Daily Archives: May 13, 2022

Data shows the crypto futures market has taken a $380 million beating over the past day as Bitcoin has rebounded above $30k. Out of this amount, $240 million liquidations have belonged to short traders.

Crypto Shorts Observe $240 Million In Liquidations Over Last 24 Hours

In case anyone isn’t aware of what “liquidations” are, it’s best to first take a brief look at the workings of margin trading in the crypto futures market.

When an investor opens a, say, Bitcoin long or short contract at a derivatives exchange, they first have to put forth some collateral called the “margin.” This margin can be in BTC, any other coin, or even fiat.

Against this margin, the investor may choose to take on “leverage,” a loaned amount often many times the initial position.

The advantage of leverage is that if the price moves in the direction the contract bet on, the profits earned are then many times more now.

Related Reading | Bitcoin Bloodbath Awakens Sleepy Giant As Spot Volumes Surge

However, it is also true that any losses incurred will also be multitudes more. When such losses eat up a specific portion of the margin, the exchange forcefully closes off the Bitcoin position.

This is what a liquidation is. The below table shows the data for liquidations in the crypto market over the past day.

Looks like liquidations in the futures market have amounted to about $380M In Last 24 Hours | Source: CoinGlass

As you can see above, the crypto market has suffered some heavy liquidations over the past day, with $184 million coming in the past 12 hours alone.

A majority of the liquidations have been from short traders, which makes sense as coins like Bitcoin have observed a big rebound in the price today.

Around 63% of the liquidations have involved shorts | Source: CoinGlass

Looking at the above data, it seems like more than $240 million liquidations have been short traders getting flushed.

Related Reading | Bitcoin Crash 20% in 5 Days. Why is it the Golden Time to Enter the Crypto Market?

Large liquidations like today’s aren’t particularly uncommon in the crypto market. There are a couple of reasons behind this.

The first is the high volatility of coins. Even the biggest coins like Bitcoin and Ethereum can observe rather large swings in a short timespan.

The other factor that contributes to this is the fact that many derivatives exchanges offer as high as even 100x leverage.

Uninformed traders opting for such large positions in a volatile market like crypto greatly increases the risk of liquidations.

Bitcoin Price

At the time of writing, Bitcoin’s price floats around $30.5k, down 15% in the past week.

The price of the coin seems to have already observed a rebound from the crash | Source: BTCUSD on TradingView

Featured image from Unsplash.com, chart from TradingView.com

Terraform Labs co-founder Do Kwon has tabled a proposal to preserve the Terra ecosystem following the historic depegging of its algorithmic stablecoin, UST, and the resulting death spiral that plunged Terra (LUNA) tokens to practically zero. 

In a Friday post on Terra’s research forum, Kwon said, “The Terra community must reconstitute the chain to preserve the community and the developer ecosystem.” His proposal, which was in response to validator groups discussing the possibility of forking the Terra chain, involves compensating UST and LUNA holders who were unable or unwilling to sell their holdings during this week’s price collapse.

Kwon proposed that validators should reset network ownership to 1 billion tokens distributed among LUNA and UST holders as well as a community pool to fund future development. Specifically, 40% of the newly distributed tokens would go toward LUNA holders before the depegging event; 40% would go towards UST holders on a pro-rata basis at the time of the new network upgrade; 10% would be allocated to LUNA holders just before the chain halted operations and the remaining 10% would go toward the development pool.

Regarding UST ever being repegged to the United States dollar, Kwon said it likely wouldn’t make a difference given the mass liquidity events across the Terra ecosystem this week. In other words, trust in the stablecoin model has been eroded permanently. He explained:

“Even if the peg were to eventually restore after the last marginal buyers and sellers have capitulated, the holders of Luna have so severely been liquidated and diluted that we will lack the ecosystem to build back up from the ashes.” 

At its height in early April, LUNA’s market cap was over $41 billion, according to CoinMarketCap. The value of Terra’s UST, which can no longer be referred to as a stablecoin, peaked at almost $19 billion. After losing its dollar peg, UST crashed to a low of around $0.13 on Friday. 

Although there’s no way to fully restore the blockchain’s value, Kwon said the redistribution plan has to compensate the network’s debt holders and “loyal community members and builders.”

Related: Failed exit? Traders complain Crypto.com reversed profitable LUNA transactions

Kwon’s proposal was submitted roughly two days after he published a plan to save UST’s dollar peg, which involved increasing the special drawing rights pool and expanding the protocol’s minting capacity. The plan failed to win favor among the community of so-called “LUNAtics,” as the price of LUNA and its sister token continued to plummet. 

Interest in the revolutionary technology “NFTs” has been growing over the last few years; in many countries, it peaked last year, in others, such as Singapore and the United Arab Emirates, the NFT boom is now.  as interest grows, so does the number of people hearing about and buying NFTs reaching well beyond the world of crypto enthusiasts. Since the real hurdle to expanding a market is turning curious people into investors in order to raise the market cap of NFTs, it’s the new investors that need to be supported. The problem is that the current poor user experiences in the NFT space are pushing away new investors and lowering the market cap. Research shows that the barriers to NFT adoption are reliability, education and necessity.

These barriers have severely limited the adoption of NFTs. One columnist for The Daily Eastern News claims that NFTs are “really confusing”, while other writers criticize NFT marketplaces for being too technical, confusing and fragmented across Web 3.0. Among the different marketplaces, many have attempted to remove barriers to entry for new NFT investors. One such example is Opensea which added MoonPay as an option to purchase cryptocurrencies. By using MoonPay, an investor can directly add funds and purchase NFTs through their app. However, MoonPay is banned in numerous countries and states. Other issues include lack of education, reliability and support.

Currently, no marketplace offers a solution to any barrier, let alone all of them. The real challenge for users is that NFTs marketplaces are all on separate blockchains, which creates a huge fragmentation of communities, fanbases, art and assets. Therefore, what is urgently needed to raise the market capitulation of the NFT space is an all-in-one platform that removes barriers and then educates and supports new users.

Enter Ludo, a revolutionary all-in-one Web 3.0 app for play-to-earn projects and NFTs. Ludo aims to be the gateway to the metaverse and all things NFT. Using the platform users can discover, collect, showcase, promote and earn. Ludo is aware there are barriers to NFT adoption and aims to remove them all, as shown in their Manifesto, which states: “At Ludo, we don’t simply want to be part of this New Renaissance. We want to shape it.”. The question is, how is Ludo tackling the barrier to NFT adoption and thus raising the NFT market capitulation?

Reliability

Ludo removes the inaccessible nature of other marketplaces by creating a hub of all things NFT. Instead of a user being separate from other marketplaces, creators and buyers, Ludo offers a platform that displays information from every marketplace. With Ludo, a user’s first NFT experience is simplified to accessing their app and finding the NFT they want. There’s no need to search across blockchains to search for a marketplace.

Education

Ludo provides a clean and sleek interface that is clearly labeled and newcomer-friendly. The app avoids technical jargon and explains terms in simplified ways, such as concert ticket NFTs and gaming NFTs labeled as ‘experiences. Further, the search tools are simplified with filters such as blockchain, cost and type. The NFTs have clear icons dictating NFT price, blockchain and other important information. Information on NFTs is compiled, allowing users to educate themselves and learn more.

Necessity

NFT-based content is rapidly growing as music, gaming, metaverses and physical assets join the market. The necessity comes from the growing fragmentation of the NFT space. As iterated previously, Ludo provides an an-all-in-one hub of information, creation, advertisement, community and content. As the NFT market grows, so does the need for Ludo.

Thus, Ludo removes every barrier by offering a seamless and necessary platform that is reliable, educational and supportive. By providing a high-quality, accessible and supportive platform, Ludo provides greatly enhanced user experiences. Resulting in new investors who are more likely to stay, purchase and grow the NFT market. The poor user experiences of newcomers are a thing of the past as Ludo supports the growing NFT market capitulation. Find out more about Ludo and apply to be an alpha tester on their website here.

Image: Pixabay

On Friday, the value locked in decentralized finance (defi) protocols dropped to a low of $110.35 billion after there was more than $200 billion total value locked (TVL) eight days ago on May 5. One specific defi protocol called Lido, a liquid staking platform and the second largest defi application in terms of TVL size today, has lost significant value losing 49.66% during the past week.

Curve’s stETH:ETH Peg Skews, Lido Adds New Pool With Liquidity Incentives

While being exposed to the Terra blockchain blunder, Lido’s bonded ethereum tokens have been under pressure due to an imbalance on Curve’s bonded ethereum (stETH) and ethereum pool. The liquid staking defi protocol Lido announced that it was deploying liquidity incentives to Curve Finance in order to improve the imbalance that has been taking place around the stETH:ETH peg.

“We are deploying an additional Curve Finance pool to improve the liquidity around the stETH:ETH peg,” Lido tweeted on May 12, 2022. “This new pool will feature an additional 1M LDO in incentives for the next week and is currently almost empty, suggesting high rewards to initial depositors.” Before the announcement, Curve’s stETH:ETH pool was showing a 2% discount amid the chaos surrounding the Terra blockchain.

Crypto journalist Colin ‘Wu’ Blockchain explained what was taking place on Thursday. “The ETH/stETH asset ratio in Curve’s largest TVL steth (ETH+stETH) pool is skewed,” the journalist tweeted. “ETH/stETH=36.48%/63.52%, people are exchanging stETH back to ETH. Users who are using stETH for leveraged staking need to be aware of potential de-pegging risks.”

Team Plans to Migrate Curve and Balancer Pools, Lido’s TVL Shed $10.26 Billion in a Week’s Time

In the same Twitter thread, Lido described the firm’s plan to mitigate the issue on Curve’s platform. “[The plan is to] migrate liquidity from the existing Curve and Balancer pools to a new one (recommended deposit ratio at current rate is 13 stETH for every 1 wETH) to maximise rewards,” Lido added on Thursday. “The new pool contains 1,000,000 LDO for the next week in rewards.”

Some people questioned the move to create a new pool on the largest defi protocol in terms of value locked. “Is it a good idea? UST was attacked during liquidity migration,” one individual asked.

The liquid staking application Lido also had significant exposure to the Terra blockchain and 49.66% in value has left the platform since last week according to defillama.com stats. Lido currently holds $9.13 billion in value but on May 5, it held $19.39 billion. $10.26 billion has been removed from Lido’s TVL since May 5 and $4,130 in LUNA remains.

What do you think about Lido adding liquidity incentives to Curve’s pool? Let us know what you think about this subject in the comments section below.

Jamie Redman

Jamie Redman is the News Lead at Bitcoin.com News and a financial tech journalist living in Florida. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for Bitcoin, open-source code, and decentralized applications. Since September 2015, Redman has written more than 5,000 articles for Bitcoin.com News about the disruptive protocols emerging today.