💡 Bitcoin drops below the $28K level. Solana's total value locked hit a new high by 2023. Ether futures ETFs show low trading volume on first day of trading. Axie Infinity, Optimism and Aptos among over $200 million in October token unlocks. LayerZero and Conflux to launch a SIM card on blockchain. Crypto losses hit $685 million in Q3
In the past 24 hours, the world's largest digital asset experienced a decline, resulting in a 2.6% decrease in its value. Bitcoin is poised to conclude the U.S. trading day just below the $28,000 mark, marking a modest increase of approximately 3%. In contrast, ether is currently trading at around $1,670, reflecting a slight decline during this session.
Within the realm of equities, Monday saw mixed performance among stocks, as U.S. lawmakers averted a government shutdown with a stop-gap bill over the weekend. Meanwhile, interest rates continued their upward trajectory, with the U.S. 10-year Treasury yield surging by an additional 11 basis points to reach 4.69%. This surge was triggered by unexpectedly robust manufacturing data, underscoring the resilience of the U.S. economy. The ISM figures came in at 49, surpassing the forecasted 47.7, potentially signaling the possibility of further interest rate hikes.
These developments in the crypto market are unfolding as the industry enters October, a month historically known for its robust performance.
The recent substantial rally in the crypto market, particularly in the case of Bitcoin, can be attributed to various factors, including the SEC's approval of ether futures ETFs and other government decisions. In a recent note, QCP Capital highlighted that Bitcoin has recorded a 15% gain over the past two weeks as a result of these influences.
Solana's Total Value Locked (TVL) reached $338.82 million on Monday, marking its highest point this year, according to DefiLlama data.
In the past 24 hours, SOL's TVL increased by approximately 4.15%, rising from $324.64 million on Sunday to $338.82 million on Monday. This growth can be attributed to the popularity of Solana-based projects such as Drift, marginfi, Solend, and others.
The native SOL token on the network has also witnessed its strongest performance since mid-July, with a 29% increase over the past week and a substantial 39.08% surge from its September low.
At present, SOL is trading at $24.42, reflecting a 65% increase from its lowest price in 2023. However, it's important to note that these numbers still fall short of the peak levels seen during the bull market. Solana's TVL had soared to just above $10 billion in November 2021 before experiencing a significant decline, bottoming out at $210 million in January 2023.
A total of nine ETFs that provide exposure to ether futures were introduced on Monday. Among these, five will exclusively hold ether futures, while the remaining four will have a combination of Bitcoin and ether futures in their portfolios. Notably, Valkyrie's Bitcoin Strategy ETF (BTF), which has been in existence for approximately two years as a Bitcoin-only fund, is altering its strategy to include ether. The other ETFs are newly introduced to the market.
One of the newly introduced ETFs that gained attention today is VanEck's Ethereum Strategy ETF (EFUT). It saw nearly 29,000 shares traded at an average price of approximately $17 per share, resulting in a total dollar volume of around $425,000.
For comparison, the ProShares Bitcoin Strategy ETF (BITO), which was launched in October 2021 during a booming crypto market, witnessed over $1 billion in dollar volume on its first day of trading.
In October, several significant token unlocks are scheduled for crypto projects, including Axie Infinity, Optimism, and Aptos.
Axie Infinity, which experienced a notable drop in price after its last unlock in July when 3.4 million AXS tokens ($16.3 million) were released, is currently trading at $4.73, down 22% in 2023. This decline comes in the midst of a challenging year for the NFT and blockchain gaming sectors.
In total, around $215 million worth of tokens are set to be unlocked in October. Ethereum Layer 2 Optimism (OP Mainnet) is preparing to release 24.2 million OP tokens on October 30, equivalent to 3% of its circulating supply, with a current value of $35.3 million. Of this, $18.6 million will be allocated to core contributors, and $16.7 million will go to investors. Notably, OP token's price increased by 8% to $1.45 following its last unlock on September 30, in contrast to a 12% decline following its August unlock.
Aptos, a Layer 1 blockchain founded by former Meta executives, is the third project with a significant token unlock in October. It is releasing 4.5 million APT tokens on October 12, which represents 1.91% of its circulating supply and is valued at approximately $26 million. Among these tokens, $18.4 million will be designated for the community, while $7.6 million is allocated to the Aptos Foundation.
Currently, APT is trading at $5.72. In September, Aptos witnessed developments such as the expansion of the decentralized exchange Sushi to its platform, the addition of Coinbase Pay to the crypto wallet Petra, and the launch of a $1 million fund aimed at fostering Aptos DeFi protocols.
The LayerZero protocol team has entered into a strategic partnership with the Conflux Network platform. This collaboration aims to introduce a blockchain-based SIM card, offering users the capability to facilitate asset and message transfers across various networks through LayerZero.
The developers assert that Conflux is the sole public blockchain in China that aligns with regulatory requirements. Although the company is registered in Singapore, it enjoys the support and backing of Chinese authorities.
Notably, in February 2023, the Conflux platform, in conjunction with China Telecom, unveiled a blockchain-based SIM card designed to securely store private keys on smartphones. However, it's worth mentioning that the number of Conflux users has experienced a decline. While at the start of April 2023, the daily transaction count stood at 70,000, it has since decreased to 23,000 by September.
In other news, during the third quarter (Q3), web3 projects experienced substantial losses totaling $685.5 million, with major exploits on cross-chain protocols Mixin Network and Multichain responsible for nearly half of these losses. This represents a notable 59.9% increase compared to the $428.7 million lost in the second quarter (Q2), and a significant year-over-year surge of 153% in incidents.
Q3 marked the most challenging quarter of the year, with total losses in 2023 due to hacks and fraud reaching a staggering $1.4 billion. Mixin Network's exploit, amounting to $200 million in September, and Multichain's loss of $126 million in July were the primary contributors, accounting for $326 million of the Q3 total, which represents 47.5% of the losses. The North Korean regime-backed Lazarus Group, allegedly involved in high-profile attacks on platforms like CoinEx ($70 million), Alphapo ($60 million), Stake ($41.3 million), and CoinsPaid ($37.3 million), was responsible for a total of $208.6 million in losses, making up 30% of the Q3 losses.
Ethereum was the most frequently targeted network, with 35 out of 76 incidents occurring on this platform, resulting in 42.7% of the total losses. BNB Chain witnessed 25 incidents, contributing to 30.5% of the losses. Additionally, the Coinbase-incubated Layer 2 network Base experienced losses across four projects since its launch on August 9, specifically LeetSwap, SwirlLend, Magnate Finance, and RocketSwap. Optimism was associated with three of these incidents.
In September, the crypto startup ecosystem experienced a significant surge in investment, totaling an impressive $560 million. This figure marks a substantial increase of 60.5% compared to the previous month.
Breaking down the investment by sector, Blockchain Services emerged as the frontrunner, securing the highest funding amount of $142 million. Following closely behind were GameFi, with $119 million in investments, and Blockchain Infrastructure, which raised an impressive $71 million. These substantial investments demonstrate the growing confidence and support for various segments within the crypto industry
You can also explore the most notable raises of this week.
Supra is in the process of developing a groundbreaking cross-chain oracle system and a "bridgeless" communication network. Their primary goal is to achieve sub-2 second finality while providing robust security guarantees, which are anticipated to be more than ten times stronger than existing bridge solutions. This enhanced security is made possible through their unique consensus algorithm known as "Moonshot Consensus."
Supra's mission extends to facilitating the substantial shift from Web2 to Web3 by greatly enhancing oracles, cross-chain communication protocols, and introducing their cutting-edge consensus mechanism. Their objective is to construct a more secure and interoperable future for the blockchain and cryptocurrency industry.
Impressively, Supra's next-generation oracle technology is already powering the updating of over 1.5 million cryptocurrency data pairs on a daily basis.
To ensure the decentralization of ownership and governance within their network, Supra has enlisted the support of more than 500 other funds, node operators, and angel investors. These prominent stakeholders have been strategically involved to assist in the equitable distribution of the token supply. This broader distribution of their token is deemed crucial for the sustained success of Supra's decentralized network.
IYK, a forward-looking Web3 startup specializing in assisting brands in launching digital collectibles linked to tangible products, has successfully secured $16.8 million in Seed funding.
The primary objective for these funds is to expand and grow the company's user base.
IYK serves as the go-to platform for brands, musicians, and creators seeking to implement fully customizable digi-physical experiences on a large scale. By seamlessly combining blockchain technology with NFC technology, the company crafts immersive encounters that bridge the gap between the physical and digital realms.
IYK has demonstrated its prowess through successful collaborations with industry giants such as Adidas, BB3 Labs (Billionaire Boys Club), and 9dcc.
Rated Labs, a London-based Ethereum-focused oracle and datasets provider, has successfully secured $12.89 million in Series A funding.
The primary goal for these funds is to expand and enhance their operations, with a particular focus on scaling their services to multiple blockchains, including Polygon, Cosmos, Polkadot, and Solana.
Under the leadership of CEO Elias Simos, Rated Labs specializes in offering node and node operator ratings, data pipelines, and an extensive infrastructure dataset for Ethereum.
Since its establishment in 2022 and the launch of its inaugural product, Rated Labs has achieved notable milestones. These include garnering nearly 150,000 unique visitors on the Rated Explorer, handling 60 million calls on the Rated API through more than 45 integrations, as well as establishing partnerships and integrations with key players and innovators within the Ethereum Staking ecosystem. These collaborations include notable names like Lido, Liquid Collective, Metamask Institutional, Chorus One, Stader Labs, and Nexus Mutual, among others.
Stablecoins - the cornerstone of liquidity in the cryptocurrency market and one of the most sought-after asset classes for all its participants, from market makers and institutional investors to DeFi enthusiasts and industry newcomers.
The sector boasts more than 120 tokens that attempt to maintain trust and a stable value, using various models, algorithms, and solutions. Some, like Tether, succeed in doing so, while others, like Basis, depreciate, leaving holders with nothing.
In this article, we will delve into how stablecoins work and examine the advantages and risks associated with their use.
A stablecoin is a class of tokens whose value is tied to a specific fiat currency or other traditional assets. These instruments can be considered a category of Real World Assets (RWA). Tokens pegged to the value of fiat currencies are considered one of the core primitives of DeFi and serve as the foundation for both centralized and decentralized trading platforms.
According to DeFi Llama data at the time of writing, the total market capitalization of stablecoins exceeds $120 billion, and the dominant asset in this segment, USDT, ranks among the top three most capitalized cryptocurrencies and holds the leading position in terms of trading volume.
The high demand for stable assets is driven by their usefulness for the cryptocurrency market and its participants. Stablecoins serve several functions:
Additionally, traders and investors traditionally view this class of tokens as protective assets that allow them to preserve capital during market downturns without exiting the cryptocurrency industry.
From a technical perspective, the key characteristics of stablecoins include:
Depending on who and how these processes are ensured, stablecoins are categorized as centralized or decentralized. In the following sections, we will delve into each group of assets in detail.
Centralized stablecoins emerged before the rest, which can be explained by the comparative simplicity of their collateralization and management.
The first widely known project in this segment was Realcoin (now Tether). In 2014, the company introduced a stablecoin pegged to the U.S. dollar based on Bitcoin via the Omnilayer protocol. At the time of writing, USDT by Tether holds a dominant position in the market and remains the most capitalized stablecoin.
The main feature of centralized assets is that their issuance, circulation, and collateralization are entirely controlled by the issuer. For example, only the Tether team approves the issuance and withdrawal of USDT from circulation and has the ability to blacklist wallets.
Another important detail is that centralized stablecoins are backed by fiat - the government currency to which their value is tied, or liquid assets such as bonds. This is why this category of coins is often referred to as 'fiat-backed.'
Fiat reserves guarantee a stable price regardless of the situation in the cryptocurrency market but require trust in the issuer and pose a number of problems, which we will discuss below.
To better understand why centralized stablecoins dominate the market today, let's examine their strengths.
The issuer independently manages the issuance and circulation of tokens, ensuring the security of their servers and access channels to fiat reserves. Thanks to this, centralized stablecoins are not susceptible to exploits common in decentralized solutions.
However, it does not mean that centralized tokens are entirely secure. Their usage is associated with risks inherent in the traditional financial sector, including freezing of funds, counterparty issues, and legal restrictions.
The stable price of a centralized asset is guaranteed by its issuer through a commitment to redeem the token at its nominal value, regardless of market conditions.
In theory, as long as the company operates normally, every user has the opportunity, under specific conditions (such as identity verification), to buy or sell their tokens directly to the issuer at the established price. Such platforms for token issuance and redemption exist for Tether, Circle, Paxos, and others.
Stablecoin issuers are legal entities, so they must comply with regulatory requirements in the region of their registration or operational activity. In turn, the company can control the circulation of issued tokens, meaning they can influence it in line with regulators' requests.
According to Dune, Tether has blocked the addresses of over 900 USDT holders, depriving them of the ability to carry out any operations with the tokens. Circle has blocked nearly 200 addresses as well.
Another example is Paxos halting the issuance of the BUSD stablecoin due to an order from the New York State Department of Financial Services.
Interacting with traditional companies always implies a certain level of trust. The issuer may refuse to meet its obligations, arbitrarily block a cluster of addresses, or change service terms.
This need for trust makes centralized stablecoins vulnerable to informational and reputational attacks. For instance, in 2023, USDT lost its parity with the US dollar due to panic among holders caused by news about the collapse of Tether's American banking partner. USDC faced similar issues.
Since issuers' reserves are held in traditional institutions, they cannot be tracked on the blockchain.
Essentially, this is the same trust issue, and to address it, companies need to involve independent auditors and guarantors who confirm the presence of sufficient funds in the accounts.
For instance, Tether publishes a quarterly report on consolidated reserves audited by a certified auditor and provides real-time unverified collateral data. Until 2017, the company did not disclose any information about collateral at all, forcing holders to literally take its word for it.
The dollar stablecoin from the largest issuer in the market, Tether. The token is issued on 15 networks and is backed by the company's reserves, the majority of which are U.S. Treasury bonds. Tether's balance is confirmed by independent quarterly audits. The supply of Tether stablecoins in all available networks can be tracked in real time. Tether, as a pioneer in the segment, has secured the company's dominant position. After the collapse of the largest crypto-oriented banks, Silvergate and Signature, in the spring of 2023, USDT replaced the fiat dollar in many trading pairs, effectively becoming the market's liquidity foundation.
A stablecoin pegged to the dollar by Circle. Initially, the company, in partnership with Coinbase, was part of the Centre consortium that controlled the instrument. However, the cryptocurrency exchange bought out the minority stake of the partner, after which the parties dissolved the structure. At the time of preparing this material, Circle solely controls the stablecoin. However, Coinbase is, de facto, a co-issuer. USDC operates on the same model as USDT. Fiat reserves are held at BNY Mellon and managed by BlackRock. The collateral is confirmed by monthly reports, and information about the current supply is available on the website. Direct purchase and redemption are possible with a verified account on the issuer's platform. Although Circle lags behind Tether by almost three times in terms of the total volume of tokens issued, the company offers USDC on more than 10 networks, as well as additional products, such as a native cross-chain protocol and a programmable wallet.
TrueUSD (TUSD) is a dollar stablecoin from the TrustToken project. It has been in existence since 2018 but gained popularity after being supported by Binance crypto exchanges, following a legal ban on issuing BUSD. At the time of writing, it ranks fourth in terms of capitalization among stablecoins, with a total supply of 3.5 billion TUSD. TUSD is available on five main networks. The token's key feature is the use of Chainlink Proof of Reserve, allowing the real-time tracking of the issuer's fiat reserves. However, the composition of reserves is not disclosed, and since 2020, the storage and management of assets and tokens have been transferred to the offshore company Techteryx. The issuance and redemption of coins are carried out through the native platform with a verified account.
Decentralized stable assets emerged as a response to the issues associated with centralized counterparts, particularly the complete control of tokens by issuers, regulatory censorship, and opaque reserve mechanisms.
To address these shortcomings, developers aimed to create a model that would utilize blockchain transparency and smart contracts to maintain pegging and protect investors. As a result, several implementations of such a mechanism came into existence.
The Collateralized Debt Position (CDP) model allows for the issuance of stablecoins against collateral in the form of cryptocurrencies. Typically, users are required to provide more collateral compared to the loan amount. The collateralization ratio depends on the algorithms of the specific platform and usually ranges from 120% to 150%.
If the cryptocurrency provided as collateral starts to decrease in value and reaches a set minimum threshold, the debt position will be liquidated, and the collateral will be sold to cover the losses. This model ensures full collateralization of the issued stablecoins.
This is a relatively safe and proven mechanism, but its key drawback is the need for overcollateralization, which reduces the capital efficiency. Additionally, in cases of a rapid market downturn and mass loan liquidation, positions may be closed at a loss, necessitating additional mechanisms to protect investors and, consequently, additional expenses.
This model uses collateral for minting stablecoins but relies on arbitrageurs to maintain the peg.
Seniorage was considered a promising mechanism for maintaining stability in 2020-2021 and effectively operated in a growing market. However, due to the lack of automatic liquidation (as with CDP) when the collateral's value falls, part of the issued stablecoins may effectively remain uncollateralized. This diminishes investor trust and, as demonstrated by the Terra (UST) example, can lead to the collapse of the asset.
The algorithm automatically burns or mints new tokens to balance supply and demand while maintaining the instrument's value. The main drawback is the automatic adjustment of wallet balances based on code-defined actions, which poses certain challenges for holders.
As of the time of writing, the elastic supply model is not widely adopted in the market. The most well-known asset with an elastic supply is Ampleforth (AMPL). However, its price chart serves as a notable demonstration of the "effectiveness" of the mechanism.
Each model may have its implementation specifics in a particular project and can differ in terms of collateral type, incentives for holders and arbitrageurs, and other details. Therefore, when choosing a stablecoin, careful research is advised to understand the security, stability, and resilience mechanisms of the asset in crisis situations.
Since decentralized stablecoins were initially designed to address the shortcomings of their centralized counterparts, they offer the following advantages to holders:
A stablecoin from the MakerDAO crypto lending platform. It operates on a CDP model and provides loans to users in DAI against excessive collateral. Position liquidation occurs when it falls below the protocol's set threshold to compensate for potential losses. DAI's main feature is the diversification of reserves. Users can provide collateral in the form of ETH (as well as wrapped and LSD tokens), RWA, other stablecoins, or wrapped Bitcoin. Diversification, combined with over-collateralization, has made DAI one of the most stable decentralized assets, allowing it to enter the top 3 stablecoins by market capitalization with a total supply of over 5 billion tokens.
A dollar stablecoin from the CurveFi platform, launched in the spring of 2023. It is considered one of the newest algorithmic assets. The innovation of crvUSD lies in combining several mechanisms to maintain its peg:
A stablecoin from the Frax Finance DeFi ecosystem. It can be considered something in between a centralized and decentralized asset. The Frax protocol allows for the minting of stable tokens backed by centralized USDC collateral. Therefore, in the event of a collapse of USDC, FRAX holders may face problems. However, FRAX's primary value for users lies in its widespread use within the native DeFi ecosystem. Due to this, the stablecoin can be used for staking, lending, or in high-risk earning strategies.
Thus, centralized and decentralized stablecoins are diametrically opposite in their advantages and disadvantages. Investors should choose a token based on their goals, priorities, and available resources. Smoothing out the weaknesses of instruments from different classes can also be achieved through portfolio diversification and storage methods.
Conferences are a great opportunity to grab the attention of the whales in the crypto industry, spread the word about your project and win some funds! A quick line-up of the upcoming conferences below!
CoinAgenda Global Conference👥 Conference🌐 Santa Monica📆 Date: 03 Oct 2023
Blockchain Economy Dubai Summit👥 Conference🌐 Dubai, United Arab Emirates📆 Date: 04 Oct 2023
ETHMilan👥 Conference🌐 Milano, Italia📆 Date: 05 Oct 2023
Zebu Live👥 Conference🌐 England, United Kingdom📆 Date: 05 Oct 2023
Block&Change Hackathon👥 Conference🌐 Madrid, España📆 Date: 06 Oct 2023
All 'Bout Crypto Conclave👥 Conference🌐 Dubai, UAE📆 Date: 07 Oct 2023
Block&Change unConference👥 Conference🌐 Madrid, España📆 Date: 09 Oct 2023
ErgoHack VII: Future Of Finance: Ways Of Adoption👥 Hackathon🌐 Online Event📆 Date: 13 Oct 2023
Future Blockchain Summit 2023👥 Conference🌐 Dubai, UAE📆 Date: 15 Oct 2023
