Cointelegraph By Marcel Pechman
Ether (ETH) price has rallied by 33% over the last five days and data shows that as this occurred some buyers began to use excessive leverage.
Although this is not necessarily negative, it should be considered a yellow flag as a higher premium on futures contracts for short periods is normal.
Although Ether’s upward movement has been going for an extended period, it was only in February that Ether finally broke the $1,500 psychological barrier and entered price discovery mode.
To assess whether the market is overly optimistic, there are a few essential derivatives metrics to review. One is the futures premium (also known as basis), and it measures the price gap between futures contract prices and the regular spot market.
The 3-month futures should usually trade with a 6% to 20% annualized premium, which should be interpreted as a lending rate. By postponing settlement, sellers demand a higher price and this creates a price difference.
The above chart shows the Ether futures premium shooting above 5.5%, which is usually unsustainable. Considering there’s less than 49 days to the Mar. 26 expiry this rate is equivalent to a 55% annualized basis.
A sustainable basis above 20% signals excessive leverage from buyers and creating the potential for massive liquidations and market crashes.
A similar movement happened on Jan. 19 as Ether broke $1,400 but failed to sustain such a level. That situation helped trigger the liquidations that followed and Ether plunged 27% over the next two days.
A basis level above 20% is not necessarily a pre-crash alert but it reflects high levels of leverage usage from futures contract buyers. This overconfidence from buyers only poses a greater risk if the market recedes below $1,450. That was the price level when the indicator broke 30% and reached alarming levels.
It is also worth noting that traders sometimes pump up their use of leverage in the midst of a rally but also purchase the underlying asset (Ether) to adjust the risk.
Sellers were not liquidated by the move to $1,750
Those betting on $2,000 Ether should be pleased to know that open interest has been increasing all throughout the recent 33% rally. This situation indicates short-sellers are likely fully hedged, taking benefit of the futures premium, instead of effectively expecting a downside.
This week the open interest on Ether futures reached a record $6.5 billion, which is a 128% monthly increase.
Professional investors using the strategy described above are essentially doing cash and carry trades which consist of buying the underlying asset and simultaneously selling futures contracts.
These arbitrage positions usually do not present liquidation risks. Therefore, the current surge in open interest during a strong rally is a positive indicator.
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.
Price analysis 3/5: BTC, ETH, ADA, BNB, DOT, XRP, UNI, LTC, LINK, BCH
PAID Network exploiter nets $3 million in infinite mint attack
Cointelegraph By Andrew Thurman
Paid Network, a DeFi platform aimed at real-world businesses, has been exploited today in an “infinite mint” attack that has sent PAID token prices plunging upwards of 85%.
While the exploit netted nearly $180 million in PAID tokens at the time of the attack — what would have comfortably been the largest exploit of a DeFi protocol — the hacker’s payday will end up being far less. One observer noted that the attacker’s wallet only converted some of their tokens to wrapped ether, leaving the rest in rapidly-devaluing PAID tokens:
Summary of $PAID incident:
Total PAID swapped to WETH: 2079.603371141493
Total PAID left in account: 594,717,455.71
Total amount in attacker account = $27,418,034.33
Stay Safe. pic.twitter.com/Lz93qGKAq0
— vasa (@vasa_develop) March 5, 2021
The attacker’s wallet still has over 57 million PAID tokens worth $37 million.
The exploit is conceptually similar to an attack on insurance protocol Cover that took place in late December last year. In that instance, the team took a “snapshot” of holders prior to the attack and issued a new token, returning the supply of the token to pre-exploit levels.
The team confirmed on Twitter that they are currently planning for a snapshot and restoration:
We are investigating the issue. We pulled liquidity, are creating a new smart contract, & will be restoring everyone’s original balances to before the hack.
Those with staked, Lpool & UniFarm $PAID will have their tokens be sent to them manually.
We will share more updates soon
— PAID NETWORK (@paid_network) March 5, 2021
However, token holders anxious for a resolution may be out of luck. Some in the community are speculating that the attack on PAID wasn’t an exploit at all, but instead a “rugpull” — a colloquial term for an insider designing contracts to specifically make them exploitable and swiping user funds.
Nick Chong of Parafi Capital noted on Twitter that Paid’s deployer contract, an externally controlled account, transferred ownership of the deployer to the attacker shortly before the mint, indicating that a member of the team either rugpulled, or errantly allowed the attack to take place with a security lapse:
Paid Network’s deployer, an EOA, transferred ownership of a contract to the attacker 30 mins before the minthttps://t.co/h14GdV4fCf
— Nick Chong (@n2ckchong) March 5, 2021
Additionally, a DeFi risk analysis account @WARONRUGS warned of exactly this exploit in late January, noting that the contract owner can mint PAID tokens at any time:
❌ Scam Advisory #86- PAID Network $PAID (0x8c8687fC965593DFb2F0b4EAeFD55E9D8df348df)
Reason: The owner can mint tokens and did mint tokens to fresh wallets who never bought the presale. Contract is behind a proxy.
Likeliness of losing all funds: Very High
— #WARONRUGS❌ (@WARONRUGS) January 25, 2021
An on-chain note sent to the attacker has ominously warned that “the LAPD will be in contact with Kyle Chasse very shortly.” Kyle Chasse is the CEO of Paid Network.
Paid Network did not respond to a request for comment by the time of publication.
Cryptocurrency exchange Bybit shuts up shop in UK in compliance with FCA ban
Cointelegraph By Greg Thomson
Singapore-based cryptocurrency derivatives exchange Bybit announced on Friday that it would be suspending services for its customers n the United Kingdom. Bybit offers a range of high-end trading products for cryptocurrencies such as Bitcoin (BTC), Ether (ETH), Bitcoin Cash (BCH), Litecoin (LTC) and more.
The move follows a blanket ban on all retail cryptocurrency derivatives trading by the Financial Conduct Authority, and U.K. customers will be given until March 31 to close out positions and withdraw their funds from the platform, a company announcement stated.
The post also affirmed the company’s intention to continue dialogue with regulators in the hope of opening up shop in the U.K. once more.
“We request your immediate cooperation in this matter. We regret this situation, and will seek dialogue with regulators to explore options. We hope to be able to earn the privilege to serve you again in the future,” stated the announcement.
Going forward, new sign-ups to the exchange using U.K.-based mobile phone numbers or IP addresses will be rejected automatically.
In October 2020, the FCA issued an announcement declaring that all retail cryptocurrency derivatives trading, encompassing products such as options, futures and exchange-traded notes, would be banned. The ban went into effect in early January 2021.
Remarkably, the FCA’s decision to ban these products flew in the face of feedback received from industry consultants. The FCA canvassed the opinions of trade bodies, national authorities, exchanges and legal representatives, with 97% of respondents arguing against the prospect of a ban.
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