Data from Cointelegraph Markets Pro and TradingView tracked an uninspiring day for Bitcoin, with $800 of losses coming in a single hourly candle several hours before the start of trading.
The largest cryptocurrency had avoided volatility on the release of minutes from the United States Federal Reserve’s Federal Open Markets Committee (FOMC).
These had avoided any serious divergence from already known facts about economic policy, and despite concerns thatanti-inflation measures could lead to a recession, no mention of the word “recession” appeared in the minutes.
Even legacy markets remained comparatively cool, with analyst Dylan LeClair describing the situation as “eerily calm” based on volatility data.
Cointelegraph contributor Michaël van de Poppe, who on May 25 had predicted a move towards $32,800 for BTC/USD, reiterated that a breakout from its current trading zone was “coming relatively soon.”
Breakout is coming relatively soon for #Bitcoin and if we combine that with FA, then we can clearly assume that; – Jobless claims – PCE inflation
Are going to be the trigger. If inflation slows down or jobless claims are fine, the FED might be slowing down the policy. pic.twitter.com/WCEgQhMvXm
— Michaël van de Poppe (@CryptoMichNL) May 26, 2022
For the meantime, however, on-chain signals meant that there was likely no impetus for significant price changes, according to fellow trader and analyst Rekt Capital.
Analyzing on-chain volumes, it became clear that neither buyers nor sellers were prepared to make a bold statement at current levels.
“Previous periods of high sell-side BTC volume preceded periods where buyer volume started trickling in in the following weeks. But now, we’re seeing that a) seller volume is declining over time. And b) no $BTC buyer volume has come in following the high seller volume,” he explained to Twitter followers on the day.
As Cointelegraph reported, the NVT Golden Cross, a long-term metric designed to catch price tops and bottoms using volume, flashed red this week as it appeared that on-chain transactions were not significant enough to support even $30,000 levels.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Two proposals to tax crypto assets have failed to gain support from Portuguese lawmakers who are now discussing the state budget. The bids came from minority left-wing parties, while the ruling majority is yet to put forward its own draft to regulate the matter.
Portuguese Lawmakers Stop Motions to Tax Crypto Gains
Members of the Assembly of the Republic, Portugal’s legislature, have rejected two separate proposals to tax profits from crypto investments. They came from the leftist parties Bloco de Esquerda (Left Bloc) and Livre, and were turned down by the majority of the ruling Socialist Party.
The attempts to adopt rules for the taxation of capital gains from crypto assets were made during the ongoing discussions on the country’s 2022 budget, Eco reported. The Portuguese news portal has been following the parliamentary debate.
The development comes after a recent statement by Finance Minister Fernando Medina, who revealed that the government is working on a legal framework allowing the taxation of crypto-related income. He indicated that it’s unacceptable to have tax loopholes for any capital gains, signaling Portugal is preparing to change its tax policy regarding cryptocurrencies.
Portugal established itself as a crypto-friendly destination by maintaining a zero-percent tax rate on profits from private crypto investments. When these gains are not resulting from professional activities, they are not subject to income tax.
Livre’s proposal envisages taxing capital gains from crypto exceeding a threshold of €5,000 ($5,400). The eco-socialist party insisted that the executive power in Lisbon should take the necessary steps to introduce an obligation to declare crypto assets for the purpose of their taxation.
Portugal’s favorable crypto tax regime and relatively affordable costs of living have turned the country into a hub for tech innovations, attracting digital nomads and bitcoin enthusiasts from around the world, including Ukrainians working in the crypto space more recently.
What’s your explanation for Portugal’s decision to change its crypto taxation policy? Tell us in the comments section below.
Lubomir Tassev
Lubomir Tassev is a journalist from tech-savvy Eastern Europe who likes Hitchens’s quote: “Being a writer is what I am, rather than what I do.” Besides crypto, blockchain and fintech, international politics and economics are two other sources of inspiration.
Image Credits: Shutterstock, Pixabay, Wiki Commons
Disclaimer: This article is for informational purposes only. It is not a direct offer or solicitation of an offer to buy or sell, or a recommendation or endorsement of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.
On-chain data shows the Bitcoin exchange whale ratio has remained at a high value recently, a sign that could be bearish for the crypto’s price.
Bitcoin Exchange Whale Ratio On Verge Of Entering “Very High Risk” Zone
As explained by an analyst in a CryptoQuant post, the 72-hour MA whale ratio is near 0.90, the very high risk zone.
The “exchange whale ratio” is an indicator that’s defined as the sum of top ten inflows to exchanges divided by the total inflows.
In simpler terms, this metric tells us what part of the total inflows are contributed by the ten largest transactions, which typically belong to the whales.
When the value of this indicator is above 0.85, it means whales occupy a very large percentage of exchange inflows right now.
As investors usually transfer their Bitcoin to exchanges for selling purposes, such a trend can be a sign that whales are dumping at the moment.
The indicator’s value usually remains above this threshold during BTC bear markets, or fake bull for mass dumping.
Related Reading | Bitcoin Trading Volume Plummets Down From Recent Top
On the other hand, values below the 0.85 mark usually signify that whale inflows are currently in a healthier balance with the rest of the market. The ratio’s value usually remains in this region during bull runs.
Now, here is a chart that shows the trend in the Bitcoin exchange whale ratio (72-hour MA) over the past couple of months:
It looks like the indicator has been at a high value recently | Source: CryptoQuant
As you can see in the above graph, the Bitcoin exchange whale ratio has a value of about 0.89 right now, above the 0.85 threshold.
According to the quant in the post, values above 0.90 may be considered the “very high risk” zone. So, the current value of the indicator is very close to that.
Related Reading | Investors May Expect Downside For Bitcoin And Ethereum Market For The Next 3 Months
In this month so far, the ratio’s value has almost always remained above the 0.85 line, with a couple of spikes above the 0.90 level.
The analyst believes whales are active right now due to the FED May Meeting Minutes, and if the ratio remains high in the near future, then it could spell trouble for Bitcoin.
BTC Price
At the time of writing, Bitcoin’s price floats around $28.8k, down 2% in the last seven days. Over the past thirty days, the crypto has lost 30% in value.
The below chart shows the trend in the price of the coin over the last five days.
Seems like the price of the coin has plunged down over the last couple of days | Source: BTCUSD on TradingView
Featured image from Unsplash.com, charts from TradingView.com, CryptoQuant.com
SWIFT probably won’t exist in 5 years, says Mastercard CEO
Mastercard CEO Michael Miebach said on Tuesday that he does not expect SWIFT, one of the most widely used platforms for cross-border fiat transactions, to exist in five years’ time.
Miebach was speaking at a panel session on central bank digital currencies (CBDCs), as part of the Global Blockchain Business Council (GBBC)’s Blockchain Central Davos conference, which ran adjacent to the World Economic Forum 2022 in Davos, Switzerland.
— Global Blockchain Business Council (GBBC) (@GBBCouncil) May 24, 2022
Towards the end of the panel discussion, when the moderator asked each panelist whether they thought SWIFT would still exist in five years’ time, Miebach caused the audience to gasp in shock after answering “no,” according to a Cointelegraph reporter who attended the session.
The response had not been expected, given his position at Mastercard and that the panelists before him, including Jon Frost, a senior economist at Bank of International Settlements and Jennifer Lassiter, executive director of the Digital Dollar project, an organization tasked with exploring a United States CBDC, had answered in the affirmative.
Other panelists following Miebach also took the affirmative viewpoint, including Yuval Rooz, CEO of Digital Asset — a data technology company — and David Treat, director at Accenture and co-lead of the company’s blockchain business.
Cointelegraph approached Miebach immediately following the panel discussion, but was denied any further comment on the subject.
Later, a Mastercard spokesperson downplayed Miebach’s comments in an email statement:
“Let us clarify the intent of the on-stage comment, as it’s not as simple as a yes or no answer. Michael was simply reinforcing what SWIFT has previously said — their operations continue to evolve. Its current form will not be the same in the future. They are adding more functionality and moving past just being a messaging system.”
SWIFT processed 42 million messages a day last year, but transactions on the network can take several days to complete. The company has been striving to maintain its relevance in the international economic order, especially in regard to CBDCs.
To this end, SWIFT has been exploring the use of CBDCs to facilitate seamless cross-border payments from as early as May 2021 when it released a joint paper with Accenture looking at how digital currencies can help cross-border payments.
Related: WEF 2022: Blockchain community breaks stereotypes at Davos
On May 19, SWIFT announced its second round of experiments involving CBDCs, collaborating with French IT company Capgemini to explore the linking of domestic CBDCs to facilitate seamless cross-border payments.
We’re collaborating with @Capgemini to explore how SWIFT can interlink the multiple domestic-based #CBDC networks emerging worldwide to make cross-border payments with #DigitalCurrencies more seamless & frictionless.
Cointelegraph reporters on the ground at Davos noted that in another panel session titled “Rules of the Road for Digital Economy,” Miebach talked about the role regulation can take in reducing the unnecessary noise around a nascent technology like crypto.
“Not everyone is screaming for regulation but it does reduce the noise in the crypto world. Engaging actively with regulators and being principled, I am optimistic,” he said.
Kusama KSM is the “canary network” for the Polkadot blockchain, designed to facilitate an audit system for Polkadot. Kusama experiments with new features before they are deployed on Polkadot. The KSM token is the native cryptocurrency of the Kusama network.
Get updates on Kusama price in real-time on CoinStats, one of the best crypto platforms around.
Read on to learn everything you need to know about the Kusama KSM network and how to buy Kusama tokens in a few simple steps.
Let’s get started with the Kusama Pros and Cons list:
Pros
Ability to scale: Kusama can scale an unlimited number of projects without slowing the network down.
Eliminates the need for a hard fork: Kusama is fortified against disputes on network upgrades, and scalability, so hard forks are not likely to occur on the project.
Decentralized governance: Kusama is truly decentralized as the KSM holders run the network rather than individuals.
Highly secure: The Kusama network is highly secure, thanks to its decentralized nature, which leaves very little chance for the network to be compromised.
Allows developers access to different blockchains: The KSM token offers developers more flexibility to access different blockchains.
Cons
Competition: Kusama, like Polkadot, faces fierce competition against smart contracts and Proof-of-Stake projects.
Not suited for all projects: Although Kusama is more than just a testnet for Polkadot, it’s still basically a testing ground for projects, some of which may not thrive on it and must be moved to Polkadot.
Parachain limitations: Kusama and Polkadot’s Parachain seem superior to Ethereum in terms of scalability. However, for any application to be launched on Polkadot, it must already exist on another Parachain.
How to Buy Kusama KSM Tokens in 4 Quick Steps
As of publication, the Kusama KSM token is ranked #71 by market cap ($676 million in Q2 2022). The token is available on various crypto exchanges globally, including Huobi Global, Binance, Kraken, etc., and on decentralized exchanges, such as Uniswap and PancakeSwap. To purchase Kusama KSM, you first need to choose a platform that suits your investment needs.
Step #1: Choose a Trading Platform
Several cryptocurrency exchanges allow you to trade KSM. You’ll have to compare them to choose the one that supports Kusama and has the features you want, such as low transaction fees, an easy-to-use platform, and 24-hour customer support. Also, consider if the cryptocurrency exchange allows purchasing KSM with your preferred payment methods, such as a credit or debit card, another cryptocurrency, or a bank transfer.
Cryptocurrency exchanges can be centralized and decentralized, and each has several advantages and disadvantages:
Centralized Crypto Exchange
A centralized crypto exchange or CEX is like a traditional exchange for trading digital assets. CEXs are governed by a centralized system and charge specific fees for using their services. The bulk of crypto trading takes place on centralized exchanges, which allow users to easily convert their fiat currencies like the euro or dollars directly into crypto. Centralized exchanges require their users to follow KYC (know your customer) and AML (anti-money laundering) rules by providing some information and personal identification documents. However, a CEX holds your digital assets on its platform while trades go through – raising the risk of hackers stealing the assets.
Decentralized Crypto Exchange
On the other hand, a decentralized exchange (DEX) is not governed by any central authority; instead, it operates over blockchain and charges no fee except for the gas fee applicable on a particular blockchain, i.e., on the Ethereum blockchain. Decentralized exchanges use smart contracts to let people trade in crypto assets without the need for a regulatory authority. They deploy an automated market maker to remove any intermediaries and give complete control over the funds to users. Decentralized exchanges are less user-friendly from an interface standpoint and also in terms of currency conversion. For instance, they don’t always allow users to deposit fiat money in exchange for crypto; users have to either already own crypto or use a centralized exchange to get crypto. It also takes longer to find someone looking to trade with you as DEX engages in peer-to-peer trade, and if liquidity is low, you may have to accept concessions on price and quickly sell or buy low-volume crypto.
Step #2: Registration
To purchase KSM on a DEX, you simply need a crypto wallet with crypto funds that you can trade for KSM.
Below, we’ll focus on centralized platforms such as Binance, as it’s a popular choice globally.
Binance Sign In page
To register on Binance, you need to provide your e-mail address or a valid phone number and create a strong password.
Binance allows customers to create accounts and perform limited transactions without submitting KYC information. However, to gain full access and increase higher deposits and withdrawal limits, you must complete the KYC verification process. You can deposit funds on the platform and start trading now that you’ve created an account!
Step #3: Deposit Funds
After verifying your account, you must deposit funds for purchasing KSM and other cryptocurrencies. Large platforms like Binance offer several options for fiat deposits. To buy Kusama, you can use a credit or debit card, bank account, or crypto from a cryptocurrency wallet. The payment method you use to buy KSM will be determined by the platform, location, and preferences.
You can also deposit your fiat funds onto your Binance account, trade them for popular crypto pairs, such as Bitcoin (BTC) or Tether stablecoin (USDT), and then exchange them for Kusama KSM.
NOTE: Always check and recheck the amount you want to deposit, as the transactions are often non-reversible.
A Few Tips for Beginners
Obtaining your first crypto as a novice can be a bit confusing, so here are a few tips to help you out:
Tip 1
Depositing BTC can take a little longer than depositing ETH and could come with higher fees. While low trading fees are never a guarantee, they depend greatly on your platform and the digital asset you purchase.
Tip 2
If you’re just starting, and this is your first deposit on a chosen platform, don’t go all in. Start with a smaller amount for your first deposit to gain exposure to various assets later. Once you get some experience, proceed to the amount you’d like to trade for Kusama tokens. Caution is never overrated, especially in the crypto world.
Tip 3
Before trading, check the token’s current price. The crypto market is volatile, and the KSM price fluctuates along with the rest of the crypto assets. Also, dive into trading strategies to make sure you know all risks and rewards.
Step #4: Buy Kusama KSM
You can also buy Kusama on CoinStats
Voilà! Now you are all set to buy KSM. Go to the navigation bar at the top of the page and open Funds> Balances to check your balance. To place an order for Kusama KSM tokens, go to exchange> Basic. We’ll assume you have BTC to trade, but there’s no difference in the process itself. Select BTC in the top right corner and search for KSM to order a trade. The KSM /BTC trading pair should be displayed.
Again, check the amount you wish to trade, as the process is not reversible. Place your order, and you’re the proud owner of your very own Kusama KSM tokens!
What to Do With Kusama KSM Tokens
Kusama website
Once you buy Kusama KSM on Huobi Global, Binance, or any other platform, you can store, stake, or sell them. Let’s revise your options below.
Option #1: Store Kusama
If you believe Kusama is a profitable store of value and could increase in price, you can store the tokens for the long term. While you can keep your newly purchased KSM tokens right on the trading platform, many traders prefer to store their digital assets in their private crypto wallets. We distinguish between a Software Wallet (Hot Wallet) and a Hardware Wallet (Cold Wallet).
If you’re looking to trade KSM regularly, software or hot wallets provided by your selected crypto exchange will suit you. Software wallets are user-friendly and free to use. They store your keys online and are less secure than hardware wallets, but their ease of use makes them ideal for newbies with a few tokens.
Hardware or cold wallets, such as a Ledger hardware wallet,are usually considered the safest way to store your cryptocurrencies as they offer offline storage, thereby significantly reducing the risks of a hack. They are secured by a pin and will erase all information after many failed attempts, preventing physical theft. A hardware wallet also lets you sign and confirm transactions on the blockchain, giving you an extra layer of protection against cyber-attacks, phishing sites, and malware. These are more suitable for experienced users who own large amounts of tokens.
Option #2: Stake Kusama
There’s nothing wrong with storing your Kusama in a hardware wallet. Hardware wallets, however, aren’t a great option if you intend to put your tokens to good use. Kusama Network provides a staking option for holders, letting them earn interest on their tokens.
Any Kusama token holder can generate income through validating transactions using their tokens and temporarily locking them on the Kusama, earning rewards for participating in the Proof-of-Stake consensus mechanism.
However, the KSM price is volatile, and staking could be risky. So make sure to monitor its market cap, price fluctuations, and cryptocurrency market general trends through various crypto portfolio trackers, such as CoinStats, CoinMarketCap, CoinGecko, or Messari.
Option #3: Sell Or Exchange Kusama Coins
Any trader can choose to exchange their Kusama tokens at any point during their journey. If you buy Kusama, then realize you don’t want to keep it any longer; you can simply exchange it for other digital assets or exchange it for fiat to leave the game entirely.
You can sell your KSM tokens on the same trading platform you purchased them.
Now that you have plenty of choices, we’re confident that your newly purchased Kusama will serve you well.
Conclusion
Kusama is a great network for experimenting with the effectiveness of new features before proceeding with the official launch on the Polkadot network. Kusama offers a flexible governance system, low staking requirements, and an elaborate reward system. If you want to participate in all the fun but are unsure where to start, this guide will hopefully give you a bit of direction.
It’s not possible to buy Kusama directly on Binance, but you can buy Bitcoin with a credit card or debit card on Binance and then exchange that for Kusama.
You can also visit our CoinStats blog to learn more about wallets, cryptocurrency exchanges, portfolio trackers, tokens, etc., and explore our in-depth buying guides on buying various cryptocurrencies, such as How to Buy Metaverse Index, What Is DeFi, How to Buy Cryptocurrency, How to Buy VeChain, etc.
Investment Advice Disclaimer: The information contained on this website is provided to you solely for informational purposes and does not constitute a recommendation by CoinStats to buy, sell, or hold any securities, financial product, or instrument mentioned in the content, nor does it constitute investment advice, financial advice, trading advice, or any other type of advice.
Cryptocurrency is a highly volatile market, do your independent research and only invest what you can afford to lose. Performance is unpredictable, and the past performance of Kusama is no guarantee of its future performance.
There are significant risks involved in trading CFDs, stocks, and cryptocurrencies. Between 74-89% of retail investor accounts lose money when trading CFDs. You should consider your own circumstances and take the time to explore all your options before making any investment.
VAST Completes Private Investment Round as It Readies to Launch First-Ever EngageFi™ NFT Platform – Press release Bitcoin News
press release
PRESS RELEASE. Miami, FL – VAST, the multimedia NFT marketplace that dropped the first-ever NFT sitcom featuring Snoop Dogg and The Harlem Globetrotters, has announced the completion of their strategic private investment round with leading blockchain venture capital firms: GHAF Capital, NGC Ventures, Skyman Ventures, Infinity Ventures Crypto, and Spartan Protocol.
The VAST backers are made up of leading visionaries in the blockchain space whose portfolios form much of the backbone of blockchain infrastructure and innovation. Initial seed investors include: Huobi Ventures, Polygon Studios, HyperEdge Capital, GHAF Capital, SL2 Capital, PrimeBlock Ventures, GBV Capital, NGC, Spartan, IVC, Skyman Ventures, LD Capital and Quantstamp. “We are incredibly grateful to our investors for supporting the future of VAST,” says Michael Jurkovac, VAST co-founder and CEO. “With their help, we are providing amazing opportunities and experiences for creators and the millison of fans who support them.”
“As the metaverse phenomenon grows, the potential for VAST – and the celebrity metaverse it is creating, is huge,” Sandeep Nailwal, Co-Founder and COO of Polygon says.
The exciting news about this private round comes on the heels of VAST, built on leading decentralized blockchain Polygon, securing a credit card integration onto their platform, the first for any platform on Polygon. With this new integration, VAST users can easily purchase MATIC, Polygon’s digital currency, directly with their credit card to purchase NFTs.
The completion of this raise enables VAST to put the finishing touches on their next product, VAST EngageFi™, the first-ever “Engage to Earn” decentralized NFT platform,. With VAST EngageFi™, creators can drop NFTs that will deliver direct value to fans who engage with their content. Details about VAST EngageFi™ will be announced in the coming weeks.
“VAST is one of the most exciting investments I’ve made in the past three years,” says Hubertus Thonhauser, partner at GHAF Capital, “I can’t wait to see this platform, which cares so much about creating a better economy for artists, build a new rewards-ecosystem including creators, collectors and media.”
ABOUT VASTx
VAST is the first premium multimedia delivery platform for buying and selling highly collectible NFTs. VAST was developed to help Creators, Influencers, and Brands build deeper engagement with their social network by launching NFT-Enhanced Content through online channels they own and control. To date, VAST has generated over 5 billion audited media impressions for content on their platform from some of the top media sites around the world – including ESPN, Vogue, Vanity Fair, GQ, Architectural Digest, and Harper’s Bazaar.
For more information about VAST, follow the project on Twitter and Instagram.
This is a press release. Readers should do their own due diligence before taking any actions related to the promoted company or any of its affiliates or services. Bitcoin.com is not responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in the press release.
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Image Credits: Shutterstock, Pixabay, Wiki Commons
Part 2: Quantitative Crypto Insight: Stablecoins and Unstable Yield | by Coinbase | May, 2022
By George Liu and Matthew Turk
Tl;dr: This blog analyzes centralized stablecoin lending yield for Compound Finance and shares our insights on performance, volatility, and factors that drive this yield on collateralized lending of stablecoins in DeFi. The analysis shows that this lending yield can outperform the risk-free yield in the TradFi market.
In part two of this quantitative research piece, we will examine stablecoin lending yield for the Compound Finance V2 decentralized finance (DeFi) protocol and share our insights on yield performance, volatility, and what factors are driving yield on collateralized lending of stablecoins through DeFi protocols. We also compare the “risk-free” yield in traditional finance (TradFi) to the concept of “low-risk” yield in DeFi, which we introduced in part one.
ACKNOWLEDGEMENT: While we are aware of the recent collapse of Terra’s algorithmic stablecoin TerraUSD (UST), our analysis here is on the area of collateralized lending yield for centralized stablecoins. We’re focused specifically on Compound for USDC and USDT (fiat-backed stablecoins), which have disparate risks and opportunities.
We conclude in this piece that using stablecoins for low-risk (within DeFi) collateralized lending could outperform the risk-free investment in the traditional financial market.
As mentioned in part one of this blog post, a Compound user who has placed their assets into a liquidity pool can calculate total lending yield using exchangeRate, which is an indication of the value of the interest that the lender can expect to receive over time, and the return from time T1 to T2 can be simply obtained as
R(T1,T2)=exchangeRate(T2)/exchangeRate(T1)-1.
Additionally, annualized yield for this type of collateralized lending (assuming continuous compounding) can be calculated as
While the Compound liquidity pools support many stablecoin assets such USDT, USDC, DAI, FEI etc, we are only going to analyze the top 2 stablecoins here, i.e USDT and USDC, which have a market capitalization of $80B and $53B respectively. Together, they make over 70% of the total market of the stablecoins.
Below are the plots of the annualized daily, weekly, monthly and biannual yields generated according to the formulas in the previous section. The daily yield is somewhat volatile, while the weekly, monthly and biannual yields are respectively the smoothed version of the prior granular plot. USDT and USDC have relatively similar patterns in the plot, as they both experience high yield and high volatility during the start of 2021. This indicates that there are some systematic factors that are affecting the stablecoin lending market as a whole.
Source: The Graph
One hypothesis of the systematic factors that could affect the lending yield are crypto market data (like the BTC/ETH prices) and its corresponding volatilities. When BTC and ETH are in an ascending trend, some bull-chasing investors may borrow from the stablecoin pools to buy BTC/ETH, and then use the purchased BTC/ETH as collateral to borrow more stablecoins and repeat this cycle until their leverage reaches the desired level. Additionally, when the market enters into a high volatility regime, there are more centralized and decentralized crypto transactions which could increase the demand for stablecoins as well.
Now, to check the relationship of the stablecoin yield and the crypto market data, we perform a simple linear regression analysis to see how much variation in the yield can be attributed to the price and volatility factors using the following formula:
To measure the magnitude of these factors’ contribution, we use the R-Squared score, which has a range of [0, 100%]. A score of 100% would mean that the yield is completely determined by the contributing factors.
Regression of USDC/USDT on the BTC market and the ETH market respectively lead us to the following R-Squared table:
ETH market data has a better explanatory power (18% & 17%) than the BTC market data (16% & 11%) in determining the yield of USDC and USDT. This is unsurprising, particularly due to ETH’s increased popularity and expanded footprint in the DeFi market since the start of 2021. As seen with these results, crypto price and volatility factors did not fully explain the yield in stablecoins. We can conclude that there must be other factors that help to improve the score from the basic model.
We performed further exploratory analysis by introducing the historical stablecoin supply data and MACD technical indicator price data to the model. The stablecoin supply (the total number of stablecoins supplied to Compound liquidity pools) should — intuitively — affect the availability/scarcity of the stablecoins and indirectly impact the yield. MACD is an important momentum trading signal (subtracting the 26 period EMA from the 12 period EMA — in this case on price) as it could help momentum investors to decide when to leverage and when to deleverage.
We see a noticeable increase in R-Squared scores, as both USDC and USDT got a bump to a level around 60%-70% as shown below.
From this data we can conclude that stablecoin supply is a substantial contributing factor, as it alone is able to bring the score to around 60% for both stablecoins in any of the two markets. It seems to suggest that [supply] is a major factor in affecting the yield in the stablecoin lending market. This is very similar to the TradFi world, where credit supply by the Federal Reserve will affect the general interest rate of the whole system.
The introduction of MACD data (on BTC and ETH price) brings mixed improvement. In the case of the BTC market, its independent contribution is far less than the supply factor, and the marginal benefit over the shoulder of supply is only a few percentage points. We noticed in the ETH market, however, that MACD has a greater independent contribution to the R-Squared value as compared to the BTC market. This suggests that stablecoin lending yields are more correlated with momentum based trading activity in ETH than in BTC.
An example of the regression coefficients for USDC lending yield in the ETH market are displayed below. The table suggests that higher ETH prices, volatility and [stable coin supply] are generally associated with lower USDC lending yield. At the same time, the stronger the MACD signal is, the higher the yield would go.
While it is interesting to reveal what has driven the low-risk yield on stablecoin lending, it is also important to compare these yields with the counterpart in the TradFi market.
Because stablecoin lending yields are derived from the realized floating interest rates for collateralized loans on the Compound platform, we selected the General Collateral (GC) rate used in the traditional money market as the comparable risk-free rate, because it is also a floating rate with treasury debt as the loan collateral.
Below is a plot of the portfolio value of the investments that earn USDC lending yield, USDT lending yield, and GC rate yield respectively. The investments all start with $100 initial value on 2020–05–01, and end on 2022–05–01. As seen below, yield on USDT and USDC collateralized lending is higher than the GC rate by a large margin. On the other hand, risk-free investment that earns GC rate hardly grows for the same period.
The average interest rate in the table below also confirms that GC rate is on average around 0.08%, while USDC and USDT lending yields are respectively 3.71% and 4.51% for this period as seen below. (We also checked the 2Y term yield on the treasury debt on 2020–05–1 which is merely 0.2%)
For the foreseeable future, it is reasonable to conclude that the low-risk rate, within the crypto market at least, will continue to outperform the risk-free rate in the TradFi market. One reason for this is the smart contract risk, or liquidation risk mentioned in part one of this blog. However, a larger reason is the slower growth in the stablecoin supply relative to the growth in the crypto economy as a whole. By comparison, the TradFi market has seen major credit growth since the start of the Covid-19 pandemic, which has helped to drive the risk-free rate to historical lows (see Fed balance sheet growth below).
This blog provided a broadly indicative analysis of the low-risk yields available from collateralized lending of stablecoins through DeFi protocols. While these yields may be very volatile on a daily basis, their general trend can be explained relatively well by BTC/ETH prices, volatilities, stablecoin supply and MACD (momentum trading activities). We also compared these yields with the risk-free rate in the TradFi market where we see consistent outperformance in the crypto market. To reiterate, this is not financial advice.
Next steps
We, as part of the Data Science Quantitative Research team, aim to get a holistic understanding of this space from a quantitative perspective. We are looking for people that are passionate in this effort to join our growing team. If you are interested in Data Science and in particular Quantitative Research in crypto, come join us.
The analysis makes use of the Compound v2 subgraph made available through the Graph Protocol. Special thanks to Institutional Research Specialist, David Duong, for his contribution and feedback.
Bitcoin Price Remains In Range, Why The Bulls Need To Take Control
Bitcoin retested the key $28,500 support zone against the US Dollar. BTC is rising and the bulls might aim a clear move above the $30,600 resistance.
Bitcoin is trading in a major range below the $30,600 resistance zone.
The price is now trading near the $29,800 level and the 100 hourly simple moving average.
There is a crucial bearish trend line forming with resistance near $29,950 on the hourly chart of the BTC/USD pair (data feed from Kraken).
The pair could gain pace if there is a clear move above the key $30,600 resistance zone.
Bitcoin Price Remains Supported
Bitcoin price remained well bid above the $28,500 support zone. There was a fresh increase initiated from the $28,635 swing low and the price climbed above $29,000.
There was a break above the $29,500 resistance zone and the 100 hourly simple moving average. The price even climbed above the $30,000 level, but there was no upside continuation. A high was formed near $30,188 and the price is now consolidating gains.
Bitcoin is trading near the $29,800 level and the 100 hourly simple moving average. There was already a test of the 50% Fib retracement level of the upward move from the $28,635 swing low to $30,188 high.
An immediate resistance on the upside is near the $29,950 level. There is also a crucial bearish trend line forming with resistance near $29,950 on the hourly chart of the BTC/USD pair. The next major resistance is near the $30,180 level.
The main resistance is still near the $30,600 zone. A clear move above the $30,600 resistance level might start a strong increase. In the stated case, the price may perhaps clear the $31,200 resistance zone.
Fresh Decline in BTC?
If bitcoin fails to clear the $30,180 resistance zone, it could start another decline. An immediate support on the downside is near the $29,400 level.
The first major support is near the $29,250 level. It is near the 61.8% Fib retracement level of the upward move from the $28,635 swing low to $30,188 high. A downside break below the $29,250 support might send the price further lower. The main support is still near the $28,500 level.
Technical indicators:
Hourly MACD – The MACD is slowly gaining pace in the bullish zone.
Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now above the 50 level.
Major Support Levels – $29,400, followed by $29,250.
Major Resistance Levels – $29,950, $30,180 and $30,600.
Exchanges back ‘Terra 2.0 revival plan’ via airdrops, listing, buyback and burning
The fall of Terra shook the entire crypto market. However, the project has no plans to stay down, having secured backing from crypto exchanges to help it rebuild.
In an announcement on Thursday, Terra provided details on an upcoming airdrop of the new native token for its new blockchain dubbed Terra 2.0. The distribution of tokens will proceed on Friday, and holders of Terra Luna Classic (LUNC), TerraUSD Classic (USTC) and Anchor Protocol UST (aUST) who are eligible will receive new tokens
Crypto exchanges Binance and FTX noted that they are working closely with the Terra team regarding the upcoming airdrop. Binance stated that it aims to help affected users on the platform by helping Terra with the recovery plan.
FTX announced that it will support the airdrop and temporarily halt LUNA and UST markets during the migration. The Terra team said that in addition to Binance and FTX, it’s also working closely with more partner exchanges that will support the airdrop.
Apart from the airdrop, many crypto exchanges, like KuCoin, also expressed support for Terra 2.0 by supporting the migration, listing and trading of the new Terra tokens on their platforms.
However, not all exchanges are eager to list the new tokens. In a statement, a spokesperson from crypto exchange BitMEX told Cointelegraph that there are currently no plans to list the new Terra tokens. They explained:
“We list tokens for spot trading based on numerous factors, including that we have a custody solution for that particular token. As such, we have no plans at this stage to list LUNA for spot.”
As for derivatives contracts, the spokesperson said that the exchange needs to ensure there is a “reliable reference index” before it can consider contracts on the new LUNA token.
Related: Terra fallout: Stablegains lawsuit, Hashed loses billions, Finder wrong and more
Meanwhile, not everyone is ready to fully move on to the new chain. Despite Terra founder Do Kwon’s position against burning LUNA’s circulating supply, users of the crypto trading platform MEXC Global voted to initiate buybacks and burning in Terra’s secondary market. Using the trading fees collected from the new LUNA/USDT spot trading pair within its platform, MEXC committed to a month-long buyback-and-burn process.
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