Bitcoin Miner Fees Jumps a Whopping 196% YTD while Indicators Turning Bullish

  • Bitcoin price and volume is down while volatility jumps above 9%
  • Long-term velocity turned bullish while MVRV Z-Score indicates market bottom

It’s just another day in the crypto market with Bitcoin down 6.36% trading at $6,225. The market doesn’t seem to decide on where it wants to head right now, as the market records double-digit percent changes in both the directions.

The crypto market started climbing this week after the stock markets found a temporary bottom. Given that cryptocurrencies are acting like risky assets in line with stock markets, it’s no surprise that the momentum has been positive throughout this week.

But the 7-day average real trading volume has dropped down after the volatile period for the past two weeks but still higher than the average recorded earlier in 2020. And increasing prices on decreasing volume is usually a bearish signal.

The 30-day volatility for the BTC price that has been extreme these days meanwhile has jumped above 9%. As Arcane Research notes, “with the global turmoil and volatile stock markets, it doesn’t look like the bitcoin price movements will settle down either.”

The rise in BTC’s price has the world’s top cryptocurrency leading the way with an increase in its dominance. While Bitcoin is closing up on Small Caps ahead of both Large and Mid Cap crypto indexes, Mid Caps continue to be the worst performer, down 34% this month.

However, despite the price boost, bitcoin is up 70% from its $3,850 bottom, the market sentiments are still reflecting “extreme fear” in the market with the Fear & Greed Index having a reading of 14. The last time the market stayed in “Extreme Fear” this long was in December 2018.

The Bitcoin Network

As we reported, mining difficulty for bitcoin declined by almost 16%, which has been the second biggest drop in its history. The largest drop was on October 31, 2011, of 18.03%. The network difficulty adjusts every 2016 block or 2 weeks in order to ensure that the network continues to mine new blocks every 10 minutes.

This decline came on the back of a drop in the hash rate following the crash in price two weeks ago. This decline indicates that fewer miners are competing to solve the math problem to mine the block and win freshly minted BTC.

Mining fees meanwhile jumped 47.8% since last month and a whopping 196% YTD, as per Glassnode.

Amidst this, the bullish metric is a long-term velocity that measures the speed at which bitcoin is moved through the network. A velocity of 600% means, active coins move six times per year and it has yet again turned bullish last week after being below 600% since August 2019.

Yet another bullish indicator is MVRV Z-Score which is used to assess when Bitcoin is under or overvalued relative to its fair value. It dropped under and then promptly bounced back over 0 in a space of two weeks and “historically, falling into the green zone has indicated market bottoms.”

Latest Bitcoin Price News and Crypto Market Updates

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Author: AnTy

Galaxy Digital’s Novogratz Remains Bullish as Ever on BTC: “This is the Time for Bitcoin”

The price of Bitcoin has surged 74% from the low the digital currency put on March 12. However, we are still down 36% from 2020 high of about $10,500. But according to billionaire investor Mike Novogratz instead of panicking, this should be taken as a buy the dip opportunity.

In a recent interview with CNBC, the Galaxy Digital Holdings’ CEO said, “If there was ever a time — debasement of fiat currencies, monetization of trillions of dollars of debt, this is the time for Bitcoin.”

The bitcoin bull predicted on Tuesday that the world’s leading cryptocurrency would rally this year as it was designed after the 2008 financial crisis to be an alternative when central banks “run amok.”

In recent weeks, we saw central banks around the world announcing trillions of dollars in stimulus to pump in the financial markets and promising every step necessary to combat the impact of coronavirus on their economies.

“It needs to rally this year,” said Novogratz. “If at the end of the year Bitcoin’s not a lot higher, I’m going to scratch my head and say, ‘Look, what the heck is going on?’”

Bitcoin Looking Promising

Currently, BTC/USD is trading under $6,700 after surging to $6,990 after the $2 trillion stimulus coronavirus bill was passed. The move yet again followed the stock market. Yesterday, the Dow Industrial Average had its historic rise only today to swing between gains and losses.

Meanwhile, one technical indicator, GTI VERA Convergence Divergence is flashing a buy signal. Moreover, according to Christel Quek, co-founder of Bolt Global,

“It could be very likely that traditional investors are seeking to regain liquidity through profit hunting from crypto assets as equities are negative worldwide.”

However, in the short-term, in the next 1 to 2 months, economist and trader Alex Kruger sees everything from equities, their volatility, bitcoin if it remains risk-on, and crude oil to be lower.

It’s worth noting, in less than two months, Bitcoin will experience its third reward halving that would cut down miners block rewards while the cost of mining bitcoin will surge between $12000 to $15,000.

In the next six months, the economist sees equities and gold higher while his 12 months’ view is everything from equities, its volatility, gold to bitcoin going higher. But the main risk he said is if the equities’ bottom is in because of the rising coronavirus cases and the period of lockdown in the US.

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Author: AnTy

Ripple Price Analysis: XRP/USD Could Continue Higher To $0.17

Ripple price is trading with a bullish angle above the $0.1560 resistance area. XRP to USD is likely to continue higher towards the 0.1700 and $0.1735 resistance levels.

Key Takeaways: XRP/USD

  • Ripple price is currently rising from the $0.1450 support area against the US Dollar.
  • XRP/USD is currently following a contracting triangle with resistance near $0.1660 on the 2-hours chart (data feed from Bitstamp)
  • Bitcoin price is also rising and it is now trading above the $6,550 resistance level.

Ripple Price Analysis

After retesting the $0.1450 support area, ripple price started a decent increase. XRP to USD gained pace and broke the key $0.1500 and $0.1550 resistance levels to move into a positive zone.

Ripple Price

Looking at the 2-hours chart, ripple price remained well bid above the $0.1550 level and the 50 simple moving average (2-hours, purple). Besides, there was a break above the 50% Fib retracement level of the key drop from $0.1760 to $0.1447.

It seems like ripple price is now following a contracting triangle with resistance near $0.1660 on the same chart. An initial resistance is near the $0.1640 level.

The 61.8% Fib retracement level of the key drop from $0.1760 to $0.1447 is also near the $0.1640 level to act as a resistance zone. If there is a break above the $0.1640 and $0.1660 resistance levels, the price could continue to rise in the coming sessions.

The next resistance is near the $0.1700 level, above which the bulls are likely to aim a test of the $0.1735 pivot level in the near term.

Conversely, ripple could fail to continue above the $0.1660 resistance level. In the mentioned case, the price could test the triangle support at $0.1600. If there is a downside break below the $0.1600 support is likely to accelerate its decline towards the $0.1520 level.

Any further losses may perhaps start an extended decline towards the $0.1450 support area. Overall, the current price action is positive above the $0.1600 level, but the price must break the $0.1660 level to set the stage for an extended rise in the coming sessions.

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Author: Aayush J

Bitcoin Jumps on the News of The Fed Launching “Unlimited QE”

Just like last weekend when the price of bitcoin reacted immediately to the US Federal Reserve slashing interest rates to zero and restarted the QE program, today bitcoin jumped on the back of unlimited QE news.

Bitcoin was trading under $6,000 only to jump to $6,629 in under an hour. However, we are back around $6,300, up 5.83% in the past 24 hours.

Despite the stimulus, the stock market opened lower with the Dow Jones Industrial Average slipping 1.8% and S&P 500 fell 2.9%. Gold, however, headed higher on Monday to $1,524.96 an ounce after the Fed unveiled an aggressive round of additional stimulus.

“US stocks gave back all gains since the start of Trump’s presidency,” noted economist and trader Alex Kruger.

No Limit

The Fed said on Monday that it will launch several programs to help markets function more efficiently amidst the coronavirus crisis.

“The coronavirus pandemic is causing tremendous hardship across the United States and around the world. Our nation’s first priority is to care for those afflicted and to limit the further spread of the virus,”

the Fed said in a statement.

“While great uncertainty remains, it has become clear that our economy will face severe disruptions. Aggressive efforts must be taken across the public and private sectors to limit the losses to jobs and incomes and to promote a swift recovery once the disruptions abate.”

Fed President James Bullard predicted the US unemployment may hit 30% in the second quarter and an unprecedented 50% drop in GDP because of the shutdown to combat the coronavirus (Covid-19).

Among the initiatives is a commitment to continue its asset purchasing program, a new chapter in Fed’s “money printing.” Other initiatives include unspecified lending programs to support eligible small-and-medium sized businesses.

“We are now in QE infinity, again,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group.

Free Money, Not Free Lunch

The Fed has been injecting billions of dollars in the economy and considerings trillions more as the coronavirus cases around the world surge over 353,000 and at least 470 people die in the US.

With the shorter-term MMT announced, “the government can now spend all it wants,” said Kruger. This the economist said is “how free money looks like. But there is no such a thing as a free lunch.”

“Society pays for this. Via inflation. The price to pay is inflation in the long run. Inflation expectations are popping and the long end of the treasuries curve is already pricing it in,” said Kruger.

And this is why the crypto industry is so excited. Already, Bitcoin is looking like it might be decoupling, and according to on-chain analyst Willy Woo, we would get more confirmation of this in the coming weeks.

He explains that in a flight to safety, traders first exit risk-on leveraged positions to pile into USD, which has been soaring all this time. Once the assets have crashed against USD and fear peaks, comes the time to hedge in assets ahead of rise in their value as it happened in 2008 in gold and Woo says would happen to BTC in 2020.

It’s the first time that Bitcoin is going through a crisis and there is no knowing how it will perform. Currently, it is acting like a risky asset with charts having a bear flag, however, the fundamentals are strong and bullish while the stock-to-flow model cointegration is being followed nicely.

“Investors and consumers have trouble understanding Bitcoin’s value proposition. The former expects a cash flow, the latter expects magical payments UX. Both are disappointed by Bitcoin. Savers quickly fall head over heels in love with Bitcoin,”

said co-founder of the Satoshi Nakamoto Institute, Pierre Rochard.

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Author: AnTy

Bitcoin Mining Death Spiral Only Exists In Theory; It’s Not Happening, Maybe Ever

Less than two months before the halvening, the price of bitcoin has more than halved. But this according to CoinShares’ Head of research, Christopher Bendiksen, is a “perfect prelude because the end effect on miners is the exact same.”

Apart from newly created BTC as block rewards, miners receive transaction fees as part of their mining reward to cover their ongoing electricity costs which are denominated in their local currency. As such the purchasing power of Bitcoin income of miners is dependent on the exchange rate between bitcoin and their local currency.

When the price of bitcoin falls, the miners’ are no longer profitable as such they are forced to stop mining, which then results in overall network hash rate dropping. As we have been seeing recently, hash rate has nosedived, 39.7% down from ATH on March 1st.

Bitcoin Hash Rate
Source: Blockchain.com Bitcoin Hash Rate

However, interestingly, the same amount of bitcoin will be produced as the bitcoin protocol is designed to adjust the difficulty as per the average hash rate every 2016 blocks, about 14 days. Bendiksen said,

“No matter how little or how much hashrate the combined mining network produces, the Bitcoin protocol will automatically adjust the difficulty such that new blocks are found every 10 minutes on average.”

Because no amount of added hash rate could make BTC produced any faster than the predetermined and vice-a-versa, the cost of mining always tends towards the market price of bitcoin.

Bitcoin Mining will Find a New Balance

From Feb. high of $10,500, Bitcoin price is currently down 50% meaning miners’ income lost over 50% purchasing power. As such, the highest cost producers are unprofitable with some even in a cash flow negative in which case they turn off their gear and hash rate fall.

And this is exactly what is happening in the market, miner’s profitability is at its lowest ever, and the hash rate has taken a drop with a 7 to 9% negative difficulty adjustment coming next week.

As difficulty is adjusted, the remaining hash rate finds blocks at the same frequency as before. Whichever miners remain cash flow positive will end up having the cost of mining reduced. And the downward difficulty adjustments means, “a new balance is found where the remaining miners find a higher percentage of blocks than they used to” — which means their BTC incomes increased making up for loss from a reduced price.

That’s what Network Designed to Handle

As for those that are worried about the mining death spiral, Bendiksen says it only exists in theory.

According to him, if bitcoin price fall, mining becoming unprofitable caused the hash rate to drop and grinding the network to halt, causing the price to drop further and more miners to shut down with no one mining and BTC price hitting zero, is a “weak” argument.

This hasn’t been witnessed before either despite the flagship cryptocurrency having two halvings in the past.

Source: Coinshares

However, there is a “steel man” form of this argument which is conceivable where exactly after a difficulty adjustment the bitcoin price suffers an “extreme” amount and very few or none of the miners believe the price will ever come back up. And miners are “physically able” to immediately shut down all the mining gear.

This means the next difficulty adjustment is 100 times higher than normal, taking more than 4 years and about 75 weeks for things to be normalized. But the markets don’t move like that in real life as it would mean the system is fundamentally wrong.

Bendiksen says the bitcoin network was designed to handle exactly the situations we are experiencing. Dramatic pullbacks aren’t unprecedented for bitcoin, neither are the halvings.

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Author: AnTy

BTC Investors Are Buying the Dip But Watchout, Options Expiry Are Coming

  • Bitcoin addresses holding 0.1+ coins breaks ATH set yesterday as price moves north of $5,800
  • Bitcoin futures and options set to be expired next week

For the past few days now, bitcoin is showing the signs of decoupling from the other risky assets like gold as the digital asset jumped to $5,920, up 8.13%, with more than $2 billion worth of bitcoin exchanging hands-on top ten exchanges with real volume.

Another positive movement is the number of addresses holding over 0.1 BTC just hitting an all-time high yet again. Just a day before, the addresses reached a peak of 2,919,003 only to surpass this with 680 new addresses.

Source: Glassnode

Looks like people are buying the dip and stacking some sats. Bitcoin HODLer Net Position Change is also showing that investors are accumulating. The metric has been positive during the recent BTC price dump, which means long term investors “accumulating discounted BTC and increasing their positions.”

Also, according to MVRV, this is the “best time to accumulate BTC at a relatively discounted price” as it drops below one for the fourth time in Bitcoin’s history.

Market Dynamics to Change

However, as bitcoin surges and altcoins jumping even higher, with Dash (19.49%), IOTA (15.50%), Chainlink (13.47%, BAT (11.14%), and Cardano (11.02%) leading the market gains, bitcoin futures and options are soon to be expired.

While next week, on the last Friday of the month, CME Bitcoin futures will expire, nearly two-third of outstanding options will expire over the next two Fridays.

Bitcoin options volume, however, has been going down since March 12 sell-off, the same as bitcoin futures contracts.

BTC Options Volume SKEW
Source: Skewdotcom

Strength of the infrastructure under question

Late last week, bitcoin plunged to its worst day in seven years as worries over the economic hit from the coronavirus (Covid-19) spread from stocks, oil, bonds, gold, to cryptocurrencies.

This resulted in a dramatic spike in volatility and volumes and the infrastructure created under this strain.

As we reported, Ethereum network congested by getting overwhelmed causing a sharp increase in gas prices and forced liquidations on DeFi projects like MakerDAO.

In the Bitcoin market, futures exchanges saw a rush of triggered liquidations of leveraged positions that fueled the pressure on price. Spread between spot and futures exchanges also jumped. This resulted in at least two major exchanges going down.

While New York-based Gemini went offline for less than 90 minutes and Seychelles-based BitMEX went down twice for a total of 45 minutes. A spokeswoman for Gemini said,

“In an abundance of caution, and to protect the integrity of our marketplace, we paused the market to resolve the issue and ensure all market services were back online in a healthy state prior to reopening.”

As for BitMEX, the exchange suffered two DDoS attacks that day, attackers waited for the right moment and overwhelmed the platform “during a moment of peak volatility.”

This has the market concerned about the strength of the infrastructure.“Volatility is not an issue — it’s whether the technology can deal with the volatility.” said Denis Vinokourov at crypto exchange BeQuant.

“The tech is important. You’re inviting traditional, big firms to trade on platforms that may not be able to withstand the amount of trading.”

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Author: AnTy

Once Bitcoin Finds the Bottom, There Are Strong Bullish Pressures Ahead :On-chain Analyst

  • Bitcoin price nearing $6,000 but pain might not be over
  • Crashing confidence in banking and trillion-dollar wealth passed over would push BTC higher
  • But bitcoin only existed inside a “macro bull market,” so be cautious of the “unknown unknowns”

Yesterday, the price of Bitcoin saw a jump, unlike the stock markets that continue to tumble. US futures and Asian stocks sank on Thursday despite a slew of dramatic steps unveiled by policymakers worldwide to cushion the blow by the coronavirus. The stock futures recorded a brief spike when the European Central Bank announced an emergency $821 billion stimulus to keep the financial system moving.

Bitcoin meanwhile, is trading at $5,456, up 4.82%, with $1.6 billion worth of bitcoin exchanging hands in the past 24 hours.

Stocks and many currencies took a beating on Wednesday as another sell-off cast doubt on the ability of the global central banks to ease cash shortages. Today stock-market benchmarks in South Korea, Hong Kong, Taiwan, and Australia slid down to their lowest levels in a year while a strong US dollar is pushing regional currencies to multi-year lows. Analysts at UBS Global Wealth Management CIO said,

“In the absence of credible signs that infection numbers in the western world can be controlled, volatility is likely to remain elevated.”

Bitcoin Looking for Bottom

Since yesterday, Bitcoin has been moving in the opposite direction of the global stocks that are plummeting after moving in line with them for the past month. Even today, the crypto asset is surging, ready to take over $6,000.

According to on-chain analyst Willy Woo, Bitcoin will moon after the dump as the market is currently piling into cash. This means, more pain could be ahead for the world’s leading cryptocurrency. Woo said in a tweet,

Since the beginning of 2020, the Dow Jones US banks’ total return index has plunged over 39% with some bank ETF indices down up to 45%.

What will tip the market into bull mode is the trillion-dollar wealth passed over from boomers to millennials, who are more interested in bitcoin than gold and many other top investment choices like Microsoft, Amazon, or Netflix. The analyst noted,

However, the analyst advised taking caution about bitcoin, in its young 10-year history it has only existed inside a “macro bull market.” The crypto industry has zero data on how it will behave in a macro bear market, which is “the known unknown. I wonder about the unknown unknowns.”

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Author: AnTy

Best Case Scenario for Bitcoin is Govt’s Overspending & Losing Control: Economist

The price of the leading cryptocurrency is stuck at just about $5,100, keeping stable for now. Meanwhile, stock futures fell today and the markets remained highly volatile as the government’s response to the coronavirus fallout unfolds.

Stock Market Rose on Fed Stimulus

Futures on the Dow Jones Industrial Average fell 821 points, indicating yet another over 1000-points loss at Wednesday’s open. Nasdaq 100 and S&P 500 futures are also down. Futures contracts for the indices yet again went in “limit down” territory, triggering a circuit break after they hit a 5% loss.

On Tuesday, the markets rebounded from their deepest route since 1987 after the Trump administration’s massive fiscal stimulus plans had the investors hopeful. The White House is designing a fiscal package of over $1 trillion that includes a direct payment to Americans, financial relief to small businesses and the airline industry, allowing individuals and corporations to defer tax payments of up to $1 million and $10 million respectively.

Treasury Secretary Steven Mnuchin told Republican senators that unemployment could reach 20% if the stimulus package isn’t enacted.

Gold prices rose on Wednesday following the US Federal Reserve’s attempt to boost liquidity in the market. Spot gold rose by 0.7% to $1,538 per ounce while US gold futures were up 0.8%. Fed’s measures also supported the benchmark US 10-year Treasury yield which went up to a two-week high on Tuesday.

Bullish for Bitcoin in both the short and long term

Bitcoin that went up to $5,600 yesterday, is currently around $5,150, keeping above $5k.

“I hear people saying BTC is holding up well, yet no other asset (ex- some individual stocks and other cryptos) has dropped more than BTC,” said economist and trader Alex Kruger. According to him,

“Bitcoin did not behave like a store of value nor a safe haven” as it collapsed over 60% and there’s “nothing wrong in BTC moving up and down with risk assets in such a black swan event.”

However, he points out that those that are “ardently criticize governments’ economic aid packages” are doing so without realizing the fiscal stimulus is not only the reason for the stock market to jump but also for bitcoin. Kruger said,

“Those packages are bullish for the price of bitcoin in both the short and long term. In theory, the best case scenario for BTC is a world where governments overspend and lose control.”

Short-term holders got spooked

It is worth noting that gold also got sold-off aggressively during the past week’s carnage. It wasn’t anything new either as investors look to get their hands on cash just like they did in 2008. During that financial crisis, gold exploded after and Kruger like many others also believes “the same will happen with both assets (bitcoin and gold) this time.”

Also, with bitcoin, it is extremely important to note that long-term holders are confident in the crypto asset. The recent sell-off was because of the short-term sellers.

“The volatility certainly didn’t come from the >5y HODLers,” noted Unchained Capital. The vast majority of it came from “UTXOs 6 months old or younger.” The 3-5 year band was flat, totally apathetic, only .02%, or ~3,650 BTC from the >5y band moved. Another crypto analysis company Glassnode also noticed,

“Bitcoin HODLer Net Position Change has been positive during the recent price dump. This means long term investors have been accumulating discounted BTC and increasing their positions.”

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Author: AnTy

Bitcoin will be Just Fine, Here’s Why a 45% Crash is Still a Buy the Dip Opportunity

  • Bitcoin price crashed 45% in a single day and the volume went 10x the normal size
  • BTC bulls just betting that framework is correct, will boom like anything once the dust settles – Travis Kling
  • BTC is the only truly free market that doesn’t need govt intervention to stabilize – macro analyst

In a crypto carnage yesterday, Bitcoin price lost about 45% of its value, falling to one year low of $3,850. Currently, we are back above $5,200, nearing $5,500 but the market still remains fearful of what’s to come now, go another leg lower, range at current levels or make our way back.

As Michael Arrington, founder of TechCrunch, and CrunchBase noted, “This was like all of 2018 in one evening.”

Interestingly, this volatility saw a massive amount of BTC move on-chain. In blocks 621358 and 621259, over 200,000 BTC and 600,000 BTC moved respectively.

Since the price drop, 10k-100k BTC per block, 10x the normal volume, were moved.

“Too much panic and too little reason”

On Feb. 13, Bitcoin price climbed to 2020 high at above $10,500 but the black swan event coronavirus (Covid-19) and oil price war that rocked the global stock markets, experiencing their worst days since 2008 financial crisis and losing trillions of dollars in the process also hit the crypto market hard.

However, what had the digital asset in free-fall was the massive liquidations on the crypto derivatives platform BitMEX.

Interestingly, while Ethereum followed Bitcoin to deep losses, altcoins didn’t fall as hard this time.

There is bloodbath on the crypto street and investors are trying to maintain the confidence to buy the dip and according to some industry commentators it’s the right opportunity for that.

According to Edward Snowden, Wikileaks founder, and a bitcoin proponent, this has been too much panic leading the prices down which had him tempted to stack some sats.

Bitcoin Price cointegration with S2F Model Intact

Macro investor Dan Tapiero, Gold Bullion International co-founder also has some soothing words for the bitcoin investors and holders who point out within a day the digital asset lost about 45% of its value only to stabilize later in the day, that too without the help of central banks and government. Tapiero said,

“BITCOINERS: Hearing guys whine that btc is krap, not a hedge, not digital gold, it’s going to zero etc..stfu. Btc is the only true free market in the world. Btc is the only asset that can go down 50% in one day and doesn’t need govt intervention to stabilize. It will be fine.”

On the current market condition Travis Kling, former equities portfolio manager, now running crypto fund Ikigai feels once the dust settles and economic activity resumes, central banks inject trillions of new dollars, “off that bottom, there is no other asset on the planet that will move like Bitcoin.”

“Bitcoin is either antifragile or it isn’t. If it is, by definition it will come out of this stronger than it went in. There is a framework to evaluate “antifragility”. It’s not evaluated haphazardly, but with sound logic. So BTC bulls today are betting that framework is correct,” said.

To further boost your confidence, the bitcoin price is still following the stock-to-flow model.

“Doesn’t look like a real black swan to me, red dot still very much in the blue zone,” said the analyst on the digital asset being Black Swanned!

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Author: AnTy

After Black Thursday, MakerDAO Opens Voting Proposal And Will Hold First-Ever Debt Auction

As Ethereum (ETH) price crashed by 30-40% on “Black Thursday”, the decentralized finance world (DeFi) showed signals of collapse with the largest DeFi protocol, Maker (MKR) contemplating shutting down in response to the value tanking.

However, following talks in the community with MakerDAO –governing council – and a revival of the price of ETH over the early morning on Friday, March 13, 2020, the community will vote on changes of the protocol to further carry out its first-ever debt auction.

Maker (MKR) is a platform that gives out collateral-based loans by producing Dai (DAI). The DAI is minted by users taking up collateral-based positions, mostly in ETH, and the ETH is stored on a smart contract. Once the collateral is locked, the contracts mint out a portion of the collateral value in DAI to give to the borrower.

Maker to carry out the first-ever Debt Auction

If the borrower cannot fulfill their debt obligations, then the collateralized ETH (asset) enters the liquidation phase allowing the smart contract to auction it off to pay the debts. However, as the crypto market exhibits an extremely bearish structure and the heightened pandemic of the COVID-19, the auctions were shortly not very attractive with some investors paying a total of ZERO DAI to gain the ETH.

One Maker community member said,

“Some vaults were liquidated with 0 DAI coming back in the system, resulting in a net loss for the system. The MakerDAO had a +500k$ surplus before the price drop and now has a -4M$ surplus that needs to be filled.”

With the Maker platform facing a $4 million deficit in debt obligations, the contract will self-execute on March 15 to open up the first-ever Maker Debt Auction. This means the contract will print out extra MKR tokens to reimburse the 44 million USD in DAI which will then be publicly available for auction.

The community is, however, remaining positive after the current carnage on Maker, stating the platform has become stronger. One member said,

“It was a trying day for #Ethereum, Maker, investors, and lots of other ppl in #defi — great to see the system prevail and while not perfect, it lives to see another day.

MakerDAO teams already reacting to work with $MKR governance to modify the system state.”

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Author: Lujan Odera