The market crash that didn’t crash
In the best traditions of a clickbait environment we live in, the world’s news outlets rushed to inform their readers about the huge crypto market crash, despite the total cryptocurrency market cap still being well above $1 trillion, a level that we’ve never seen prior to 2021.
Clickbait headlines aside, the recent price correction served as a great reminder of high risks associated with leverage trading, especially in the crypto space. For example, cascading liquidations - also known as flash crashes - were triggered on the American crypto exchange Kraken, leaving many users with empty or even negative balances.
DeFi users were not spared from margin calls either, with more than $146 million worth of loans being forcefully closed within 48 hours, according to data from DeBank. While Kraken traders are asking to receive a reimbursement from the platform, DeFi users are left with nothing but an expensive lesson.
Ethereum gas outperforms Ether
While ether (ETH) price set its new All-Time High above $2,000 before plunging more than 30%, the Ethereum network experienced the worst congestion it has ever seen. Average transaction fees set new records, skyrocketing above $40. At the peak of the congestion, gas prices jumped over 1,000 gwei, meaning that DeFi users were paying up to $300 in fees for each token swap on popular decentralized exchanges (DEXes) such as Uniswap or Sushiswap.
To hide from high gas prices, many DeFi users flocked to Ethereum-based layer-2 DEXes like Loopring or DeversiFi, where traders have to pay only a one-time fee when depositing funds into contracts for the privilege of enjoying almost-instant low-fee trades.
Some investors decided to try DeFi projects on other chains, with the Binance Smart Chain (BSC) being the hottest destination. The BSC currently hosts all sorts of copycat projects from copycat Uniswap forks to exact copies of CryptoPunks NFTs. At the same time, many crypto influencers argue that BSC-based protocols should not be considered “DeFi” projects since they are built on a more centralized chain, which is presumably controlled by Binance and its affiliated parties.
Indeed, Binance has a controversial history of allegedly subverting relatively decentralized systems, with the most notable example being the hostile “takeover” of the Steem blockchain, when Binance and Huobi used their customers’ STEEM tokens to oust community-backed elected leaders of the Steem blockchain and instead give power to Justin Sun — the founder of TRON — which led to a hardfork, multiple resignations, and the creation of the HIVE blockchain.
Discussing the long term impact that Binance and its BSC blockchain may contribute to cryptocurrency communities can often be a controversial topic. From one perspective, Binance provides one of the best regarded privacy-aware custodial solutions for crypto retail investors, serves as many people’s gateway to and from crypto economies, and provides tremendous support and funding to various much-loved decentralized projects. On the other hand, Binance appears to be on a trajectory toward becoming the “Amazon of crypto” by launching its own blockchain, acquiring small domestic exchanges across the world, and recently snapping up one of the most popular crypto price tracking websites in the world – CoinMarketCap (CMC) – despite a supposed conflict of interest (CMC now ranks Binance as the top exchange in the world using its new “Exchange Score” metric).
In other news
Decentralized exchange (DEX) aggregator 1inch performed another retrospective airdrop of its native 1INCH tokens in the attempt to entice active Uniswap traders to try the 1inch platform. To qualify for the airdrop worth more than $1,000 at the time of the announcement, a user must have traded on Uniswap in at least 20 separate days, with at least three trades in 2021, and never interacted with 1inch nor Mooniswap in the past.
DeFi protocol Alpha Homora has been exploited for $37.5 million worth of cryptos. An attacker was able to borrow $37.5 million from CREAM Finance’s Iron Bank on behalf of Alpha Homora without any collateral. According to the team, there is no danger to user’s funds, the vulnerability has been patched, and the project has more than $1.4 billion worth of ALPHA tokens in its treasury.
Tether and Bitfinex have finally settled with the New York Attorney General. According to the settlement, the sister companies denied any wrongdoings, agreed to pay a $18.5 million fine, and have been prohibited from conducting any business in New York State. NY AG Letitia James said in a statement that “Bitfinex and Tether recklessly and unlawfully covered-up massive financial losses to keep their scheme going and protect their bottom lines”.
American bitcoin payment processor BitPay announced that it has added support for Apple Pay. US-based holders of BitPay’s debit Mastercard can now connect it to the Apple Pay app and make payments with cryptos that will be converted into fiat money.
Bitwise Asset Management, a provider of crypto index funds to professional investors, launched the world’s first regulated custodial DeFi index fund, which includes 9 major DeFi tokens: UNI, AAVE, SNX, MKR, COMP, UMA, YFI, ZRX, and LRC. While Ethereum-based DeFi indexes are nothing new, it is the first such offering for accredited investors, according to Bitwise CIO Matt Hougan.