DeFi Investor Turns $200 Into $250,000; SushiSwap Crash Sinks Ether

Bitcoin stabilized following its near-20% crash at the beginning of September, and the market structure remains more bullish than it was when it plummeted 50% in March. Large whale order have set a possible floor at about $8,800, though the macro environment is far from certain, and bitcoin may still be partially dependent on the whims of the stock market.

Ether underperformed bitcoin this week, in part because of a SushiSwap crash that magnified the fragility of the DeFi bubble, which has boosted ether in recent months. SushiSwap, founded as a token to bootstrap liquidity on the uniswap decentralized exchange, lost more than 70% of its value after its anonymous creator Chef Nomi liquidated his wallet, netting nearly $12.5 million. 

The ripple effects pushed ether down 30% last weekend, though it recovered those losses during the week. Chef Nomi transferred the keys to SushiSwap to crypto executive Sam Bankman-Fried, who was optimistic about DeFi’s future, but added that “you can imagine a scenario where it could flame out back into hibernation for a while.”

crypto bitcoin price chart


Another DeFi cautionary tale this week came via a glitch in Soft Yearn Finance, a project meant to be artificially pegged to the Yearn Finance token. It overrides the token holder balances every 24 hours in a process called a rebase to return to its pegged price.

But when it was listed on the uniswap exchange, it spiked to $160 and then immediately plummeted back to less than a penny, but not before an investor initiated a sell transaction while the protocol was mishandling the rebase. The result: that investor turned $200 into $250,000 in a matter of minutes at the expense of misguided buyers.


Digital Currency Group, the parent company of asset manager Grayscale and media outlet CoinDesk, announced Wednesday that it acquired London-based crypto exchange Luno for an undisclosed amount. Luno CEO Marcus Swanepoel said his exchange, which has 400 employees and 5 million users, is poised to expand in the Middle East and South America.


Part of the Digital Taxonomy Act made it out of committee in the House of Representatives and will be considered by the full chamber, marking the farthest a bill addressing regulation for blockchain tokens has gotten in the 116th Congress. The portion of the bill, aimed at preventing crypto scams and crime, as well as part of the Blockchain Innovation Act were incorporated into the Energy and Commerce Committee’s Consumer Protection Safety Act.

The American Compete Act, which calls for the Department of Commerce and the Federal Trade Commission to conduct a study examining blockchain development to stay competitive with China, also made it out of the marathon committee session.


UK-based crypto startup Crypterium, run by former visa executive Steven Parker, recently launched a Visa V -0.4% card for its European customers and is now eyeing a partnership with PayPal and support for Apple Pay. Parker insists that the blockchain industry should be “happy to be regulated,” saying that more regulation means “traditional players such as Visa and banks are happy to work with us.”


How China Is Closing In on Its Own Digital Currency [Bloomberg]

Hackers Are Trying To Break Into This Bitcoin Wallet Holding $690 Million [Vice]

How bitcoin met the real world in Africa [NBC News]

‘High’ Severity Bug in Bitcoin Software Revealed 2 Years After Fix [CoinDesk]Follow me on Twitter. Send me a secure tipCrypto ConfidentialCovering the most important news in crypto and blockchain. Sign up to get Crypto Confidential delivered to your inbox every Saturday:


Bitcoin Futures Trading Spells Danger Ahead


Since last October there has been a growing debate as to whether bitcoin (and other cryptocurrencies by association) are safe havens or risky, speculative assets. The stress test of the coronavirus crisis has helped to clarify this.

During the past two months, bitcoin has moved in sync with the S&P 500, betraying the fact that it is a risky asset. Gold, typically seen as a safe haven, has also risen but that is likely a response to falling interest rates, huge liquidity injections from the Fed and other central banks, and the possibility of monetary debasement.

Fed liquidity boosts bitcoin futures trading

The recovery in bitcoin has come alongside the overly generous provision of liquidity by the Fed, and the worrying development is the explosion in open interest in bitcoin futures (up to three times the average of the last year).

This points to the risk that bitcoin has now become a speculative plaything (several large hedge funds have become active in the bitcoin market) in markets and is at risk of a correction should risk appetite change.

Underlying this, on longer horizon view, bitcoin has also tended to move in sync with equities, for instance the peak in bitcoin in December 2017 prefigured weakness in equities.

Still within the less ‘independent’ crypto currency community there is a view abroad that bitcoin and crypto currencies are a ‘safe haven’ in the same way people might for instance, regard gold. Recent behavior suggests this is not the case.

From the point of view of cryptocurrencies as assets, very basic data analysis suggests that optically bitcoin has a low correlation with safe havens like gold. This does not mean that bitcoin is a good diversifier or a safe haven. It has been highly volatile over the past two years and is subject to trading and liquidity risks not normally associated with safe havens.

A further clue as to the true nature of cryptocurrencies as investable assets comes from the community of people who hold and trade them. The micro-structure (or plumbing) of markets, as well as the anthropology and sociology of those who populate them (which will have to be the subject of a future missive) is crucial to the way they behave and subsequently to their risk characteristics. Note that the current spike in bitcoin futures trading coincides with a huge spike in Robinhood account trading and in retail buying of call options.

Bitcoin futures activity explodes

Though admittedly not scientific, nor thorough, I suspect that many bitcoin traders also trade equity futures and currencies and use the same equity trading rules (technical) to buy and sell bitcoin (cryptos now have their own rating system, FCAS). If this generalization holds, it suggests that risk budgeting may drive a positive correlation between cryptocurrencies and equities, especially at market highs and lows.

Another observation is that for its size (the top ten cryptocurrencies barely add up to the market cap of JPMorgan JPM ) the crypto market attracts an inordinately large amount of attention, which may draw money in at high points. To my mind this points to bitcoin having a pro-cyclical bias in terms of its riskiness as a trading asset.

On a structural basis the coronavirus crisis may create greater interest in cryptocurrencies – especially given how the crisis have underlined the role of the digital economy and how higher taxes will be required to pay for the stimulus programs enacted.

However, the disarray surrounding Facebook’s Libra project is a sign of the operating and regulatory complexities facing cryptocurrencies. More powerful still is the incentive that central banks and fiscal authorities around the world have for the bitcoin not to succeed. Witness as an example the vigour with which the Chinese – who tightly control money flows – have clamped down on cryptocurrency exchanges.

Madness of crowds

The next steps in the crypto or digital currency (they are almost the same in that crypto currencies are digital currencies that use cryptography) industry for central banks to issue their own coins, and for the digital payments industry. More thorough regulation, cleaner cross-border payment processes and more reliable identification mechanisms will be part of the workload of central banks and governments.

In the short-run, keep an eye on the growing number of speculators in the bitcoin market – financial history shows that when new assets attract crowds, it invariably ends badly.

I am the author of a book called The Levelling which points to what’s next after globalization and puts forward constructive ideas as to how an increasingly fractured world can develop in a positive and constructive way. The book mixes economics, history, politics, finance and geopolitics. Markets are the best place to watch and test the way the world evolves. Most of my career has been spent in investment management, the last 12 years at Credit Suisse where I was the chief investment officer in the International Wealth Management Division. I started my career as an academic, at Oxford and Princeton.



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Bitcoin Just Painted a ‘Golden Cross’ But Is $10,500 Now Achievable?


Bitcoin (BTC) price remains in a somewhat neutral zone, caught between two highly consequential paths. For the past week, the top-ranked digital asset on CoinMarketCap has struggled to push above $9,900 in order to attack the $10K mark.

On Tuesday morning Bitcoin made another attempt at $10,000 when the price quickly rallied to $9,900 as some sort of hiccup in the BitMEX trading engine caused the exchange to cut out for nearly an hour. The move didn’t last long and for the remainder of the day, the price remained pinned below $9,800.

Yesterday the mining difficulty rate dropped by 6%, meaning some miners who shut down their operations due to the block reward reduction and current Bitcoin price may also find it easier to mine Bitcoin after the difficulty adjustment.

As mentioned earlier, Bitcoin is currently at a ‘crossing the Rubicon’ moment. Some traders believe that if the asset can rally to $10,200 and close above this level the path forward is bullish, especially if Bitcoin can push through $10,500. Others believe that a drop below the $8,900-$8,550 support zone means prolonged sideways price action is to be expected for the remainder of 2020.

Looking at the daily chart, we can see that Bitcoin continues to make higher lows and remains above the multi-week ascending trendline. Currently, the price continues to tighten in a pennant seen on the 4-hour and 1-hour timeframe.

A strong volume breakout from this pennant should propel the price to $10,200, a point which is also aligned with the top arm of the Bollinger Band indicator.

Does a golden cross mean a bull run is coming?

This week crypto media has given much attention to the impending golden cross between the 50-day and 100-day moving average which is expected to occur within the next few days. Data from Cointelegraph Markets shows this would be the seventh time the moving averages have converged in Bitcoin’s history.

Typically, traders interpret the cross between the moving averages as a bullish signal so as the maneuver comes closer to completion Bitcoin price could see an increase in buying pressure. This is possible more reason to expect the digital asset to break above $10K and test the $10,200 level in the short term.

It should be noted that a golden cross is not always followed by a strong rally. Take the most recent example of the February 19 golden cross which was followed by the catastrophic drop to $3,750 less than a month later on March 13.

BTC USDT 4-hour chart. Source: TradingView

For the short term, traders are watching to see if Bitcoin can breakout from the pennant and overtake the $9,900-$10,000 resistance zone. Volume permitting, a move above $10,071 clears a path for the digital asset to rally to $10,200.

Knocking out the 2020 high at $10,500 would place the price above the long term descending trendline from the $19,800 all-time high, a feat which many traders say would be confirmation of a new bullish cycle starting.

From a bearish point of view, repeated rejection at $9,900 and $10,000 increase the chance that the price will drop to major support levels. A drop below $9,600 could see the price drop to support at $8,900-$8,550 and below this $7,438-7,200.




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