Time for Fear or Redemption?
The week after the worst sinking of the last six months manages to curb the fear of new sales. DeFi, despite the difficulties, continues to show strong growth in volumes
After a great start, the first week of September closed with the worst decline in the last 6 months. There hadn't been a drop of this depth since mid-March 2020.
Out of the first two in the ranking, Ethereum is the one to suffer the most painful decline, with a weekly loss of 20%, while Bitcoin manages to limit the descent to 12%, despite a loss of over 2000 dollars in a handful of days.
BTC vs ALTS
In just a few days, the hard work done by the bulls during the month of August has vanished, with prices returning to the values recorded at the end of July.
Despite the activity of the bears, the second week saw the proud reaction of the operators who returned to buy, in particular Bitcoin and Ethereum, opting to move immediately to the various decentralized finance projects.
Total Value Locked in DeFi
The total value locked on DeFi protocols registers a heavy contraction for the first time. In a few days it went from $9.6b of TVL (Total Value Locked) on September 2nd to $6.1b on September 9th.
This is a loss of value to be attributed to the fall in the prices of Ethereum which, with over 90% of the market share, continues to be the most widely used collateral. Looking at the locked collateral more in detail, on September 5th, ETH reached an all-time high with nearly 7 million units locked on DeFi protocols.
Bitcoin on Ethereum (Balances)
Many Bitcoin holders are also adopting a paradigm shift by choosing to tokenize BTC via ERC20 to take advantage of the returns offered by DeFi projects.
On September 10th there were about 87 thousand tokenized BTC - equivalent to over $800 million at current market value - the highest figure ever. The current conversion of BTC on the Ethereum network accounts for 2% of Ethereum's current market cap, while with 0.4% it is decidedly insignificant compared to the total Bitcoin mined so far (about 18.5 million BTC).
The undisputed leader remains WBTC with about 50,000 BTC locked;
This is followed by renBTC with 18,427;
HBTC with 4,810;
sBTC with 2,902;
imBTC with 1,113;
pBTC with 43.
DEXes Monthly Chart
Decentralised exchanges (DEX) continue to grow and in just 10 days have collected volumes of over $9 billion, announcing a further upward leap that overcomes the previous record set in August with $11.6 billion traded.
This rise, if it continues with the same intensity over the next few days, will see volume growth of over 1000% in just three months.
Options and Technical Analysis
by Federico Izzi
Bitcoin
A week apart, the price of Bitcoin continues to fluctuate in the 10,000 USD area. During the week, an attempt to sink below this psychological level, which has now also become technical, was rejected. Technical analysis indicates that rejecting a test several times in a few days of the same price level, as happened in this week, points to the ending of the trend and the intention of reversal on the part of the traders. It seems that this is taking place. But caution: a further sinking supported by the sales (a condition that has not happened in these days) will attract speculation, increasing the possibilities of dangerous falls accompanied by the fear of not being able to sustain further collapses of prices, causing nervousness.
Last week's declines wiped out all downward protection from options traders built in previous weeks as prices rose. These days saw new strategies being set up targeting the most important levels to capitalize on the price bounce. Although the ratio of Put to Call remains high in favour of the latter, options traders are beginning to cover the supports between 9700 and 9980. It will be necessary to continue to increase the strength of Put positions in order to attract confidence again. Against this backdrop, fear continues to prevail, as evidenced by the high levels of open positions held down on strike calls between 11650 and 12420. Only a return of the prices to these levels will cause the strategies to change from bearish to bullish.
Ethereum
The bearish movement that is colouring red this beginning of the month is recording a loss of more than 35% in the value of ETH from the highs reached on September 1st, just one step away from the $500, the highest level in the last two years.
This is a fall that has caused volatility to return to April levels. Previously such a steep increase in volatility in a few days occurred in mid-March during the bearish storm at the start of the Covid 19 crisis.
It was an event that in the following days triggered the rise that in less than six months saw the value of ETH gain more than 400%.
The recent drop in prices has stopped in the 310 USD area, just over 50% of Fibonacci's retracement, combining the recent highs with the mid-March low. The same level - area 290/300 USD - also features the dynamic bullish trendline that combines the March and July lows. In addition, the same level coincides with the former resistance of February, which has now become support.
These signals reinforce the conditions of approaching bullish reaction levels. It is a reaction that in the last few hours has brought the prices of Ethereum above the 370 USD area.
ETH is Flying!
The rebound in prices allows options operators to strengthen the downward protections that in recent days have repelled the falls between $305 and $330. In the last 48 hours, the strength of Put positions has doubled, despite the fact that the gap with Call positions remains at a 1:3 ratio.
Analyzing the bullish strikes, the first sign of strength will come with the break of the 395 USD area. To confirm a return of the bullish force it will be necessary to extend the climb beyond 435 USD.
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Is Ethereum dead for DeFi? An insightful interview with Equilibrium
Ethereum is experiencing big issues due to high fees and the choking of the blockchain. The Vitalik Buterin’s network, in fact, is the most used in the DeFi sector and with so many projects and smart contracts running on it, it is inevitable to have these kinds of issues.
Equilibrium launched a stablecoin built on top of the EOS blockchain and speaking about these problems DeFi Today interviewed their CEO Alex Melikhov.
When will interest related to BTC as collateral for EOSDT be integrated?
We’ve already integrated BTC collateral into our ecosystem, thanks to our partners from Provable who provided a solution to bridge BTC into the EOS ecosystem
Have you suffered any attacks on your platform? At which stage is the integration with other blockchains such as Ethereum and Binance Chain?
If there even were any attacks the system has performed well without any losses. In any case we have a high security level and run the bug bounty program that incentivizes the community to help us upgrade our security and quality of our services. In connection with our project’s current expansion phase, we have teamed up with Polkadot for using its substrate technology to create our own blockchain. Polkadot has an exceptionally advanced security system. Technologically, it is one of its particular strong points.
Polkadot’s technology will enable us to extend our DeFi product line to a one-stop cross-chain money market. We are currently building compatibility with Ethereum. Next will be BNB, XTZ, and DOT. The latter of which will in fact be essentially added when we will be connected with Polkadot by virtue of the parachain.
Your team has a number of people from the world of traditional finance, is this an advantage?
It is definitely an advantage, as DeFi in many cases concentrates on adapting traditional financial instruments and approaches to on-chain usage. It also gives us a clear understanding of what pain points exist and how they can be improved.
EOSDT is definitely the most capitalized stablecoin, are you afraid of competition?
Absolutely not. Furthermore we think that competition is always helpful since it drives interest for the industry overall. We have learned a lot from the competition and pooled their innovations. In fact, with the expansion of our project to cross-chain enablement, we are adding another stablecoin and even more synthetic assets to provide wider functionality. So if we are talking about the development of another liquid asset - we have that on the way too. Our new stablecoin will also be USD-pegged, but it will work cross-chain, using collateral from various cryptocurrencies.
In decentralized finance we are witnessing the emergence of governance tokens and their exploding prices. Do you think the same will happen to the NUT token?
You may have heard that we are planning a token swap, EQ for NUT (August 31-September 29), where users can swap their NUT holdings for EQ with additional bonus. With the expansion of our project to include interoperability across major blockchains and use of their assets, Equilibrium is filling a missing link in the DeFi space, which will unlock huge economic potential.The NUT token will still work for its original utilities, but not for the expanded product line. Given that we are building our own blockchain on the basis of Polkadot Substrate technology, EQ token will play a significant role in its governance. It will be used for paying transaction fees alongside voting for Substrate validators.
In the long run, do you think that the EOS blockchain will overtake the Ethereum blockchain in the DeFi sphere?
EOSIO is designed to handle an industry-grade volume of transactions, to provide a wide array of dev tools to make blockchain development an easy task, and to lower the barriers for entry for the new devs. At the same time, the future belongs to cross-chain technologies and the ability of EOS-based projects to be interoperable with other blockchains. We think that interoperability such as what we offer thanks to Polkadot integration will become the standard and enable blockchain-agnostic value.
Are you planning to create a flash loan system for users?
We’ve been thinking about that, it's a good additional source of income for collateral holders (even if current flash loan rates are a race to the bottom), and would allow us to significantly optimize the logic in our pyramiding smart-contract / product.
How much does APR affect the choice of one asset over another?
If we are speaking about our staking pool, the APR totally depends on the asset which users choose for staking. For example, for EOS currently it’s 2.36%, for EOSDT - 13,63% and for NUT - 10.28%.
What is your opinion about centralized stablecoins?
They are pioneers in DeFi, so we can’t discard their contribution to the entire DeFi ecosystem evolution. We think they’re here to stay for a while.
Do you think DeFi on Ethereum depends too much on MakerDAO and DAI, and that the same could happen with EOSDT?
Of course MakerDAO occupies most of the market by locked value, at the same time there are other major players like Compound, Synthetix, Aave. As for EOSDT, even though it is the premier stablecoin on EOS, the key difference in your comparison is that there is no danger that it will lock part of the market on EOS -- since we are enabling cross-chain functionality for EOS as well as Ethereum via Equilibrium.
All tools being equal, why should a DeFi user move from Ethereum to EOS?
First, Ethereum charges high transaction fees. Second, EOS ensures a significantly higher transaction speed than Ethereum, for example. Third, EOS DeFi projects are not overhyped now and they have a lower APR for borrowers and higher interest on staking than ETH-based ones.
Give us an example of an essential and fundamental DeFi tool compared to a centralized one?
I think it's the ability to exchange value without any 3rd party intermediaries in a cryptographically-secure and anonymous way.
Many believe that DeFi is the next bubble, do you agree?
No, we don’t. There are a bunch of prominent and proven concepts out there. Also it’s just taking off — we’ve seen a lot of financial primitives built. Now it’s time to combine them in sophisticated consortiums of financial products.
How much do Block.one's choices influence the EOS blockchain?
We think that B1 has been pretty distant from influencing the EOS blockchain so far. The current BP voting they do seems to us to bebalanced and well thought-out. However, as an ecosystem participant, we expect them to have more impact on the network by being more active in decision making. Also we think that they should revise their politics of supporting EOS-based projects and become more proactive on this side. We know that many EOS-based projects are expecting more transparent and particular action plan from B1.
Yield farming has started to flourish on the Ethereum blockchain, will we see the same pattern on EOS?
Yes, that’s possible. In any case, we are planning to implement yield farming on our cross-chain product, which will vastly expand its value and drive EQ token distribution.
Are you going to replicate your protocol and services on the other EOS sister chains as well?
In fact we are considering doing that. At least from the perspective of porting our native assets like EOSDT into the side chains. We have already done that in collaboration with Malta block who built a bridge between EOSIO chain and WAX.
What is the biggest obstacle for a normal user when approaching the EOS blockchain?
Newcomers may have some difficulties with obtaining EOS resources for completing transactions. Another pain point is account creation. Sometimes it might seem complicated to create a new paid blockchain account that can cost over $1.
There have been several attacks on DeFi platforms on Ethereum, but not yet on EOS, is that due to best practices or blockchain/ smart contract security?
EOS still has lower interest among developers than Ethereum. Presumably, the more users/developers are working from Polkadot and its bridges the stronger their cumulative security gets, so we foresee that this will be a benefit for EOS.
SushiSwap drained 55% of Uniswap's liquidity
The migration of liquidity from Uniswap to Sushiswap took place on September 9th, 2020. Sushiswap is a fork of Uniswap that aims to provide users of the previous protocol with improved services with decentralized governance. Despite the problems in the days leading up to the migration, everything went as planned.
On sushiswap.vision it is now possible to verify that the liquidity on Sushiswap is around $1.2 billion, whereas on September 8th, i.e. before the migration started, it was zero. In reality, on the day of the migration, about $1.1 billion was transferred to this new protocol, while the next day there was a slight decrease, followed by new growth.
It is worth noting that trading volumes were very low on September 9th, and they literally exploded the following day to over $270 million. In contrast, defipulse.com/uniswap clearly shows that Uniswap's Total Value Locked (TVL) was over $1.5 billion on September 8th, but then fell to over $400 million the day after the migration was completed.
In other words, in two days Uniswap's liquidity was reduced by more than 70%, but then recovered slightly in the following days. It has now returned to around 700 million, which is much more than it was before the launch of Sushiswap.
In fact, until August 27th, Uniswap's liquidity had never exceeded 300 million dollars, while only six days later it had increased more than fivefold to over 1.6 billion dollars.
Not surprisingly, August 28th was the day of the launch of Sushiswap.
The process successfully attempted by this new protocol is called "Vampire Mining", but in reality, it is simply trivial competition. Evidently many users have found in Sushiswap a better potential than Uniswap, and have ended up migrating en masse from the previous protocol to the new one.
A separate issue is the value of the SUSHI governance token.
In fact, after debuting on the crypto markets at around $3 on August 28th, its price had quickly risen to $11 on September 1st. It is thus possible that the speculators have invested in this token in advance, perhaps even too much considering that in the following days the price collapsed until it reached $1.2 on September 6th.
To be honest though, the tensions generated by the sale of the tokens by the founder Chef Nomi probably had a great influence on this collapse, given that the hypothesis that it could have been an exit scam was spreading.
Instead, in the end it turned out that it was basically just a way to monetize the work done at a time when the value of the token was even higher than the initial one. Moreover, the governance of the project is decentralized and with the sale of the tokens, Chef Nomi ceases to have a primary role in it.
Nevertheless, the incredible success of the migration did not have a significant impact on the price, which in the meantime had returned to the initial $3. On the contrary, when the migration ended, the price fell again to around $2.2.
Now the question that many people are asking is: will the huge amount of liquidity flowing so quickly into the new Sushiswap protocol stay there, or will it migrate to other similar projects, or will it end up returning to Uniswap?
Speculators would seem to be betting on a possible loss of value of the SUSHI token, as it has not reacted to the success of the migration, but this is an observation that is too weak and isolated to make predictions.
It should be noted, however, that Sushiswap now appears to be the second DEX for daily trading volumes behind Uniswap, and this, on the one hand, indicates that Uniswap is still more widely used as an exchange, and on the other, indicates that the adoption of Sushiswap in very few days has grown a lot.