Blockchain

Decentralized Finance, commonly known as DeFi, is rapidly reshaping the landscape of financial transactions and systems in our increasingly digital world. This innovative approach to finance merges traditional monetary processes with the cutting-edge technology of blockchain, offering a more accessible, transparent, and efficient financial system.

In this guide, we delve into the question “What Is DeFi”, we aim to demystify decentralized finance, illustrating its importance and impact in today’s financial and cryptocurrency landscapes.

What Is DeFi?

DeFi, short for Decentralized Finance, represents a paradigm shift in the way we think about financial services. At its core, DeFi is an umbrella term for a variety of financial applications in cryptocurrency or blockchain geared toward disrupting financial intermediaries.

Unlike traditional banking systems that rely on institutions like banks and governments, DeFi operates on a decentralized network, typically using blockchain technology. This means that DeFi platforms are not controlled by any single entity and are instead maintained by a distributed network of computers.

DeFi encompasses a broad spectrum of financial services, including lending, borrowing, trading, investment, and insurance, all without the need for a central authority. This approach aims to democratize finance by making these services accessible to anyone with an internet connection, reducing costs, and increasing transaction speed and transparency.

DeFi Explained: How It Challenges Traditional Finance

DeFi stands in stark contrast to traditional finance in several key ways. The most notable difference is the elimination of intermediaries. In traditional finance, banks, brokers, and other financial institutions act as gatekeepers, controlling access to financial services and often creating bottlenecks. DeFi, however, uses blockchain technology and smart contracts to facilitate direct peer-to-peer transactions, effectively removing these intermediaries.

This decentralization offers numerous advantages:

Lower Fees: Without intermediaries charging for their services, DeFi platforms can significantly reduce transaction costs. This cost efficiency is particularly beneficial in cross-border transactions, where traditional banking fees can be substantial.
No Central Point Of Control: In traditional finance, centralized systems create points of vulnerability, where failure or attack can have widespread repercussions. DeFi’s decentralized nature mitigates this risk, distributing operations across a blockchain network, enhancing security and resilience.
Accessibility And Inclusivity: DeFi democratizes finance by providing access to financial services to anyone with an internet connection, regardless of location or status. This is particularly crucial for unbanked or underbanked populations who have limited access to traditional banking services.
Transparency And Auditability: Blockchain’s transparent ledger allows for greater visibility into transactions and smart contract operations, fostering trust among users.

The Role Of Blockchain

Blockchain is the backbone of DeFi. It’s a distributed ledger technology that records transactions across multiple computers in a way that ensures the data cannot be altered retroactively. This technology enables the creation of smart contracts – self-executing contracts with the terms of the agreement directly written into lines of code. Smart contracts automate and enforce the terms of an agreement, eliminating the need for intermediaries and reducing the chances of fraud.

In DeFi, blockchain not only ensures the security and transparency of transactions but also allows for the creation of decentralized applications (dApps) that operate on this technology. These dApps provide various financial services directly to users, bypassing traditional financial institutions and reducing costs. The innovation of blockchain in DeFi represents a significant step towards a more open, inclusive, and efficient financial system, promising to revolutionize the way we interact with money.

DeFi In The World Of Cryptocurrency

DeFi within the cryptocurrency realm is a transformative force, redefining the very essence of financial transactions. This space, termed ‘DeFi crypto,’ is characterized by the utilization of cryptographic assets to power a myriad of financial services traditionally monopolized by banks and centralized institutions.

Understanding DeFi Crypto

The intersection of DeFi with cryptocurrencies, commonly referred to as “DeFi crypto,” marks a significant milestone in the evolution of digital finance. This synergy allows for the creation and management of financial products and services in a decentralized environment, free from traditional banking constraints and centralized control.

DeFi crypto platforms enable users to lend, borrow, trade, and earn interest on their cryptocurrency holdings in a trustless manner. These activities are conducted via smart contracts, which autonomously execute the terms of a contract when certain conditions are met, thereby eliminating the need for intermediaries.

The term “DeFi crypto” encompasses a wide range of applications and protocols that operate on blockchain technology, allowing for innovative financial solutions such as yield farming, liquidity mining, and decentralized exchanges (DEXs). These DeFi protocols offer users complete control over their financial assets, with enhanced privacy and security, which is a significant shift from the traditional finance model.

DEXs are at the heart of DeFi crypto activity. Uniswap, for example, stands out as a leading DEX, providing liquidity through an automated market maker (AMM) protocol rather than a traditional order book. It allows users to swap ERC-20 tokens directly from their wallets, contributing to the pool and earning fees proportionate to their share. Other DEXes like SushiSwap have followed suit, iterating on Uniswap’s original protocol with additional features and incentives.

What Are The Most Popular DeFi Blockchains?

Ethereum, widely known as the leading blockchain for DeFi applications due to its early adoption of smart contract functionality, is not alone in the space. Several other blockchains have become significant DeFi players, with their popularity often measured by Total Value Locked (TVL).

TVL in DeFi refers to the aggregate value of assets locked within a decentralized finance (DeFi) protocol. It signifies the amount of crypto assets, such as tokens, staked or deposited by liquidity providers in various DeFi platforms. TVL is a crucial metric for assessing the overall health and popularity of a DeFi protocol. It helps determine user demand and the protocol’s attractiveness to investors.

Top-10 Blockchains

As of November 11, below is the list of the most popular DeFi blockchains based on data from DefiLlama:

Ethereum: Despite high gas fees, Ethereum’s TVL of $25.559 billion and daily active users amounting to 355.267 speak to its dominance and pioneering role in DeFi. It remains the largest and most widely used blockchain for DeFi, hosting numerous protocols like MakerDAO, Aave, and Compound.
Tron: Tron’s significant TVL of $8.331 billion, coupled with its massive 1.59 million daily active users, underscores its popularity, especially in Asian markets. Its DeFi ecosystem is fueled by high throughput and effective community engagement strategies.
Binance Smart Chain (BSC): BSC has attracted a considerable number of users, with 957.028 daily active users and a TVL of $3.004 billion, due to its compatibility with Ethereum’s assets and lower transaction costs.
Solana: Known for its speed and low fees, Solana has a TVL of $561.84 million and 179.363 daily active users. It hosts Serum, a high-speed, non-custodial DEX, and other innovative DeFi projects that exploit its fast block times.
Polygon: As a scaling solution for Ethereum, Polygon enhances transaction speed and reduces costs, with a TVL of $832.66 million and 346.808 daily active users. It serves as a sidechain that runs alongside the main Ethereum chain, hosting popular DApps like QuickSwap and Aavegotchi.

Best Decentralized Finance Applications

DeFi is home to a multitude of applications, each striving to offer unique and compelling financial services. Based on the latest data from DappRadar, here’s an overview of the top DeFi applications, distinguished by their Total Value Locked (TVL), which signifies the amount of capital they have secured within their respective protocols:

Lido: At the zenith of the list with a TVL of $18.27 billion, Lido stands out as the most prominent liquid staking solution. It allows Ethereum holders to stake their ETH while retaining liquidity, facilitating participation in the network’s security without sacrificing asset accessibility.
MakerDAO: With a TVL of $5.31 billion, MakerDAO is a trailblazer in the DeFi space. It’s a decentralized credit platform on Ethereum that manages the DAI stablecoin, pegged to the US dollar, and allows users to open collateralized debt positions (CDPs) to generate DAI.
Uniswap V3: Commanding a TVL of $3.57 billion, Uniswap V3 is the latest iteration of the popular DEX, offering improved capital efficiency for liquidity providers through concentrated liquidity positions.
Aave V3: Aave V3 has garnered a TVL of $3.27 billion and is known for its innovative approach in decentralized lending. It allows users to lend and borrow a diverse range of cryptocurrencies with varying interest rate options.
Aave V2: Preceding its successor, Aave V2 holds a TVL of $2.96 billion. It introduced features such as collateral swapping and stable borrowing rates, which have been instrumental in advancing the DeFi lending landscape.

DeFi Staking Explained

DeFi staking is a process that involves locking up one’s cryptocurrency holdings to support the operations of a blockchain network and, in return, earning rewards. In DeFi, staking is not merely a support mechanism for the network, but also a way for users to earn passive income on their crypto holdings. This is achieved through various DeFi protocols that offer staking services.

When users stake their cryptocurrencies within a DeFi protocol, they typically transfer their assets into a smart contract, which then uses those assets in various network functions such as validating transactions if it’s a Proof of Stake (PoS) blockchain, or providing liquidity. The users’ staked assets help maintain the security and efficacy of the platform or network.

In return for staking their assets, users receive rewards, usually in the form of additional tokens. The rate of return can vary widely, depending on the platform and the demand for the asset being staked. Some DeFi protocols also offer additional incentives such as governance rights, where users can participate in decision-making processes regarding the future development of the protocol.

Platforms like Synthetix and Curve Finance exemplify DeFi staking. On Synthetix, users stake SNX tokens to mint synthetic assets, while on Curve Finance, users stake stablecoins to earn trading fees and CRV tokens. The complexity of staking varies across platforms, with some offering simple ‘deposit and earn’ mechanisms, while others may require active participation in governance or other network activities.

What Is Liquidity Mining?

Liquidity mining is a key concept in DeFi that incentivizes users to supply liquidity to decentralized exchanges and other financial applications by rewarding them with governance tokens. This process is fundamental to Automated Market Makers (AMMs), which are at the core of many DeFi trading platforms.

In liquidity mining, users deposit two assets that form a trading pair into a liquidity pool. For example, a user might supply both Ethereum and USDC to the ETH/USDC pool. By providing liquidity, they enable other users to trade between these two assets more efficiently. The liquidity provider (LP) gets a share of the transaction fees generated from trades that happen in that pool, proportional to their share of the pool’s total liquidity.

Beyond transaction fees, liquidity miners also earn additional rewards, typically in the form of the platform’s native tokens. These tokens can carry significant value and often grant holders governance rights, allowing them to vote on proposals that can affect the platform’s direction and tokenomics. The phenomenon of liquidity mining really took off with the emergence of Compound’s COMP token, which was distributed to users who borrowed or supplied assets to the protocol, kicking off the “yield farming” craze in the summer of 2020.

While liquidity mining can offer substantial returns, it’s not without risks. Users can experience an impermanent loss when the price of your deposited assets changes. Additionally, smart contract vulnerabilities pose a risk, as exploitation of these vulnerabilities can lead to a loss of funds.

What Is Yield Farming?

Yield farming, a cornerstone activity within DeFi, is an investment strategy that involves staking or lending crypto assets to generate high returns or rewards in the form of additional cryptocurrency. This process, akin to earning interest in a traditional bank, takes advantage of the intricate incentive structures built into many DeFi protocols.

Investors engage in yield farming by adding their assets to a liquidity pool, which is essentially a smart contract that contains funds. In exchange for their contribution, participants obtain liquidity tokens, which they can subsequently utilize to garner additional rewards. The DeFi platform typically generates these rewards from transaction fees, or sometimes they come from new tokens released during a promotion.

For instance, protocols like Compound distribute their native COMP tokens to users who lend or borrow on their platform. Similarly, users who provide liquidity to Uniswap’s pools earn a portion of the trading fees in addition to potential UNI token rewards. These incentives can be quite lucrative, leading to the rapid growth and popularity of yield farming within the DeFi ecosystem.

Notably, yield farming involves high complexity and significant risks, such as smart contract vulnerabilities, impermanent loss (a change in the value of deposited assets compared to their value at the time of deposit), and the volatility of reward tokens. Yet, it remains a popular method for crypto-savvy users to potentially grow their holdings by leveraging the DeFi sector’s innovative protocols.

DeFi Explained: Risks And Rewards

DeFi’s allure is largely due to its high-yield opportunities and the democratization of financial services. Users can engage directly with markets, offering liquidity, borrowing, lending, and earning potential returns that far surpass traditional banking products. For example, protocols like Yearn.finance have popularized yield farming, where investors can earn rewards by staking or lending cryptocurrency assets.

Yet, DeFi is not without substantial risks. One of the most significant risks comes from smart contract vulnerabilities. High-profile incidents like the hack of The DAO, where attackers drained $50 million worth of Ether due to a smart contract exploit, and the recent Poly Network attack, leading to the siphoning off of over $600 million (though largely returned later), highlight the potential for catastrophic losses.

Market volatility can lead to the rapid devaluation of assets, as seen in the May 2021 market crash, where DeFi markets experienced significant stress. Furthermore, the absence of a regulatory safety net means there’s no FDIC insurance equivalent, leaving users fully exposed if their funds are lost or stolen.

What Is The Future Of DeFi Crypto

The trajectory of DeFi crypto is anticipated to be revolutionary, with potential integration into mainstream finance and the creation of more complex financial instruments. This integration could see the likes of Aave or Compound potentially working alongside or within traditional financial institutions, bringing liquidity and new lending mechanisms to the market.

However, the road ahead is fraught with challenges that need addressing. Expected changes in regulatory frameworks could legitimize DeFi platforms by ensuring their compliance with global financial regulations. This could mitigate one of the most pressing risks: the uncertainty and the “Wild West” nature of the current DeFi landscape.

The future also likely holds more advanced security protocols to prevent exploits and hacks, which have historically plagued platforms like dForce and Harvest Finance, resulting in losses worth millions. Improved security, alongside enhanced user experience, could help in reducing the entry barrier for less tech-savvy users, broadening DeFi’s appeal.

Another anticipated development is the rise of “DeFi 2.0”, with protocols that address the issues of its predecessor, such as impermanent loss in liquidity pools or the sustainability of yield farming rewards. With these advancements, coupled with a possible increase in institutional involvement, DeFi crypto stands to redefine not only how we understand finance but how we interact with money in a digital age.

FAQ: What Is Decentralized Finance (DeFi)?

What Is DeFi?

DeFi, or Decentralized Finance, refers to a movement that aims to create an open-source, permissionless, and transparent financial service ecosystem that operates without central authorities. Blockchain networks host DeFi systems, which use smart contracts to offer services that include banking, loans, asset trading, and complex financial instruments.

What Is Decentralized Finance?

Decentralized Finance is a term synonymous with DeFi. It represents the shift from traditional, centralized financial systems to peer-to-peer finance enabled by decentralized technologies built on the blockchain.

What Is DeFi Crypto?

DeFi crypto refers to the use of cryptocurrency within DeFi systems. It involves the application of crypto assets to engage in financial activities such as earning interest, borrowing, lending, and trading through decentralized platforms.

What Is Compound DeFi?

Compound is a DeFi protocol that allows individuals to earn interest on their cryptocurrencies by depositing them into one of several pools supported by the platform. Moreover, it also enables borrowing of a range of cryptocurrencies.

What Is DeFi Staking?

DeFi staking involves locking up one’s cryptocurrency holdings within a DeFi protocol to earn rewards or interest.

What Does DeFi Mean?

“Decentralized Finance,” or DeFi, represents financial services built on open and decentralized blockchain technologies, independent of traditional financial institutions.

What Does DeFi Stand For?

DeFi stands for Decentralized Finance, encapsulating the idea of financial services being open to everyone, operating autonomously on blockchain, and utilizing smart contracts to facilitate transactions.

What Does DeFi Mean In Crypto?

In the context of crypto, DeFi describes the ecosystem of financial applications built on blockchain technology, especially those employing smart contracts, commonly on networks like Ethereum. This setup allows parties to conduct a variety of financial transactions directly with each other, eliminating the need for centralized intermediaries.

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Avalanche, the fourth-generation proof-of-stake (PoS) blockchain, incurs significant costs to incentivize its validators. Token Terminal data on December 7 shows that in the past year, the smart contract platform paid over $275 million in AVAX to compensate its validators despite generating only $11.5 million in user fees. 

Avalanche Is Paying A Premium To Incentivize Validators

Although it appears that Avalanche is paying a premium for validators, this is critical in securing the network and ensuring all transactions are confirmed. Overall, and being a proof-of-stake network reliant on node operators for security and decentralization, Avalanche’s decision to pay validators a premium is, as its users demand, to maintain a robust network of nodes. 

According to CoinMarketCap data, the network has a market cap of over $9.8 billion. It is currently in the top 10 by liquidity, surpassing Polygon and Polkadot, competing low-fee alternatives. As it is, by incentivizing validators with generous rewards, Avalanche ensures that there is a strong pool of nodes available to maintain the network’s operation.

Through these validators, AVAX holders can stake and receive rewards. As of December 7, there are over 1,539 validators currently staking over 248 million AVAX and earning 7.84% APY. At the same time, statistics show that Avalanche has a staking ratio of 57.11%. Most AVAX in circulation are used to secure the network at this level.

While AVAX incentivization might draw more validators, Avalanche documentation also states that the network doesn’t require complex hardware to operate a node. At the same time, the blockchain, unlike Ethereum, states that staked AVAX is not at risk of being slashed–or penalized by the network–provided all network requirements are met. This feature could explain the steady rise in validator count over the past three years.

AVAX Is Up By 200%, Trading At 2023 High

While Avalanche grows its validator count, AVAX prices have also been expanding steadily, mirroring the general market. Thus far, AVAX is changing hands above $26, up over 200% in the last three months. At spot rates, AVAX is trading at new 2023 highs and in a bullish breakout formation, looking at price action in the daily chart.

Related Reading: Apollo Crypto Predicts Bitcoin Price Of $200,000 This Cycle, Here’s Why

Looking at how AVAX is, bulls might break above $30. If the accompanying surge is with expanding trading volume, it might be the base for another leg up that might lift the coin toward $90 or higher in the sessions ahead. When AVAX peaked in 2021, it rose to as high as $145.

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The rise in the Shiba Inu burn rate has no doubt been one of the most notable developments in the community. At the start of the week, the burn rate rose over 7,000,000% after more than 8 billion tokens were burned in a 24-hour period. This trend has not slowed down either given that the burn figures have continued to rise daily.

Shiba Inu Burn Surge Continues

Earlier in the week when the Shiba Inu burn saw one of its highest daily spikes, the total number of tokens burned had come out to just over 8 billion. At the time, this was a significant figure given that the burn rate had been slowing down over the last year. However, there has been a steady rise in the number of SHIB tokens that are being burned lately, which raises the question of what is driving the burn.

After a dip in the burn rate following the 8 billion daily burn, the community is back at it again and their zeal has been rewarded once more. On Thursday, the burn tracker Shibburn reported that the 24-hour figure had crossed 10 million once again. This shows a steady recovery from Wednesday’s figures which had tanked significantly.

As Shibburn data shows, the 10.34 million SHIB that were burned in the last 24 hours amounts to an 803.4% increase in the burn rate compared to the previous day. The majority of the burns have, however, come from a single wallet address. The address sent a little over 10.2 million SHIB to the burn address.

This recent spike in the BURN rate has also added to the total amount burned on a weekly basis. The figure comes out to 8.497 billion, which is a 1,969.72% increase from the previous week’s figures.

What Is Driving The SHIB Burn?

The most significant burn for the week was the 8.2 billion burn, most of which came from a single address. This address was the ShibaSwap deployer wallet, which meant that the SHIB team was the one burning the tokens.

The spike in the burn rate coincides with the increased usage of the Shiba Inu layer 2 blockchain Shibarium, which marked multiple milestones this week. As the usage has risen and more fees were collected on the network, the amount of SHIB to be burned rose drastically.

Daily transactions on Shibarium have consistently come out above 7 million this week, bringing the total transactions on the network above 51 million. If this continues, then the burn rate could continue to rise as more usage of the L2 means more fees being burned.

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Recently, Michael Saylor, the founder of MicroStrategy and a prominent Bitcoin (BTC) proponent, took to social media to gauge the Bitcoin community’s sentiment on the future price of the digital asset.

Saylor, who has transitioned from CEO to head of Bitcoin strategy at MicroStrategy, posed a significant question to the Bitcoin community on X. Saylor’s inquiry was straightforward yet profound: “How high will BTC need to rise before you would consider selling a small portion of your Bitcoin?”

This question, aimed at understanding the threshold that might trigger selling decisions, garnered extensive attention, with roughly 122,839 individuals participating in the poll. The answers, revealing the mindset of the Bitcoin community, ranged from moderate to extremely bullish sentiments.

Surprising Results: Majority Eye $1 Million Bitcoin Threshold

The survey results painted a fascinating picture of the BTC community’s outlook. While a minority of respondents, 18.8% and 14.1%, selected $250,000 and $500,000 price points, a significant portion of the community leaned towards much higher figures.

Notably, 36.3% of voters indicated a price range from $1 million to never selling their Bitcoin holdings, highlighting a strong belief in BTCs long-term value. Additionally, 30.8% of participants marked $100,000 as their potential selling point.

Saylor’s survey revealed the community’s predominant inclination to hold BTC until it reaches or surpasses the $1 million mark. Some were willing to hold indefinitely, reflecting a deep-rooted confidence in Bitcoin’s future.

How high will $BTC need to rise before you would consider selling a small portion of your #Bitcoin?

— Michael Saylor (@saylor) December 6, 2023

Institutional Capital And Halving Events: Catalysts For A $1 Million BTC

As the crypto space closely watches these survey results, the $1 million price point for Bitcoin is increasingly viewed as a realistic possibility by many enthusiasts and experts alike. Samson Mow, the CEO of Jan3 and a vocal BTC advocate, recently supported this view.

Mow agreed with the general sentiment of Saylor’s survey, stating that while “Balaji wasn’t wrong about BTC going to $1M,” he was perhaps wrong about the timing and the driving factors.

Mow attributed the potential surge to a confluence of significant institutional investment and the impact of Bitcoin halving events. The halving, a scheduled reduction in BTC mining rewards, inherently limits the new supply of Bitcoin, thereby introducing a scarcity factor.

Coupled with a projected influx of institutional capital into the crypto market, these factors could collectively catalyze Bitcoin’s price to unprecedented heights. Mow’s analysis aligns with the optimism reflected in Saylor’s survey, underlining a solid belief in Bitcoin’s capacity for substantial value growth.

Balaji wasn’t wrong about #Bitcoin going to $1M, but he was wrong on the timing and the catalyst.

My $1M call is based on a massive rapid influx of institutional capital while Bitcoin available for sale is at historical lows, compounded by the halving.

His $1M prediction was…

— Samson Mow (@Excellion) December 6, 2023

It is worth noting that this optimism within the Bitcoin community, coupled with expert insights, suggests a future where Bitcoin’s valuation might reach, or even exceed, the coveted $1 million mark.

Featured image from Unsplash, Chart from TradingView

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Data shows that the Bitcoin whales that may have been helping drive the latest rally have switched to profit-taking instead.

Bitcoin Whales On BitMEX Have Changed Their Tune Recently

An analyst in a CryptoQuant Quicktake post explained that the BitMEX whales were likely the ones helping fuel the latest rally. The relevant indicator here is the “Open Interest,” which keeps track of the total amount of Bitcoin derivative positions open on a centralized exchange.

When this metric’s value increases, investors are opening up new contracts on the platform. On the other hand, a decline suggests the holders are either getting liquidated or closing up their positions of their own volition.

Now, here is a chart that shows the trend in the Bitcoin Open Interest for two exchanges, BitMEX and Binance, over the past few weeks:

The graph shows that the Bitcoin Open Interest on BitMEX had observed a sharp rise at the start of the month when the cryptocurrency’s price was still trading around the $38,000 level.

This open interest increase followed a sharp rally for BTC towards the $44,000 mark. As is visible in the chart, the indicator’s value for Binance also registered an increase as the rally occurred, but BitMEX’s rise stands out as it was huge and pretty much happened in one go before the rally.

Since BTC has hit its local top above the $44,000 level, though, the BitMEX Open Interest has plummeted, implying a large-scale closure of positions on the platform has taken place. On the other hand, the metric’s value for Binance has continued to stay high.

The quant has also attached charts of another metric for the two exchanges: the “Funding Rates.” The funding rates keep track of the periodic fee the derivative traders on an exchange currently pay each other.

When this indicator has a positive value, the longs are paying a premium to the shorts to hold onto their positions right now. This suggests that the traders on the platform share a majority of bullish sentiment.

The BitMEX Funding Rates had been favorable for the duration that the Open Interest had been at high levels, implying that most positions had been extended. However, with the plunge in the indicator, the Funding Rates have returned to neutral values.

Based on this pattern, the analyst thinks the BitMEX whales, potentially driving the rally earlier, have already taken their profits, as they closed up a large chunk of their positions near the top.

The Open Interest hasn’t completely retraced itself yet, but the fact that most of these whales have decided to pull out may be a troubling sign for the rally’s continuation.

BTC Price

Bitcoin has seen some retrace during the past day as the coin’s price is now floating around $43,600.

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A dormant Ethereum whale has resurfaced, moving their 39,260 ETH worth approximately $87.5 million. According to data from Lookonchain, this Ethereum whale with almost $90 million in ETH recently woke up and decided to move its mountain of digital assets to an exchange. 

Although it is unclear the motive behind this transfer, it appears to be to take profit on a 670% gain over the past five years. 

Ethereum Whale Moves 39,260 ETH To Crypto Exchange

The crypto market has had another flurry of price increases in the past few days, with Coinmarketcap’s Fear & Greed Index now pointing to an extreme greed of 81. Ethereum hasn’t been left out of the price gains, and the crypto is currently up by 11% in a 7-day timeframe. 

Amidst the price gain, a social media post by on-chain analysis tracker Lookonchain shows that a whale recently deposited 39,260 ETH worth $87.5 million to the crypto exchange Kraken. Further details from on-chain data show that the coins were acquired around June to August 2017. 

During this period, the whale address received 47,260 ETH acquired at an average price of $240 and worth $11.34 million in total at the time. However, the account has remained largely inactive since then, sitting on unrealized profit as Ethereum continued to grow in price. But now, the coins have made their way into Kraken.  

The massive transfer of funds from a whale’s wallet to an exchange typically signals them cashing out some or all of their holdings. In this particular case, the whale would make a profit of approximately $78 million if they decided to sell all their holdings on the exchange. 

An early $ETH whale appears to be selling ETH again after being dormant for 5 years.

The whale deposited all 39,260 $ETH($87.5M) to #Kraken 30 mins ago.

The whale received 47,260 $ETH($11.34M) at ~$240 from June to August 2017.

If sold the whale would make a profit of ~$78M. pic.twitter.com/v0PI4LNTKO

— Lookonchain (@lookonchain) December 5, 2023

Trend Of ETH Profit Taking Increasing?

A massive transfer of funds naturally leads to speculation within the crypto community, and there seems to be an increasing trend of large ETH holders taking profits. Other social media posts from Lookonchain over the past few days have shown similar cases of large wallets sending their ETH to exchanges. 

For instance, a recent post showed the movement of ETH in wallet addresses belonging to defunct exchanges FTX and Celsius. FTX deposited 3,143 ETH worth $7.2 million on Coinbase, while Celsius sent 7,500 ETH worth $17.2 million to address “0xc450.” 

Galaxy Digital followed suit, depositing 9,179 ETH worth $20.9 million to Binance. According to Whale Alerts, 16,944 ETH worth $38.14 million also made its way to Coinbase from a private wallet.

16,944 #ETH (38,148,363 USD) transferred from unknown wallet to #Coinbasehttps://t.co/XJYadmioyi

— Whale Alert (@whale_alert) December 6, 2023

Even though Ethereum briefly touched $2,300 yesterday, it would seem the recent transfer to exchanges has had an effect on the price of ETH, as the crypto is trading at $2,269 at the time of writing, down by 1.5%. 

The crypto market remains largely unpredictable, but it would be prudent to wait to see if the crypto approaches and rebounds at the $2,200 resistance level. At the same time, a strong blast above $2,300 could signal bulls are still in control.

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Since October 2023, Solana (SOL), often called the Ethereum killer, has seen significant network and price action growth. 

However, everything points out that the most notable growth in recent months has been in SOL’s price, which has surged over 368% year-to-date, taking the token from a low of $7.95 in 2022 to a now staggering $64.20, with an annual high of $68.

But are these numbers reflective of fundamental growth, or are there discrepancies between price action and network progress? 

Growth In Network And Price Action Fuel Optimism

According to Ally Zach, a research analyst at Messari, SOL has experienced significant growth since its December 2022 lows. The price of SOL has increased by over six times, while active addresses and Total Value Locked (TVL) have doubled. 

Initially positioned as a decentralized finance (DeFi) hub, Solana has diversified over time, introducing new infrastructure and tools, such as compressed non-fungible tokens (NFTs), which have led to the emergence of new consumer applications on the platform.

According to Zach’s latest report, throughout most of 2023, consumer apps served as the primary entry point for first-time users on Solana. However, early November’s “breakpoint event” reignited Solana’s DeFi sector. 

A series of airdrop announcements for major projects in the ecosystem, particularly the airdrop by JupiterExchange, propelled the DeFi sector to the forefront. These airdrops, coupled with new token launches, have boosted market caps and decentralized exchange (DEX) TVL, attracting users through the trading potential of these tokens.

Notably, Solana’s new DEX users exhibit different behavioral patterns compared to airdrop farmers on other networks. Instead of high-frequency, low-volume transactions involving stablecoins, these users actively trade small and mid-cap tokens and spend more per swap. 

This suggests a more sustained and engaged user base, moving away from transient farming practices. DEXs play a crucial role in the decentralized finance ecosystem, deriving strength from the diversity and robustness of the surrounding apps and tokens.

Ally Zach’s analysis suggests that Solana’s newest user base, including newcomers and veterans, is shifting away from typical airdrop farming behaviors. 

This shift indicates the potential for these users to become long-term contributors, strengthening the sustainability of the Solana ecosystem.

Potential Solana Rally To $90 On The Horizon

In addition to the potential long-term growth of the Solana network, the price of SOL is not far behind. Prominent crypto analyst Ali Martinez has identified an intriguing price pattern for SOL that indicates the potential for further gains soon. 

Martinez highlights an ascending triangle formation on the 12-hour chart of SOL, suggesting a continuation pattern that typically precedes upward price movements.

The ascending triangle formation implies that SOL’s price has been consolidating within a tightening range, with higher lows and a resistance level of around $68.2. If SOL manages to sustain a close above this critical level, it could trigger a bullish breakout, potentially propelling the price toward the $90 mark.

However, Martinez advises caution and emphasizes the importance of monitoring the $60 support level. Any signs of weakness or a breach of this level may trigger a spike in profit-taking by traders, potentially leading to a temporary price decline. In such a scenario, SOL could experience a dip, potentially reaching as low as $47.

Featured image from Shutterstock, chart from TradingView.com 

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An analyst has explained how Cardano may be heading towards a rally to $0.75 soon if the historical pattern is anything to refer to.

Cardano Could See A Rally Of Over 70% In The Near Future

As explained by analyst Ali in a post on X, ADA currently appears to be mirroring the same pattern as that between 2018 and 2020. Below is the chart shared by the analyst, which points out this similarity.

From the graph, it’s visible that ADA had been in a phase of consolidation inside a channel back between 2018 and 2020, and it would appear that the asset has been ranging in a similar fashion recently as well.

There is one dissimilarity present between the two patterns, however, and that is the presence of the COVID-19 crash. This price plunge below the consolidation channel only happened because of the emergence of an anomaly in the form of the virus, though, so it might be safe to ignore it in the grand scheme of things.

Cardano has recently observed a rally towards the upper end of the channel and the cryptocurrency is now trying to break out of it. Back during the previous consolidation period, a similar break took place, and it ended up leading to a very significant uplift for the cryptocurrency.

“If this pattern holds, we could see ADA punching through the $0.45 resistance soon,” notes Ali. As for what trajectory the asset would follow after this break, the analyst thinks that a rally towards the $0.75 level could potentially happen by “late December.”

From the current spot price, such a surge would mean an increase of more than 70% for Cardano. If the previous instance of the trend is anything to refer to, though, the rally would perhaps not end at just these gains, as ADA in fact eventually ended up registering a total increase of almost 3000% in the bull run that followed then.

The on-chain analytics firm Santiment also discussed about ADA yesterday, revealing a possible instigator behind the latest price uptrend in the asset. The relevant metric here is the total number of ADA addresses carrying some amount of balance.

The below chart shows how this indicator’s value has changed over the last few months:

As displayed in the chart, the total number of Cardano wallets observed a sharp decrease last month and what occurred alongside it was a rally in the price. In recent days, another decline in the indicator has taken place, although the scale is much smaller this time around.

“Typically, declining wallets is a sign of small holders capitulating & selling to whales at a loss,” explains the analytics firm. ADA has observed an increase in the past few days, so it’s possible that this effect may be in action once more.

ADA Price

Cardano has again been rejected from the $0.45 resistance mark as its price has pulled back to $0.43 since the retest.

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The price of Bitcoin slowed down its ascend following a week of smashing critical resistance levels. However, the rally is likely in its early stages, with BTC preparing to see further profits in the coming months.

As of this writing, the cryptocurrency trades at $43,300, reclaiming levels last seen in 2022 before the crash to its yearly lows. In the weekly chart, BTC records a 15% rally, with Ethereum following the trend while other altcoins lagged behind the two most prominent cryptocurrencies.

Spot Bitcoin Jumps 15% In December, Eyes On Potential SEC Approval

The crypto market has witnessed another remarkable surge in Bitcoin (BTC), with a 15% increase in just the first week of December. According to QCP Capital’s latest market update, this growth takes BTC’s year-to-date (YTD) gain to 260%.

This exponential rise is primarily attributed to the anticipation surrounding the approval of a spot Bitcoin Exchange-Traded Fund (ETF) by the U.S. Securities and Exchange Commission (SEC).

On December 1st, the SEC announced that January 5th, 2024, will be the final deadline for rebuttal comments. This timeline sets the stage for probable approval in the week following.

Although QCP Capital humorously notes that the significance of the 15th anniversary of Bitcoin’s Genesis block on January 3rd, 2024, might be lost on the SEC, the “market has certainly taken note.”

As Bitcoin nears the $45,000 mark leading up to the expected announcement, investors are weighing how much of this news has already been priced. The post-ETF approval period will be critical, as the real impact depends on the actual flows from the ETF in its initial trading weeks. A ‘sell-the-news’ event is possible next year if expectations don’t match reality.

Asian Buyers Re-Enter Market, When Altcoin Season?

The December 1st announcement has also spurred renewed interest from Asian buyers, who had been less active in the preceding month. Notably, most of the recent spot gains have occurred during U.S. trading hours as investors in the country take positions in preparation for the SEC announcement.

As the market prepares for the launch of the spot ETF, investors won’t find themselves short of options. With 13 applications for spot ETFs and several others for leveraged and options-based ETFs in the pipeline, the traditional finance ecosystem surrounding BTC (and soon ETH) is poised for significant expansion.

QCP Capital anticipates that in a market characterized by low costs and tight spreads, structured products might emerge as a key asset class for generating alpha, similar to other markets like gold. The trading desk noted:

This means that should spot BTC top on launch day itself, it will not stop the Traditional Finance ecosystem boom around BTC, and soon ETH – the likes of which we have been writing about for years now.

A report from the Glassnode co-founders indicates that the altcoin sector is already trying to catch up with the current BTC price action. The current pullback could provide an opportunity for smaller coins waiting to benefit from the bullish momentum.

How much longer will altcoins trail behind before making their move?

The Bitcoin narrative continues to steer the ship, but a closer look reveals the total altcoin market cap playing catch-up.

With Ethereum and BTC leading the way, we are potentially on the brink of… pic.twitter.com/KC1QdWmnlE

— 𝗡𝗲𝗴𝗲𝗻𝘁𝗿𝗼𝗽𝗶𝗰 (@Negentropic_) December 7, 2023 

Cover image from Unsplash, chart from Tradingview

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A crypto pundit and Bitcoin maximalist, Mark Harvey, has explained why he believes the foremost cryptocurrency Bitcoin, is far off from its true potential. According to him, the crypto token could be worth close to $17 million in the future. 

Why One Bitcoin Could Worth $17 Million

In a post shared on his X (formerly Twitter) platform, Harvey made a strong case for Bitcoin on why it could on why a price even greater than $17 million is likely. He referred to Bitcoin’s use case as a store of value and how it could further chop into the market share of other asset classes. He noted Bitcoin’s “tremendous upside” despite being a relative newcomer.

Bitcoin is said to have 0.1% of the $871 trillion which are invested in global assets. Other global assets that hold a substantial market share include gold and silver, bonds, equities, real estate, and fiat money. Harvey believes that Bitcoin’s price could rally significantly as the foremost cryptocurrency becomes the most preferred option for people to preserve their money.

Harvey stated that the monetary premium of those global assets highlights how much they are used as a store of value. The crypto pundit asserts that Bitcoin has the potential to capture the monetary premiums of other asset classes, which would see its price rise to $17 million with a market cap of $356.7 trillion. 

In his opinion, this is very likely because Bitcoin is a “superior form of property.” If it does happen, the crypto token could also end up capturing 41% of the $871 trillion in global assets. Harvey also provided a more probable scenario as to Bitcoin’s future price. He noted that the crypto token could still rise to as high as $415,000 per token if it captures 1% of global assets.

Is BTC Superior To Other Asset Classes?

Harvey labeled Bitcoin as a “superior form of property,” and there is evidence to back up this assertion. As highlighted by the Director of Global Macro at Fidelity Investments, Jurrien Timmer, Bitcoin stands out in comparison to other asset classes. 

Source: Fidelity Investments

According to data from Fidelity, the flagship cryptocurrency provided the best risk-reward with a 58% return from 2020 to this year. In terms of drawdowns and rallies, Bitcoin also stood out with an 84% gain from its 2-year low.

Meanwhile, a recent report by Glassnode noted that Bitcoin continues to lead as one of the best-performing global assets, with a gain of over 140% year to date (YTD). Specifically, Bitcoin has more than doubled in relation to Gold. 

Featured image from Coin Culture, chart from Tradingview.com

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