FTX website comes back online with message advising against deposits

November 10, 2022 Coin Telegraph

Neither FTX CEO Sam Bankman-Fried nor any FTX official has provided its users with clarity as to why FTX’s website was taken down.

Financially-troubled crypto exchange FTX has brought its website back online following a period of intermittent downtime — with the trading platform now sporting a banner confirming withdrawals are halted and advising users against depositing.

The FTX website returned online at approximately 9:00 pm UTC on Nov. 9, after encountering five separate periods of network downtime spanning over two hours, according to the “IS IT DOWN OR JUST ME” website.

The crypto community on Twitter has also noticed a new bright red banner that can be seen throughout the website that reads:

“FTX is currently unable to process withdrawals. We strongly advise against depositing.”

*FTX's notification on deposits and withdrawals on the trading platform. Source: FTX.com*

A pinned message on the official FTX Telegram Group on Nov. 8 also confirmed the halting of withdrawals, without any estimates about when they would return.

"We are waiting for confirmation from our team to ramp it up. Right now we dont have an ETA but surely will communicate it as soon as we have it," a member of FTX support staff wrote in the message.

Attempting to sign up for a new account on the website also comes with an alert that “signups are paused” at this current time, Cointelegraph has discovered.

This suggests that deposits, while “strongly advised against,” are only accessible to those who have existing accounts on the trading platform.

Meanwhile, two websites linked to the crypto exchange including Alameda Research and FTX Ventures remain down at the time of writing.

It comes amid an ongoing liquidity crisis being faced by the crypto exchange.

A Nov. 9 report from the Wall Street Journal claims that the exchange is facing a shortfall of $8 billion, and is unable to meet withdrawal demands without emergency funding.

Binance initially signed a non-binding letter of intent to buy out the embattled exchange but pulled out less than 48 hours later, citing the mishandling of customer funds and alleged U.S. agency investigations as the reasons for its change in decision.

Google search results for “FTX website” also saw a large spike over the last few hours following the reports that the FTX website was intermittently going down, according to Google Trends:

*Google searches for "FTX website'" over the last seven days. Source: Google Trends*

Publicly-Listed Bitcoin Miner Argo Blockchain’s Stock Gets Downgraded, Firm Offloads Close to 4,000 Bitmain Miners

November 2, 2022 Bitcoin.com

An Unknown Miner Commands More Than 51% of BSV’s Hashpower, Consecutive Strings of Empty Blocks Makes Chain Unreliable

October 23, 2022 Bitcoin.com

What directional liquidity pooling brings to DeFi

October 22, 2022 Coin Telegraph

Coin Telegraph

Directional liquidity pooling is a new way for liquidity providers to add liquidity to exchanges while avoiding impermanent loss.

Modern decentralized exchanges (DEXs) mainly rely on liquidity providers (LP) to provide the tokens that are being traded. These liquidity providers are rewarded by receiving a portion of the trading fees generated on the DEX. Unfortunately, while liquidity providers earn an income via fees, they’re exposed to impermanent loss if the price of their deposited assets changes.

Directional liquidity pooling is a new method that is different from the traditional system used by DEXs and aims to reduce the risk of impermanent loss for liquidity providers.

What is directional liquidity pooling?

Directional liquidity pooling is a system developed by Maverick automated market maker (AMM). The system lets liquidity providers control how their capital is used based on predicted price changes.

In the traditional liquidity pool model, liquidity providers are betting that the price of their asset pairs will move sideways. As long as the price of the asset pair doesn’t increase or decrease, the liquidity provider can collect fees without changing the ratio of their deposited tokens. However, if the price of any of the paired assets were to move up or down, the liquidity provider would lose money due to what is called impermanent loss. In some cases, these losses can be greater than the fees earned from the liquidity pool.

This is a major drawback of the traditional liquidity pool model since the liquidity provider cannot change their strategy to profit based on bullish or bearish price movements. So, for example, if a user expects Ether’s (ETH) price to increase, there is no method to earn profits via the liquidity pool system.

Directional liquidity pooling changes this system by allowing liquidity providers to choose a price direction and earn additional returns if they choose correctly. So, for example, if a user is bullish on ETH and the price increases, they’ll earn additional fees. Bob Baxley, chief technology officer of Maverick Protocol, told Cointelegraph:

“With directional LPing, LPs are no longer locked into the sideways market bet. Now they can make a bet with their LP position that the market will move in a certain direction. By bringing a new degree of freedom to liquidity providing, directional LPing AMMs like Maverick AMM open the liquidity pool market to a new class of LPs.”

How does this benefit users in DeFi?

The AMM industry and related technologies have grown quickly in the past few years. A very early innovation was UniSwap’s constant product (x * y = k) AMM. But, constant product AMMs are not capital efficient because each LP’s capital is spread over all values from zero to infinity, leaving only a small amount of liquidity at the current price.

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This means that even a small trade can have a big effect on the market price, causing the trader to lose money and the LP to pay less.

In order to solve this problem, several plans have been made to “concentrate liquidity” around a certain price. Curve made the Stableswap AMM, and all of the liquidity in the pool is centered around a single price, which is often equal to one. In the meantime, Uniswap v3 made the Range AMM more popular. This gives limited partners more control over where their liquidity goes by letting them stake a range of prices.

Range AMMs have given LPs a lot more freedom when it comes to allocating their cash. If the current price is included in the chosen range, capital efficiency may be much better than constant product AMMs. Of course, how much the stakes can go up depends on how much the LP can bet.

Because of the concentration of liquidity, LP capital is better at generating fees and swappers are getting much better pricing.

One big problem with range positions is their efficiency drops to zero if the price moves outside the range. So, to sum up, it’s possible that a “set it and forget it” liquidity pooling in Range AMM like Uniswap v3 could be even less efficient in the long run than a constant product LP position.

So, liquidity providers need to keep changing their range as the price moves to make a Range AMM work better. This takes work and technical knowledge to write contract integrations and gas fees.

Directional liquidity pooling lets liquidity providers stake a range and choose how the liquidity should move as the price moves. In addition, the AMM smart contract automatically changes liquidity with each swap, so liquidity providers can keep their money working no matter the price.

Liquidity providers can choose to have the automated market maker move their liquidity based on the price changes of their pooled assets. There are four different modes in total:

Static: Like traditional liquidity pools, the liquidity does not move.
Right: Liquidity moves right as the price increases and does not move as the price decreases (bullish expectation on price movement).
Left: Liquidity moves left as the price decreases and does not move as the price increases (bearish expectation on price movement).
Both: Liquidity moves in both price directions.

The liquidity provider can put up a single asset and have it move with the price. If the chosen direction matches the price performance of the asset, the liquidity provider can earn revenue from trading fees while avoiding impermanent loss.

When the price changes, impermanent loss happens because the AMM sells the more valuable asset in exchange for the less valuable asset, leaving the liquidity provider with a net loss.

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For example, if there is ETH and Token B (ERC-20 token) in the pool and ETH increases in price, the AMM will sell some ETH to buy more Token B. Baxley expanded on this:

“Directional liquidity represents a significant expansion of the options available to prospective LPs in decentralized finance. Current AMM positions are essentially a bet that the market will go sideways; if it doesn’t, an LP is likely to lose more in impermanent loss than they make in fees. This simple reality arguably keeps a lot of potential LPs from ever entering the market.”

When it comes to traditional AMMs, impermanent loss is difficult to hedge against since it can be caused by prices moving in any direction. On the other hand, directional liquidity providers can limit their exposure to impermanent loss with single-sided pooling. Single-sided pooling is where the liquidity provider only deposits one asset, so if impermanent loss happens, it can only occur on that single asset.

Crypto markets to see ‘explosive volatility’ soon: Arcane Research

October 13, 2022 Coin Telegraph

Coin Telegraph

Ballooning leverage and reduced volatility on crypto markets create a situation where explosive volatility is very possible in the short-to-medium term.

After weeks of reduced volatility, cryptocurrencies like Bitcoin (BTC) are likely to see sharp price changes in the short to medium term, according to one analyst.

The current situation in cryptocurrency markets could potentially generate “explosive volatility” due to massive leverage and recent low volatility, Arcane Research analyst Vetle Lunde suggested.

Lunde pointed to “leverage bonanza,” or leverage going parabolic in the crypto derivatives market, while Bitcoin has continued to hover around $19,000 over the past few weeks.

In crypto trading, leverage refers to using borrowed funds to make trades in order to profit bigger through contracts like perpetual swaps. According to Arcane, notional open interest (OI) in Bitcoin perpetual contracts was nearing 500,000 BTC as of Oct. 11, which marked parabolic growth in leverage amid Bitcoin’s flattening volatility.

*Bitcoin perpetual swaps’ open interest by Arcane Research. Source: Laevitas*

While forecasting potential bursts of volatility in the short or medium term, Lunde avoided predicting exact market moves, stating:

“I view the current open interest as well blown above any levels that may be assessed as sustainable, opaqueness from market signals restricts me from having any directional view on the winddown of said leverage.”

The analyst also stressed that the current market could benefit sophisticated traders that are familiar with straddle strategy, which involves simultaneously buying both a put option and a call option with the same price and the same expiration date.

In the medium term, Lunde pointed to the growing trend in OI in crypto derivatives which could lead to a “very volatile” breakout. As previously reported, Bitcoin futures OI hit an all-time high, with BTC-denominated futures OI hitting 660,000 BTC on Oct. 12.

Lunde also mentioned a few potent triggers in the medium term for crypto, including potential BTC purchases by Michael Saylor’s MicroStrategy in November. “If the usual MicroStrategy riddance repeats, expect small rallies and brief hardcore sell-offs as MicroStrategy bids and then announces its purchases for the remainder of Q4 2022,” the analyst wrote.

No matter what trend is coming in the short-to-medium term, the Arcane Research analyst is still bullish on Bitcoin over a longer period of time. Lunde expressed confidence that the next year will bring “idiosyncratic crypto-related regulatory clarity” in the United States as well as a more stable interest rate and inflation regime.

He also predicted more crypto growth as major financial institutions like BlackRock, Citadel, and Nasdaq have been moving into the industry recently. He stated:

“I am certain that the show will go on, and new highs will be met in a not too far distant future.”

As previously reported, some major financial institutions like JPMorgan set a long-term theoretical target for Bitcoin at $150,000.

Acala Network to resume operations after burning 2.7B in aUSD stablecoin

September 26, 2022 Coin Telegraph

Coin Telegraph

A total of 2.97 billion aUSD erroneously minted were recovered after the glitch.

After the mining failure involving its stablecoin aUSD, the Acala Network announced on Monday that it had resumed its operations following a referendum allowing LPs to withdraw liquidity from pools or unstake LP tokens.

The community referendum for Stage 1 of resuming Acala operations has passed and been executed.

LPs who choose to unstake LP tokens or withdraw liquidity on Acala now have the option to do so. https://t.co/yzvOz7zwxT
— Acala (@AcalaNetwork) September 26, 2022

In August, a misconfiguration of the iBTC/aUSD liquidity pool led to a 3.022 billion aUSD to be erroneously minted, taking its price to less than $0.01 from its dollar peg. Acala is a decentralized finance platform built on the Polkadot (DOT) ecosystem.

The wallet addresses that had received the minted aUSD have been identified via on-chain tracing, allowing the recovery of 2.97 billion aUSD mistake mints from 16 addresses. Other thirty-five accounts were identified as having acquired 12.38 million erroneously minted aUSD.

According to the incident report, 16 iBTC/aUSD LP contributors received the error mints, and some of them repeatedly added more liquidity to the pool, claiming more aUSD error mints and resulting in more aUSD being erroneously minted. It noted:

"Some of these users repeatedly swapped more aUSD error mints as the imbalance of pools grew. They then transferred a significant amount of aUSD error mints to other XCM-connected chains and CEXs."

The cause of the incident "was a vulnerability in the DEX saving code that is part of the incentives pallet", said the company, which also announced a security roadmap to strengthen the security of the Acala network.

The report revealed the full extent of the event. Reportedly a total of 3.022B aUSD error were minted, 2.97 billion aUSD were found in the addresses of the 16 identified LP contributors, and 12.38M aUSD error mints were found on the top 35 accounts that acquired a significant amount of aUSD error mints or were linked to the accounts that acquired it. A remaining 52.068M aUSD error mints, error mint-swapped tokens and address involved in the incident were identified.

Coinflex plans give 65% of company to creditors as part of restructuring proposal

September 22, 2022 Coin Telegraph

Business

Subject to a vote and court approval, the plan proposed CoinFlex creditors own 65% of the company, while its team members be allocated 15% of the company's shares.

Cryptocurrency exchange CoinFlex announced a structuring proposal in response to user feedback following the platform experiencing liquidity issues.

In a Wednesday blog post, CoinFlex said under the proposal — which will be subject to a vote and then court approval— creditors will own 65% of the company, while its team members will be allocated 15% of shares as part of an employee share option plan. According to the platform, Series B investors would remain shareholders in the restructured company should the plan be approved.

“As with any reorganization, unfortunately, most shareholders get wiped out,” said CoinFlex CEO Mark Lamb and chief revenue officer Sudhu Arumugam. “This situation is no different; with all existing Ordinary and Series A shareholders of the Company losing their equity stakes, including us.”

The platform added that it would be offering creditors its recovery token rvUSD, equity and USD Coin (USDC) instead of its FLEX Coin. The SmartBCH Alliance would also assume responsibility for the SmartBCH Bridge under the proposal, using its Bitcoin Cash (BCH) to “exchange the sBCH Tokens held by the DeFi SmartBCH users on a 1:1 basis.”

“The SmartBCH Alliance will take over as a creditor of [CoinFlex] for the amount of the BCH that it expends on performing these obligations. The Alliance will be treated like any other creditor with no change in the position of any of the other current creditors.”

CoinFlex plans to hold a community vote on the proposed restructuring on Sept. 25, with 75% of creditors voting yay considered sufficient to pass. The company will then pass the plan along with the vote count to the Seychelles Courts for final approval.

“If everything is in order, we expect this process to take up to six weeks; however, this is just an estimate,” said Lamb and Arumugam.

A successful conclusion of this vote and acceptance by the Seychelles courts will mark the end of our restructuring period and the beginning of the next phase in our journey. We aim to emerge as a community owned business, with a new exciting focus. More details to come.
— Mark Lamb (@MarkDavidLamb) September 21, 2022

The exchange suspended withdrawals in June, later claiming one “large individual customer” had defaulted on tens of millions of dollars in debt to CoinFlex, causing liquidity issues. Lamb called out BCH proponent Roger Ver for being this individual, while he, in t has denied the exchange’s claims.

Staking providers could expand institutional presence in the crypto space: Report

September 20, 2022 Coin Telegraph

Coin Telegraph

The recent Ethereum upgrade highlights staking opportunities for institutional holders. In the short term, however, liquidity is still an issue, .

The Ethereum blockchain’s carbon footprint is expected to reduce by 99% following last week’s Merge event. By positioning staking as a service for retail and institutional investors, the upgrade could also have a significant impact on the crypto economy, according to a report from Bitwise on Tuesday.

The company said it projects potential gains of 4%–8% for long-term investors through Ether (ETH) staking, while J.P. Morgan analysts forecast that staking yields across PoS blockchains could double to $40 billion by 2025.

Users who stake crypto assets earn rewards — known as yields — from transaction fees paid by other network users. Seen by some as a form of passive income generation, staking requires users to lock their assets in a smart contract, during which time coins can not be spent or traded on the market. This may be one of the main challenges to the adoption of PoS blockchains, especially by institutional investors.

In a Q2 earnings call, Coinbase CEO Alesia Haas noted that institutional staking of crypto assets could be a "phenomenon" in the future as soon as the market overcomes its liquidity lock-up.

Industry players have proposed a number of solutions in an effort to address this lack of liquidity surrounding staked coins. On Sunday, Alluvial announced a liquid collective enterprise and multichain protocol with Coinbase and Kraken as integrators and Staked, Coinbase Cloud and Figment as validators. The solution aims to provide institutional holders with a viable liquid staking solution.

“Proof of Stake blockchains make up more than half of the entire crypto market cap, yet, there hasn't been a viable option for institutional token holders to participate in liquid staking," Matt Leisinger, CEO of Alluvial said in a statement.

Ahead of the Merge, the Swiss digital asset banking platform SEBA Bank launched an Ethereum staking service for institutions eager to earn yields from staking on the Ethereum network. According to the firm, the move was a response to the growing institutional demand for decentralized finance (DeFi) services.

"Not only are investors diving head first into staking, but they are leveraging liquid staking services and the composability of DeFi to amplify the APY and utility of assets they are already staking," stated the authors of a Bitwise report.

The opportunity for staking could bring further centralization issues to the community as well. Hours after completing the upgrade, analysis from Santiment indicated that 46.15% of Ethereum’s PoS nodes are controlled by only two addresses belonging to Lido and Coinbase, respectively holding 30.8% and 14.7% market share of the $13.2 billion staked ETH as of as August 31.

As more staking providers enter the market, not only will institutional holders benefit, but risks may also be diversified and network resilience may improve, according to Bitwise analysis.

Grayscale Declares Distribution of Rights to Ethereum Proof-of-Work Tokens With SEC

September 17, 2022 Bitcoin.com

Crypto Biz: The biggest problem with DeFi isn’t what you think

September 16, 2022 Coin Telegraph

Banks

Decentralized finance still has a way to go before it can attract institutional capital. Meanwhile, Fireblocks has become a 9-figure revenue-generating company.

Cryptocurrency has converted another veteran of Wall Street after ex-Morgan Stanley executive Kevin Lepsoe launched a new platform for decentralized finance (DeFi). His new firm, Infinity Exchange, received a nice injection of seed funding in a bid to boost DeFi adoption among institutions. In his pledge to help build “DeFi 2.0,” Lepsoe described one of the biggest pain points of DeFi 1.0 — and it’s one you probably haven’t heard of. As it turns out, if you want institutions to adopt your products and services, you need to give them a product suite they’re familiar with. Until then, DeFi offers a value proposition that’s obscured by risk and inefficiency.

This week’s Crypto Biz newsletter explores Lepsoe’s solution to the perils of DeFi. We also dissect the latest news involving MicroStrategy and Fireblocks.

Fixed interest rates to create a DeFi 2.0 for institutions, says former bank exec

Lepsoe’s Infinity Exchange raised $4.2 million to continue building its institutional fixed income protocol, which introduces the concept of a floating rate with a zero-bid offer. In other words, Infinity Exchange is trying to bring the interest rate mechanics and risk management practices of traditional finance to DeFi. According to Lepsoe, providing institutional investors with access to a full rates product suite, including fixed-to-floating rates, could be the key to boosting DeFi adoption. Although most of us know about DeFi’s boom-and-bust cycles, Lepsoe said the sector’s biggest challenge is the disconnect between floating rate and fixed-rate markets. Not exactly intuitive, but it’s a compelling take, nonetheless.

MicroStrategy to reinvest $500M stock sales into Bitcoin: SEC filing

Michael Saylor’s business intelligence firm MicroStrategy plans to buy a lot more Bitcoin (BTC), which, at this point, should surprise nobody. In a recent filing with the United States Securities and Exchange Commission, MicroStrategy revealed that it has partnered with agents Cowen and Company and BTIG to raise $500 million via a stock sale, with proceeds going toward acquiring more BTC. The business intelligence firm is doubling down on its Bitcoin gambit despite being down over $1 billion in its current position. With BTC teetering around $20,000 and with analysts expecting more downside in the short term, will MicroStrategy actually buy the dip this time, or will the price just keep on dipping after the purchase?

MicroStrategy is set to reinvest to buy the dip as the company's reserves suffer from an aggregated $1 billion in value loss. https://t.co/rr8eqW7Xen
— Cointelegraph (@Cointelegraph) September 10, 2022

Institutional investors headed for a tipping point on crypto: Apollo Capital

Remember when investing in crypto was considered to be a “career risk?” Now, it seems that not investing in digital assets carries the biggest reputational risk of all. What a difference a year can make. According to Apollo Capital chief informatio Henrik Andersson, institutional investors may soon “flip” on their conservative approach toward digital assets. In an exclusive interview with Cointelegraph, the crypto fund manager said institutional interest in digital assets is slowly picking up. Some of the major institutions, such as pension funds, may be waiting for others to make the first move because nobody wants to be first and be wrong. But, once the floodgates open, not being allocated will be considered a bigger career risk.

Fireblocks records $100M+ revenue in subscriptions amid bear market

The crypto industry has crowned dozens of unicorns over the past two years, but how many of these companies have a viable business model? Blockchain infrastructure provider Fireblocks disclosed that it generated over $100 million in annual recurring revenue this year, which is a huge milestone given the current state of the market. Web3 start-ups, payment service providers, consumer brands and gaming companies all contributed to Fireblocks’ massive haul, demonstrating that the blockchain industry is attracting steady interest despite the bear market.

Don’t miss it! Will Ethereum’s Merge alter crypto history?

Ethereum’s Merge has been described as a historical event for the blockchain industry as the largest smart contract platform embarks on a major shift in its governance structure. Whereas most traders are fixated on Ether’s (ETH) price, there’s much more at stake. Will the Merge alter the trajectory of the crypto industry that relies so heavily on Ethereum? Or will it prove to have a negligible impact in the long term? In this week’s Market Report, analysts Marcel Pechman, Benton Yaun and Joe Hall discussed this very topic. You can watch the full replay below.

Crypto Biz is your weekly pulse of the business behind blockchain and crypto delivered directly to your inbox every Thursday.

Liquidity

What is directional liquidity pooling?

How does this benefit users in DeFi?

Fixed interest rates to create a DeFi 2.0 for institutions, says former bank exec

MicroStrategy to reinvest $500M stock sales into Bitcoin: SEC filing

Institutional investors headed for a tipping point on crypto: Apollo Capital

Fireblocks records $100M+ revenue in subscriptions amid bear market

Don’t miss it! Will Ethereum’s Merge alter crypto history?

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