Ethereum Holders Not Staking ETH Altogether Is “Not Unreasonable” – ConsenSys DeFi Report

Ethereum 2.0 is likely to launch its genesis block in Q4 2020, says Ethereum developer ConsenSys in its latest DeFi report.

With the launch of the first phase, Phase 0 – Beacon Chain, the long-anticipated staking will come to ETH. The Proof of Stake consensus mechanism will allow the holders to earn rewards through staking Ether. For this, validators have to lock up their ETH. But this may become a problem as the report states,

“Some community members expressed concern that DeFi could be the number one threat to getting a significant amount of staking participation in Eth2.”

The Risk of Locking ETH

DeFi has been the star of Q3 2020 as it saw “the largest bull run since the ICO boom of late 2017 and early 2018.”

This DeFi bull run started with Compound’s governance token (COMP) release, leading to a frenzy of activity and an exuberant amount of yield.

With various DeFi protocols offering higher returns than staking, ETH holders may elect to direct their tokens elsewhere that wouldn’t even require them to lock ETH up for an unspecified amount of time.

“It is not unreasonable to worry that ETH holders would (at best) wait to see how early staking returns compare to DeFi returns, or (at worst) decide altogether not to “risk” locking up ETH until Phase 1.5 (which is likely at least a year away) in case another similar bull run occurs in the meantime.”

But the team sees the emergence of derivative tokens representing the users’ pooled token. As we reported, recently launched project Lido has already announced the same intentions.

However, it remains to be seen how the holders will really react when the time comes with considerations like the amount of liquidity an ETH holder can access, the volatility of Eth1.x vs Eth2, and the evolving user experience of being an ETH holder to play into their decision making to lock funds.

Major Changes Expected

The report also covered how it was the rise of Automated Market Makers (AMM), governance tokens and yield farming, forks, derivatives, and network effects, and weird DeFi where it “began to incorporate memetic internet culture into the lexicon,” were the trends that defined Ethereum DeFi in Q3.

Although the excitement has come down extensively and the price of DeFi tokens are in capitulation mode, in the afterglow still, “smart financial and technical minds are increasingly attracted to the financial capabilities of Ethereum,” states the report.

These rapid innovation periods also saw an increase in ETH locked in DeFi protocols and a spike in the average gas price. But,

“As the Ethereum community prepares for an upgrade to the base protocol, and the Eth2 Deposit Contract goes live in Quarter 4 of 2020, this cycle could see major changes as DeFi continues to drive major activity on Ethereum.”

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Author: AnTy

Eurosystem to Make a Decision on Digital Euro in the Coming Weeks, ECB President

European Central Bank President Christine Lagarde says a panel of eurozone central bank officials is exploring the pros and cons of a digital euro and will soon reveal whether or not the region needs to create their very own central bank digital currency.

The initiative of a CBDC may be critical to ensure they don’t get left behind in the move to digital currencies and global changes in payments, said Lagarde, in a virtual event with Germany’s Bundesbank. Thursday evening she said,

“The Eurosystem has so far not made a decision on whether to introduce a digital euro. But, like many other central banks around the world, we are exploring the benefits, risks, and operational challenges of doing so.”

“The findings of a Eurosystem task force are expected to be presented to the public in the coming weeks, followed by the launch of a public consultation.”

While the fact that Europe is dominated by foreign payment service providers isn’t necessarily a concern, the ECB president said the “global context” and “increase in protectionist policies” do present new risks.

“We have a responsibility to ensure that our citizens have choice and cannot be excluded from the payments ecosystem due to the unilateral actions of others.”

A digital euro would be useful for retail users that are increasingly ditching banknotes in favor of digital payments. Still, it also poses the danger of crowding out private sector solutions and hollowing out the banking sector.

In the meantime, Sweden’s Riksbank has been testing its e-krona for months now. However, cash remains prevalent in eurozone countries, including Germany.

The Bank of England and the Federal Reserve have taken a cautious approach to introduce a CBDC. People’s Bank of China, meanwhile, is already running a trial for its DC/EP while the Bank of Japan is currently at the research phase of a digital yen.

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Author: AnTy

Binance Plays Catch Up, Launches DeFi Index Perpetual Contract With Up to 50x Leverage

“Trade DEFIUSDT. Trade the trend,” says Binance.

“Long or short the DeFi market, all in one contract,” it further states as the exchange announces the DeFi Composite Perpetual Contract with a leverage of up to 50x. The futures will start trading from August 28th, 7:00 AM (UTC).

That’s right, Binance is offering you 50x leverage to trade the explosive DeFi tokens which have been already surging like crazy.

Binance isn’t the first one to offer a DeFi index trading, except for the 50x leverage, of course. FTX first announced the launch of a DeFi Index perpetual contract, and just this week also introduced Uniswap index futures that cover the top 100 Uniswap pools. FTX also launched a decentralized derivatives platform, Serum.

This week, the exchange also acquired Blockfolio in a $150 million deal to attract retail traders. While the community celebrated the acquisition, “FTX didn’t pay for a portfolio tracker they could build in 5 minutes, they paid $150M for your data and bag info.”

What’s Available & Missing?

Binance’s DeFi index covers 10 DeFi projects that are currently popular in the market. This list comprises some of the hottest tokens that almost completely feed the DeFi appetite of a trader.

With names like Band Protocol (BAND), Compound (COMP), (KAVA), Kyber Network (KNC), Aave (LEND), Chainlink (LINK), Maker (MKR), Synthetic Network Token (SNX), and 0x (ZRX), the index is attractive.

However, amidst this is Swipe (SXP), which has more weightage in this index than any other token except for Chainlink, Aave, and 0x.

The community didn’t appreciate that while this list lacks the DeFi darling YFI, it also covers Swipe, arguing it isn’t even a DeFi project. Swipe might not be a DeFi yet, but it is on its way to join the craze as it announced earlier this month that Swipe would be launching a decentralized finance lending/earn application on Binance Smart Chain.

Binance acquired Swipe last month; the latter one also added BNB making it spendable with fiat at over 50 million locations worldwide via the Swipe Visa Debit Card.

Reportedly, when Binance acquired CoinMarketCap, in the biggest ever deal of $400 million, first introduced DeFi project ranking, it published its native token BNB at the top, which has since then been removed.

Binance has constantly been listing new DeFi tokens to capture this hot trend and now advertising its Binance Smart Chain with EVM compatibility, rich & growing ecosystem of assets, cheap transaction fees, high performance, funding, and cross-chain DeFi mechanisms to be the perfect blockchain to launch DeFi projects.

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Author: AnTy

Bitcoin’s ‘Very Attractive’ as a Safe Haven, Many Wealthy Investors & Traders will Turn to it

Ex-Prudential CEO George Ball says Bitcoin could soon become sought after as a safe-haven asset, and many wealthy investors or traders will consider buying it after Labor Day.

In an interview with Reuters, the current chief executive officer of Sanders Morris Harris said he “always” has been an opponent of bitcoin, cryptocurrency, and the technology underpinning them blockchain.

But with all the monetary stimulus from the government, these digital assets make sense because “the government can’t stimulate the markets forever,” and the “liquidity flood will end,” sooner or later.

For now, thanks to government policies, stocks have been flying with S&P 500 just inches away from its all-time high.

“You’ve got a wash of liquidity, which is really what’s driving and holding the stock market up right now, the risk of an election,” said Ball.

He also clarified that Joe Biden’s win wouldn’t be a “catastrophe for the stock market,” as his tax policies are “benign.”

Precious metals have also been surging with gold hitting a new high above $2,000.

But when the money printer’s ink gets run out, which could happen around the fourth quarter, both traders and investors are going to need to “realign their portfolios substantially” in favor of the cryptocurrency.

And “if they print money, that debases the currency and probably even things like TIPS — Treasury inflation-protected securities — can be corrupted. So the very wealthy investor or the trader probably turns to Bitcoin or something like it as a staple,” said Ball.

So, it’s a win-win for bitcoin as in both cases, investors will be turning to Bitcoin and the time for that is now — “before the fuse is lit or when the fuse is lit and hasn’t expanded – exploded yet, which is probably now.”

He also points out how the largest digital asset isn’t about seeking a tax refuge, but it is something the government can’t undermine, and unlike fiat currency, bitcoin “won’t become worthless” either.

“There’s no yield today. And so Bitcoin or another cryptocurrency becomes very attractive either long term, I want to make a safe haven for my money or a short-term speculative bet… I think it’s where many people will turn after Labor Day.”

For Robinhood traders as well, when they don’t want to trade stocks down the line, as they have been doing throughout 2020, Ball believes they will be putting their money into the cryptocurrency market.

On Bitcoin skeptic Jamie Dimon, who once called it a “fraud,” talking about the digital asset, Ball thinks “Jamie’s at least a partial convert. I’m not sure that he’s a total convert.”

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Author: AnTy

Bitcoin is Money, But Not a New Type of Money; It’s An Exchange Mechanism: NY Fed Reserve

“Bitcoin Is Not a New Type of Money,” says the Federal Reserve Bank of New York in its latest paper, where it talks about bitcoin instead of being a new type of exchange mechanism that can support the transfer of monies and other things.

Bitcoin is a new type of money, is actually a “misconception,” argues the authors Michael Lee, an economist in the Bank’s Research and Statistics Group and Antoine Martin, a senior vice president of the Group. They said,

“Bitcoin may be money, but it is not a new type of money.”

There are three types of money; fiat money, asset-backed money, and claim-backed money. Fiat money — the currency is “intrinsically worthless objects that have value based on the belief that they will be accepted in exchange for valued goods and services,” states the paper.

As such, Bitcoin is just another fiat money, unlike central bank-issued currencies (CBDC) that are different from pure fiat money due to its legal tender status, the authors said.

Asset-backed monies like gold coins derive their value from the assets backing the money while claim-backed monies derive their worth from the promise of some institution to exchange the money for something of value.

Just like money, there are three types of exchange mechanisms, including physical transfer, such as currency or notes, and electronic transfer with a trusted third party that represents the vast majority of electron payments today, like the Fedwire Funds Service.

The third type is electronic transfers without a trusted third party where the validation of transactions is decentralized, as is the case for Bitcoin.

Classifying Bitcoin
Source: New York Fed- Classifying Bitcoin

According to the paper, Bitcoin is not backed by anything. It further discusses post-Bitcoin era stablecoins which are tied to assets and tokens from ICOs for which issuers offer rights, though not legally binding, to a product or service in the future.

Overall, bitcoin and other cryptocurrencies are not a new type of money as other categories of fiat money has existed for a very long time. It was the ‘electronics without third party’ that did not exist before 2009, it said.

“The real innovation of cryptocurrencies is that they offer a radically new exchange mechanism,” that can support the transfer of different kinds of monies.

While bitcoin moves fiat money, stablecoins move assets, and future services or products like CryptoKitties are moved by ICO tokens.

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Author: AnTy

Top UN Blockchain Expert Believes Digital Currencies And CBDC’s Pose a Threat To Bank Accounts

  • Top U.N. official says digital assets, particularly central bank-issued digital payment systems may soon replace bank accounts due to the low-interest rates.

Massimo Buonomo, a United Nations global blockchain and fintech expert, said the rising development of CBDCs and the low interest (negative) rates offered in commercial bank accounts may act as a catalyst to make corporate bank accounts obsolete.

The corporate banking system deficiencies are getting exemplified over the years and the monopoly on digital payments finally being challenged by cryptocurrencies, opening a way to the extinction of bank accounts, Buonomo explained.

In another interview on City AM this Thursday, Buonomo urged the need for adoption of cryptocurrencies and blockchain technologies to combat the global COVID-19 pandemic and the state of the current Bitcoin market.

Massimo sees the exponential growth of digital currencies development killing off the need for bank accounts completely. The global monetary system does not give any signal of getting better any time soon either. For instance, the Federal Reserve chairman, Jerome Powell, called for more financial stimulus in the economy, and Trump called for a possible extension of negative interest rates.

‘CBDCs over public blockchains’

While Massimo remains a big fan of public blockchains such as BTC and ETH, he believes the implementation of a central bank based is more suitable to be used as a national currency. The scalability and congestion issues combined with the technological limitations on the legacy blockchain systems still hinder mass adoption hence the call for the central bank to step in.

Research published by the Philadelphia Fed Reserve on June 1, shared the opinion that the development of a CBDC may replace the role of commercial banks. The proposed implementation of a digital USD by the Digital Dollar Foundation, the ECB’s plans of a retail CBDC, and China’s accelerated efforts on launching a digital Yuan all culminate in a possible commercial bank death spiral as the middleman.

U.N. takes on cryptocurrency and blockchain development

United Nations has taken a keen interest in blockchain technology and cryptocurrency implementation over the past few years. The World Food Program has run tests of a blockchain food distribution system in African countries to ease the refugee aid process.

In October 2019, UNICEF opened up a donation website accepting Ethereum, ETH Foundation donating 100 ETH (~$20,000 at the time). UNICEF also opened up tests on blockchain projects in different fields – providing internet to Kyrgyzstan schools, a bounty token system, and extensive donations to blockchain projects.

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Author: Lujan Odera

Bitcoin’s Intrinsic Value has Effectively Doubled After Halving: JPMorgan Report

Bitcoin “markets effectively priced in a 25% decline in the amount spent on energy per day,” says the “Global Markets Strategy: Flows & Liquidity” report by JPMorgan & Chase Co. published on March 22, 2020.

JPMorgan that treats Bitcoin as a commodity because mining consumes electricity said Bitcoin miners have responded swiftly to the collapse in the revenue following the halving.

After the block rewards were cut in half to 6.25 coins, it has been found that “the intrinsic value estimate effectively doubled,” wrote Nikolaos Panigirtzoglou, Managing Director at the bank.

In principle, if the market price of bitcoin is above its intrinsic cost miners should be induced to increase their resources to mine BTC, bringing the cost of mining higher until the marginal cost approaches the market price.

In contrast, if the price is below the intrinsic cost higher-cost producers must exit the market and lower the overall cost until it again approaches the marginal cost.

bitcoin market price intrinsic value

To find the intrinsic value of BTC, the estimated daily cost of production as a function of the computational power employed, cost of electricity and energy efficiency of hardware is calculated which is then divided by the expected number of bitcoins produced daily.

Since the halving, the hash rate has declined by 20%, such a drop was last seen when the BTC price collapsed 50%. This decline also happened against a backdrop of “an improvement in average efficiency of mining hardware, as energy consumption per GH/s has declined by more than 15%.”

This closed down the gap between the intrinsic value and market price.

Positioning Backdrop

Panigirtzoglou also covered the sharp increase in the open interest on both bitcoin futures and options. For CME contracts, it recovered faster than crypto exchanges and had a “steep” increase in both BTC and USD terms. Although CME’s OI has overtaken that of LedgerX, it’s way behind the nearly $1 bln OI on Deribit.

As for positioning in bitcoin futures, JP Morgan takes on cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week based on the rationale that when price increases so do the net long position of spec investors and magnitude of the increase and vice-a-versa.

bitcoin position proxy based on OI in bitMEX and CME

The trends in both CME and BitMEX futures have been similar this year directionally, “with net longs being cut or net shorts being increased sharply amid the March sell-off, and a significant adding of net longs or decreases in net shorts ahead of the halving event.”

JPMorgan’s report however, doesn’t mention the decline in BitMEX’s market share and more than 40% drop in its web traffic.

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Author: AnTy

Mike Novogratz Sees More Bitcoin Adoption Than Ever; Now Short on Stocks

Bitcoin bull Michael Novogratz says, “This is the time for Bitcoin” because of the unprecedented actions taken by central banks to battle the coronavirus fallout and crypto asset’s adoption around the globe.

“The risk on any store of value, if it’s gold, is that enough people believe in it,” said Novogratz in an interview with Bloomberg.

“It’s still a question of adoption. I’m just seeing more adoption here in the U.S. and in Europe than I have literally since I started this.”

Currently, Bitcoin is trading under $6,900, up 3.71% but again recording negative 6.91% year-to-date returns.

Central banks’ actions all over the world, according to him, would cause hard assets to be more appealing. Also, Bitcoin’s upcoming halving is another event that will work in the crypto asset’s favor.

This year cryptocurrencies have been under pressure alongside the stock market due to investors choosing safe-haven assets over riskier assets amidst the coronavirus pandemic. Bitcoin is down 34.7% from the February 2020 high of $10,500.

The billionaire investor is as bullish as on bitcoin as ever but the same can’t be said of equity and credit markets. Novogratz said,

“I got short Friday for the first time in a while — both stocks and credit.”

Going into a very good era for crypto

This past week, his crypto investment firm Galaxy Digital reported a net income loss of $32.9 million in fourth-quarter 2019.

Headed by Novogratz, the liquidity provider and asset manager also had layoffs in February 2020 as the firm struggled with weak financial results.

However, CEO Novogratz reassured investors that the recent bitcoin price crash doesn’t invalidate its thesis as a safe haven asset.

In an earnings call last week, Novogratz said Bitcoin was the result of the 2008 financial crisis, “because of a breakdown in trust, a trust in the financial system.”

Now we are in the second crisis, which is both a humanitarian and a financial crisis. And Bitcoin’s anonymous creator Satoshi designed the digital currency for this period of time.

He also said that Bitcoin and Ether should end the year “significantly higher” as he is seeing from hedge fund managers to high net worth individuals starting to buy BTC. He said,

“It feels to me like we are going into a very, very good era for crypto; Bitcoin specifically, but all the crypto.”

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Author: AnTy

Ether Price Undervalued But The Fundamentals Are Not Looking Good

  • After a bad March, ETH price seeing greens, MVRV Ratio says ETH undervalued
  • While Bitcoin active addresses on the rise, Eth’s declining but its exchange inflow, especially on Bitfinex increasing while Bitcoin’s decreasing
  • With GETHE shares to be unlocked soon, they would be making “absolute bank off the back of retail traders”

Bitcoin fundamentals are growing with mining showing healthy recovery with an estimated hash rate increase of 7.3%. This rise in hash power suggests that inefficient miners have started to capitulate and are being replaced by more efficient miners.

The crypto market is also showing signs of recovery after the Bitcoin price jumped above $7,000 and altcoins followed suit.

These price gains have 56% of Bitcoin addresses in profit while the second-largest cryptocurrency Ether has 63% of its addresses in the loss. The Ethereum Index was actually the worst performer through March.

However, Ether’s the MVRV Ratio, a metric that assets if the price of a digital asset is above or below its “fair value” is currently at 0.8 which indicates that the crypto asset is undervalued right now.

The realized price of ETH is above $200 while the current market value is $168.

Just like the price, while Bitcoin’s active addresses showed positive signs of recovering this week, increasing by 63%, Ethereum’s active addresses tumbled.

Ether’s active addresses saw a decline of 13.4% week-over-week. Since peaking at 537,000 on March 21st, the highest daily total since May 2018, ETH daily addresses have been declining, recording 310,000 on April 5th.

ETH’s Exchange Inflow Increasing

Now, interestingly, the amount of ETH held by the exchanges viz. Bitfinex, Binance, Bitstamp, Bittrex, Gemini, Huobi, Kraken, BitMEX, and Poloniex increased by about 5% over the last 30 days.

Source: CoinMetrics

The amount of BTC held on exchanges, on the other hand, decreased by about 3% which has been largely due to the rapid decrease in the supply held by derivatives exchange BitMEX. BTC held in BitMEX has been in freefall over the past few weeks, from 315k BTC on March 29 to 244k, after it went through mass liquidations on March 13 during the crypto carnage.

Bitfinex out of all the exchanges meanwhile had the largest increase in ETH supply, increasing about 17% over the last 30 days while no other exchanges have had more than a 10% increase.

Now, it’s to be seen if these investors are looking to cash out and put selling pressure on ETH price.

Institutional investor to make bank off retail traders

Meanwhile, about 5% of GETHE (Grayscale Ethereum Trust) shares are publicly traded and analyst Ceteris Paribus noted, when these shares are unlocked soon, they would be making “absolute bank off the back of retail traders.”

The trust took in about $100 million in ETH in 2019, most of which have been in the second half of the year with an average ETH price of $195.

“Looks like the bulk of the 2019 ETHE flows came in between the end of June – September, so should see premium come down in summer at the latest,” stated Paribus.

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Author: AnTy

Cash is King in Coronavirus Ravaged Economy But Bitcoin is “Next in Line to the Throne”

Mark Yusko, the CEO at Morgan Creek Capital Management says coronavirus is unleashing a once in a lifetime downturn.

Yusko appeared on CNBC’s “Trading Nation” to talk about how the closest comparison to the coronavirus ravaged economy is the Great Depression. The hedge fund manager on Thursday,

“The economic shock wave that’s coming is going to be like nothing that any of us has ever experienced because it’s going to be very similar to the 1930s.”

Since hitting its all-time highs, S&P 500 has plunged 26% while the Dow is down 28% from its record high. In the first quarter of 2020, both the indexes recorded a negative 23% and 20% returns respectively.

The market is not expected to make a real recovery until the number of coronavirus infections and death peak. The COVID-19 pandemic has infected 1,040,664 people globally and 55,191 people have lost their lives to it.

Yusko is currently short on “a lot of stocks,” he is particularly bearish on retail, consumer stocks, and over-leveraged companies.

Move into Cash, Gold, and Bitcoin

According to Yusko, the market is not showing any signs of recovery and it’s not late to cut losses and go into cash in response to coronavirus.

“Cash is king,” said Yusko, who manages $1.7 billion in assets. “We’re in for a very drawn-out bear market.”

Besides cash, he finds gold miners as an attractive option. Interestingly, gold has beaten other assets by ending the Q1 with a positive 4% returns. Yusko also finds opportunity in Bitcoin, an asset that is part of his investment portfolio.

“Bitcoin is next in line to the throne,” added Yusko on Twitter.

The world’s leading cryptocurrency fell 50% from its mid-February high of $10,500 but since then has recovered 80% of its value as it currently trades at $6,700.

However, given that bitcoin hasn’t decoupled from the stock market yet, it could still be in for some pain as Yusko estimates the negative effect from the global economic shutdown to combat novel coronavirus won’t be limited to just weeks and months but quarters and years.

But quantitative easing by central banks all over the globe will work in Bitcoin’s favor which is “insurance against the collapse of the financial system.” Yusko said,

“The stimulus response from the government is going to have a negative impact on currencies globally, particularly western currencies. So, you want to have something that appreciates in value. Bitcoin is going to do that.”

Yusko is not alone in thinking this, much like the vast majority of the crypto community, Morgan Creek Capital founder Anthony Pompliano also sees central banks printing money to push the price of bitcoin higher by “hundreds of percent.”

Also, while central banks are focused on quantitative easing, bitcoin will go through “quantitative-hardening” next month that will cause miner flow to be halved from 1800 BTC per day to 900 BTC per day and the scarcity, the S2F to double to 54 years.

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Author: AnTy