanisms” to ensure traceability.

“We are implementing a series of recommendations from international institutions against money laundering,” said the adviser adding, transactions would be halted temporarily if the value were to collapse to minimize the impact of extreme currency fluctuation.

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Author: AnTy

Crypto Market Dips and Over 165k Traders Get Liquidated for More Than $890 Million

But as long as central banks and governments continue to print money, which they will as Democrats are now pushing to expand the largest single spending bill in history $3.5 trillion package, investors will continue to turn to risk assets.

The cryptocurrency market has taken a drop today.

From its highs in the last 24 hours, Bitcoin has fallen more than 3.6% to as low as $50,590. The leading cryptocurrency had surged to $53,000 late on Sunday or early Monday.

As for Ether, it slid more than 6.5% to $3,675 from its 24-hour high of about $3,975.

Among the top 100 crypto assets, the biggest hit in the past 24-hours was recorded by SafeMoon of 15%, with other double-digit losses seen by Avalanche, IOTA, Horizen, Internet Computer, Filecoin, Sushi, Compound, Ethereum Classic, Polygon, Uniswap, VeChain, BAT, GRT, Cardano, Shiba Inu, Terra, Dogecoin, and Aave.

This has resulted in a 4% dip in the total market cap, which was at almost $2.47 trillion yesterday, nearing its $2.55 trillion peak, which slid down today and is currently at $2.36 trillion.

Despite the losses, Solana is up 25% and Fantom over 23%, while FTT is in the green by almost 5%.

The latest drop in the market resulted in liquidating 165,323 traders for more than $890 million, according to Bybt. But these numbers are not exhaustive as Binance does not report its full figures.

Bitcoin accounted for the most of it at $222.4 million, followed by $159.3 million in Ether and $80.8 million in Solana.

The funding rate on Bitcoin perpetual contracts has slid down some, with the highest currently at 0.0536% on Binance. The crypto asset prices have been recovering since July 21, and last week funding started trending up as prices made their way up, especially for Ether which went past $4k briefly on Friday, not far off of its $4,380 peak.

The highest funding rate on Ethereum perpetual is currently on Bybit at 0.0778% on USDT margin contracts, while the lowest is 0.01% on Binance for token margins contracts.

Meanwhile, open interest remains elevated at $19.41 billion on Bitcoin futures, gradually making its way to a $27.68 billion high. For Ethereum, OI has hit a new ATH on Monday, surpassing $11.6 billion from May 10. Today, it has seen a slight dip to $11.26 billion.

Despite the dip, the macro outlook remains bullish, with Democrats pushing to expand the largest single spending bill in history, $3.5 trillion tax and spending package.

So, as cryptocurrency exchange FTX noted in its blog titled “The everything bubble & TINA 2.0,” as long as money is being printed, the prices of everything from stocks, commodities, to venture capital, retail estate, and crypto should increase in value.

Since the COVID-19 pandemic began, already $32 trillion of fiscal and monetary stimulus — the largest stimulus as a percentage of global GDP — has been pumped into the markets while government bonds are negative-yielding.

“If global central banks and governments are going to continue to print money, investors are faced with a TINA 2.0 predicament, where cash is literally burning a hole in their pockets, pushing them not just into risk assets, but further out the risk curve, exacerbating wealth inequality along the way, leading to even further risk taking,” noted FTX.

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Author: AnTy

Additional Money Is Coming to BTC as Capitulation Period Ends & Hash Rate Climbs to June Level

Additional Money Is Coming into Bitcoin as Capitulation Period Ends and Hash Rate Climbs to Early June Level

Breaking above $50k, Bitcoin price has recovered from the $29,760 low in July. As of writing, BTC/USD is trading around $47,500, about 26.7% down from its peak four months back.

Just like price, other data metrics suggest that the leading cryptocurrency is on a path to recovery after the market-wide sell-off just three months ago when the government’s crackdown caused Chinese miners to suddenly shut down their operations.

As miners and investors sold their BTC amidst the news of crackdown and further regulation, BTC’s price crashed by more than 50% and altcoins between 60% to 95%.

Besides price, mining operations moving out of China caused the Bitcoin hash rate to plummet to its lowest level since 2019. But as we reported, it started to recover in July and August and is already back near 150 Th/s.

The recovering hash rate is a signal that mining operations are starting to come back online in new locations overseas and that the worst of the crackdown is over.

Bitcoin’s usage is also climbing, growing 4.6% week-over-week. Additionally, BTC SOPR (7-day average) has turned positive yet again in August, “a sign that the capitulation period has ended and that the market is back on more solid ground.” Back in June, it turned negative, meaning investors were selling at a loss.

Last week actually saw some minor profit realization on-chain by long-term holders, according to the Exchange Net Flow metric, which showed net inflows to exchanges, not dissimilar to that seen through Dec 2020 to April 2021 bull market period, as per Glassnode data.

In the meantime, open interest for Bitcoin perpetual futures has started to climb back up and returned to May levels. OI which is a measurement of the total number of active futures contracts, currently indicates that additional money is coming into the market.

Open interest can also serve as a proxy for measuring leverage, and high OI means there’s a good chance there’s a high amount of leverage in the futures market as contracts are usually opened using leverage.

Based on the funding rate, the highest currently at 0.0691% on Bybit, speculators have yet to ape in. Meanwhile, Binance and FTX reduced their maximum amount of leverage to 20x last month, down from the previous max of over 100x.

In the options market as well, OI is at multi-month highs, rising by 150% from late June low to $9.06 billion now.

“Although open interest is rising the overall amount of leverage is likely lower than seen in April and May. Lower leverage should help reduce the risks of the extreme liquidation cascades that occurred during May’s crash,” said CoinMetrics.

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Author: AnTy

Over 60% of Robinhood Clients Traded Crypto for the First Time in Q2

Robinhood is currently making more money from crypto trading than equities and options combined. While crypto revenue surged 4,560% from a year earlier, transaction revenue from equity was down 26.8% from 2Q20 and 61% from 1Q21, and for options, it was down 16.7% from 1Q21.

Robinhood Markets (HOOD) reported a 131% increase in its second-quarter revenue, having benefited from a surge in cryptocurrency trading on its platform.

Still, the company’s shares dropped and are currently trading at $49.80 after it warned investors that this crypto boom-driven jump in revenue might not last.

“We expect seasonal headwinds and lower trading activity across the industry to result in lower revenues and considerably fewer new funded accounts,” in the third quarter ended September 30, 2021, Robinhood said in a statement.

In its first earnings report as a publicly traded company, the online brokerage said revenue more than doubled to $565 million for the quarter ended June 30 compared to $244 million a year earlier.

Transaction-based revenue at $451 million formed the bulk of the investing app’s $565 million revenue in Q2.

And crypto revenue totaled $233 million in the second quarter, an increase of a whopping 4,560% from a year earlier. Crypto trading revenue was only $5 million a year ago.

A significant portion of this primarily came from Dogecoin (DOGE) alone, which accounted for 62% of cryptocurrency transaction-based revenue.

In the past year, crypto has grown to become 41%, from just 2% of Robinhood’s total revenue.

But even more interesting is the fact that over 60% of funded accounts traded crypto for the first time in Q2 as “Robinhood’s customers demonstrated significant interest in cryptocurrencies,” it said.

At this point, Robinhood is making more money from crypto trading than equities and options combined.

As a matter of fact, Robinhood’s transaction revenue from equity was down 26.8% from 2Q20 and 61% from 1Q21. As for options transaction revenue, down 16.7% from 1Q21 but still up 48.6% from 2Q20.

QoQ growth of average account size of the firm is flat at ~$4,500 but recorded an increase of 34.6% YoY while operating expenses climbed 169% YoY.

Despite this growth, Robinhood is yet to offer its users the options to move their crypto assets out of the platform. When asked about when the firm will provide crypto wallets, Chief Executive Officer Vlad Tenev said, “It’s something that our teams are working on,” adding they’re in particular demand among DOGE enthusiasts.

“The ability to deposit and withdraw cryptocurrencies is tricky to do with scale, and we want to make sure it’s done correctly and properly.”

Executives also said they would explore making more crypto assets available for trading, Round Up Investing, and offering retirement accounts.

“The heat is on for Robinhood to invest in crypto-trading products, including added crypto-wallet functionality and more coins to buy and trade, after the strong interest from users reflected in 2Q results,” noted Julie Chariell, Bloomberg Intelligence fintech industry analyst.

A large part of Robinhood’s transactional revenue actually comes from a practice called payment for order flow (PFOF). In this practice, rental brokers send customers orders to wholesale brokers instead of exchanges for a slightly better execution price and payments from the wholesalers in return.

The US SEC is scrutinizing this practice over concerns that it is a potential conflict of interest. Brokers may be incentivized to maximize their own profit by not sending orders to places where customers would get the best execution.

But Robinhood doesn’t expect PFOF to be banned, but even if it does happen, it said, it can find other ways to generate revenue.

Robinhood’s funded accounts reached 22.5 million customers as of June 30, compared with about 9.8 million a year earlier. Monthly active users increased 109% to 21.3 million, from 10.2 million in Q2 of 2020, while assets under custody jumped 205% to $102 billion during the same period.

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Author: AnTy

Congressman Reintroduces Bipartisan Blockchain Regulatory Certainty Act to Redefine Money Transmitters

Congressman Reintroduces Bipartisan Blockchain Regulatory Certainty Act to Redefine Money Transmitters

The redesigned bill aims to provide a “safe harbor” for developers and blockchain services providers in the wake of the infrastructure bill discussion.

U.S. Representatives Tom Emmer (R-Minn.) and Darren Soto (D-Fla.) reintroduced the bipartisan Blockchain Regulatory Certainty Act to clarify crypto investors by clarifying that non-custodial crypto service providers are not money transmitters.

This redesign aims to remedy the concerning proposed guidance from Financial Action Task Force (FATF) that threatens to stifle blockchain innovation in the US and send it overseas.

This year, the FATF issued draft guidance to expand the definition of virtual asset service provider (VASP) to include the developers or operators of a DeFi platform even if they have no interaction with users.

As such, with this reintroduced Act, Congressman Emmer wants to remove developers and service providers like miners from having to register as money transmitters because they never custody consumer funds.

“Blockchain service providers need clear rules of the road to be able to develop and invest in the United States.”

“It’s imperative that we provide the framework for this technology to thrive, without being limited by outdated rules and overregulation.”

Tom Emmer (R-Minn.)

Last month, Emmer also reintroduced a separate bill called the Securities Clarity Act, that instead of treating crypto assets as securities, would treat them as commodities.

The Blockchain Regulatory Certainty Act basically aims to provide a “safe harbor” from all the licensing and registration for developers and certain blockchain services providers, reads the bill.

“The re-introduction of the Blockchain Regulatory Certainty Act is extremely timely in the wake of the cryptocurrency and infrastructure bill discussion that recently took place.”

Darren Soto (D-Fla.)

This bill is endorsed by the Coin Center, the Blockchain Association, and the Chamber of Digital Commerce.

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Author: AnTy

Twitter’s Jack Dorsey Doesn’t ‘Hate’ Ethereum; He Isn’t in Bitcoin for the Money, But to “Fix the Money”

Twitter’s Jack Dorsey Doesn’t ‘Hate’ Ethereum; He Isn’t in Bitcoin for the Money, But to “Fix the Money”

As the Twitter and Square co-founder shared that he is using “Lightning to enable a currency for the internet” by allowing every account on Twitter to link to a Bitcoin Lightning Wallet, the Ethereum community took it as a direct attack against them.

Twitter co-founder and CEO Jack Dorsey’s focus is on Bitcoin as he works on making it the currency of the Internet.

Taking another step towards this mission, Twitter will enable every account on the platform to link to a Lightning wallet. The idea, Dorsey said, is using “Lightning to enable a currency for the internet.”

This isn’t something new though, Dorsey has been hinting towards this for some time now. A couple of months back, he had said that it was “only a matter of time” that LN would be built into BlueSky or Twitter.

Lightning Network is a second-layer scaling solution that speeds up Bitcoin transactions and reduces costs by routing transactions through channels without needing the first layer Bitcoin blockchain to verify each transaction.

Dorsey launched BlueSky in December 2019, a project to build a decentralized standard for social media. The project has “taken a long time,” as the team decided to research before hiring a lead whose announcement Dorsey said will be made next week.

This time, Dorsey shared this tidbit about BTC on Twitter when the discussion was started around Twitter and NFTs by Brandon Jacoby, former design lead at Dorsey’s Cash App, noting, “Every account on Twitter should have a wallet address for storing NFTs. Users could select any NFT in their wallet to use as their avatar. Would serve as one of the biggest verified layers for showcase/distribution.”

But this, Dorsey agreed, benefits the Ethereum ecosystem more than Twitter itself, not to mention, he is working on bringing BTC to the masses through the social media giant.

This didn’t go down well with the Ethereum community as they took Dorseys’ interest in Bitcoin as an attack against Ether. But as Dorsey said, “Focus on one thing isn’t hate of the others.” Much like many, ETH enthusiast DCinvestor then took to Twitter to share his displeasure with Dorsey’s decision, saying,

“Jack “maximally” doubling down against Ethereum will become one of the biggest miscalculations in web history; there is a huge opp for social networks and other websites ready to embrace Ethereum Web3, not lightning wallets linked to your account which no one cares about.”

In response, Dorsey clarified that he’s just “focused on a native currency for the internet. That is all.”

As for why not Ethereum, Dorsey is clear that he is looking for Bitcoin with key concerns with other blockchains centered around “founding principles, security, and centralization.” In a separate tweet, he said that “No one technology alone” will disrupt ‘Big Tech’ which needs to be done.

The CEO of Square and Twitter isn’t in it for the money either, as he said he intends “to give all mine away.” What he wants to do is “to help fix the money.”

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Author: AnTy

Historic Hydro-Power Station in The US Is Earning 3 Times the Money By Mining Bitcoin

Historic Hydro-Power Station in The US Is Earning 3 Times the Money By Mining Bitcoin

One of the oldest renewable energy facilities in the world, the Mechanicville plant has now started to mine Bitcoin.

Mining Bitcoin has allowed the hydro-power station in the US to earn three times the money they earned by selling energy.

“We think this is the oldest renewable energy facility in the world that’s still running,” said Jim Besha Sr., CEO of Albany Engineering Corp., which owns the Mechanicville hydroelectric station.

“We can actually make more money with bitcoin than selling the electricity to National Grid.”

Built in 1897 and listed on the National Register of Historic Places, the plant is running at full capacity again after being abandoned by the National Grid, part of which is used to mine the cryptocurrency.

Albany Engineering got involved with the plant in 1986 when National Grid asked them to refurbish and operate the plant, which provides power to two 2-megawatt transformers. It signed a deal with National Grid to sell it the power for 40 years below the market price.

Albany Engineering gets 3 cents per kilowatt-hour when it sells energy to National Grid.

Founded on an antique structure, there hasn’t been a lot of profit in running a plant using original 1800s machinery, which has now been changed by Bitcoin.

“It’s the best (type of bitcoin mining) because we’re using renewable energy,” Besha said. “We’re just doing it on the side, experimenting with it. We’re buying used servers.”

The Mechanicville hydroelectric plant has also been nominated for landmark status in three different types of engineering — civil, electrical, and mechanical.

The company, however, isn’t holding the mined Bitcoin rather converting the thousandths of a bitcoin they make each week to cash.

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Author: AnTy

MAS Head says Central Banks and Regulators “Should Welcome” Decentralized Finance

While the future of money shouldn’t be “left entirely to central bankers,” Ravi Menon warns not to discount the possibility of crypto whose widespread use could “lead to an erosion of the nation state’s monetary sovereignty.”

The head of the Monetary Authority of Singapore (MAS) is bullish on decentralized finance (DeFi), and that central banks and regulators can potentially shape this decentralization.

Earlier this week, Ravi Menon, Managing Director at Singapore’s central bank, gave remarks at the “Decentralised Finance and the Future of Money” panel at the Andrew Crockett Memorial Lecture by Mark Carney via Video Conference.

Here, he talked about centrifugal forces driving financial functions away from the traditional core and affecting all aspects of the monetary system.

“The delivery of retail financial services is being decentralized,” said Menon, explaining that it is happening in two ways.

One is by non-financial players, including big tech, fintech, and smaller technology firms which are often unregulated and providing payments, lending, savings, and investments as complements to their core digital service.

The second is regulated financial players who are reinventing their business models and leveraging on technology to offer an array of non-bank digital platforms in an attempt to reach new customers at lower acquisition costs.

“Central banks and regulators should welcome both these developments,” said Menon, adding, regulators also need to be on alert about new sources of risk.

What needs to be done is “adapt our regulatory approaches,” including paying greater attention to market conduct, consumer protection, and technology risks and making regulatory frameworks more modular and agile.

“Technology is enabling a fundamentally different approach to financial infrastructure, compared to the centralized systems of today.”

Menon takes note of crypto networks here which are based on self-executing smart contracts and non-custodial financial services, where users maintain control over their assets at all times.

While by replacing intermediaries and central parties, these networks reduce cost and risk, by decentralizing key aspects of financial infrastructure, they “can also potentially enhance inclusion and innovation.”

Though self-governing networks can not meet the high standards of governance, security, and resilience that are demanded of critical infrastructure, “central banks would do well to incorporate these innovations in designing the next generation of payment infrastructure,” he added.

However, while cryptos like Bitcoin have “failed to become money,” Menon urges not to discount the possibility of better algorithms leading to such cryptocurrency whose widespread use “could lead to an erosion of the nation state’s monetary sovereignty” and have implications for “central banks’ ability to safeguard financial stability,” to which small economies may be particularly vulnerable.

Given that currency competition is not an unfamiliar challenge, the top official says, the benefits of an independent monetary policy have to be weighed against the efficiency gains from adopting a more widely used currency.

“The future of money is too important a matter to be left entirely to central bankers.”

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Author: AnTy

Yield Compression Continues as More Money Seeks Yield while Avoiding Capitulation

Yield Compression Continues as More Money Seeks Yield while Avoiding Capitulation

Activity in the crypto market and DeFi has taken a hit as prices either dump or trade sideways. When it comes to the Ethereum network, gas prices have fallen to early DeFi summer levels, a mere 10 gwie which skyrocketed to 2,000 gwei for a brief period in May.

Amidst this, the total stablecoin supply has reached nearly $108 billion, adding more than $47 billion in just the last three months. trader CL of eGirl Capital said,

“The rate of USDC minting concerns me, the more money-seeking yield in crypto, the more alpha decay in futures curve. The pool of yield-seeking money only gets bigger, leverage traders seem to perpetually lose money. 1 day we might never see quarterlies above 20% again.”

While “good for price… it will make speculation way more competitive,” he added.

In the meantime, this growth in stablecoins supply is crypto market participants looking for risk-off yield farming opportunities or even traditional market participants bypassing directly investing in crypto. Glassnode noted,

“Among the bearish sentiment, liquidity remains strong on-chain as core DeFi participants seek out the highest yields in stablecoins, accumulate governance tokens, and continue to hold spot ETH.”

However, yields have already started to contract as demand for leverage slows. With funding on perpetual contracts normalizing and going negative, yield in DeFi is bound to go down even more as well. Meanwhile, the low volatility interest rates have arisen, giving stablecoin farmers and short-sellers access to cheap borrowed capital. Glassnode says,

“As long as liquidity stays strong and demand for borrow lessens, yields will continue to stay low in borrow/lend markets.”

The latest sell-off in the market saw Bitcoin crashing 55% from its all-time high and Ether experiencing a drawdown of over 66%. But while short-term ETH holders see their unrealized gains evaporate as the loss enters the capitulation zone, long-term holds remain firmly in profit.

Unlike previous times of capitulation, this time, these long-term holders have the opportunity to deploy their assets in DeFi. Fiskantes said,

“One of the reasons this down cycle could be shorter than 2018-2020. Money don’t have a reason to leave if they can stay in stables -> compressed yields -> higher yield seekers increase risk appetite -> buy pressure for “productive assets.”

As we reported, both the lending protocols Aave and Compound have seen over $4 billion in outstanding deposits.

These protocols allow ETH holders to borrow stablecoins against their deposited crypto asset, which can be used for attractive risk-off yields or speculate on token prices and gain governance tokens, stablecoin balances, and crypto assets by buying the dips, all the while keeping their exposure to ETH.

“Stablecoin yield farmers remain healthy profiteers during downturns,” states Glassnode, noting the competition is waging on in the Curve Finance ecosystem as Yearn, Convex Finance, and Stake DAO compete for deposit dominance.

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Author: AnTy