The native token of the IDEX decentralised exchange (IDEX) has seen significant gains this week, pumping over 150 percent following the announcement of IDEX version 4, which will feature decentralised perpetual swaps:
Time to take your trading to the next lever. đŸ
Weâve started work on IDEX v4, a decentralized perpetual swaps exchange.
Our infrastructure is perfectly aligned with the desire from traders for a high-performance derivatives DEX
According to CoinGecko, on May 16 IDEX was trading at US$0.049 before reaching a high one day later of US$0.126. At the time of writing it was changing hands at US$0.111.
IDEX is planning to launch IDEX v4 within four to eight months, suggesting perpetual swaps could be available on the platform by the end of 2022.
Perpetual Swaps an Opportunity for IDEX to Grow
IDEX refers to itself as a hybrid DEX, or a hybrid-liquidity DEX, meaning it has elements of centralised exchanges (CEXs) – such as order books and order types usually associated with CEXs, like limit orders – all while maintaining the decentralised model that defines DEXs.
IDEX has seen an opportunity to grow its market share by bringing perpetual swaps to the world of DEXs. Derivatives trading represents about 57 percent of total monthly trading volume in crypto markets, with one of the most popular instruments being perpetual swaps. Offering trading options traditionally dominated by centralised exchanges makes perfect sense for IDEX, given its position as a hybrid exchange.
The large gains seen by IDEX in the past few days mirror the performance of several other small-cap alts since the start of the year, including STEEM, which increased 60 percent following its launch on Binance, and MINA, which pumped 75 percent following its Coinbase listing.
Robinhood is diving into the world of Web3 with the announcement of a non-custodial wallet, allowing customers to access NFTs, decentralised exchanges and swap tokens through a new interface.
According to the announcement made at the Permissionless Web3 conference, the newly launched non-custodial wallet will operate much like rival MetaMask, which remains the wallet of choice in the world of Web3 despite recent issues concerning phishing attacks and user downtime:
Robinhood just announced they are launching a self custody Web3 wallet at #permissionless
– trading and swapping with no network fees or commissions
– Will be able to access defi protocols to earn yield
– Will be able to store NFTs and connect to marketplaces
The wallet will operate separately from Robinhood’s existing stock platform, and has been specifically optimised for user experience. This was apparently done in order to provide beginners with a simple and intuitive design to easily navigate a space that can be complex.
Co-founder and chief executive Vlad Tenev confirmed as much, saying:
With our Web3 wallet, weâre building a product that will satisfy the most advanced DeFi believers while creating a secure on-ramp for those who are just starting out in crypto to go deeper into the ecosystem.
Vlad Tenev, co-founder and CEO, Robinhood
Robinhood’s crypto CTO Johann Kerbrat reiterated the importance of being user-friendly to beginners, adding: “We’re [Robinhood] making it [the wallet] not scary, [but] easy to use.”
Aside from providing a newbie-friendly interface, users may also be pleased to hear that the company intends on subsidising gas fees, elevated levels of which have plagued the sector of late.
Shift in Public Perception
Robinhood has been making news since inception, more often for the wrong reasons – from revelations that “free trades” came at the expense of selling users’ order flow, to its role in the infamous GameStop short squeeze.
Following on from the collapse of TerraUSD (UST), the Fantom-based algorithmic stablecoin DEI has also lost its dollar peg, plummeting 35 percent in value to reach an all-time low of US$0.54 on May 16.
Like many algorithmic stablecoins, DEI became unstable after DeFi market confidence was rocked by the UST debacle, dropping to US$0.97 on May 15 before suddenly falling dramatically the next day. At the time of writing, DEI was trading at US$0.62:
Our team is working around the clock to restore the DEI peg. Mitigation measures were implemented immediately and solutions are being developed for long-term stability.
DEI is an algorithmic stablecoin on the Fantom blockchain created by DeFi project DEUS Finance. Itâs the unit of account for all projects built on DEUS infrastructure.
In many ways DEI is similar to UST, the primary difference between them being that DEI is collateralised – meaning that users can mint 1 DEI by depositing US$1 of collateral in the form of either USD Coin (USDC), Fantom (FTM), Dai (DAI), wrapped Bitcoin (WBTC) or DEUS (the DEUS Finance governance token).
DEI attempts to maintain its peg much like UST by using an algorithm that incentivises arbitrage trading to maintain a stable value.
What Triggered the Crash?
The proximate cause of DEIâs decline was the loss of confidence in algorithmic stablecoins caused by the sudden collapse of LUNA and UST, though there were other factors that made DEI especially vulnerable.
The DEUS Finance ecosystem had suffered two flash loan attacks in the past two months, losing over US$30 million. In addition, the DEUS governance token has plummeted in value over the past six weeks, falling from its all-time high of US$1062.41 on April 2 to just US$218.80 at the time of writing.
These issues have caused the collateral ratio of DEI to drop to only 43 percent, according to DEUS Finance, which means there isnât enough capital backing the coin for users to make redemptions against their DEI, further undermining confidence.
DEUS Finance Doesnât Want to See DEI Die
To try to avoid complete collapse, DEUS Finance has suspended redemptions of DEI in an attempt to stabilise its price. It has also announced a treasury bond program to attempt to raise funds to increase DEIâs collateral ratio and restore confidence:
This week’s long-awaited launch of the first Australian crypto ETFs went off not with a bang but with a fizzle, as the investment products were released amid some of the darkest days in the history of crypto.
Since May 11 Australians have been able to invest directly in three Bitcoin and Ethereum exchange traded funds (ETFs) listed on Cboe Australia, through two providers.
All three new crypto ETFs had trading volumes far below what was predicted, as the Terra blockchain collapse continued to wreak havoc across the entire crypto market, with Bitcoin plunging to levels not seen since 2020 and Ethereum falling to a six-month low.
All Three ETFs Attract Little Interest
On their first day of trade, none of the newly launched funds was able to crack A$1 million in trading volume:
ETF Securitiesâ Ethereum fund ETFS 21Shares Ethereum ETF (EETH) attracted just A$604,305.
Cosmos Purpose Bitcoin Asset ETF (CBTC), issued by Sydney-based Cosmos Asset Management, fared worst, securing only A$454,002 in investor funds.
These numbers compare poorly with the launch of the BetaShares Crypto Innovators ETF (CRYP) – a fund that doesnât invest directly in crypto but rather in crypto-related shares, such as Coinbase – which did over A$8 million in trade within 15 minutes of its listing on the Australian Securities Exchange (ASX). To be fair, though, that fund launched when Bitcoin was at an all-time high last November and the crypto market was on the ascent.
Why the Poor Start?
The new funds launched during a full-blown crisis in crypto markets, the magnitude of which we havenât seen for years, if ever. It makes sense that concerned investors would be less inclined to get into crypto under current conditions.
The collapse of the Terra blockchain has sparked a US$450 billion drop in the overall crypto market cap since May 7, in a single week. According to CoinGecko, the price of Bitcoin has dropped by almost 25 percent in the past fortnight alone and now sits at US$29,531.
In addition, the unusually high 42 percent margin requirement imposed on the new ETFs by national clearing authority, ASX Clear, has made the funds less attractive to market participants, meaning major brokers and platforms are refusing to support the ETFs.
Due to the high margin requirements and higher volatility of the underlying assets, some brokers who are selling the ETFs are also only allowing sophisticated investors to trade and are charging additional fees for the privilege.
Another factor likely affecting demand is that investors can already easily access Bitcoin and Ethereum directly, simply by purchasing the assets from a crypto exchange.
Bitcoin mining stocks have seen a sharp decrease in value with the price of Bitcoin (BTC) and the wider crypto market going down in parallel. Mining stocks have especially suffered due to more businesses holding the asset on their balance sheets and the lack of a significant hashrate increase.
As the cryptocurrency market continues on a sharp downtrend, Bitcoin mining stocks have followed. Even though they fared very well in 2021, they’ve taken a bigger knock than the cryptos in 2022. While the digital asset itself was recording losses close to 30 percent, bitcoin mining stocks have taken what amounts to a double hit, with more than 60 percent losses in some cases:
Bitcoin mining stocks continue bleeding…
Mining investors probably wish they had simply bought bitcoin instead at the beginning of 2022, as most bitcoin mining stocks have underperformed bitcoin by a wide margin. pic.twitter.com/anSoUEoUJ1
According to Jaran Mellerud, an analyst at Arcane Research, data from the beginning of the year shows the top five Bitcoin mining stocks by market cap have all been halved. Riot – one of the hardest hit by the slump – is down 65 per cent year-to-date (YTD), but is still trading one per cent in the green (which can’t be said for the others).
Additionally, when looking at the top 10 mining companies, the one down the least had lost 41 per cent, a testament to the devastation of the niche. Most of these companies have not grown their hashrate as fast as investors were hoping and this has impacted them significantly. As it stands, 90 per cent of BTC has been mined and the hashrate is at an all-time high.
How are Mining Stocks Affected by BTC Price Drops?
As the price of bitcoin continues to drop, cryptocurrency mining stocks also lose out. One of the major reasons is because many tech and other companies now hold bitcoin on their balance sheets through an exchange traded fund (ETF). Any decrease in price leads to lower revenue for these companies.
Usually, when the BTC price falls, the global hashrate also decreases, but this has not been the case this year. The combination of rising global hashrate and a falling BTC price has led to less BTC mined for these companies and a lower USD denominated value of their mined BTC.
Jaran Mellerud, analyst, Arcane Research
A good example of this is MicroStrategy, which has large amounts of the mined token on its balance sheets that can be used as a proxy by investors who do not want to directly hold bitcoin in their portfolios:
According to Steven McClurg, chief investment officer of Valkyrie Investments, “The correlation between the two asset classes has grown more pronounced in recent months because the number of publicly traded companies involved in blockchain and digital assets continues to grow, and is not likely to reverse course.”
As bitcoin finds its way into organisations (both listed and not), the price of bitcoin will influence their balance sheets. In the case of Nasdaq and tech stocks, both are seeing red crypto fall under their umbrella.
Bitcoin has continued its dramatic descent, falling below US$29,000 to its lowest point since December 2020. It’s currently hovering around that $29,000k support level, with everyone wondering which way it’s going next.
BTC/AUD price chart. Source: CoinMarketCap
The US Consumer Price Index (CPI) figures were published on May 11 and the knock-on effect saw Bitcoin piercing the $30,000 support at US$28,170. Aprilâs annual CPI figure is 8.3 percent, down 0.2 percent from the previous month, yet the update sent Bitcoin into a frenzy, its price falling from US$31,700 to $28,170 in as little as 20 minutes, followed closely by a rebound to approximately $31,600:
Just an observation, but all of the tradfi guys who are laughing at bitcoin currently weâre doing the same in March 2020.
Doesnât mean a bottom is in, itâs just funny how the goalposts can move.
The sea of red in the crypto market has caused issues with Terra’s UST stablecoin, which relies on bitcoin as a reserve currency. The plummeting LUNA price has also caused liquidations totalling nearly US$900 million.
Terra Stablecoin Crashes
During the past week, a marketwide correction has been ravaging the cryptocurrency market, with LUNA hit harder than others. This is mostly due to a negative feedback loop that happened when the chain tried to stabilise its native TerraUSD (UST) algorithmic stablecoin. UST works with its sister token, LUNA, to maintain a price of around US$1 using a set of on-chain mint-and-burn mechanics.
The Terra public blockchain has seen massive growth in its ecosystem and the use of its TerraUSD (UST) stablecoin, mostly due to its key DeFi platform Anchor’s 20 percent returns. LUNA is the primary asset used to regulate and maintain the value of the algorithmic stablecoin. Created by Terraform Labs and its CEO/co-founder Do Kwon, the stablecoin used reserves of BTC to back its 1:1 value against the US dollar.
LUNA/USD price chart. Source: CoinMarketCap
The UST software automatically adjusts the price of LUNA, so that $1 of LUNA always matches $1 UST, thereby mimicking the US dollar. The asset was trading at around US$90 during the past month and has since dropped to below $1, losing about 99 per cent of its value in a matter of days.
As reported earlier this month, the stablecoin lost half of its value because it started losing its peg to the dollar:
An $18 billion stablecoin is losing its dollar peg with all the magical chaos of algorithmic stables, with a dash of Bitcoin systemic risk drama.
This is $18 billion in wealth that weâre seeing evaporate before our eyes, and people are losing money.
Todd Phillips, director of financial regulation and corporate governance, Center for American Progress
Liquidations Triggered by Collapse of UST
As the price of Bitcoin crashed past US$30,000 – a 10-month low – over-leveraged traders were also caught out. According to data from Coinglass, in the past 24 hours almost 300,000 traders have been liquidated for US$896 million:
"People are still processing this but this is the Lehman moment for crypto"
Hearing about a lot of funds possibly insolvent from Luna meltdown
This situation stands as a reminder of why stablecoins â which play a pivotal role in the functioning of decentralised finance â not only pose a risk to individual traders but also a systemic risk to the entire crypto ecosystem if not managed responsibly.
Both the US Federal Reserve and Treasury are eager to see stablecoins regulated by the end of this year, a move they say would improve the overall financial stability of the US economy.
A new report from the Federal Reserve has identified several risks associated with stablecoins – cryptocurrencies whose value is pegged to the US dollar – and has suggested that government-backed alternatives may reduce risks to consumers and investors.
The report follows the recent collapse in value of the stablecoin Terra USD (UST), which threatens to destabilise the DeFi market, and calls from Treasury Secretary Janet Yellen for stablecoin legislation to be enacted by the end of 2022.
Report Identifies Weaknesses of Asset-Backed Stablecoins
The Federal Reserve Board’s âFinancial Stability Reportâ identifies significant stability risks in the US economy. When discussing stablecoins the report focuses on centralised, asset-backed stablecoins such as Tether and USDC, highlighting the opaque nature of the assets backing the coins and the risks posed if or when there are runs on these coins.
Stablecoins typically aim to be convertible, at par, to dollars, but they are backed by assets that may lose value or become illiquid during stress; hence, they face redemption risks similar to those of prime and tax-exempt MMFs [money market funds]. These vulnerabilities may be exacerbated by a lack of transparency regarding the riskiness and liquidity of assets backing stablecoins.
The recent decoupling of TerraUSD from the dollar has shown yet again that algorithmic stablecoins, like their asset-backed counterparts, are not necessarily as stable as they purport to be.
Over the past few days UST has fallen dramatically in value, at one stage dropping as low as US$0.60 after its algorithm failed to function as intended and the delayed deployment of its Bitcoin reserves failed to prop up its price. According to CoinGecko, at the time of writing UST was changing hands at US$0.83.
UST isnât the first algorithmic stablecoin to face stability issues; last year, Iron Finance plunged all the way to zero after a similar decoupling triggered a bank run costing investors millions.
Treasury Secretary Wants Legislation, Fast
US Treasury Secretary Janet Yellen. Source: ledgerinsights.com
In a further sign that legislation governing stablecoins in the US may be imminent, Treasury Secretary Yellen, when questioned on the issue during a May 10 hearing, responded that it was âimportant, even urgentâ that Congress act. She went on to say she considers it âhighly appropriateâ that regulation should occur by the end of the year.
Yellenâs sense of urgency for legislation seems to have been heightened by the problems currently confronting UST:
A stablecoin known as TerraUSD experienced a run and had declined in value. I think that simply illustrates that this is a rapidly growing product and that there are risks to financial stability and we need a framework thatâs appropriate.
Janet Yellen, US Treasury Secretary
This talk of imminent stablecoin legislation follows speculation last year that the US government was considering offering insurance to stablecoin holders of up to US$250,000, similar to the protections provided to account holders at insured banks.
Nasdaq-listed Coinbase has endured a torrid time of late. Most recently, its share price tanked over 20 percent following a distinct shift in tone away from risk-on assets, sinking the preeminent exchange’s share price to a record all-time low and surpassing the unenviable milestone it reached just two weeks ago:
Coinbase earnings after the bell
-80% since IPO
How do they explain that Coinbase NFT has not ticked over $1m in volume since launch? pic.twitter.com/TyWhMvOT7u
The sharp downward move was precipitated by Coinbase’s recently released earnings for Q1 2022, and unfortunately for shareholders it wasn’t good news.
The company revealed that despite generating over US$1.17 billion in revenue, it remained significantly shy of the US$2.5 billion it took in Q4 2021. In addition, the business reported quarterly losses of US$430 million, and even analysts were left scratching their heads since consensus opinion was that Coinbase would, at the very least, break even.
Perhaps most concerning is the fact that active monthly users dropped from 11.2 million to 9.2 million over the past quarter, reflecting in part the dour mood in crypto markets.
The market responded predictably to the weak results as Coinbase shares plummeted by more than 20 percent, touching as low as US$62. At the time of publication it had somewhat recovered, trading at US$78, albeit still 79 percent lower than its IPO. Youthful on-chain wizard Will Clemente saw the funny side of it all:
Coinbase now has a lower market cap than both XRP and Cardano lol
Despite the disappointing results, Coinbase sought to temper the bad news with an upbeat tone, saying:
The first quarter of 2022 continued a trend of both lower crypto asset prices and volatility that began in late 2021. These market conditions directly impacted our Q1 results. [However], we entered these market conditions with foresight and preparation, and remain as excited as ever about the future of crypto #wagmi.
Coinbase shareholder letter
Anil Gupta, Coinbase’s VP of Investor Relations, noted that the company was well positioned to weather current conditions, saying: “We don’t have infinite runway, but we have plenty of gas in the tank.”
The company is no doubt on the back foot, amid ongoing criticism of its custody arrangements as well as the unsuccessful launch of an NFT marketplace. With the market in turmoil, Coinbase will need something special to turn the ship around, as investors are unlikely to tolerate such dramatic and prolonged declines since inception.
In a sign that the publicâs appetite for cartoonish NFT art mightâve peaked, CryptoPunk #273, a male punk with a cap and “big shades”, sold on May 8 for US$139,836, which is 87 percent lower than its October 19, 2021 purchase price of US$1.03 million.Â
Thatâs an eye-watering loss of around US$890,000 in just over six months and is consistent with a recent downward trend in the CryptoPunks market, with eight of the last 10 NFTs changing hands at a loss:
8 of the last 10 Cryptopunks that have been sold have been sold at a loss, led by this one — Cryptopunk #273.
It was bought six months ago for $1,026,499, it sold early this morning for $139,530. pic.twitter.com/vSAonBerbl
The slowdown in the CryptoPunks market reflects a general weakening of interest in NFTs in the first quarter of 2022, with data from the crypto analysis site NonFungible showing a decrease in transactions volume of 47 percent quarter on quarter.
An increase in exploits and NFT thefts, such as a recent phishing scam that resulted in the loss of US$2.8 million Bored Ape Yacht Club (BAYC) NFTs, in addition to the downturn in the wider crypto market, may partially explain the cooling of prices.
Other popular NFT collections are also seeing dramatic falls in their floor prices (the cheapest NFT in the collection): BAYCâs floor price is down around 55 percent since April 29 and Moonbirds’ floor price fell 34 percent in a single day yesterday.
Not All Doom and Gloom
Despite the recent declining values of some collections, itâs not all bad news for the NFT market – so far this year thereâs been US$16 billion worth of organic trading volume, almost two-thirds of the 2021 total of US25 billion, and weâre only in May.
Also, many NFT owners who got in early are still up considerably on their initial investment, such as the Australian man who bought a Bored Ape NFT in 2021 for US$300 which is now valued at around US$5 million.
