EOSDT Supply Increases by $100M With Bitcoin Liquidity Support

https://cointelegraph.com/news/eosdt-supply-increases-by-100m-with-bitcoin-liquidity-support

Multi-chain DeFi framework, Equilibrium, raised EOSDT circulation cap from $70 million up to $170 million with pBTC integration.

As the decentralized finance, or DeFi, industry continues to grow, the need for liquidity in cryptocurrencies is steadily increasing.

DeFi startup Equilibrium has today expanded the supply of its decentralized EOS stablecoin, EOSDT, as a result of integrating Bitcoin (BTC)-powered liquidity.

Equilibrium, a major multi-chain DeFi framework, has raised the EOSDT circulation cap from $70 million to $170 million, the firm announced on May 1.

EOSDT integration with pBTC drives the liquidity flow

This push became possible through EOSDT’s integration with cross-chain DeFi liquidity network pTokens, which enabled Bitcoin collateralization through pTokens’s BTC-pegged token, pBTC.

Bitcoin is the biggest cryptocurrency by market capitalization. It is one of the most liquid crypto assets with a trading volume of over $52 billion as of press time. By integrating pBTC — an Ethereum and EOS-compatible token pegged 1:1 to Bitcoin — Equilibrium unlocks massive new liquidity for the EOS ecosystem while driving interest in BTC-based DeFi.

Alex Melikhov, CEO and founder of Equilibrium said:

 “Liquidity is one of the first challenges that a DeFi framework must overcome, so Bitcoin compatibility is a major achievement for securing Equilibrium’s future. This integration makes it possible for billions of dollars in fresh liquidity to make its way to EOS-based decentralized finance.”

Dollars and Bitcoins

Thomas Bertani, founder of the development team behind pTokens, Provable Things, emphasized that the integration unites the world’s reserve currency, the United States dollar, with the biggest cryptocurrency, Bitcoin:

“With Bitcoin now providing additional collateral for EOSDT, we unite the world’s traditional reserve currency, the U.S. dollar, with the most used and popularised digital asset to date. This marriage between fiat and digital currencies creates layers of liquidity and a unique collateral base that traditional currencies simply cannot provide.”

Equilibrium says that EOSDT smart contracts hold more than $10 million EOS collateral. This is claimed to be the biggest amount among all EOS-based decentralized applications so far. The annual percentage rate of EOSDT-driven liquidity against collateral of volatile crypto assets accounts for 1%, Melikhov told Cointelegraph.

The news comes amid the upcoming pBTC listing on major crypto exchange, Bitfinex. As reported, the listing will take place in May 2020.

Why Today’s BTC Difficulty Adjustment May Cause the Price to Plunge

https://cointelegraph.com/news/why-todays-btc-difficulty-adjustment-may-cause-the-price-to-plunge

Bitcoin mining’s difficulty will decrease tomorrow, and it may be an ominous sign for the coin’s price.

On March 25, Bitcoin (BTC) mining difficulty will decrease. The last time a downward adjustment took place, Bitcoin price plummeted more than 50% percent.

Bitcoin difficulty

Bitcoin’s difficulty is designed to adjust every 2016 blocks — or approximately every two weeks. This adjustment is based on changes in the network’s hashrate, and occurs regularly in an attempt to ensure that the network continues to solve new blocks at a rate of one every 10 minutes.

If the hashrate during the past two weeks has gone up, the difficulty will go up as well, making mining more challenging. If the hashrate has dropped, the difficulty level will decrease, making blocks easier to solve. The latter event is somewhat uncommon, and is considered by some to be a historically ominous indicator for Bitcoin’s price. When the next adjustment takes place, mining difficulty is expected to ease by 13.67%.

Recent history

The last downward adjustment took place on February 25, 2020, when bitcoin price was $9,989.39. Three days later, it dropped to $8,785.52, and by March 14, had retreated to $4830.21. In a span of twenty days, bitcoin lost 52% percent of its value.

Source: Cointelegraph, Quandle

The previous significant downward adjustment happened on November 7 2019. Bitcoin’s price on that date closed at $9,310.19. Some twenty days later, November 26, the price dropped to $6,907.4, surrendering 25.81% in total.

Miners give up

While this relationship could be a fluke, there is a rationale behind the trend. Downward difficulty adjustment completes the so-called “miners’ capitulation cycle.” 

In short, let’s say we are at a point where mining is highly profitable. This leads to more miners joining the network, increasing the hash rate. As a result, the difficulty adjusts upwards and the margins get a little thinner, but mining is still profitable, incentivizing more miners to join.

This cycle continues until a relatively large proportion of miners cannot keep up anymore. Some are forced to liquidate an ever-increasing percentage of their newly mined Bitcoins, eventually depleting their treasuries. This causes an increased supply of bitcoins for sale on the market. At some point, they capitulate and stop mining. The hashrate decreases and, finally, the difficulty receives a downward reset. 

Philip Salter, head of operations at Genesis Mining, echoed this sentiment while speaking to Cointelegraph recently: 

“It’s no different from traditional markets, you have to sell everything to keep the operations going, to pay off your debts. As a miner you have bills to pay, you have to pay for electricity, for operations; and your expenses are in dollars, so as the price of bitcoin is dropping, it means you have to sell more of your inventory just to keep going.”

With the next decrease in Bitcoin mining difficulty just hours away, this theory will soon be tested once more.

Ethereum Looks To Trigger Altseason Again With A 25% Upsurge

https://zycrypto.com/ethereum-looks-to-trigger-altseason-again-with-a-25-upsurge/
Ethereum Gas Prices Skyrocket Amid Devastating Market Correction

In the late hours of Thursday, the crypto market began experiencing a surprising upsurge. After a long day of setting higher supports, the crypto market finally broke above. Ethereum has been recording gains of more than 20%. The surge has seen Ethereum climb from the $110 levels to over $150.

Other top cryptocurrencies also enjoying the upsurge is Bitcoin. The top crypto has also added more than 20%. Bitcoin Cash and Bitcoin SV are two of the best performers adding more than 30%. XRP, the third-largest cryptocurrencies, is rallying by 15%.

For Ethereum, despite the latest surge, there’s still potential for a sell-off. ViewBase has noted that  Ethereum inflows into exchanges than outflows have soared. This means that investors could be preparing to cash in. ViewBase adds that the exchange deposits have exceeded previous highs when Ethereum fell below $89.

Bitcoin, in contrast, saw inflow into exchanges fall drastically (74,951) according to CQ Live. Its surge inflow (223,919) came on 12th-13th March before it dipped below $5K.

Can Ethereum Trigger The Altseason Again?

During the first two months of the year, Ethereum doubled its value. Being among the first cryptocurrencies to rally at the start of the year, Ethereum inspired the short-lived altseason. Given the trend it’s setting now, the largest altcoin by market cap could be looking to do it again.

For this, Ethereum needs to continue outperforming Bitcoin and luring investors to invest in it. With time, Bitcoin dominance will fall and see altcoins strengthen their positions in the market.

FOMO Coming

The crypto boost has been celebrated by the crypto community. Finally, the crypto market has decoupled from traditional markets. This means that crypto can finally be hedged against inflation, acting as a safe haven. The breakout could also be a confirmation of bottoms being achieved last week.

The crypto community, however, remains wary with recent market movements proving irrational.

Recently, Google searches have shown that investors are again interested in Bitcoin. If Bitcoin can keep up the upward trend, we could see FOMO coming back and the crypto market explodes over the coming weeks.

PAX Gold Can Now Be Traded Against Swiss Franc and British Pound

https://cointelegraph.com/news/pax-gold-can-now-be-traded-against-swiss-franc-and-british-pound

Switzerland-based crypto exchange Smart Valor listed major gold-backed stablecoin PAX Gold for trading against the Swiss franc and the British pound.

While global stock markets are experiencing extreme turmoil, cryptocurrency projects keep introducing more ways to trade gold-backed assets twenty-four hours a day.

PAX Gold (PAXG), a major cryptocurrency pegged to physical gold, has now rolled out for trading against two European fiat currencies — the Swiss franc (CHF) and the British pound (GBP).

The new trading pairs became available when Switzerland-based digital asset exchange Smart Valor listed PAXG on its platform on March 19.

As announced by Paxos, the New York-based company that launched the gold-backed token in late 2019, PAX Gold can now be traded on Smart Valor against four fiat currencies like CHF, GBP, the euro and the United States dollar (USD). The token is also trading against major cryptocurrency Bitcoin (BTC) as well as a major USD-pegged stablecoin Tether (USDT).

While Smart Valor claims that the exchange is the first European crypto exchange to list PAXG, a spokesperson at Paxos confirmed to Cointelegraph that the exchange is the first platform enabling users to buy PAX Gold with CHF and GBP. Additionally, PAX Gold is said to be the first gold-pegged asset listed on Smart Valor. 

The Paxos representative said that other exchanges listing PAXG are Kraken, HitBTC, BitThumb and itBit.

Amid the ongoing crash, there is increasing demand in alternative investments

Olga Feldmeier, CEO of Smart Valor, said that the listing of PAX Gold comes in response to the ongoing financial crisis fueled by the intensifying coronavirus pandemic. As the U.S. Federal Reserve announced March 15 that it would cut interest rates to 0%, Feldmeier emphasized the further risks of devaluation:

“With the breakout of the coronavirus we also might be heading into the deep recession like the Great Depression of the 1930s. This is the time when investors are in dire need for a real alternative to protect their savings. Therefore, we decided to move forward with listing of tokenized gold on SMART VALOR exchange.”

Paxos highlighted that gold held steady amid the market turmoil over the past weeks, outlining gold as a safe-haven asset. The company also stressed that Paxos is a regulated trust company as it was approved by the New York State Department of Financial Services. 

As reported by Cointelegraph, Paxos launched PAX Gold in September 2019 as the “first crypto-asset redeemable for physical gold.”

The exchange said that the PAXG has been also attractive to investors because the Ethereum-based token is accessible for trading twenty-four hours a day. As some traditional market players like the New York Stock Exchange announced that they would temporarily halt trading due to COVID-19 risks, crypto markets become increasingly attractive for investors in general.

Gunnar Jaerv, COO of digital asset custody firm First Digital Trust, commented on the matter to Cointelegraph, saying:

“With stock markets being suspended and fears of a recession, digital asset markets may become an unexpected source of liquidity for many. Operating 24 hours a day, seven days a week cryptocurrency and tokenized securities markets will not stop, even if it seems the rest of the market might.”

Ethereum surges 20%, brings its market cap to $15 billion

https://decrypt.co/22961/ethereum-surges-market-cap-to-15-billion

Ether (ETH)—the world’s second largest cryptocurrency by market cap—has bull blood flowing through its veins again. The currency is trading for roughly $142—more than $20 higher than where it stood yesterday—and is up by more than 20 percent.

Ethereum has been hit hard over the past two weeks, and while its present numbers don’t compare with the $282 price it was sporting in mid-February, the currency is roughly $36 higher than its March 16 low of $106—the lowest it had been in over a year.

ETH is surging alongside assets like Bitcoin, which is currently trading for over $6,400. The jumps occurred following news that President Trump had signed a bill granting Americans access to free coronavirus testing and paid emergency leave.

However, the Ethereum network has also seen its user base and potential grow over the past month, a reminder that while its price may be on the low side, its blockchain remains viable. Among the most recent Ethereum developments is the Enjin Multiverse Program, which makes Ethereum-based assets and tokens available for use across multiple games

In addition, the coronavirus isn’t stopping production on Ethereum 2.0, which will theoretically make the network more scalable. Vitalik Buterin, Ethereum’s creator, believes the upgraded network can be superior to Bitcoin in terms of its smart contract capabilities.

Today’s positive vibes are extending through the entire crypto industry. Assets like Bitcoin Cash (BCH) and Bitcoin SV (BSV) have jumped in value by 25 and 35 percent, respectively, and are trading at $232 and $168. Meanwhile, Litecoin (LTC) and EOS (EOS) have recorded gains of roughly 17 and 19 percent.

The Week On-Chain (11 Mar 2020 – 18 Mar 2020)

https://insights.glassnode.com/the-week-on-chain-19-mar-2020/

Bitcoin Market Health

The Week On-Chain (11 Mar 2020 - 18 Mar 2020)

After the massive BTC price drop last Thursday, the price continued to decline before stabilising around $5000-5500. At its lowest point, bitcoin experienced a 50% drop from its price a month ago.

However, we are seeing a rebound today, with BTC rising almost 16% in the last 24 hours and passing the $6k mark on many exchanges.

The Week On-Chain (11 Mar 2020 - 18 Mar 2020)

Meanwhile, on-chain fundamentals are varied. Transaction volume is up almost 2x since the beginning of the year, signalling increased economic activity.

The Week On-Chain (11 Mar 2020 - 18 Mar 2020)

For the second week in a row, transaction count has decreased while volume has increased, suggesting that the average value of transactions is much higher than usual. This could signal both large sales as people attempt to minimize losses, and large purchases as investors buy the dip.


HODLers Are Buying The Dip

The Hodler Net Position Change metric shows that long-term bitcoin holders are buying the dip.

When this metric is above zero (green), it means that, on average, hodlers are accumulating BTC. When below zero, it means hodlers are selling (likely realizing profits).

The Week On-Chain (11 Mar 2020 - 18 Mar 2020)
Hodlers are using this dip as an opportunity to accumulate more BTC (Glassnode Studio)

We can see that this February, when prices approached $10k, hodlers stopped accumulating more BTC, potentially having identified it as a market top. However, during the crash last week, hodlers began accumulating, signalling confidence in BTC at this price point.

Long-term investors appear have identified this as the bottom, which today’s price increase supports.


Community Narrative

Content and insights derived from Glassnode data by our community

Using Glassnode data, based on our summary of the MakerDAO zero-bid exploit, @RyanSAdams pointed out the dangers of relying on nascent infrastructure for something as important as financial applications.

Many commentators have used this as an example of the fact that core blockchain infrastructure has far to go before it can be trusted to support critical financial functions (such as lending) at scale.

Read the article for the full breakdown (and a TL;DR) of the exploit:

What Really Happened To MakerDAO?
Black Thursday: The sell-off of 12 March resulted in $4.5 million of unbacked DAI in the MakerDAO system. What really happened?
The Week On-Chain (11 Mar 2020 - 18 Mar 2020)

Remember to send us your own content using Glassnode data to be featured in our next weekly update.


The Week On-Chain (11 Mar 2020 - 18 Mar 2020)

Disclaimer: This report does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.

Over 90% Ethereum addresses record capital outflow; ‘Optimism’ curve declining?

https://eng.ambcrypto.com/over-90-ethereum-addresses-record-capital-outflow-optimism-curve-declining

Market fundamentals and metrics in the digital asset industry undergo significant changes whenever the network registers a significant price swing, whether the movement is up or down.
The collectiv

The post Over 90% Ethereum addresses record capital outflow; ‘Optimism’ curve declining? appeared first on AMBCrypto.

Binance P2P Adds Five New Fiat Currencies in Latin America

https://cointelegraph.com/news/binance-p2p-adds-five-new-fiat-currencies-in-latin-america

Binance has rolled out peer-to-peer crypto trading with five new Latin American fiat currencies.

Cryptocurrency exchange Binance has rolled out peer-to-peer (P2P) crypto trading with five new Latin American fiat currencies. 

Users of the Binance P2P trading platform can now buy and sell cryptocurrency directly with Brazilian real (BRL), Argentine peso (ARS), Colombian peso (COP), Mexican peso (MXN) and Peruvian sol (PEN).

Supported cryptocurrencies include Bitcoin (BTC), Ether (ETH), Tether (USDT), Binance Coin (BNB) and Binance USD (BUSD). The platform has zero transaction fees and uses an escrow service to protect user funds. 

Latin American region active in crypto trading

Binance CEO Changpeng Zhao — also known as CZ — said that Latin America is one of the most active regions for crypto trading and P2P trading is well established there:

“Amidst the current global economic uncertainty, cryptocurrency is still a favorable asset with great potential use despite its price volatility. […] For the massive unbanked population in Latin America, cryptocurrency is a more promising financial asset, and we are glad to directly provide the financial access and service for them.”

Binance P2P’s fiat-to-crypto expansion

In early March, Nigerian naira (NGN) became the first African fiat currency to trade on the Binance P2P platform. Binance also intends to roll out its P2P trading service to a number of other African countries this month, with CZ calling Africa a “blockchain continent” where cryptocurrency can empower ordinary people to join the financial world. 

The Binance P2P platform added support for the Vietnamese dong (VND), in January of this year, and Chinese yuan (CNY), in October 2019.

Highs and lows of other P2P trading platforms

In the meantime, another P2P crypto trading exchange LocalBitcoins saw a major decline in BTC trading volumes recently.

During the week ending on Feb. 22, global BTC trading volumes on LocalBitcoins touched a seven-year low, with just 3,144 bitcoins traded, or around $28 million at the time, marking the lowest weekly trading amount since May 2013.

Huobi Derivatives Introduces Circuit Breaker and Partial Liquidations

https://cointelegraph.com/news/huobi-derivatives-introduces-circuit-breaker-and-partial-liquidations

Huobi DM announced a new partial liquidation feature on its exchange, aimed at decreasing customers’ risk.

Huobi’s derivatives trading platform, Huobi DM, has announced a new ‘partial liquidation’ feature that aims to limit trading losses.

Sudden market swings can immediately liquidate highly leveraged positions and cause extensive user losses, as seen during the last week’s Bitcoin price crash. 

The platform’s new liquidation mechanism will jump into action when markets face turbulence to mitigate the impact on traders, Huobi said in a statement.

Crazy market times cause issues

Amid recent coronavirus fears and market uncertainty in stocks and crypto, asset prices have seen violent swings. Between March 12 and 13, Bitcoin dropped more than 50% in value before bouncing off the bottom. 

During the crash BitMEX saw liquidations top half a billion dollars in an hour. It also went offline, which some users claim resulted in unnecessary liquidations. It blamed denial-of-service (DDoS), attacks as the culprit.

Huobi’s platform saw around $27.45 million in liquidations in a few hours during the crash.

After a stark price swing, liquidation occurs when traders do not hold enough capital in the exchange on which they are trading, resulting in trading position closure. Huobi DM’s new adjustment aims to improve the all-or-nothing liquidation mechanism that wipes out funds all at once. 

Huobi DM looks at a different approach

Huobi DM’s new liquidation mechanism offers the option for partial liquidation. The mechanism gradually reduces users’ positions rather than liquidating them in full in a single event. Huobi DM explained:

“With the new mechanism, the system will automatically start liquidating a user’s positions in stages—at predetermined margin ratios determined by the user’s calculated exposure—until the margin ratio reaches above zero. The liquidation process also includes a circuit breaker function that halts liquidation when large or unusual deviations between the liquidation price and market price are detected.”

Huobi DM said the new feature applies to all assets and leverages on the derivatives exchange. Additionally, the outfit decreased its maintenance margin ratio, as well as updated its system’s firmware. 

Cointelegraph reached out to Huobi for additional details. This article will be updated accordingly should a response come in.

Ethereums’ unlikely rally needs to begin with breach of $123

https://eng.ambcrypto.com/ethereums-unlikely-rally-needs-to-begin-with-breach-of-123-level

The volatility in the digital asset industry has been off the charts lately and according to cryptovolatility.net, Ethereum was 4.58 percent volatile, when compared to Bitcoin, at the time of writing.

The post Ethereums’ unlikely rally needs to begin with breach of $123 appeared first on AMBCrypto.

What The Upcoming Dilution Means For The Price Of MKR

https://insights.glassnode.com/what-the-upcoming-dilution-means-for-the-price-of-mkr/

What The Upcoming Dilution Means For The Price Of MKR

This analysis looks at the consequences of the MKR Debt Auction on the price of the MKR token. To learn more about the events leading up to the auction, read our explainer article:

What Really Happened To MakerDAO?
Black Thursday: The sell-off of 12 March resulted in $4.5 million of unbacked DAI in the MakerDAO system. What really happened?
What The Upcoming Dilution Means For The Price Of MKR


MKR Debt Auction Mechanics

The MKR Debt Auction will take place at approximately 10:28 ET (14:28 UTC) on March 19, with MKR being auctioned off in lots for 50,000 DAI. This DAI will then be burned in order to cancel out the Maker system’s DAI debt.

The auction mechanics allow Keepers to bid on how many MKR they are willing to accept for this price. Offers will start at 250 MKR per bundle (or 200 DAI per MKR), and Keepers can bid to buy less MKR for the same 50,000 DAI cost.

From the MakerDAO blog:

The protocol offers a Keeper (bidder) a lot of 250 MKR for 50,000 Dai, which translates to a price of 200 Dai/MKR. A second keeper bids 50,000 Dai but only requires 230 MKR, which translates to a price of 217 Dai/MKR. The bid prices increase through the Keepers’ willingness to take slightly less MKR in exchange for 50,000 Dai.


How Much Will MKR Sell For?

The auction mechanism means that it is unclear how many MKR will be added into circulation in order to redress the deficit faced by the protocol. The core factor that will affect the final amount minted will be the market value of MKR and DAI at the time of the auction (and how these affect demand at various price points).

While the exact number of MKR being minted is uncertain, some basic estimates can be made using widely available information and some assumptions about how much it will sell for in the auction.

The Current Price of MKR and DAI

The price of MKR a month ago was over $600, whereas since the crash, it has sat at slightly over $200 USD.

What The Upcoming Dilution Means For The Price Of MKR
Figure 1: MKR’s price and market cap over the past week (Glassnode Studio)

Due to higher-than-normal demand (and despite being under-collateralized), DAI is currently valued at around $1.02 USD per token, after peaking at a price of $1.11 on 14 March.

The following analysis will use current prices for these assets.

What is the minimum bid required to break even?

Taking the current MKR and DAI prices, ($214 and $1.02, respectively), and assuming these hold until the auction takes place, we can calculate a number of possible scenarios:

What The Upcoming Dilution Means For The Price Of MKR
Figure 2: Possible MKR auction outcomes based on current prices for MKR and DAI

Opening Price

Looking at the first row in Figure 2: if DAI and MKR stay at current prices, a successful bid at the opening price of 200 DAI/MKR (i.e. 250 MKR per bundle) would equate to $204 USD/MKR at $51,000 per bundle (50,000 DAI/bundle). This would result in a profit of:

  • 9.8 DAI/MKR ($10/MKR); or
  • 2450 DAI per bundle ($2500/bundle); or
  • 4.9% profit

This high profit margin means we can likely expect bids at higher prices (i.e. lower MKR amounts per bundle).

Break-Even Price

The fourth line in Figure 2 above indicates the break-even price, below which anyone who bid on the auction would be buying at a loss.

The minimum break-even MKR amount for a bid would be 238.32 MKR per bundle (i.e. 209.8 DAI/MKR).


To What Extent Will MKR Be Diluted?

Current MKR Supply

When MakerDAO was launched in late 2017, there were a total of 1,000,000 MKR tokens. Of these, 530,000 were released into circulation, while 470,000 were held by the Maker Foundation’s development fund. Because the supply of MKR is fluid, however, these figures are not fixed:

What The Upcoming Dilution Means For The Price Of MKR
Figure 3: MKR supply across its lifetime (Glassnode Studio)

The current supply is 985,464 MKR.

How much MKR might be minted?

Based on the system’s current deficit, we can calculate how much MKR will be added into circulation based on various auction scenarios.

MakerDAO deficit: 5,362,718 DAI

Number of bundles for sale (based on the deficit): 107.25436 DAI

What The Upcoming Dilution Means For The Price Of MKR
Figure 4: Possible MKR dilution scenarios

These figures show that if MKR is sold for a low price (i.e. the opening price of 200 DAI/MKR), the total supply will only increase by 2.72%.

The scenario is not very different if MKR is sold for market (break-even) price; then, the supply will only increase by 2.59%.

Even if all MKR were sold in bundles of 230 MKR (well below market price), dilution would still only be 2.50%.

This would bring the total supply to 1,010,133 to 1,012,278 MKR.


What Impact Will This Have On MKR?

The addition of ~25,000 MKR to the existing supply should, in theory, not affect the price of the MKR token too drastically (i.e. not more than a few percent).

Overall, given the current low market cap of MKR (and all cryptoassets) and the fact that the dilution event will not meaningfully increase the MKR token supply, holders should not be too worried about the effect of the auction on the price of their MKR tokens.

While a single inflation event of >3% is not insignificant, the effect of the dilution will probably have less of an effect on the price of MKR than the events that led to the auction itself. The more important effects to be aware of are:

  • The impact of the zero-bid exploit on the reputation of the Maker project.
  • The general state of crypto markets as a result of the COVID-19 pandemic.

Stay updated about the MKR auction via Glassnode’s Twitter, and subscribe to Glassnode Insights below for updates.


What The Upcoming Dilution Means For The Price Of MKR

Disclaimer: This report does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.

Ethereum Bletchley Index falls by 42% as the small-cap assets follow suit

https://eng.ambcrypto.com/ethereum-bletchley-index-falls-by-42-as-the-small-cap-assets-follow-suit

The volatility inherent to the cryptocurrency market hasn’t done those who expect crypto-assets to shoot up in value any favor. In fact, such is the volatility that the total market capitalization fel

The post Ethereum Bletchley Index falls by 42% as the small-cap assets follow suit appeared first on AMBCrypto.

What Really Happened To MakerDAO?

https://insights.glassnode.com/what-really-happened-to-makerdao/

What Really Happened To MakerDAO?

The massive crypto sell-off on 12 March saw the price of ETH fall 43% from $194 to $111 – its largest ever loss in a single day.

This sell-off triggered unintended consequences for the MakerDAO ecosystem. Dubbed “Black Thursday”, this sent the Maker system into chaos as $4.5 million worth of DAI was left unbacked by any collateral, and users lost millions.

News outlets and industry commentators have been reporting on these events, but a clear account is hard to come by. Many market observers have been left asking: what really happened to MakerDAO?


TL;DR

  1. Ethereum Network Overwhelmed, Gas Prices Increased – On 12 March, the Ethereum network was overwhelmed by demand as the price rapidly plummeted. The transaction queue grew as network capacity was reached, and gas prices shot up by an order of magnitude.
  2. Price Oracles Failed – Due to uncharacteristically high gas prices, price oracles including the Maker ‘Medianizer’ failed to update their feeds.
  3. CDP Liquidations Lagged, Then Were Triggered En Masse – When the Medianizer feed was updated, the reported price instantly decreased by over 20%, causing many CDPs to be liquidated immediately.
  4. ETH Was Sold For Free Through Maker – Again due to high gas fees and network congestion, when the ETH collateral in these CDPs was auctioned off, many bids did not get through. This allowed some liquidators to win these auctions with bids of zero DAI by paying high gas fees, extracting over $8 million worth of ETH essentially for free.
  5. CDP Owners Left With Millions In Losses – This exploit means that over $4.5 million of DAI in the MakerDAO system is now unbacked. In addition, users whose CDPs were liquidated (and whose ETH was sold to the zero-bid liquidator) lost 100% of their collateral, resulting in millions of dollars of losses for the DeFi community.

1 – The Ethereum Network Was Overwhelmed As The Price Fell

As the price of cryptoassets across the market began to plummet early on March 12, on-chain volumes spiked massively, and ETH deposits to exchanges hiked as users scrambled to react to falling prices across the market.

What Really Happened To MakerDAO?

At the same time, many Ethereum dapps saw their highest ever daily activity. This, combined with increasing deposits to exchanges, overwhelmed the network.

The mean gas price for the day spiked over 6x to almost 80 Gwei, with mean hourly prices reaching almost 200 Gwei (according to Glassnode’s hourly data).

What Really Happened To MakerDAO?
Ethereum’s hourly mean gas price reached ~200 Gwei on 12 March, skyrocketing to over 400 Gwei the following day (Glassnode Studio)

2 – ETH Price Oracles Failed

The increase in on-chain activity was especially significant for DeFi apps, which were overwhelmed by the radical spike in demand.

One of the most notable consequences was caused by the failure of pricing oracles offered by projects such as MakerDAO and Chainlink. With gas prices so high and so many transactions in the queue, these oracles were unable to update their price feeds quickly enough to keep up with the rapidly decreasing price of ETH.

Chainlink’s ETH price feed stalled for hours as it waited for price updates to make their way through the queue of transactions. The Maker ‘Medianizer’ oracle also provided radically incorrect ETH price data, giving a price of $166 when the real price was around $130.


3 – CDP Liquidations Lagged, Then Were Triggered En Masse

Positively, this gave some network participants time to top up or pay off their Maker CDPs, which would otherwise have been liquidated. By paying high gas fees, they were able to rescue their CDPs before the Maker price oracle was updated on-chain.

However, it also meant that when the price provided by the oracle was finally updated, many CDPs were suddenly liquidated en masse.

What Really Happened To MakerDAO?
Distribution of CDP liquidations through 12–13 March (source: whiterabbit)

CDP automation systems such as DeFi Saver were unable to rescue many users’ CDPs, as the price instantly dropped from above their configured minimums to below a 150% collateralization ratio. These users therefore had their CDPs liquidated despite having put safeguards in place, as their safeguards relied on accurate and regularly updated price data.

Further, some CDPs whose liquidations hadn’t completed (i.e. their collateral had not yet been purchased) were nonetheless liquidated even after the ETH price went back up, because price oracles were again too slow to reflect this change.


4 – ETH Was Sold For Free Through Maker

The tumbling ETH prices and slow oracles on 12 March led to a massive amount of Maker CDP liquidations, but high gas fees on Ethereum led to an even more dire situation for the MakerDAO ecosystem.

Refresher – How CDP liquidations work: When Maker CDPs (“vaults”) are liquidated, the collateral they contain gets auctioned off by the Maker system to pay back the CDP owner’s debt and the 13% liquidation penalty. Entities who purchase this collateral (“Keepers”) can make bids for bundles of 50 ETH, with auctions open for a limited amount of time, and ETH collateral selling for slightly less than market value.

The purpose of these auctions is to raise enough DAI to pay back the CDP debt. However, because gas prices on Ethereum on 12 March were so high and the queue was so long, bids which offered “regular” gas prices weren’t being processed fast enough.

Taking advantage of this network delay, a liquidator (likely a bot) was able to win these auctions with bids of zero DAI, essentially buying bundles of 50 ETH for free (aside from the comparatively nominal gas fee they paid to front-run the auctions). Several copycat liquidators also joined in on this exploit after noticing these strange auctions.

Over $8 million in ETH was liquidated for zero DAI by these few opportunists exploiting vulnerabilities in the MakerDAO auction system.

This resulted in a net loss for the MakerDAO system, as the auctions did not raise the amount of DAI required to pay back the attached CDP debt. Because of this anomaly, at least $4.5 million (at the time) worth of DAI was left unbacked by any collateral.


5 – CDP Owners Left With Millions In Losses

Not only did this exploit leave the Maker system undercollateralized, but the users whose CDPs were liquidated lost all of the additional collateral in their CDPs.

Because CDPs are overcollateralized by default, these users should have received the total ETH value of their CDP minus their debt and the 13% liquidation penalty. However, because their ETH collateral was sold for zero DAI, they were left with nothing.

Users took to Reddit to ask questions:

What Really Happened To MakerDAO?
The owner of Vault #4458 should have received ~74 ETH, but instead received zero (source: Reddit)
What Really Happened To MakerDAO?
The owner of Vault #849 lost over 1000 ETH as a result of the exploit (source: Reddit)

As u/BitBurst noted, many MakerDAO users lost their life savings. The largest liquidated CDP lost around 35,000 ETH, equivalent to ~$4 million USD at current prices. Community members are calling for MakerDAO to rectify the situation.


The Aftermath

Patching the System

Shortly after the exploit occurred, MakerDAO conducted a vote on how to prevent this from happening again. New system parameters have increased the maximum lot size from 50 to 500 ETH and increased the duration of auctions. Further solutions such as minimum bid amounts on auctions are also being explored.

Re-Collateralization of DAI

The Maker community vetoed an Emergency Shutdown in favor of less drastic measures. Instead, as per the Maker whitepaper, the main way in which the system will be re-collateralized is via the printing and auctioning of new MKR tokens:

If the Collateral Auction does not raise enough Dai to cover the Vault’s outstanding obligation, the deficit is converted into Protocol debt. Protocol debt is covered by the Dai in the Maker Buffer. If there is not enough Dai in the Buffer, the Protocol triggers a Debt Auction. During a Debt Auction, MKR is minted by the system (increasing the amount of MKR in circulation), and then sold to bidders for Dai.

This sale mechanism will dilute existing MKR holders, considered fair “punishment” for their failure to maintain steady backing for DAI via good protocol governance.

The community is also proposing a reduction of the DSR (Dai Savings Rate) and the Global Stability Fee, in order to bring the DAI price closer to its 1 USD peg.

Redress for Liquidated CDP Owners?

At this time, it is unclear whether further MKR tokens will be minted and sold in order to cover the losses suffered by CDP owners who were liquidated. Many community members are calling for this as an “act of good faith”, stating that it will also help the protocol’s reputation in the long run.

What Really Happened To MakerDAO?
(source: Reddit)

Other community members have pointed out the irony of Maker’s response to the event, stating that it “sounds a lot like the traditional system DeFi was supposed to disrupt.”

What Really Happened To MakerDAO?
(source: Reddit)

The system of “the richest few (MKR holders) must apply and adjust monetary policy to decide the fate of the many (DAI users)” does seem eerily similar to the way financial systems work in the traditional world, and users of the MakerDAO ecosystem are concerned for its future.


What Does This Mean For MKR?

To find out what this series of events means for the price of the MKR token, read our follow-up analysis:

What The Upcoming Dilution Means For The Price Of MKR
The MKR Debt Auction on 19 March will see the token supply diluted as more MKR are minted. What will this do to the price of MKR?
What Really Happened To MakerDAO?

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What Really Happened To MakerDAO?

Disclaimer: This report does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.

Crypto Exchange Deposits Increase as Price Plummets

https://insights.glassnode.com/crypto-exchange-deposits-increase-as-price-plummets/

Crypto Exchange Deposits Increase as Price Plummets

As the crypto market continues to see massive losses, BTC inflow to exchanges has tripled over the past 24 hours, reaching new highs for this year.

Crypto Exchange Deposits Increase as Price Plummets

In its most active period yesterday, over $358 million USD worth of bitcoin was transferred to exchanges in a single hour, shortly before the price dropped even further from ~$6100 down to the low $5000s.


The number of ETH exchange deposits also spiked massively, more than doubling in half a day as the price crashed by 30% and investors rushed to minimise losses.

Crypto Exchange Deposits Increase as Price Plummets

Stablecoin Activity: Investors Look to Buy the Dip

But it wasn’t just panic sellers who were transferring their coins to exchanges. The inflow of Tether to exchanges also saw a massive increase, suggesting that many investors are looking to buy the dip.

Crypto Exchange Deposits Increase as Price Plummets

This makes sense, as Bitcoin’s Stablecoin Supply Ratio has reached record lows, meaning that stablecoins’ buying power over bitcoin is currently at its strongest point ever.

Crypto Exchange Deposits Increase as Price Plummets

Based on these figures, have we reached the bottom yet, or does crypto have further to fall before recovering?

Take our Twitter poll to have your say and see what the community thinks:


Crypto Exchange Deposits Increase as Price Plummets

Disclaimer: This report does not provide any investment advice. All data is provided for information purposes only. No investment decision shall be based on the information provided here and you are solely responsible for your own investment decisions.