AAVE price takes double-digit hit, but strong fundamentals point to eventual recovery

August 2, 2023 Coin Telegraph

AAVE price may have been impacted by this week’s Curve Finance scandal, but a robust insurance fund and steady fee revenue could protect against further downside.

AAVE, the governance token of the decentralized finance (DeFi) protocol Aave, experienced a 17% decline between July 30 and August 1, reaching the $62 level.

While the $62 support has demonstrated its resilience, the current price of $64.40 is still 12% below the daily close on July 30. Investors are now questioning whether this movement signifies a more cautious approach to the sector or if other factors are exerting pressure on the AAVE token price.

*AAVE price index, 12-hour chart. Source: TradingView*

Part of the recent movement in the AAVE token can be attributed to the risks of cascading liquidations on DeFi protocols, resulting from the Curve Finance pool exploit that commenced on July 30. However, Aave's decentralized liquidity protocol has successfully survived previous identical scenarios and the protocol has a substantial $295.6 million deposited in its Safety Module.

Notably, Michael Egorov, the founder of Curve, currently holds a substantial $76.6 million loan backed by 357.3 million CRV tokens across three DeFi applications, as reported by Delphi Digital. This represents 40.5% of the entire CRV circulating supply and poses risks to the ecosystem, raising concerns about potential liquidation repercussions on major protocols, including Aave.

18/ Update: Having paid down some of his loans, Egorov has managed to significantly reduce his liquidation price points.

*Note on his Fraxlend position: Utlization has fallen to 37% so the APY should continue to decline* pic.twitter.com/LUyeopWRMp
— Delphi Digital (@Delphi_Digital) August 1, 2023

According to Delphi Digital data, specifically on Aave, Egorov holds 267 million CRV tokens, backing a 54.2 million Tether (USDT) loan. With a 55% liquidation threshold, the current liquidation price for the CRV token stands at $0.37, which appears relatively secure at the moment. However, it's essential to note that Egorov is paying a significant 50% APY for this loan.

This situation serves as evidence that Aave and other top DeFi protocols function as intended, without special rules or bailouts, even for project founders. While the Curve token debacle continues, there's no distinct issue with the Aave protocol, aside from notable players taking assertive actions to close their positions.

Aave stablecoin trading below $1 is an ongoing concern

Another factor influencing AAVE's token performance is the stablecoin GHO, which has been trading below the $1 peg since its launch on July 16. According to 21Shares' on-chain data and research analyst, Tom Wan, the stablecoin's low fixed-rate borrowing presents a double-edged sword.

The lack of DeFi integration and farming opportunities for GHO discourages borrowers from holding the token, as they seek higher yields in other stablecoins. Tom Wan emphasizes that this selling pressure leads to the depegging of the GHO stablecoin on decentralized exchanges.

The Aave protocol currently boasts a substantial $5.1 billion in Total Value Locked (TVL) across six chains, but it has experienced a recent 12.5% decline in this figure within just one week. In comparison, Uniswap's and Compound's TVL remained relatively stable at $3.75 billion and $2.23 billion, respectively.

*Total value locked (TVL), USD. Source: DefiLlama*

However, it is worth noting that Aave's annualized revenue is $12 million, as per DefiLlama data, which falls significantly short of Convex Finance's $52 million and Radiant's $20 million.

*Collateralized Debt, Yield and Lending protocols revenue rank. Source: DefiLlama*

Despite this, some proponents argue that Aave's higher fees compared to its competitors leave room for potential future revenue growth.

Recent events might have tamed investors’ views on Aave

In May 2023, the older version of Aave protocol (v2) encountered a bug that hindered users from withdrawing $110 million worth of assets on the Polygon Network implementation. The issue arose due to an interest rate curve patch on May 16, but it was promptly resolved within a week, and no funds were reported lost in this occurrence.

Another recent contentious event on Aave took place on June 12 when a proposal was introduced to prevent a specific account, belonging to Curve founder Michael Egorov, from accumulating further debt. This move sparked debates among participants, with some contending that it infringed upon the principle of censorship-resistance or "neutrality" in DeFi.

Despite the recent 17% decline in the AAVE token price and a 12.5% drop in TVL, Aave's decentralized application remains a strong contender in the DeFi space. With a robust insurance fund and protocol fees, the protocol is well-equipped to weather market fluctuations and potential risks.

Although Aave's annualized revenue may be lower compared to some competitors, the higher fees could potentially pave the way for future revenue growth. Overall, Aave's solid foundation and significant TVL signal its resilience and potential for continued success.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Crypto survey finds 47% of investors expect Ether to ‘surpass’ Bitcoin

July 18, 2023 Coin Telegraph

Coin Telegraph

Fidelity Digital Assets gave a bullish forecast for ETH in the next 12 months, while a separate survey from CryptoVantage found 47% of investors expect Ether to “surpass” Bitcoin.

Fidelity Digital Assets released a “Q2 2023 Signals Report” on July 18, which claimed that Ether’s outlook for the next 12 months and the long term is positive. Year-to-date, Ether (ETH) has gained 62%, but while the investment firm might be short-term bullish on Ether, that does not mean it believes that the month-long bullish channel will be sustained.

While institutional investors like Fidelity Digital Assets may have a bullish longer-term vision for ETH's price, let’s compare their analysis against network and market data to see if they’re on the money.

*Ether/USD 1-day price index. Source: TradingView*

Beyond the technical indicators, the rationale behind Fidelity’s bullish outlook for Ether is the network’s higher burn rate versus coin issuance, the “new address momentum” and a growth in the number of network validators.

*Fidelity “Q2 2023 Signals Report,” July 18. Source: Fidelity Digital Assets*

According to the Fidelity report, the net issuance since the Merge in September 2022 resulted in a net supply decrease of more than 700,000 Ether. Additionally, the analysts claim that Glassnode data showing an increasing number of Ethereum addresses that transacted for the first time ever proves healthy network adoption.

The report also points to a 15% increase in the number of active Ethereum validators in the second quarter.

The expectation around EIP-1153 is also building momentum for the Ethereum network, as the “transient storage opcode” improves smart contract efficiency, reduces costs and amplifies the Ethereum Virtual Machine design. The change is especially meaningful for decentralized exchanges (DEXs), where Ethereum’s dominance declined to 46% from 60% six months prior, according to DefiLlama data.

Dencun upgrade expected to reduce transaction costs

Another potentially bullish factor for the Ethereum network is the anticipated upgrade on the leading DEX, Uniswap. According to a July 17 presentation at the Ethereum Community Conference, the upcoming Uniswap v4 will allow users to build unlimited types of pools using programmable buttons (hooks), native ETH support and a singleton contract that performs internal transactions before settling final balances.

The announcement fueled the likelihood that EIP-1153 will be included in the next “Dencun” upgrade, which triggered Slingshot and DeFi Pulse co-founder Scott Lewis.

i had missed the news that uniswap labs got eip1153 into cancun.

they kept the details for wanting eip1153 secret from the community, only publishing v4 only after inclusion was finalized.

informal governance captured by an insider-aligned, for-profit monopoly. sad day.
— scottlewis.canto➕ (@scott_lew_is) June 13, 2023

If approved, the implementation will be vital for the Ethereum network to recoup the market share lost due to high gas fees, as the seven-day average transaction cost has been above $4 since February. Consequently, Ethereum’s total value locked has dropped to its lowest level since April 2020, at 13.55 million ETH, according to DefiLlama.

Moreover, decentralized application activity has dwindled, as shown by DappRadar’s unique active wallets’ 30-day data: Uniswap, minus 28%; 1inch Network, minus 14%; MetaMask Swap, minus 8%; and OpenSea, minus 5%. As a comparison, in the same period, BNB Smart Chain’s PancakeSwap gained 10%, and Polygon’s Uniswap users increased 8%.

Derivatives metrics remain flat

Ether quarterly futures have been signaling unease among professional traders. Those fixed-month contracts typically trade at a 5% to 10% premium compared to spot markets to compensate for the delayed settlement, a situation known as contango.

*Ether 3-month futures premium. Source: Laevitas*

According to data from Laevitas, the Ether three-month futures premium currently stands at 4%, which is below the neutral threshold and lower than the 5.5% level seen on July 14. This indicator is clear evidence that traders are less inclined to use leverage for bullish ETH positions.

More concerningly, Ether’s 59% gains year-to-date might have caused investors to become overly optimistic. A recent survey from CryptoVantage of 1,000 North Americans that invested in cryptocurrencies over the past five years found that 46% named Ether as the top contender to surpass Bitcoin (BTC).

*Coins with the best chances of surpassing Bitcoin. Source: 2023 CryptoVantage survey*

This is a somewhat startling point of view, but it could be misleading since the survey did not ask whether any coin would eventually flip Bitcoin, so respondents don’t necessarily place strong odds on this outcome.

Fidelity’s analysis has given valid reasons for why the firm is bullish on Ether’s 12-month price performance, but in the shorter term, the recurrent high gas fees and lack of interest from leverage buyers signal increased odds of the Ether price breaking below the channel support.

Cardano price turns bullish, but is there substance to the ADA rally?

July 14, 2023 Coin Telegraph

Basho

Cardano’s DeFi footprint and network activity show an uptick in users, but will it be enough to sustain ADA’s recent bullish price action?

Cardano (ADA) experienced a remarkable price surge of 23.9% on July 13, leaving investors curious about the potential for further gains. This significant rally comes on the heels of a favorable judicial decision regarding XRP, leading many to question if ADA has what it takes to break above the $0.40 mark.

*Cardano 1-day price in USD at Coinbase. Source: TradingView*

There are three reasons to support Cardano’s bullish momentum, including its potential to integrate other blockchains, increased activity in decentralized applications, and the decreased regulatory risk, although the latest XRP event requires a more cautious approach.

SEC actions specifically named ADA as a potential security

Cardano and its ADA token found itself in the spotlight as the Securities and Exchange Commission (SEC) referred to it as a potential security during the recent court action against Coinbase and Binance exchange. However, it's important to distinguish that while the staking offering may be considered a security, it does not pose a direct risk to Cardano or its development companies.

Following the SEC's remarks in June, ADA faced a 36% correction, dropping to $0.24. However, the recent XRP ruling on July 13 helped alleviate regulatory risks, leading to a boost in the rally of ADA and other coins impacted by the regulator's comments.

The idea of implementing sidechains sparked additional interest

After a recent video shared by John Woods, CTO at Algo Foundation, Charles Hoskinson, co-founder of Cardano, proposed incorporating Algorand (ALGO) as a Cardano sidechain.

It might be prudent for Algorand to consider becoming a sidechain of Cardano. Always here to help. https://t.co/h3lQeF7WlK
— Charles Hoskinson (@IOHK_Charles) July 12, 2023

Although it may seem unlikely for the Algorand community to accept such a suggestion, the proposal gains relevance amidst AlgoFi's shutdown announcement on July 11. The decision followed the SEC's allegations of security-like characteristics against Algorand due to its ICO. This could provide a way for Algorand to avoid regulatory scrutiny, and it could also boost the adoption of Cardano's ecosystem.

It's worth noting that smaller altcoins could be incentivized monetarily to become a Cardano sidechain, leveraging Cardano's rich treasury and marketing potential.

Increased activity in Cardano DApps and NFT markets

Smart contract activity plays a vital role in the success of blockchains designed for decentralized applications, especially as Ethereum struggles with soaring transaction fees. Therefore, assessing ADA’s activity in terms of deposits locked on smart contracts and the number of DApp users becomes crucial in determining the sustainability of the current bull run.

*Cardano smart contracts TVL, in ADA terms. Source: DefiLlama*

According to DefiLlama, Cardano's Total Value Locked (TVL) in ADA terms increased by 10% month-on-month, reaching 550 million ADA on July 14. Additionally, DEX volumes saw a 6% increase over the past seven days.

Cardano's NFT sales, as reported by CryptoSlam, surged by 56% to $3.1 million, outperforming leading platforms like Solana and Ethereum.

Data sounds promising, but ADA could still face regulatory setbacks

The recent rally in ADA is certainly encouraging, but there are still some risks to consider before investing in the project.

Despite the beneficial XRP decision, it's important to note that Cardano's ICO was not explicitly cleared by the court ruling, as it solely addressed sales via exchanges and OTC desks. The ongoing XRP trial will further determine the fate of Cardano's regulatory status.

Additionally, ADA’s TVL of $200 million lags behind other layer-1 smart contract alternatives such as Tron ($5.9 billion), BNB Smart Chain ($3.4 billion) and Avalanche ($727 million). This suggests that there is still limited demand for ADA's services.

To solidify its position and potentially surpass the $0.40 mark, Cardano needs to continue growing and delivering on its promises, including the planned updates for 2023. Important upcoming updates include the Hydra layer-2 solution that uses sidechains to offload transactions from the main chain, and Basho, a layer-1 scalability and performance improvement proposal including improved block structure, parallelization, and pipelining.

4 reasons why Ethereum price can’t break $1,970

July 6, 2023 Coin Telegraph

<div>4 reasons why Ethereum price can't break ,970</div>

Coin Telegraph

The Ethereum network has faced withdrawals from its smart contract applications, putting the recent ETH price rally in check.

Ether (ETH) price faced resistance after hitting the $1,970 level on July 3. A number of factors capped the rally, including higher odds of more interest rate hikes in the coming months and a tighter regulatory cryptocurrency environment.

Macro headwinds from the Fed

Besides the external factors, the Ethereum network has faced withdrawals from its smart contract applications, which also put the June rally in check.

Investors now question whether the tailwinds from Bitcoin’s (BTC) ETF requests have faded, opening room for a correction down to the $1,700 level last seen on June 16.

The recent macroeconomic events may provide some hints, including the, U.S. Gross Domestic Product grew by an annualized 2% in the first quarter, Germany’s Consumer Price Index increased 6.8% in June versus the previous year, and The China Caixin global services purchasing managers’ index (PMI) reporting activity expansion.

Thus, strong economic indicators have heightened investors' expectations of further tightening measures from the U.S. Federal Reserve.

Fed Chair Jerome Powell's suggestion of two more interest rate hikes in 2023, coupled with the increasing cost of capital and higher returns on fixed-income investments, have diminished interest in cryptocurrencies.

On the regulatory front, the most pressing news and events included:

June 28: European Union (EU) lawmakers moved ahead with the controversial Data Act, imposing altering requirements for smart contracts, including kill switches that allow them to be safely terminated and rules for providing shareable data.
July 4: Binance Australia had their corporate offices searched by local authorities, part of an ongoing probe of its derivatives business, whose license was shut down in April 2023.

TVL nears 3-year lows as network demand falls

The Ethereum network is likely facing its own challenges, particularly after co-founder Vitalik Buterin stated on June 29 that he does not stake all of his Ether due to the complexities associated with multisignature wallets.

*Ethereum network total smart contract deposits (TVL) in ETH terms. Source: DefiLlama*

The total value locked (TVL), which measures the deposits locked in Ethereum's smart contracts, reached its lowest level since August 2020. The indicator declined by 3.1% to 13.7 million ETH in the 30 days leading to July 4, according to DefiLlama.

A lower TVL means either investors are losing interest in the network's smart contract use or have moved to layer-2 alternatives in search of lower transaction fees. Either way, the potential demand for the Ethereum network is negatively impacted, thus being interpreted as bearish.

ETH price gains fueled by leveraged longs

Analyzing the positions of professional traders in ETH derivatives is crucial to determine the likelihood of Ether's price surpassing the $1,970 resistance level.

There are occasional methodological discrepancies between different exchanges, so readers should monitor changes instead of absolute figures.

*ETH top traders' futures long-to-short ratio. Source: CoinGlass*

Despite Ether trading within a narrow range of $1,815 to $1,975 since June 22, professional traders have increased their leveraged long positions in futures, as indicated by the long-to-short ratio.

At crypto exchange Binance, the long-to-short ratio sharply increased, from 1.14 on June 20 to 1.30 on July 4. Similarly, at OKX, the long-to-short ratio also increased from 0.76 on June 20 to a 2.25 peak on July 4, favoring leveraged longs.

To exclude externalities that might have solely impacted the Ether futures, one should analyze the ETH options markets. The 25% delta skew indicator compares similar call (buy) and put (sell) options and will turn positive when fear is prevalent because the protective put option premium is higher than the call options.

*Ether 30-day 25% skew. Source: Laevitas*

The skew indicator will move above 8% if traders fear an Ether price crash. On the other hand, generalized excitement reflects a negative 8% skew.

As displayed above, the delta skew flirted with moderate optimism between July 3 and July 4, but was unable to sustain such a level. Presently, the negative 2% metric displays a balanced demand for call and put options.

ETH at $1,700 might be distant, but so is $2,000

Considering these four reasons, namely increased leverage long-to-short ratio, declining TVL, potential interest rate increases, and tighter cryptocurrency regulation, ETH bears are in a better position to hold back the positive price impact coming from the Bitcoin ETF saga.

Although these factors may not be sufficient to drive ETH price down to $1,700, they present significant obstacles for ETH bulls. Notably, the previous attempt to brea $2,000 on April 13 lasted less than a week. Therefore, in the short term, bears have better odds of successfully defending the $1,970 resistance.

3 reasons why Ethereum’s market cap dominance is on the rise

June 21, 2023 Coin Telegraph

bnb

Bitcoin dominance is rising, but so is Ethereum’s share of market dominance among its altcoin competitors. Cointelegraph explains why.

Ethereum has been the dominant smart contract and decentralized application (Dapp) network since its inception. An analysis based on Ether’s price (ETH), and its market capitalization, shows indisputable evidence that the blockchain has been gaining market share over time.

*Ether market capitalization dominance (%). Source: TradingView*

As shown above, Ether’s dominance in market capitalization terms grew over the past couple of years, from an 18% average in July 2021 to the current 20%. Excluding Bitcoin (BTC) from the analysis, Ether’s market share presently stands at 40.6%, while the next competitor, BNB, holds a 7.2% share.

This shows the disparity from the leading Dapp-focused network to the incumbents, which is also evident when analyzing the total value locked (TVL) on each network’s smart contracts. Ethereum is the absolute leader with $24.6 billion in TVL, followed by Tron’s $5.4 billion and BNB Chain’s $3.3 billion.

*Total value locked market share (%). Source: DefiLlama*

The above chart depicts the Ethereum network’s TVL market share declining from 70.5% in June 2021 to 49.5% in May 2022. The movement happened while Terra and Avalanche gained a combined 20% market share in smart contract deposits. However, after the Terra-Luna ecosystem collapse in May 2022, which culminated with developers halting network activity, Ethereum quickly regained a 58% market share.

Despite the emergence of Dapps on the BNB and Tron blockchains, Ethereum’s leadership has remained unquestioned over the past 12 months. This data shows the irrelevance of the total number of unique active wallets interacting with smart contracts (UAW) per chain.

For instance, according to DappRadar, WAX has 363,600 active users, followed by BNB Chain's 517,300 30-day UAW. These figures are way higher than the Ethereum network’s 66,300 unique active addresses, but they reflect a much lower transaction fee, opening room for manipulation.

Decentralization matters, and Ethereum stands out among its competitors

Ethereum is the ecosystem with the highest number of active developers, surpassing 1,870, which is more than the next three competitors combined: Polkadot (752), Cosmos (511), and Solana (383).

Currently, the Ethereum network has over 700,000 validators, with 99% of the balances locked in staking participating in the process. The 32 ETH threshold limit per validator undoubtedly inflates this number, but Lido, the largest known staking pool, controls 32% of the staking, with Coinbase coming in second with 9.6%.

Consequently, it is safe to say that Ethereum is far less centralized in terms of development and validation in comparison to Tron, BNB Chain and Solana.

Other reasons why Ether’s dominance has been on the rise, even as Bitcoin reached a 50% market share on June 19 are: derivatives activity and Ethereum’s dominance of the NFT market

Derivatives markets are essential to institutional investors

Ether’s future contracts are essential for institutional trading practices like hedging and trading with leverage. Ether’s cash-settled futures were added to the Chicago Mercantile Exchange in February 2021. To date, no other cryptocurrency, apart from Bitcoin, has ever reached the world’s largest derivatives exchange.

In futures markets, longs and shorts are balanced at all times, but having a larger number of active contracts — open interest — allows the participation of institutional investors who require a minimum market size. Ether futures aggregated open interest stands at $5.4 billion, while competitors BNB hold $380 million and Solana a mere $178 million.

Ethereum is still the market leader in NFTs

Nonfungible tokens (NFT) are a perfect example of how cheaper and faster transactions do not always translate to increased adoption. There’s nothing stopping NFT projects from shifting between blockchains, whether for new listings or existing collections. In fact, y00ts and DeGods moved to Polygon earlier in 2023.

Despite facing gas fees that oftentimes break above $10, Ethereum remains the absolute leader in the number of buyers and total sales. According to CryptoSlam!, the leading network reached $380 million in sales in the past 30 days, while Solana, Polygon and BNB Chain totaled a combined $93 million.

Ultimately, the data favors Ethereum versus the competing smart contract-focused blockchains. The positive trend in Ether’s dominance might fade over time if the promised upgrade to allow parallel processing (sharding) does not come to fruition, but for now, Ether’s 20% market capitalization share remains unchallenged.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

3 key Ethereum price metrics point to growing resistance at the $1,750 level

June 16, 2023 Coin Telegraph

3 key Ethereum price metrics point to growing resistance at the ,750 level

basis

Ethereum price looks poised for additional downside as low as the $1,560 level.

Ether (ETH) price plunged 7% between June 14 and June 15, reaching its lowest level in three months and impacting investors’ view that the altcoin was en-route to turning $2,000 to support.

It is worth noting that the $1,620 bottom represents a $196 billion market capitalization for Ether, which is higher than PetroChina’s $186 billion, and not far from chipmaker AMD’s $198 billion.

Being the 66th largest global tradable asset in the world is no small feat, especially considering that the cryptocurrency is merely 8 years old and does not return any kind of direct profit for the project’s maintenance. On the other hand, securities enjoy the benefits of corporate earnings and eventual government subsidies, so perhaps investors should be concerned by the recent price drop from Ether.

Ether price pressured succumbs to regulation and lowered network activity

Regulatory pressure helped to subdue investors’ appetite for Ether as the Securities and Exchange Commission (SEC) proposed a rule change regarding the definition of an exchange. Paul Grewal, chief legal officer of the Coinbase exchange, has pushed back against the proposed change, claiming that it violates the Administrative Procedure Act.

More concerningly, decentralized applications (Dapps) usage on the Ethereum network failed to gain momentum despite gas fees plummeting by 75%. The 7-day average transaction cost dropped to $4 on June 14, down from $16 one month prior. Meanwhile, Dapps active addresses declined by 18% in the same period.

*30-day Ethereum DApp activity. Source: DappRadar*

Notice that the decline happened across the board, affecting decentralized finance (DeFi), NFT marketplaces, gaming and collectibles alike. Curiously, the total value locked (TVL), which measures the deposits locked in Ethereum's smart contracts, declined by a mere 2% versus mid-May to 14.6 million ETH, according to DefiLlama.

To analyze the odds of Ether’s price breaking below the $1,650 support, one should check for a reduced ETH futures premium and increased costs for protective put options.

Ether quarterly futures are popular among whales and arbitrage desks. However, these fixed-month contracts typically trade at a slight premium to spot markets, indicating that sellers are asking for more money to delay settlement.

As a result, ETH futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Ether 2-month futures annualized premium. Source: Laevitas*

According to the futures premium, known as the basis indicator, professional traders have been avoiding leveraged longs (bullish bets). Despite the modest improvement to 2%, the indicator remains far from the neutral 5% threshold.

The skew indicator will move above 8% if traders fear an Ether price crash. On the other hand, generalized excitement reflects a negative 8% skew. As displayed above, the delta skew has been signaling fear since June 10 and peaked at 21% on June 15 — the highest level in three months.

Ether’s price looks poised to drop down to $1,560

Investors tend to focus solely on short-term price movements and forget that Ether’s price is up 37% year-to-date in 2023. Moreover, by relying too much on Ethereum Network's $24 billion total value locked (TVL), traders might have missed the signals of weakening demand for Dapps use.

For now, bears have the upper hand considering the ETH derivatives metrics, so a retest of the $1,560 support is the most likely outcome. That does not mean that the 2023 gains are at risk, but until the regulatory FUD dissipates, bulls will have a hard time moving Ether above the $1,750 resistance.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Binance CEO CZ responds as data points to billions in exchange outflows

June 12, 2023 Coin Telegraph

Balances

Data analytics platforms have reported billions of dollars in outflows from Binance over the last week, but this can be misinterpreted, argues Changpeng Zhao.

While data suggests that crypto assets have been flowing out of centralized exchanges at an accelerated pace over the last week, Binance CEO Changpeng Zhao argues it may not be as bad as it appears.

Leading analytics platforms such as Nansen and DefiLlama have all measured increased exchange outflows from Binance over the past seven days after news of the Securities and Exchange Commission’s lawsuit against the firm hit the airwaves.

According to Nansen, there has been a net outflow of $2.36 billion from Binance over the past seven days, along with $123.7 million flowing out of Binance.US.

DefiLlama reported an even larger figure of $3.35 billion in outflows from Binance, while Glassnode data shows the exchange’s BTC balance having declined by 5.7% or around $1 billion over the past seven days.

However, in a June 10 Twitter post, CZ argued that some exchange outflow data can be skewed as some third-party analytics measure change in assets under management as “outflow,” which would include times when crypto prices decline.

According to our data, last 24hrs, @Binance net outflow is about $392m.

Our wallet addresses are public. Some 3rd party analytics measure Change in AUM (asset under management) in USD equivalent as outflow. This would include crypto price drops (which decrease AUM) as "outflow".…
— CZ Binance (@cz_binance) June 10, 2023

CZ instead claimed the firm’s outflow over the past 24 hours on June 9 was around $392 million, which pales in comparison to the $7 billion in one-day outflow that was recorded last year in November, around the time of FTX’s collapse.

CZ continued to explain that large inflows and outflows are perfectly normal during times of volatility.

“Some even only measure outflow, not inflows. On a sharp price movement day like today, many arbitrage traders move a lot of funds between exchanges, usually exponentially more than on normal days.”

Since the SEC’s lawsuits against Binance and Coinbase on June 5 and 6, the total crypto market capitalization has declined by 7%, or more than $80 billion, according to CoinGecko.

On June 9, Cointelegraph reported that decentralized finance volumes surged more than 400% following the twin lawsuits targeting thecentralized exchanges.

Magazine: Binance, Coinbase head to court, and the SEC labels 67 crypto-securities: Hodler’s Digest, June 4-10

Ethereum price is pinned below $1.9K, and data suggests that is unlikely to change in the short–term

May 24, 2023 Coin Telegraph

Ethereum price is pinned below .9K, and data suggests that is unlikely to change in the short–term

basis

3 key indicators are behind the prolonged bearish trend in Ether, and data fails to identify an immediate catalyst for a price breakout.

Ether’s price has been stuck below $1,920 for the past 16 days, which is especially concerning since the latest breakout attempt on May 6 lasted less than 24 hours. Excluding this brief price pump, Ether’s (ETH) journey below $1,920 was initiated on April 21, over 30 days ago.

One can likely blame the Ethereum network’s $8.80 average transaction fee for investors’ diminished appetite, but the macroeconomic environment has also played an important role. On May 22, JPMorgan Chase CEO Jamie Dimon said it is impossible to predict the outcome of the Federal Reserve’s monetary policy, designed to curb inflation.

As CNN reported, Dimon added:

“You’re already seeing credit tighten up because the easiest way for a bank to retain capital is not to make the next loan."

The uncertainty surrounding the United States debt ceiling standoff between Joe Biden’s administration and the U.S. Congress is the probable cause for the worsening sentiment among institutional investors toward cryptocurrencies. According to CoinShares’ latest “Digital Asset Fund Flows Report," outflows across digital asset investment products hit $232 million over the past five weeks.

Furthermore, there are two indicators that impact Ether’s price and signal reduced demand for its decentralized finance ecosystem, in addition to weak leverage buying activity from professional traders.

Total Ethereum deposits are stable, but there’s a catch

The Ethereum network’s limited processing capabilities have been causing high gas fees, which greatly reduces the demand for smart contract usage. For the past five weeks, the average transaction fee has remained above $8, although at first sight, no impact was felt.

*Ethereum network applications' total deposits in ETH. Source: DefiLlama*

The total value locked (TVL) in the network remained stable at 15.1 million ETH versus four weeks prior, but it is nearing the lowest levels since August 2020. As a comparison, the TVL on the BNB Smart Chain in BNB (BNB) terms was essentially flat in the same period, while TRX (TRX) deposits on the Tron network declined by 12%.

BNB Smart Chain flips Ethereum’s lead in DEX volume

Ethereum has historically been the absolute leader in decentralized exchange (DEX) volumes, but it all changed in the week ending May 21.

*Weekly DEX volume by chain. Source: DefiLlama*

The Ethereum network’s DEX market share drastically dropped from a 75.5% peak on March 5 to 22.3% on May 21. Meanwhile, BNB Smart Chain was the biggest beneficiary, growing to 61.1% from 5.6%.

The number of active addresses interacting with decentralized applications (DApps) is also in a slump. Over the last 30 days, the top 12 DApps running on the Ethereum network saw an 11% drop in active addresses, possibly reflecting investor dissatisfaction with the high transaction costs.

Data shows drop leverage traders using derivatives

As a result, ETH futures contracts in healthy markets should trade at a 4 to 8% annualized premium — a situation known as contango, which is not unique to crypto markets.

According to the futures premium, known as the basis indicator, Ether professional traders have avoided leveraged longs (bullish bets) for the past four weeks. Moreover, not even the brief rally toward $2,000 on May 6 was enough to flip those whales and market makers into bullish sentiment.

In short, these three indicators signal bearishness — namely, the record-low DEX market share, the declining addresses engaging with DApps and a lack of leveraged buying demand.

Maybe investors were expecting some kind of announcement out of Ethereum inventor Vitalik Buterin’s appearance at Edcon 2023 in Montenegro, which wasn’t the case — the fact is there’s no imminent driver to justify a sustainable rally above $1,920 in the short term.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

3 reasons why Ethereum price could struggle at the $1.9K level

May 16, 2023 Coin Telegraph

3 reasons why Ethereum price could struggle at the .9K level

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The ETH price could come under short-term pressure due to a downtrend in deposits, reduced DEX volume market share and futures data showing traders with a bearish bias.

Since May 12, Ether’s price has been struggling to sustain its $1,800 support level, as investors face pressures from a worsening crypto regulatory environment and the Ethereum network’s high gas fees. Also negatively impacting Ether’s (ETH) price are three indicators signaling reduced demand for its decentralized applications (DApps) and a lack of leverage buying demand from professional traders.

Regulators signal their plan to further limit crypto intermediaries

According to court documents filed on May 15, the United States Securities and Exchange Commission (SEC) has given a formal response in court in relation to Coinbase’s petition for clear crypto regulation. The SEC stated that any rulemaking may take years and that enforcement actions will continue in the meantime.

On May 16, the Economic and Financial Affairs Council of the European Union — comprising finance ministers of all member states — approved the highly anticipated Markets in Crypto-Assets (MiCA) regulation, which will come into effect by mid-2024.

Some argue that MiCA facilitates business growth in the region. Others focus on the privacy risks for personal users’ data and the risks imposed on non-custodial solutions, including decentralized finance applications.

The drop in DApp deposits is concerning

The Ethereum network is experiencing problems caused by surging gas fees — the cost associated with transactions, including those performed by smart contracts. For the past four weeks, the average transaction fee has stood above $9, which severely limited the demand for DApp usage.

Total deposits on the Ethereum network in Ether terms plunged to their lowest levels since August 2020. Such an analysis excludes the effects of native Ethereum staking, which recently started to allow withdrawals.

According to DefiLlama data, Ethereum DApps reached 14.9 million ETH in total value locked (TVL) on May 16. That compares with 16.5 million ETH two months prior, a 10% decline. As a comparison, TVL on BNB Smart Chain in BNB (BNB) terms was essentially flat in the same period, while Polygon (MATIC) deposits on the Polygon network increased by 29%.

BNB Smart Chain attempts to take a lead in DEX volume

Ethereum might have been the absolute leader in decentralized exchange (DEX) volume since its inception, but this position is being challenged. Ethereum’s market share by volume on DEXs peaked at 75% in the week ending March 5 but steadily declined to its lowest level ever, 39.6%, in the week ending May 14.

Gainers since March 5 on DEX trading volume were Arbitrum, increasing to 14% from 7%, and BNB Smart Chain, growing to 31% from 5.6%. One might argue that the success of the Ethereum network’s scaling solutions reflects bullishness for Ether’s price, but that relationship is not so direct.

Data shows pro traders turning bearish

As a result, ETH futures contracts in healthy markets should trade at a 5 to 10% annualized premium — a situation known as contango, which is not unique to crypto markets.

*Ether 3-month futures annualized premium. Source: Laevitas*

Ether professional traders have avoided leverage longs (bullish bets) since early April. Moreover, the current 1% ETH futures premium is on the edge of becoming negative, known as backwardation — if confirmed, this is an alarming red flag, as bearish demand dominates the scene.

In short, these three indicators — namely, the reduced TVL, record-low DEX market share and lack of leverage buying demand — signal the $1,900 resistance will be hard to break in the short term. For now, Ether bears are in control, favoring the odds of a price correction.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

Over 440,000 Ethereum Added to Liquid Staking Derivatives in Two Weeks

May 13, 2023 Bitcoin.com

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