Cointelegraph By Marcel Pechman
The price of Ether (ETH) fell by 19.6% on April 18, resulting in the quick liquidation of $1 billion in long futures contracts. Despite the size of this record liquidation and its impact on Ether’s price, the futures open interest remained above $20.5 billion, which is 5% below the previous month.
After the sell-off, there were signs that investor sentiment deteriorated, which was evident in derivatives markets.
Historically, there’s much higher borrowing demand for Ether longs as opposed to shorts. Over the past couple of days, the long-to-short ratio has flipped, reaching the lowest level since December 2018.
There’s hardly any news that could justify the substantial price correction, as Ether has no direct relation with Coinbase shares receding, Bitcoin’s (BTC) falling hash rate or TV host Jim Cramer calling Bitcoin “phoney money.”
However, investors have reason to worry about potential harsh cryptocurrency regulation. Over the weekend, unsubstantiated news that the United States Department of Treasury would bring money laundering charges emerged. The focus would be financial institutions that have used cryptocurrencies, but little has come of this.
In February, Janet Yellen, secretary of the Treasury and a known crypto critic, cited the misuse of cryptocurrencies for illegal activities as a growing concern. Meanwhile, the Treasury’s Financial Crimes Enforcement Network signaled that the reporting of foreign financial accounts could include digital currencies.
The potential move means FinCEN may soon require individuals to file annual Reports of Foreign Bank and Financial Accounts, or FBARs, for cryptocurrencies held on foreign exchanges.
Therefore, investors’ increased interest in Ether shorts could have been fueled by the potential regulatory changes. Curiously, Ether’s price currently stands less than 5% below its $2,550 all-time high.
As the above chart shows, the average demand for Ether longs at exchange Bitfinex has been 65% higher than shorts over the last couple of months. On April 20, this indicator shifted, favoring the shorts and reaching its lowest level since December 2018.
Ethereum network congestion is another reason causing traders to act more carefully. Over the past couple of months, the average transaction cost stood near $16, making it quite impractical for individuals looking to facilitate smaller transactions.
The recent Berlin update has laid the groundwork for the much bigger London hard fork, which will activate EIP-1559. The controversial change will overhaul Ethereum’s existing fee structure, but experts have stated that the new base fee mechanism would not provide a long-term solution for Ethereum’ scalability problems.
Whatever the reason behind Bitfinex’s margin markets shifts favoring bears, there’s no indicator better than the 20% ETH price increase that took place over the previous four days. As of now, this isolated indicator should not be deemed worrisome, and it appears that Ether’s price is en route to new all-time highs.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Gelato Network launches ‘G-UNI’ Uniswap v3 management token
Cointelegraph By Andrew Thurman
While Uniswap’s highly-touted v3 has been racing to the top of TVL charts as of late, the need for active management has kept some retail participants out of their pools — a problem that a new product from the Gelato Network is aiming to fix.
First teased in a community call last week, the Gelato Network has released today the details of their “G-UNI” Uniswap v3 management system. G-UNI aims to perpetually maintain a liquidity range of 5-10% within the current price of an asset pair, with an oracle network checking prices and rebalancing liquidity pool position ranges every half hour. G-UNI also automatically re-invests trading fees for compounding returns.
“Passive G-UNIs work by just providing very broad liquidity, similar to Uniswap v2 that never has to be changed,” an announcement blog post reads. “It thus can be completely free of anyone’s control as it does not require changes in its price range.”
While Uniswap v3 allows liquidity providers to earn more fees by concentrating their funds at specific prices, it opens them up to risk of impermanent loss if the prices of the trading pair moves beyond the provider’s specified range.
Update: REKT ☠️ https://t.co/0MF0gCd9sm
— ameen.eth (@ameensol) May 29, 2021
The blog post notes that G-UNI’s auto rebalancing brings the benefits of concentrated liquidity, but with the option of passively managing the position in a manner more in line with Uniswap v2.
“The advantage of this includes that users can sit back and relax as all the difficulties that come with monitoring LP positions are taken care of.”
Composability and incentives
While the new tool will be a boon to passive liquidity providers, the real benefits of G-UNI might be for other DeFi protocols.
A self-described “Legendary Member” of Gelato, Hilmar, noted that projects can now incentivize concentrated liquidity in “pool 2” liquidity pools. Pool 2 is a colloquialism for a native governance asset paired with a popular base asset, such as ETH or MATIC.
3) Having an ERC20 wrapper around Uni V3 LP positions is extremely powerful, as this enables teams like Instadapp to offer “Liquidity Mining” incentive schemes on top of G-UNI.
This means you can now incentivize your community to provide liquidity around specific ranges
— Hilmar X 冰淇淋 团队 (@hilmarxo) June 16, 2021
Projects often have to provide ample liquidity mining incentives for participants in pool 2s, as liquidity providers take on the risk of the native governance token collapsing in price. Concentrated liquidity rewards may help stabilize native asset prices to a more regular range.
Additionally, G-UNI is a ERC-20 token as opposed to a NFT, which opens it up to a broader number of possible applications in DeFi. Many lending platforms accept liquidity pool tokens as collateral, but aren’t yet widely prepared for positions represented as NFTs; G-UNI will allow them to onboard v3 liquidity positions faster. Likewise, yield vaults like Yearn.Finance, which has been planning to incorporate exchange positions for some time, may find it easier to integrate ERC-20s.
G-UNI will be used out of the gate as part of the launch of Instadapp’s governance token. The team is setting aside 1,000,000 INST tokens for INST/ETH liquidity mining, with 3/4ths of the rewards focused on a higher INST price liquidity range.
Per the Instadapp dashboard, the incentivized pools are currently live and offering 2,200% and 1,800% APY respectively.
Alchemix patches ‘Reverse Rug’ exploit, address $6.5 million shortfall
Cointelegraph By Andrew Thurman
It’s as miraculous as Aladdin taking off on a magic carpet: in a possible first, some of the users of a decentralized finance protocol were the ones to benefit today from an exploit, turning the concept of a ‘rugpull’ on its head.
A colloquialism for when liquidity is drained from a project (often an unscrupulous founder or developer draining the funds themselves), depositors and DeFi users are most often the ones holding bad debt and/or worthless tokens — left to hope for compensation plans that can take months or even years to fully vest.
In an exploit today, however, the users are the ones who got to pull at the seams for a change.
This morning, Alchemix announced that the contracts for one of their synthetic assets, alETH, had experienced an “incident.”
There has been an incident with the Alchemix alETH contracts. Together with the fantastic team at @iearnfinance, we have identified the error and are both working on a post-mortem and a solution to the problem.
Funds are safe.
— Alchemix (@AlchemixFi) June 16, 2021
In a incident report published later in the day, Alchemix developer “n4n0” said that “an issue with the deployment script of the alETH vault accidentally created additional vaults,” some of which the protocol used to incorrectly calculate outstanding debts, which in turn meant protocol funds were used to “pay off user debts.”
As a result, for a short window of time users were able to withdraw their ETH collateral with their alETH loans still outstanding — a rugpull by the community to the tune of $6.5 million.
Alchemix innovating again… this time with the reverse rugpull.. a ‘rugput’
Joking aside there was a little incident with the new alETH vault in which nobody lost any funds but some users actually gained@n4n084191635 with a great incident report herehttps://t.co/Vo3cWRnZPx pic.twitter.com/68G3y1s3x0
— ⟠ toast.eth (@intocryptoast) June 16, 2021
Per the incident report, the team paused the mint contract for alETH two and a half hours after the exploit was discovered. The report notes that no users lost funds as a result of the exploit, and that Yearn.Finance — whose yield vaults automatically repay Alchemix’s synthetic loans — suffered no loss as well. Additionally, a “conservative” initial debt ceiling prevented the protocol loss from being more extreme.
The team, including incident report author n4n0 appear to be taking the loss in stride:
— n4n0 (@n4n084191635) June 16, 2021
A trio of solutions is being deployed to cover the shortfall, including a temporary increase in protocol fees, a injection of ETH liquidity from Alchemix’s treasury, and a sale of DAI from the treasury for additional ETH. The team says they will be deploying an entirely new vault to address the flaws of the original.
Further changes may be on the horizon for the alETH asset as well. Alchemix currently has a alETH/ETH pool live on Saddle, a VC-backed fork of Curve Finance, following Curve reportedly turning down creating a pool for the synthetic Ether. However, in the past 48 hours the Curve social media account has been making overtures in an effort to bring Alchemix’s latest synthetic asset back.
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