DeFi Today: the End-of-Summer Storms
Welcome to the first edition of Defi Today! You can stay updated on the exciting DeFi space, with exclusive contents, and the operations of our traders. Much more to come!
August closes positively for the third time in the last seven years. Before that, only in 2013 and 2017 did the hottest month of the year end with a positive balance. Total market capitalization is back above $390 billion with a 9% gain from the beginning of the month. This is attributable to altcoins, which recorded a +21% performance. Ethereum took the lion's share with a rise of almost 30% to over $450, levels abandoned in summer 2018. Bitcoin remains more contained with an increase that stops at +2% on a monthly basis.
BTC vs ALTS
The different pace between the first two is also evident from the correlation that touches the lowest levels since February 2018.
Index Correlation BTC vs ETH
The Fear & Greed index, which measures investor sentiment, maintains an average of over 80 points. This is the first time since its launch (end 2017) that the fluctuations remain at such a high level for over a month.
Fear & Greed Index
Decentralized Finance
In August, with almost $11 billion traded, the total monthly trading volume on decentralized exchanges (DEX) was twice that recorded in July ($4.47 billion), an absolute record. In just 6 months, the volume on DEXs increased from $1.063 billion in March to the current $10.8 billion.
Total DEX Volume
The total amount of tokens locked on DeFi applications continues to grow, with deposits closing the month of August at over $8.6 billion. A dizzying growth that seems unstoppable, which began in mid-June (around $1.1 billion) and is now eight times greater than the total capitalization. A large part of the growth has been recorded since the beginning of July, rising from just under $2 billion to the current $9.5 billion recorded on September 2nd. Uniswap strengthened its market share by processing around 90 trades in the last week, accounting for over 70% of total trade.
A dominant position that sees a DEX (decentralised exchange) take first place in the DeFi Pulse ranking with over $1.77 billions in locked assets for the first time.
New records for Ethereum locked in decentralized apps (dApps) with more than 6.8 million units.
Investors continue to tokenize Bitcoin on the ERC-20 network exceeding 62,420 BTC for $711.680 million (calculated at Bitcoin's daily closing price on September 2nd).
WBTC is the leader in the area with 39,904 bitcoin.
Followed by RenBTC with 16,5050 units.
The ranking ends with pBTC (token of the pTokens project) with 48 units.
The Lightning Network with 1,055 BTC is also close to the record number of units locked on the secondary network of the Bitcoin blockchain, for a value of over $12.5 million.
Market Share Dex Volume
Technical Analysis & Options
by Federico Izzi
Bitcoin
After closing the second week of August at $11,925, the highest weekly closing level since January 2018, the prices of Bitcoin have entered a slow downturn mainly due to profit-taking. The recent declines that have brought prices back to test the monthly support of $11,200, currently do not endanger the bullish trend that started in mid-March and confirmed with the further bullish push started in mid-July. Technically the levels to be monitored are area 12,100 first and 12,500 upwards, while downwards a break of the support at $11,200 could attract bearish speculation down to area 10,500.
In fact, the options barriers are positioned between 11,200 and 10,450 dollars in defence of possible falls (Put options). A break of these levels would increase speculation and, consequently, volatility. Upwards, the bullish defences are between $11,800 and $12,600.
Analyzing the strength of the options between Put and Call this week, professional traders fear more a continuation of the bearish trend.
Ethereum
The queen of altcoins saw the second month on the rise by totalling almost 100% in two months, with prices doubling in value from $225 at the beginning of July to $448 at the end of August. A trend that opens September with a revision of $490, a level that had not been recorded for more than two years (July 2018). Technically, it will be important to understand in the coming days whether the recent increases have the strength to build solid foundations in the $435-445 area.
The former technical resistance, $445 area, which lasted throughout August, was for several weeks the main level defended by operators in options. For this reason, very presumably, the break of the $445 on Monday pushed prices to new period records ($490) in a few minutes and then revised the prices back to where they started.
The repositioning of downward protection continues to highlight the $355 area, the first real bulwark to defend against any downward speculative attacks. While on the opposite side, upwards, despite the wall still remaining valid at $445, the difference in strength between the Put and Call options, which have remained open to date, does not show fears in the event of further falls. The medium-long term trend remains very solid. Only a drop under this last support ($355 area) could be of concern.
5 hottest DeFi News of the week
IOST launched its first DeFi dAPP thanks to Aegis. Major blockchains are trying to attire DeFi project, removing issues on Ethereum.
Aave gets its FCA license and becomes the first most used DeFi app in the world;
Ethereum founder’s Vitalik Buterin tweets against DeFi. A contradiction in terms?
The SUSHI token and the SushiSwap protocol
Uniswap is by far one of the DeFi protocols with the highest volume of locked assets, and SushiSwap intends to be an evolution of this.
On August 26th, 2020 the launch of this new DeFi protocol was officially announced, defined as "an improved version of Uniswap with token incentives", to the point that many have defined it as a fork of Uniswap.
Despite its goofy name, SushiSwap has been presented as an ambitious and interesting project for those who want to trade. On the one hand, it aims to be better than Uniswap, and on the other, it distributes incentives. In light of this, it is not difficult to imagine why it has been so successful in such a short time.
For example, its native token, $SUSHI, debuted on the crypto markets on August 28th, 2020 at around $3.7, but within a few days the price practically tripled, exceeding $11 on September 1st, and then fell back to around $6 in the following two days.
The developers of SushiSwap took the underlying code of Uniswap, and added community-oriented features that should improve the protocol design and provide benefits to the various players involved.
Its greatest strength, however, are the incentives for liquidity providers. In fact, on Uniswap, users only collect fees when they actively provide liquidity. Moreover, the exponential growth in the success of this protocol has already attracted many liquidity providers to Uniswap, reducing the interest that can be collected.
SushiSwap, on the other hand, not only remunerates liquidity providers, but also provides rewards in the form of SUSHI tokens. These tokens grant the right to continue to earn a portion of the protocol fees even if the user decides to no longer participate in the liquidity supply. In other words, early adopters become a stakeholder in the protocol.
This has attracted many users from the very first days, making SushiSwap a virtually immediate success. In fact, in the days following the launch, there were some problems arising from the rush and speed with which this new protocol was being adopted, so much so that probably the code on which it is based still needs to be fully secured.
The code has been verified on the testnet, but to date, there is still no audit to certify its security. The same SushiSwap development team has offered to pay 5 ETH to the first company that will provide a full audit of the code available on GitHub.
How to Earn SUSHI tokens
To start providing liquidity, and to start earning SUSHI tokens, Uniswap LP token holders can stake their LP tokens in SushiSwap pools.
For each new block, 100 SUSHI tokens are created, which are distributed equally to the stakers of each supported pool.
For the first 100,000 blocks, i.e. approximately the first 2 weeks, the amount of SUSHI tokens produced is 10 times greater, and this has significantly boosted the first "farmers" and liquidity providers. On the other hand, as far as trading fees are concerned, on Uniswap 0.3% is distributed to liquidity providers, whereas SushiSwap distributes 0.25%, with the remaining 0.05% being converted into SUSHI tokens and distributed to its owners.
After the first 100,000 blocks, all the Uniswap LP tokens staked on SushiSwap will be migrated to new pools almost identical to the standard Uniswap ones, but with the characteristic addition that any accrued commission will be distributed to SUSHI token holders through the above-mentioned mechanism.
To deposit LP tokens in the SushiSwap smart contract users can use the app.sushiswap.org interface.
At the moment, the funds listed on the SushiSwap smart contract amount to almost 1.4 billion dollars, which is as much as the funds on Aave, and a little less than the funds listed on Uniswap.
Most of these funds come from Uniswap LP tokens.