The amount of Ethereum (ETH) held on centralized cryptocurrency exchanges or CEXes has been continuously reducing since September last year. On Tuesday, ETH reserve on exchanges dropped to another low, which is quite bullish, provided the demand for the cryptocurrency continues to soar.
During press time, the second-largest cryptocurrency with a market capitalization of over US$207 billion, was trading at $1,801 on Coinmarketcap. Many holders think that ETH is undervalued, owing to the growing network traction and ecosystem.
ETH Reserve Might Drop Further
There are currently less than 21 million ETH sitting on centralized exchanges, according to data from CryptoQuant.
The declining amount of ETH in exchange reserve is probably due to more holders moving their cryptos to external wallets for HODLing. The decentralized finance (DeFi) is one other factor behind the decreasing ETH reserve. Among other things, traders are moving ETH from centralized exchanges to decentralized platforms like Uniswap, SushiSwap, Compound, etc., for trading and lending.
This is evident as there is about 9.138 million ETH currently locked in DeFi projects. This equals over US$16 billion, following the price of the cryptocurrency during press time.
Another place to watch is the Ethereum 2.0 staking contract. The ETH reserve on centralized exchanges dropped further after the deployment of the deposit contract. At the time of writing, a total of 3,588,404 ETH has been staked on the network so far, which is worth over US$6.4 billion.
Is This a Bullish Case?
The reserve is likely to decrease further as more people increasingly participate in DeFi projects and Ethereum 2.0 staking. This is quite bullish, as less supply with more demand could see ETH soaring in price.
On Sunday, Roll Wallet was hacked which sent the value of social tokens plummeting all the way down to the bottom.
Down By More Than 50%
Social tokens are a type of cryptocurrency designed specifically to support online communities. A number of these are in a race to the bottom following a hack on Roll Wallet. Most notable among them – due to the current NFT frenzy – is WHALE. WHALE is a social coin whose value is maintained by a basket of Non Fungible Tokens (NFTs). Other coins that have plummeted are PICA and RARE.
The hack was confirmed on Twitter by the founder of WHALE, who confirmed that 2.17% of all tokens were compromised in an attack on the platform’s hot wallet. However, the remaining assets are secure, having been stored in cold wallets.
The founder went on to say that he is confident that this attack will not have far-reaching effects on the cryptocurrency and its future.
“We were fortunate that this hack was minimally detrimental to the project despite the large price volatility (due to the level of liquidity on Uniswap) and will find a way to absorb this so it has zero impact on our short, mid and long term growth of $WHALE.”
However, as the following chart shows, recovery – if there is one – may take a while.
On the other hand, competitor token RLY – a token launched by the Rally platform – has reached its highest value in history.
Meanwhile, MyCrypto reports that the attacker who pulled off this digital heist is already cashing out to Tornado Cash – with the total amount of ETH reaching nearly 2600. It also looks like social tokens were minted by malicious parties before the attack, hinting at a possibly high-level manipulation of the network.
Crypto mining is an environmentally costly process with Bitcoin mining alone using more power than the entire country of Argentina. Using blockchain technology may be revolutionary, but at what cost?
Ethereum moved from mining to staking and it’s 99% greener!
Ethereum moves from PoW to PoS
PoS (Proof-of-Stake) was developed as an energy-saving alternative to PoW (Proof-of-Work). PoS using electricity to process blockchain transactions whereas PoW uses staking of ETH instead with minimal electricity required.
Ethereum moved to PoS at the end of 2020 as part of its Eth 2.0 Ecosystem update. And according to some Ethereum proponents this change could make mining of Ethereum significantly more sustainable, some even argue 99% more sustainable.
Ethereum’s eth2 upgrade – an overhaul of Ethereum’s core consensus to provide a more sustainable, secure, and scalable home for Ethereum and its community. […] to move from the energy-hungry, inefficient proof-of-work to a more sustainable, scalable proof-of-stake.
As it stands, there are currently approximately 414 PoW cryptocurrencies and 324 PoS cryptocurrencies in existence. Could we see more make the switch?
Bitcoin’s Proof of Work Is Bad For the Environment
The main issue with PoW is that it is extremely resource-intensive, and lots of energy is required to run the protocol. In addition, as many more people are joining the mining process, the difficulty increases in order to keep the mining time the same.
The mining done for Bitcoin has risen its annual carbon footprint equalling that of Argentina. Issues like these raise an environmental concern to such a magnitude that a major Bitcoin mining hub in Mongolia has been shut down recently due to massive power consumption.
The environmental impact of miners might make Bitcoin and other PoW protocols unattractive to environmentally conscious investors. Since the world is slowly on its way to going green, blockchain companies should consider the impact that they have on the environment.
100 more nodes launched for a total of 6,400 ETH valued at approx. $11M now staked.
Silver Spring, MD – (Globe Newswire – March 11, 2021) – BTCS Inc (OTCQB: BTCS) (“BTCS” or the “Company”), a digital asset and blockchain technology focused company, today announced it further expanded its transaction verification services operation on Ethereum 2.0 to 200 nodes. The Company expects the additional 100 nodes will begin generating revenue by the end of the first quarter of 2021.
“With a significantly strengthened balance sheet from the recent $9.5 million capital raise, we are well- positioned to accelerate revenue growth from our transaction verification services business and have already doubled our Ethereum 2.0 staking operation to 200 nodes,” stated Charles Allen, Chief Executive Officer of BTCS. “With financial returns superior to traditional bitcoin mining, our staking operation strategy will drive strong near-term revenue growth while being more profitable than resource intensive proof-of-work mining and opening the door to other revenue generating operations such as staking as a service.”
On December 1, 2020, Ethereum began transitioning to a “proof-of-stake” protocol, Ethereum 2.0. Under the “proof-of-stake” consensus algorithm, ETH holders have the exclusive right to operate validator nodes on the network and verify transactions, thereby earning transaction fees for their work. In early March 2021, Ethereum blockchain developers approved EIP 1559, one of the biggest changes to the network since its 2015 inception, that will reduce the supply of the Ether cryptocurrency when effective in August 2021, a move likely to prompt price increases as user demand grows. BTCS is the first U.S. public company to run validator nodes on Ethereum 2.0.
Allen continued “With more than $8 million in cash and approximately $14.5 million in crypto currencies, we have a solid financial foundation to accelerate the execution of our vision.”
About BTCS
BTCS is an early entrant in the digital asset market and one of the first U.S. publicly traded companies focused on digital assets and blockchain technologies. The Company through its transaction verification services business actively verifies and validates blockchain transactions and is rewarded with digital assets for its work. The Company is also developing a proprietary digital asset data analytics platform that allows users to consolidate their crypto trades from multiple exchanges onto a single platform, enabling users to view and analyse their performance, risk metrics, and potential tax implications. The Company employs a digital asset treasury strategy with a primary focus on disruptive non-security protocol layer assets such as bitcoin and Ethereum. For more information visit: www.btcs.com.
New research on the Ethereum blockchain has revealed at least $318M worth of ETH was made in profits through DeFi bot arbitrage trading since the beginning of 2020.
The data shows that the technique has netted at least $57M USD (47,600 ETH) in January 2021 and at least $107M USD for February 2021. Before analysing a couple of real-world cases, here is a quick primer on the theory.
What is Triangular Arbitrage?
In plain English, the price of the cryptocurrencies can vary across different exchanges and you can swap them to make a profit.
Triangular arbitrage (also referred to as cross-currency arbitrage or three-point arbitrage) is the act of exploiting an arbitrage opportunity resulting from a pricing discrepancy among three different currencies […]. A profitable trade is only possible if there exist market imperfections. Profitable triangular arbitrage is very rarely possible because when such opportunities arise, traders execute trades that take advantage of the imperfections and prices adjust up or down until the opportunity disappears.
Highly-volatile new DeFi crypto markets provide market imperfections which don’t often exist in Forex exchange markets – creating opportunities for arbitrage traders.
Let’s now take a look at recent examples of Triangular Arbitrage trades.
Real Trading Example #1
This trade uses the programmable DeFi liquidty pools of Uniswap and Balancer and the 3 coins: USDC (stablecoin), OPT, and AKRO.
As you can see, there was a profit made by selling on one platform, swapping and then buying on the other platform. It is also worth noting that currently DeFi transactions are fees are very high, but they still made a profit.
Real Trading Example #2
This example is slightly different to the first one, as this trade uses SushiSwap and Balancer and the 3 coins: USDC (stablecoin), ETH, and SIL (an old ICO coin called Silvar Coin).
What makes this trade different is that the contract has SELF DESTRUCT sub-contracts attached where the sender continuously re-bids the same trade but at higher GAS fees to protect it from other trading bots that noticed the same opportunity. This has a bi-product negative effect on the Ethereum blockchain by have pushing up the GAS fee ridiculously high and congesting the network.
DeFi Exchanges Usage
The majority of profits are being made using Uniswap with 47% of the total trades, followed by Sushiswap 22%, Balancer 13% and dYdX 9.4%.
Image by MEV Explorer
Further Arbitrage Trade Musings
As the Ethereum blockchain is public, these arbitrage trades can be tracked and there is a website called Flashbots which has a leaderboard showing all the recent trades.
Here are some interesting ones:
This successful trade on Uniswap between $AKRO, $PICKLE, $CREAM, $YFI, $KP3R, $SUSHI and $YPIE turning 3 ETH into 153 ETH, with a profit of $188,867 USD (including a massive $13,021 USD transaction fee!)
This successful trade on Uniswap between $ETH, $UDO and $USDT turning 0.4 ETH into 59 ETH, with a profit of $78,836 (including a massive $17,667 USD transaction fee!)
This failed trade on Cream Finance where the sender ran out of GAS while trying to attempt an arbitrage trade. Luckily (or so) there was another trader waiting and their trade was successful in capturing the arbitrage opportunity making around $5,362 USD profit.
Averting the ETH Network Congestion Crisis
As the Ethereum community tries to improve the network, there is a proof of concept being developed to help the solve the problem of trading bots congesting the network by prioritising the transactions. If you want to contribute there is a public discussions board on Github.
Ethereum are introducing Improvement Proposal EIP 1559 to help address issues with high transaction fees (known as “gas price”) and improve user experience. The update is scheduled to be included in the London hard fork in July or August 2021.
EIP 1559 is probably one of the biggest milestones we’ve seen recently […] Now, they’re actually controlling inflation on Ethereum
Eric Turner, Director of Research at Messari
Users traditionally have to set the Gasprice for a transaction, which is part of an auction process that allows miners to select transactions to process. With a higher than average Gasprice the user has an increased likelihood of their transaction to be processed faster. This mechanism can lead to:
Mismatch between volatility of transaction fee levels and social cost of transactions
Needless delays for users
Inefficiencies of first price auctions
Instability of blockchains with no block reward
How are miners affected by the hard fork?
Ethereum mining revenue grew 65.1% from January to February, and transaction fees grew with 122.1% this lead to a total mining revenue of over $1.3 billion. Users have been up in arms about fees as well as some users having to play many times the value of the transaction in Gasfees.
This means that miners have the most to lose from the proposal being implemented since transaction fees will be limited to a smaller range and also gradually increasing the difficulty of mining on the network. Thereby decreasing the reward and frequency of rewards. A community survey conducted on EIP 1559 included eight of the nine mining projects, and resulted in seven of the eight refusing to implement the IEP.
Additionally, 60% of Ethereum network’s hash power is against the proposal, however developers are going through with it regardless of the discontent shown by miners.
Why is this good for users?
Due to the reduced supply of Ether as a result of the burning process the value of Ether may increase because of the scarcity of the token. The update also helps reduce inconsistency in the price of fees stopping the guesswork needed to process a transaction or the reliance on sites like ETHGasStation. This will also allow wallets and users to auto-set the gas fees and inclusion fees.
The Hong-Kong registered company Meitu announced on 7th March that they purchased $22 million in Ethereum (ETH) and $17.9 million of Bitcoin (BTC) in the open market.
Are Asian entrepreneurs starting to follow @michael_saylor & @elonmusk ? Chinese tech company Meitu (https://t.co/VfUwTjuL1Z) just announced they have purchased $40 mil. worth of crypto, including 380 #Bitcoin (~$47105/BTC) and 15,000 #Ethereum (~$1473/ETH) on March 5, 2021.
They stated the reason for buying was to help diversify their holdings away from cash, preparing the company for entry into the blockchain industry with Ethereum and believing it will enhance shareholder value in the long-term.
Here are some quotes from the announcement:
Against this backdrop, the Board believes cryptocurrencies have ample room for appreciation in value and by allocating part of its treasury in cryptocurrencies can also serve as a diversification to holding cash (which is subject to depreciation pressure due to aggressive increases in money supply by central banks globally) in treasury management.
The Board takes the view that blockchain technology has the potential to disrupt both existing financial and technology industries.
The Group is currently evaluating the feasibility of integrating blockchain technologies to its various overseas businesses, including but not limited to launching Ethereum-based dApps.
Who’s Meitu?
Meitu released a popular app which allowed photos to be touched up in the early 2010s, but their stock shrank from HK$18 in 2017 to less than HK$3 today. Now it looks like they are turning to cryptocurrency in a bid to revive the stock price and provide value to their almost 300 million monthly active users.
Meitu chairman Cai Wensheng has been an advocate of crypto and said in 2018 that he personally bought about 10,000 Bitcoins.
It’s probably no longer news that the transaction count on Ethereum has been growing extensively since the last quarter of 2020. This is also not different from the first quarter of 2021. In fact, more transactions have been settled on the network this quarter alone, when compared to the record in Q4 of last year.
The increasing number of transactions on Ethereum explains why the network fees have been surging incredibly.
Messari Forecasts Ethereum Might Settle US$1.6 Trillion in Q1 2021
Ryan Watkins, a researcher at Messari, recently shared data from the crypto-analysis platform, which charted out that the transaction volume of the Ethereum network increases with every proceeding quarter of the year. Already, about US$926 billion transactions have been settled on the network since Q1 2020. In the previous quarter, only US$577 billion was settled on the network and a total of US$2.1 trillion in the whole of 2020.
One can easily say that Ethereum will surpass last year’s transaction volume quickly, following the record seen so far. More like a prediction, Messari also stated that the transaction volume is on pace to reach $1.6 trillion this quarter. That will be a milestone for the network; however, the growing rate of activities is, unfortunately, forcing many users out of the network due to high transaction fees.
Ethereum is on pace to settle $1.6 trillion in transactions for Q1 2021.
In the last 12 months it has settled $2.1 trillion in transactions.
Since recent months, many Ethereum users have complained of the high transaction fees of the network, which is due to the congestion. This is no longer funny, and the users are left with no other option than to switch to other alternatives. Evidently, the number of transactions on the Binance Smart Chain recently went up as some Ethereum projects and users began joining the network.
On February 24, Binance Smart Chain recorded over 2.6 million transactions, while Ethereum saw as low as 1.28 million transactions.
After founding the first two Bitcoin ETFs in North America last week, Canadian authorities have now set their sights on an even loftier goal – being the first country in the world to found an ETF for Ethereum.
First Of Its Kind
If the filing is approved, the ETF will be traded on the Toronto Stock Exchange (TSX) as ETHX.
CI Global Asset Management released a statement outlining their action plan, stating that cryptocurrencies are not only here to stay – they are changing the way the financial world operates. As a result, they intend to stay well ahead of the curve by founding an ETF for the 2nd largest cryptocurrency by market cap.
According to Kurt McAlpine – the CEO of CI Financial, which is CI GAM’s parent company – the ETH ETF will reduce the number of hoops traditional investors have to jump through before investing in what they see as the future of currency.
“CI is quickly establishing a leadership position in this space, having launched CI Galaxy Bitcoin Fund and recently filing a preliminary prospectus for CI Galaxy Bitcoin ETF, in partnership with blockchain and cryptocurrency experts Galaxy Digital. With these funds, we are reducing the friction points that investors have traditionally faced in buying and holding cryptocurrencies. CI Galaxy Ethereum ETF is an important addition to that lineup as this emerging asset class gains increasing interest and validation.”
Furthermore, Mike Novogratz – the Chairman and Chief Executive Officer of Galaxy Digital Holdings – stated that Ethereum’s decentralized nature that lends itself to building applications on it’s blockchain stands to become a pillar of the so-called “Web 3.0”.
If approved, ETHX will invest directly in Ethereum using its holdings – which will be priced using the Bloomberg Galaxy Ethereum Index, which is owned by Bloomberg Index Services.
Kraken CEO stated in an interview that they’re looking into what happened. Stating that “Ether Flash Crash Down to Trading, Not System Glitch” and suggested “someone might have decided to dump their life savings.”.
This highlights the importance of education for new traders, especially those that are new to margin trading. Jesse also stated that “there will be no refunds, we generally don’t do that. It’s the traders own fault if they make bad trades”. That being said, even after the recent dip in Ethereum, it’s still up around 26% in price for the month.
Around the same time, we also saw Binance temporarily suspending ETH withdrawals.
#Binance has temporarily suspended withdrawals of $ETH and Ethereum-based tokens due to high network congestion.
Rest assured funds are #SAFU and we apologize for any inconvenience caused.
