Crypto users turned to DEXs, loaded up on USDC after Silicon Valley Bank crash

March 17, 2023 Coin Telegraph

CEX

The collapse of FTX led to a similar exodus from centralized exchanges, as users worried they may lose access to funds during crises.

The collapse of Silicon Valley Bank saw investors loading their bags with USD Coin (USDC), along with an exodus of funds from centralized exchanges (CEXs) to decentralized exchanges (DEXs).

Outflows from centralized exchanges often spike when the markets are in turmoil, blockchain analysis firm Chainalysis said in a March 16 blog post, as users are likely worried about losing access to their funds when exchanges go down.

*Funds sent from CEXs to DEXs following SVB’s collapse. Source: Chainalysis.*

The Chainalysis data shows that hourly outflows from CEXs to DEXs spiked to over $300 million on March 11, soon after SVB was shut down by a Californiaregulator.

A similar phenomenon was observed during the collapse of cryptocurrency exchange FTX last year, amid fears that the contagion could spread to other crypto firms.

However, data from the blockchain analytics platform Token Terminal suggests that the surge in daily trading volumes for large DEXs was short-lived in both cases.

*Daily trading volumes for large DEXs from September to March. Source:* *Token Terminal*

USDC was identified as one of the top assets being moved to DEXs, which Chainalysis said was unsurprising given that USDC depegged after stablecoin issuer Circle announced it had $3.3 billion in reserves stuck on SVB, prompting many CEXs like Coinbase to temporarily halt USDC trading.

What was surprising, Chainalysis noted, was the surge in USDC acquisitions on large DEXs such as Curve3pool and Uniswap. “Several assets saw large spikes in user acquisition, but none more than USDC,” the blockchain analysis firm wrote.

*Token acquisitions on Uniswap from March 7 to March 14. Source: Chainalysis*

Chainalysis theorized that this was due to confidence in the stablecoin, with some crypto users loading up on USDC while it was relatively cheap and betting that it would regain its peg — which it did on March 13 according to CoinMarketCap.

*USDC’s brief depeg from March 11 to March 13. Source: CoinMarketCap*

Orca DEX to block US users from trading with its interface

March 16, 2023 Coin Telegraph

Coin Telegraph

The company said U.S. traders would still be able to make swaps by directly interacting with Orca’s smart contracts, however.

The Solana-based decentralized exchange (DEX) Orca will block all United States users from trading using its web interface beginning March 31, according to a March 16 notice posted to its official website.

The exchange did over $634 million worth of trading volume in February and has over $46 million total value locked in Solana smart contracts, according to DefiLlama.

On March 16, the protocol’s website added a notification that read, “Orca will be adding the United States to the regions and countries which are restricted from trading on orca.so effective March 31, 2023.”

*Notice appearing on Orca's website. Source: Orca*

The alert emphasized that the change “will not impact the ability of U.S. users to directly interact with Orca’s smart contract or SDK, nor will it impact their ability to provide liquidity through orca.so.”

Americans who directly interact with Orca smart contracts will not be affected by the change, the notice said.

Orca is one of the DEXs used by Jupiter to source liquidity for its swap aggregator service, so Jupiter’s website may be an alternative for traders wanting to interact with Orca smart contracts.

Cointelegraph attempted to contact both Orca and Jupiter but did not receive a response from either by the time of publication.

Centralized crypto exchanges that are not licensed in the U.S. have often blocked American users to avoid the ire of the country’s regulators, but most decentralized exchanges have not followed suit, with a few exceptions. Aggregator 1inch began blocking American users in September 2021, after stating in its terms of use that U.S. residents were not allowed to use its interface. Binance DEX also banned U.S. users in June 2019.

Unlike centralized exchanges, DEXs do not have a centralized “back end” or database controlled by the developer. For this reason, many users have found that they can circumvent geographical bans in most cases by using a VPN to hide their IP address or by connecting directly to the blockchain through a development tool such as Truffle or Hardhat.

USDC Dominated Trading Volume on Decentralized Exchanges Amidst Depegging Incident

March 12, 2023 Bitcoin.com

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Crypto funding seen shifting from CeFi to DeFi after major collapses: CoinGecko

March 6, 2023 Coin Telegraph

"NFTfi,” on-chain derivative platforms, decentralized stablecoins and Ethereum L2s are four investment opportunities being looked at closely by one crypto investment firm.

Digital asset investment firms poured $2.7 billion into decentralized finance projects in 2022, up 190% from 2021, while investments into centralized finance projects went the other way — falling 73% to $4.3 billion over the same timeframe.

The staggering rise in DeFi funding was despite overall crypto funding figures falling from $31.92 billion in 2021 to $18.25 billion in 2022 as the market shifted from bull to bear.

According to a March 1 report from CoinGecko, citing data from DefiLlama, the figures “potentially points to DeFi as the new high growth area for the crypto industry.” The report says that the decrease in funding toward CeFi could point to the sector “reaching a degree of saturation.”

*Funding amount by sector in the cryptocurrency market between 2018-2022. Source:* *CoinGecko*

The near three-fold increase in DeFi investment is also a staggering 65-fold increase from 2020, at the start of the last bull run.

According to CoinGecko, the largest DeFi funding in 2022 came from Luna Foundation Guard’s (LFG) $1 billion sale of LUNA tokens in February 2022, which came about three months before the catastrophic collapse of Terra Luna Classic (LUNC) and TerraClassicUSD (USTC) in May.

Ethereum-native decentralized exchange (DEX) Uniswap and Ethereum staking protocol Lido Finance raised $164 million and $94 million, respectively.

Meanwhile, FTX and FTX US were the largest recipients of CeFi funding, having raised $800 million in January — accounting for 18.6% of CeFi funding in 2022 alone. The crypto exchanges, however, collapsed only 10 months later and filed for bankruptcy.

Other areas of investments included blockchain infrastructure and blockchain technology companies, which raised $2.8 billion and $2.7 billion, respectively, a trend that has remained strong over the last five years, said CoinGecko.

Henrik Andersson, the chief investment officer of Australia-based asset fund manager Apollo Crypto, says his firm is looking at four specific sectors within crypto as of late:

The first is “NFTfi,” which he said results from the combination of DeFi and NFTs. These are NFT projects that use DeFi to implement various trading strategies to earn passive income, or long or short-trade NFT projects, among other things.

I haven't bought any NFTFI token

Just waiting for @nftperp to launch a token.

Anything perp derivatives outperforms other categories

Wen launch pic.twitter.com/yaW6HNkIGN
— DeFI Saint (@TheDeFISaint) February 17, 2023

The second and third are on-chain derivative platforms and decentralized stablecoins, which Andersson believes have come about due to the collapse of FTX and recent regulatory action:

“In the light of the FTX debacle and regulatory movements, we have seen renewed interest for on-chain derivatives platforms, such as GMX, SNX and LYRA. All seeing record volume/TVL.Decentralised stablecoins such as LUSD/LQTY has also gained from the current regulatory environment.”

After @LiquityProtocol listed on Binance, combined with the recent crackdown by the SEC against Centralized Stablecoins has put some spotlight on this narrative.

Let's check it out of TOP 15 Decentralized Stablecoins pic.twitter.com/XWJvWpaT4l
— HC - Capital (@hc_capital) March 5, 2023

The fourth vertical Andersson cited was Ethereum-based layer-2 networks. “2023 is set to be the year for L2s, and in particular Ethereum L2s,” he said.

The chief investment officer explained that layer-2 tokens such as Optimism (OP) have performed well of late, particularly in light of the testnet launch of “Base,” which was created by Coinbase and is powered by Optimism.

GMX, SNX, LYRA, LQTY and OP are all investments of Apollo Crypto.

Last month, cryptocurrency analyst Miles Deutscher predicted in a Feb. 19 tweet to his 301,700 followers that zero-knowledge rollup tokens, liquid staking derivative tokens, artificial intelligence (AI) tokens, perpetual DEX tokens, “real yield” tokens, GambleFi tokens, decentralized stablecoins and Chinese coins would perform well in 2023 on the back of heavy funding:

To make the biggest gains in crypto, you need to position yourself in the strongest narratives.

Some of the trends outlined in this thread still have potential to generate 50x opportunities.

: 8 crypto narratives I'm eyeing right now.
— Miles Deutscher (@milesdeutscher) February 18, 2023

Venture capital funding in the crypto space has, however, fallen over the last three consecutive quarters, amid tough market conditions.

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Blockchain DEXs Onchain and Camelot part ways over IFO spat

February 23, 2023 Coin Telegraph

Camelot

"We urge @CamelotDEX delete any information related to @OnchainTrade from all of your platforms as soon as possible," wrote OnChain developers.

In a dispute that originated Feb. 22, decentralized exchanges (DEXs) Onchain Trade and Camelot terminated an agreement for the former's initial fair offering (IFO), with both firms alleging that the opposing counterparty acted in bad faith. An IFO, whilst still an emerging concept, typically involves promises made by developers consisting of no venture capitalist involvement, no whitelist, no presale, and vast majority of income going to token holders, on top of a traditional initial coin offering.

As told by Onchain, developers began negotiations with Camelot for an IFO, for which the latter charged a fee of 2%, and both parties agreed upon the amount. In addition, Camelot required that Onchain exclusively sell tokens on its platform, to which Onchain also agreed. However, at this point, Onchain alleged that Camelot became "more demanding and trying to start another round of bargain; we started feeling uncomfortable working with Camelot and decided to terminate deal with them altogether."

In a follow-up Chinese language tweet, Onchain, which stated its core developers "come from China," explained that the root cause of the disagreement was the "no-limit" token sale allegedly demanded by Camelot. "There are many opportunities in the bear market; retail investors simply don't have the risk management and valuation capabilities to assess projects," Onchain developers wrote.

In response, Camelot said that Onchain's statements were "false allegations." According to Camelot's version of the story, its IFO sales model "was never mentioned as being an issue from their team [OnChain]."

"This low number [2% fee] which never once changed from our side, was set well below market for such a launch due to a desire to support the ecosystem and facilitate a protocol transitioning over from zksync."

Regarding exclusivity, Camelot explained that "doing a multiple IDO [IFO] model isn't feasible, and the same was clearly communicated, and on multiple occasions the OCT team confirmed understanding." The firm then accused OnChain's leadership of "acting in bad faith or simply being inexperienced" and "denials after the fact" in a series of direct messages, which Camelot said led to their cancellation of the deal.

We’ll work hard to try and make every project succeed, but some will and some won’t. But in the end, those that fail to understand your words matter, will never have a seat on the Round table.

To which Onchain replied: "tricking us into canceling deal with other partners and starts bargaining round over round thinking we can't live without you, calling that good faith." Onchain has since decided to move its IFO directly onto its website. At the time of publication, Cointelegraph was not able to independently confirm the allegations presented by either party.

"Onchain Trade team is so inexperienced in grifting that they cancelled a chance to grift hand in hand". Tricking us into cancelling deal with other partners and starts bargining round over round thinking we can't live without you, calling that good faith. https://t.co/ibKLctNdht
— OT | Onchain Trade (@OnchainTrade) February 23, 2023

Dexible aggregator hacked for $2M via ‘selfSwap’ function

February 17, 2023 Coin Telegraph

Dexible aggregator hacked for M via ‘selfSwap’ function

Coin Telegraph

The buggy function was intended to allow users to provide their own routing information, but the code did not limit routers to a preapproved list.

The multichain exchange aggregator Dexible has been hit by an exploit, and $2 million worth of cryptocurrency has been lost as a result, according to a Feb. 17 post-mortem report released by the team on the project’s official Discord server.

As of 6:35 pm UTC on Feb. 17, the Dexible front end shows a popup warning about the hack whenever users navigate to it.

At 6:17 am UTC, the team reported that it had discovered “a potential hack on Dexible v2 contracts” and was investigating the issue. Approximately nine hours later, it released a second statement that it now knew “$2,047,635.17 was exploited from 17 trader addresses. 4 on mainnet, 13 on arbitrum.”

A post-mortem report was issued at 4:00 pm UTC as a PDF file and released on Discord, and the team said it was “actively working on a remediation plan.”

In the report, the team states that it had noticed something was wrong when one of its founders had $50,000 worth of crypto moved out of his wallet for reasons that were unknown at the time. After investigating, the team found that an attacker had used the app’s selfSwap function to move over $2 million worth of crypto from users that had previously authorized the app to move their tokens.

The selfSwap function allowed users to provide the address of a router and calldata associated with it to make a swap of one token for another. However, there was no list of preapproved routers written into the code. So, the attacker used this function to route a transaction from Dexible to each token contract, moving users’ tokens from their wallets into the attacker’s own smart contract. Because these malicious transactions were coming from Dexible, which users had already authorized to spend their tokens, the token contracts did not block the transactions.

After receiving the tokens into their own smart contract, the attacker withdrew the coins through Tornado Cash into unknown BNB (BNB) wallets.

Dexible has paused its contracts and urged users to revoke token authorizations for them.

The common practice of authorizing token approvals for large amounts has sometimes led to losses for crypto users due to buggy or outright malicious contracts, leading some experts to warn users to revoke approvals on a regular basis. The front ends for most Web3 apps do not directly allow users to edit the amount of tokens approved, so users often lose the full balance of their tokens if an app turns out to have a security flaw. MetaMask and other wallets have tried to fix this problem by allowing users to edit token approvals at the wallet confirmation step, but many crypto users are still unaware of the risk of not using this feature.

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