Wednesday, 31 August 2022

Market Summary

Market Summary 31 August 2022

Bitcoin Price: US$ 19,811.66 (-2.34%)
Ethereum Price: US$ 1,524.59 (-1.75%) 

 

Ethereum Futures Funding Rates Decline as Traders Turn Bearish

  • Meta expands NFT rollout to Facebook, allowing select users to share NFTs across Facebook and Instagram.
  • Temasek Holdings, Singapore’s sovereign wealth fund, announces $100M investment in Animoca Brands.
  • Crypto.com accidentally transfers $10.5M to customer asking for a $100 refund.
  • Alexis Ohanian, co-founder of Reddit, plans to raise $177.6M for a crypto fund.
  • Funding rates for perpetual futures on ETH hit a low of -0.024% on August 27th. This level was last seen in June-2021 and was followed by a massive short-squeeze in July-2021.
  • Funding rates are periodic payments made to/by long or short traders based on the difference between perpetual contract prices and spot market prices.
  • When rates are positive, long traders pay short traders. This implies that traders are generally bullish as they are willing to pay the funding rate to keep their long positions open. On the other hand, negative rates imply that traders are generally bearish.
  • Perpetual futures open interest is also rising since the June capitulation, peaking at $6.8 billion on August 13th. Open interest has remained above $5 billion, most of which is likely to be short as funding rates have flipped negative from August 14th.
  • Negative funding rates may also indicate that traders are hedging spot ETH positions to remain delta neutral. This is a popular strategy that allows spot ETH holders to mitigate any downside risk heading into the Merge, while still collecting any airdrop from a potential proof-of-work hard fork.
  • The upcoming Merge is divided into two stages, beginning with a network upgrade called Bellatrix on September 6th.
  • Later, the Paris upgrade will shift the execution layer from proof-of-work to proof-of-stake when the Terminal Total Difficulty (TTD) reaches a value of 58750000000000000000000. This is expected to occur between September 10-20th.
  • From a valuation perspective, SUSHI trades at a discount to its peers. Its price-to-sales ratio is ~3x compared to Uniswap’s 5x and Balancer’s 8x.
  • While this may be viewed as relatively cheap, it also reflects its declining fundamentals and indicates lower growth and low investor confidence in the future.
  • Another reason for the depressed price could be sell pressure from liquidity mining rewards, which has certainly contributed to SUSHI’s 95% decline from ATHs.

 

Compound cETH market bricked by update — 7-day wait on vote to fix it

  • Decentralized lending platform Compound has been plagued by a code bug in a recent governance proposal to update its price feeds. 
  • The code error has “temporarily frozen” the Compound ETH (cETH) market, causing cETH transactions to revert, but Compound Labs stated that despite the front end not working, “funds are not immediately at risk.”
  • Compound Labs announced on Aug. 31 that the code bug came from Proposal 117: Compound Oracle Upgrade v3, which was implemented a couple of hours ago to update the oracle contracts on the Compound protocol to a new version that uses Uniswap V3 instead of V2 for price feeds.

 

Crypto ‘cannot be partisan,’ says US lawmaker who scored negative on bipartisanship index: Report

  • United States House of Representatives member Tom Emmer has reportedly suggested that regulating and encouraging innovation in the crypto space should not be a political win for either Democrats or Republicans.
  • According to an interview released Tuesday by Axios reporter Brady Dale, Emmer said many of his colleagues in Congress were treating cryptocurrencies as a risk that merited warnings, rather than an investment opportunity for the United States. The U.S. lawmaker added that encouraging figures like FTX CEO Sam Bankman-Fried to stay in the country will open more doors for residents rather than driving them away with regulatory uncertainty.
  • Emmer, who has often pushed back against the “regulation by enforcement” approach some government agencies — including the Securities and Exchange Commission — have taken, reportedly questioned the partisan divide among crypto-related legislation and policies. A Republican, Emmer reportedly challenged claims made by Democratic Senator Elizabeth Warren, who has been one of the most outspoken critics of crypto in Congress, proposing legislation that would shut down bank-provided crypto services, calling decentralized finance “the most dangerous part of the crypto world,” and equating crypto investments to scams with no consumer protection.
  • “I feel that [crypto] cannot be partisan,” said Emmer. “This is literally about looking at America and opportunities for Americans […] If you try to take all risk out of this stuff, well, you’re going to take away a lot of the opportunity […] It can either happen here in this country or it will happen somewhere else.”

 

Bitcoin could become a zero-emission network: Report

  • A pro-Bitcoin mining report from self-proclaimed philanthropist Daniel Batten has claimed that Bitcoin could become a zero-emission network.
  • The report builds upon data from the Bitcoin Mining Council to understand the impact of carbon-negative energy sources on Bitcoin’s (BTC) overall carbon footprint. Following an investigation and extrapolation of the results, it claims to then “predict when the entire Bitcoin network becomes a zero emission network.”
  • But how does the network become carbon-negative in the first place? Put simply, by combusting stranded methane gas to mine BTC that would have otherwise been emitted into the atmosphere. The study finds that this process, which already happens worldwide, reduces the network’s emissions by 63%.
  • “That means that the 1.57% of the Bitcoin network using carbon-negative sources have a -4.2% impact on the carbon intensity of the Bitcoin network.”
  • The study uses data from various flare gas BTC miners, including Crusoe Energy in Colorado, Jai Energy in Wyoming and Arthur Mining in Brazil. It also touches upon miners using waste gases from animal waste — such as those in Slovakia — to illustrate that Bitcoin mining can positively impact the environment by preventing the emission of harmful methane gases.

 

Fireblocks launches Web3 Engine support on Solana

  • Digital asset custody platform Fireblocks has launched support for Solana, giving its thousands of users access to the developer network’s applications and infrastructure. 
  • Beginning Tuesday, Fireblocks users will have direct access to Solana’s various decentralized finance (DeFi) and Web3 applications — a move the company says will directly benefit “alternative asset managers” and “capital market participants.”
  • “Thousands of businesses use Fireblocks to access novel Web3 products and services,” Solana co-founder Anatoly Yakovenko said in a statement. “Starting today, these businesses will immediately have access to the depth and breadth of the Solana ecosystem.”
  • The Solana integration will come via Fireblocks’ Web3 Engine, a suite of tools designed for developers building in the DeFi, GameFi and nonfungible token spaces. As Cointelegraph reported, the Fireblocks Web3 Engine was launched in May of this year. Fireblocks CEO Michael Shaulov said his company’s Web3 suite offers Solana ecosystem developers a higher level of security when developing products.
  • Solana has been subjected to several high-profile security breaches this year — the latest being a hack that compromised 7,000 ecosystem wallets to the tune of $8 million.

 

Aave community proposes to temporarily suspend ETH lending before the Merge

  • With the Ethereum Merge on the way, the risk research and analysis team Block Analitica proposed a temporary pause in Ether (ETH) borrowing to mitigate the risks that may lead to a decentralized finance (DeFi) implosion in the Aave lending protocol during the Merge. 
  • The team pointed out the potential issue of high ETH utilization, which may result in liquidations being hard or impossible and annual percentage yields (APYs) reaching negative figures. Furthermore, the uncertainties surrounding the Merge and a potential Ethereum proof-of-work (PoW) fork may cause liquidity providers to start a bank run, pushing utilization to even higher levels. 
  • Block Analitica proposed several solutions, including a temporary halt for ETH lending on the Aave platform and increasing the variable borrow annual percentage rate (APR) at 100% utilization from 103% to 1,000%.
  • In response to the proposal, the market risk assessment team Gauntlet network expressed support for tpausing of ETH borrowing. However, they suggested breaking up the proposal into two parts and conducting more analysis regarding the second solution presented by Block Analitica.

 

Ethereum scaling network Arbitrum set for major upgrade on Aug. 31

  • Ethereum layer-2 scaling solution Arbitrum is set to undergo one of its most significant upgrades on Wednesday, set to increase transaction throughput, slash transaction fees and simplify cross-chain communication between Arbitrum and Ethereum.
  • Referred to as the “Nitro” upgrade, Arbitrum reconfirmed the date of the upgrade in a Twitter post on Aug. 29, confirming that the upgrade will take effect on Aug. 31 at 10:30 AM Eastern Time, while noting a two to four hours of network downtime period is to be expected.

 

Binance Aus ramping up measures to protect vulnerable users, says CEO

  • Binance Australia is tightening up its onboarding process for new users as part of a push to protect users it has flagged as most vulnerable to financial crypto crime.
  • The new measures were mentioned in Binance Australia’s June quarter Economic, Social, and Governance (ESG) report on Monday, which noted that the exchange was working on a “stringent and user-focused onboarding experience” aimed at groups with a higher occurrence of financial crime.
  • Speaking with Cointelegraph, Leigh Travers, CEO of Binance Aus, and Zachary Lu from the exchange’s Financial Crime, Risk and Compliance unit, noted the company has been actively working on ways to protect “vulnerable users,” which starts from the onboarding process.
  • “From the whole financial crime risk management perspective, we are really looking at it from end to end and also from a whole life circle’s perspective,” said Lu:
  • “We are looking at three main areas: onboarding, ongoing and at the end of the life cycle [the point of time in which someone is scammed].”

 

Glassnode:

The latest Week On-chain video report is live for week 35.

In this edition, we analyse:

  • Weakness in #Bitcoin markets
  • $BTC prices falling below $20k
  • Lifespan metrics describing investor spending
  • Macro scale coinyears destroyed
  • Realized Losses

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