Tuesday, 25 January 2022

Market Summary

Market Summary 25 January 2022

Bitcoin Price: US$ 36,641.31 (+1.15%)
Ethereum Price: US$ 2,438.13 (-3.95%)


ETH Liquidations, OI Trends Down, & Fantom’s Rise

  • As a major correction sent ETH falling from $3.2k to $2.5k in the past week, on-chain liquidations surged as positions started to hit their liquidation point.
  • Over the last Friday, money markets on ETH experienced their largest liquidation event to date, amounting to over $200m. MakerDAO was responsible for more than 50% of liquidations.
  • Panic came when the second-largest vault owner with $600M of debt on MakerDAO, nicknamed 7-siblings, was at risk of liquidation. $60M was liquidated from their vault. The vault owner managed to repay some of their positions to prevent further liquidations. If they had been fully liquidated, the market would have seen a significant cascading liquidation. You can read the full analysis by MakerDAO here.
  • MakerDAO stands to profit from all the liquidation events happening recently. With January yet to end, MakerDAO has already earned $17.5M in liquidation revenue. That’s multiples more than recent months and surpassed the revenues generated during the May 2021 drawdown. MakerDAO uses liquidation penalties to buy back and burn $MKR to return value to token holders.
  • MakerDAO charges a liquidation penalty to the vault owners if the value of their collateral reaches its liquidation price. This fee is added to the vault owner’s total debt as DAI.
  • Open interest moved down as the markets turned bearish from hints of impending rate hikes. BTC and ETH futures OI have contracted by $6B and $3.1B, respectively, since their peaks in November.
  • Fantom started the year at the 8th spot in TVL rankings by chain. Since then, it has climbed up to the 3rd spot, with the flippening of BSC occurring earlier today. As the snapshot of ve(3,3) nears, many projects like Radial, veDAO, and 0xDAO came up with liquidity mining launches that vampire attacked other protocols to gain TVL. These projects share a lot of resemblance to defi summer projects in 2020.
  • Mercenary capital came over to Fantom to yield farm these projects as they were providing incredible yields on single-sided staking.


Uniswap founder’s bank account shut down by JP Morgan Chase, shadow-debanking allegations surface

  • On Sunday, Hayden Adams, CEO and founder of the popular decentralized exchange, or DEX, Uniswap (UNI), claimed that his JP Morgan Chase bank accounts were shut down with no explanation. In addition, Adams stated that the incident was personal in nature as he knew “many individuals and companies who have been similarly targeted simply for working in the crypto industry.”
  • Former Commodity Futures Trading Commissioner Brian Quintenz responded with a comment suggesting that the move was likely an instance of “shadow de-banking of crypto by the Federal Reserves and Office of the Comptroller of the Currency bank examiners.”
  • Quintenz explained that banks are contractually prevented from telling customers the reason for ending the business relationship if they deem them too risky. Although most users commiserated with Adams on the alleged debanking, others maintained that there is no universal right to a bank account and, therefore, banks have the discretion to act as they deem fit.


Bitcoin dives below $33K to fill futures gap amid record BTC ‘hodling’

  • Bitcoin price losses keep coming but coins dormant for at least a year now account for 60% of the total BTC supply.
  • Data from Cointelegraph Markets Pro and TradingView showed BTC/USD dipping to $32,967 on Bitstamp prior to the Wall Street open on Jan. 24.
  • That level represented the start of a CME futures gap left over from July 2021, Bitcoin “filling” it almost to the dollar before reversing upwards to add over $1,000 in minutes.
  • With volatility clearly in the air, expectations were running high for the start of trading on United States equities markets.
  • Zooming out, investor behavior meanwhile appeared to counter concerns over short-term sellers. As noted by investor and entrepreneur Alistair Milne, the proportion of the Bitcoin supply that has remained stationary for a year or more hit levels not seen during previous capitulation events.


No regrets for NYC mayor receiving his first Bitcoin paycheck during dip

  • Bitcoin (BTC) is a New York state of mind thing for Eric Adams, the crypto advocate serving as the 110th mayor of New York City. He received his first Bitcoin payout on Friday during some epic downward price action and was unflappable when asked about losses during an interview. 
  • Bitcoin’s price has taken a nosedive from Friday highs of $41,000 to $35,000, meaning Adams has effectively taken a 15% haircut on his first wages.
  • In light of the plummeting price action, a CNN interviewer asked on Sunday, “How much money did you lose, and do you have any regrets?”
  • The recently instated mayor sidestepped the question, instead shining a spotlight on Bitcoin technology while making comparisons to investing in the S&P 500:
  • “It’s the same as when I invested in the stock market; we saw a drastic drop during 2018 and other times. The purpose of Bitcoin is to send a message that New York City is open to technology. We want to see a large amount of new technology in the city of New York and to encourage our young people to engage in these new emerging markets.”


Bank of Korea completes first phase of digital currency pilot

  • The Bank of Korea has successfully completed the first phase of its central bank digital currency (CBDC) mock testing, which started in August 2021. 
  • The South Korean central bank said that the first phase of its CBDC mock testing was completed in December while the second phase is currently underway, reported YNA news. The first phase of the mock test involved some of the basic functions of the sovereign digital currency such as distribution and issuance.
  • The second phase of the CBDC pilot would test real-world functionalities such as cross-border remittance, retail payments and offline payments. The bank stated:
  • “We will confirm the possibility of operating various functions, such as offline settlements, and the application of new technologies, such as one intended to strengthen privacy protection during the second phase of the test.”
  • Bank of Korea (BOK) is also looking to onboard financial institutions for the second phase, quite similar to what China is currently doing with its digital yuan. However, unlike China, BOK-issued digital currency would also focus on user privacy.


Illiquid supply ‘going up relentlessly’ — 5 things to watch in Bitcoin this week

  • From $39,000 to current lows of $34,000, BTC showed no mercy as liquidations mounted and sentiment took a fresh beating. Now, traders are naturally eyeing a test of $30,000 as a more definitive representation of how Bitcoin is likely to fare in the short to mid-term.
  • Other estimates for where some relief may occur previously lay at $33,000 and $31,500, these likewise yet to be reached.
  • Analyzing various aspects of the on-chain situation, Dylan LeClair, senior analyst at UTXO Management, highlighted Bitcoin’s current cost basis as a potential clue for what he calls a “generational bottom.”
  • The current MVRV ratio is in the 38th percentile of historical readings. In the past $BTC dips below realized price (MVRV below 1.0) have served as generational buying opportunities.
  • Over the weekend, Cointelegraph reported on Bitcoin’s daily relative strength index (RSI) metric nearing its lowest levels since the coronavirus crash of March 2020. Well below even its classic “oversold” zone, RSI is now becoming one of the most convincing signals for analysts keen to put faith in a market rebound.
  • Looking at data covering movements from mining pools and known miner wallets, however, it appears that despite presumably low or even negative profit margins, miners are in no mood to sell their BTC holdings. A significant accumulation trend that began last year thus shows no sign of reversing — yet.
  • Analyzing the overall BTC supply at the weekend, Lex Moskovski, chief investment officer of Moskovski Capital, drew attention to the ongoing trend of coins becoming ever more inaccessible.
  • Spot price moves aside, more and more of the supply is being siphoned off to cold storage, accompanying data from Glassnode shows.
  • In January, despite the downtrend, the conversion of Bitcoin to illiquid actually accelerated, underscoring the desire from investors to buy at price levels seen over recent weeks. Selling, it would seem, is the last thing on their minds.


Sonic DEX Launches New Era of DeFi With Zero Gas Fees on the Internet Computer

  • With Sonic’s launch of a new decentralized exchange and automated market maker (AMM) running on the Internet Computer blockchain, users can now access permissionless token swaps and liquidity services over the protocol — where the Internet Computer’s reverse gas model introduces a new era of DeFi with zero gas fees and 1-second transaction finality. Formed after DFinance rebranded and joined with the Web3 product studio Psychedelic, Sonic aims to become one of the leading DeFi hubs serving the Internet Computer and its ecosystem.
  • Essentially comprising a cluster of DeFi protocols, Sonic offers permissionless swaps and liquidity mining. Its swaps will enable users to deposit tokens and automatically receive specified coins in return. Similarly, its liquidity protocols permit users to deposit tokens into pools and earn regular rewards via the collection of fees from users performing swaps.

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