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Income from crypto investments

Posted on January 20, 2023January 17, 2023 by admin
Income from crypto investments

There are many options to increase income from digital assets. For example, depositing bitcoin and getting interested without doing anything. Next, we’ll break down what can bitcoin make interest in detail, as well as learn what is btc lend and Rug Pulls.

Investing in Cryptocurrency

Cryptocurrency investing and trading are the basic ways to make money in the digital asset market. But there are other options as well. Some of them will suit those who have bought Bitcoin, Ethereum, or other coins and are not ready to sell them short. Others can be useful for active traders who want to make money here and now and as much as possible.

For example, bitcoin holders who are confident in the future growth of its price and intend to keep the asset for a long time can deposit it on special platforms. They can open a deposit in BTC and other cryptocurrencies and thus passively increase the number of coins and potential profit. Such an option is available at blockchain.com, crypto.com, and other services, the deposit rate is 5-8% per annum.

Decentralized Finance (DeFi) offers a similar solution. Their users can also use cryptocurrency to make deposits on various platforms. There are two options. The first, with less potential income and less risk, is to provide liquidity to decentralized trading platforms such as Uniswap, 1inch, and others. These exchanges need capital so that traders can trade. That is why the services pay remuneration to those who provide them with assets for use.

The exact profitability cannot be predicted; it may be 3%, 5%, 10%, or more. It depends on the volume of trades on each site and with each token, as users who have made a deposit receive a percentage of the commissions paid by traders.

Services help you to choose

Services such as dextools.io will help you choose the most profitable option. They allow you to sort trading pairs on Uniswap and other sites by profitability. Because this index is constantly changing, users who earn from providing liquidity are constantly “moving” from one pair to another in pursuit of the highest percentage.

The second option for earning in DeFi is “profitable farming.” It works the same way, but here, as a rule, users provide deposits to separate platforms created specifically for this strategy. You deposit Ethereum or other coins to the platform, and it pays a percentage in its tokens for this, thus “harvesting”.

The difference from the first option is that both risks and potential returns increase significantly. Often “farming” platforms offer deposit rates of thousands of percent per annum in the early days. This result is calculated based on the price of the token in which users will receive payouts for making deposits. “Farmers,” receiving coins, sell them, causing their rate to fall. Accordingly, the initial rate of thousands of percent begins to decline dramatically, which happened, for example, with DeFi-service Spaghetti Money, which offered an annual yield of 35,000% for a deposit in BTC on the first day of operation, but a week later that figure fell below 50%.

Aggregators such as coingecko.com and coinmarketcap.com help “farmers” find the best option. On them, you can sort DeFi-platforms by the highest rates, the amount of which currently reaches 20,000% per annum.

For bitcoin holders who want to make money from “income farming,” there is a solution – “wrapped” bitcoin or Wrapped BTC. This is a token issued based on Ethereum, the rate of which corresponds to the rate of the first cryptocurrency. This asset can be stored like a real BTC and, at the same time, deposited as liquidity on DeFi-platforms to earn interest on the deposit.

When working with cryptocurrency, security is very important, especially for investments in DeFi instruments, which are popular nowadays, Alexey Markov, a leading trader at United Traders, stressed. He recommended being cautious about promises of exorbitant yields. Dozens of percent a day is “absolutely unrealistic,” but many traders count on getting rich quickly without even thinking about the banal economics of such investments. One should be no less vigilant with the new surge of token sales (ICOs, IEOs, IDOs) taking place in this area.

Rug Pulls

Because the crypto industry is largely unregulated, the DeFi space operates solely on trust. From buying to selling to lending to stealing, trust is one of DeFi’s defining factors. When that trust is violated, as it often is, it is called Rug Pulls.

In cryptocurrency lending, developers can create a new token, link it to a stablecoin, create a liquidity pool, and start mass advertising. When these pools have a lot of stablecoin deposits, developers use the backdoor they have put in the smart contract to issue millions of their new tokens.

This causes a shortage of stablecoin. Rebalancing the pool would mean the new token would be virtually worthless. Founders will dissolve into thin air with millions. Surprisingly, all of these risks can be avoided if investors do basic checks before putting their tokens or fiat into credit platforms. Need to verify:

  • Conduct online background checks on founders (social media accounts, past projects, etc.). A founder not seen online should be treated with caution.
  • Watch for red flags on how much they spend on marketing if a third party has criticized their project and the interests they promise.

Landing

The tool allows you to have a passive but small income from the interest on the deposit. This method is suitable for beginners because you do not need to understand the quotes on the stock exchange and know complex terms. How it works: like a deposit in the bank – the investor “rents” to the exchange or platform a part of his savings to return later with interest. The interest depends on the terms of the exchange itself or the digital currency in which the investor deposits his assets.

Interest is charged when a bank uses users’ digital assets for other transactions, cryptocurrency loans, and other blockchain transactions. Smart contracts typically record a guarantee to return on demand. For example, you can send $1,000 to a lending account and get up to 15% interest in USDT, which is about $150.

There are two types of contracts found in lending: open-ended and fixed-term. The perpetual has a low-interest rate and allows you to withdraw at any time. A fixed term is set for a specific period (a few days or months), so it has a higher interest rate. It is not possible to withdraw funds before the end of the term. The only disadvantage of lending – you may get caught by fraudsters if you choose an unreliable platform.

The most high-profile case happened in 2016 with the Bitconnect platform. It offered users to invest in BCC cryptocurrency and place it in the service’s system at interest to earn passive income. The creators came up with a referral program with several levels, as is common in pyramid schemes. After an investigation, the U.S. Securities and Exchange Commission found that investors had invested at least $2 billion in the project.

One of the easiest ways to spot scammers is overly sweet and overstated promises. Pay attention to the yield offered by the platform. If the figure is around 10-15% per annum – you can trust it, but if the creators promise 2-3% per day – it’s better to give up.

  • Pros: you can start with a minimum investment and see how it works; no equipment or investor qualification is required; if you choose a reliable platform for placement, the risk of losing funds is minimal.
  • Disadvantages: the risk of falling for a fraudulent platform is still there; you can’t earn very much at once; offers with a high-interest rate are quickly dispersed.

Recommendation: allocate for banding, steaking, and “profitable farming” not more than 10% of your crypto portfolio in total.

Three platforms for lending:

  • Binance. If you choose to invest your currency in Ethereum on a fixed contract, it will yield about 3.6% over six months, and if you invest in Ethereum Classic, about 5% over six months;
  • Nexo. Offers investors a fixed rate (about 8% p.a.) on all available assets, including currencies (USD, EUR to GBP) and stablecoins (USDT, SAI, USDC);
  • Salt. One of the major platforms for lending has its token of the same name. Owners of the token get access to preferential interest rates. In addition, investors can borrow currency, paying interest in convenient digital assets – Bitcoin, Ethereum, USDT, and others.

Conclusion

Investors can earn 8% for keeping their digital money in deposits. It is more reliable than a classic exchange because blockchain does not allow you to recover a lost password, and in a cryptocurrency bank, you can return access to the account with your passport.

Posted in LoansTagged income

Adidas Unveils Its First NFT Collection

Posted on December 14, 2022December 6, 2022 by admin
Adidas Unveils Its First NFT Collection

Adidas Originals, a German sportswear brand, launches its first collection of blockchain-powered virtual wearables, called “Virtual Gear.” The release of the NFT line strengthens Adidas Originals’ focus on community-driven and member-centric innovation in the open metaverse space.

The 16-piece collection is available to those who have ITM’s capsule collection from May, which was airdropped to NFT holders of Into The Metaverse. This represents a huge breakthrough for the brand, because it spans past and future generations, virtuality and reality, connection between people and their communities, culture vs identity.

Erika Wykes-Sneyd, VP of Adidas, said the following about NFT wearables at their launch: “I’m thrilled for our most passionate community members with this release. On collection launch day, every one of our capsule holders will have a choice – to express their virtual identity with adidas’ first Virtual Gear collection by burning it, or make it available to others in the community.” Our community and creators are at the heart of everything we do, which is why we are committed to exploring every opportunity that Web3 has to offer. We want to create wearables with value and utility for our community members that can be used in a variety of ways.

According to the report, people who own Adidas Originals’ Capsule NFT Collection can find out which of the 16 unique pieces they have been given by display and destroying their current Capsule NFT. This means that users must use their current Capsule NFT to create one of 16 new digital wearableNFTs at random.

Nic Galway, Senior VP of Creative Direction for Adidas Originals commented on the upcoming collection. He said that Adidas is always one of those brands which explores creativity and pushes boundaries to find new potential.

He continued, “Web3 provides an opportunity for our team to explore new possibilities in how our brand can be represented through virtual and augmented reality.”

NFT marketplaces will have the new virtual gear collection starting November 16th for those who don’t own an adidas originals Capsule NFT. As a bonus, people who have both a partner NFT (BAYC, MAYC, inhabitants) and a virtual wearable NFT from Adidas will be able to use their virtual wear on their PFP Tool that’s releasing soon.

On November 16th, members of the Capsule NFT community will be able to obtain the new Virtual Gear collection from various NFT marketplaces. As an extra incentive, those community members who own both a virtual wearable NFT and a compatible partner collection NFT (BAYC, MAYC, Inhabitants) will soon be able to use those NFTSs together with Adidas’ virtual wearables using the PFP Tool.

Most notably, the well-known sports brand Nike has made large appearances in the world of Web3 fashion. Recently, they introduced a new platform called Swoosh to increase its presence in the non-fungible token (NFT) space.

Posted in NFTTagged Adidas, NFT

How is Zk-SNARK Used in Cryptocurrency?

Posted on December 5, 2022November 23, 2022 by admin
How is Zk-SNARK Used in Cryptocurrency?

Zk-SNARK is an acronym that stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.” A zk-SNARK allows one party to prove it possesses certain information without revealing what that information is. This proof uses a secret key created before the transaction takes place and is part of the protocol for Zcash, a cryptocurrency.

For most of cryptocurrency’s early adopters, privacy was an unstated but desired goal. Yet it always took a backseat to another priority: developing a way to securely and reliably transfer digital currency without resorting to traditional banking methods.

Bitcoin users in the early 2010’s thought that their transactions were anonymous. This was because user’s public keys weren’t associated with offline identities. However, efforts from data scientists, hackers and law enforcement at the end of the decade proved otherwise. It is possible and relatively easy to re-identify people who had given pseudonymous data to multiple sources.

Because people were concerned about the lack of privacy with original cryptocurrencies like Bitcoin, developers started working on creating coins that focused on privacy. The most well-known of these was Zcash, which used a technology called zk-SNARKs.

zk-SNARKs use “zero-knowledge proofs,” which were first though up in the 1980s. In short, a zero-knowledge proof is when two people can confirm they have certain information to each other without revealing what that information is.

Proofs that don’t utilize 2FA require one party to have access to all the information. A standard proof is akin to a password used for logging into an online network. The user inputs the password, and then the network checks its contents for accuracy. However, in order for this method to work, the network must also have access To sum up, Two-Factor Authentication adds an extra layer of security by requiring two pieces of evidence (or “factors”) before granting authorization.

In a zero-knowledge proof scenario, the user would demonstrate to the network (by way of mathematical proof) that they have the proper password, without revealing the password itself. The advantages for privacy and security are evident: If the network doesn’t store the password somewhere for verification purposes, then it cannot be stolen.

Though the mathematics behind zk-SNARKs is complex, this type of proof allows one party to show not only that a certain piece of information exists, but also that they are aware of it. With Zcash, these proofs can be verified quickly, and the protocol does not need any interaction between the person demonstrating and the person verifying.

 

There are a few concerns that come along with zk-SNARKs, though. For example, if somebody got ahold of the private key used to create the protocol’s parameters for proofing, they could make false proofs that would look valid to anyone who checks them. This person would essentially be able to print new Zcash tokens through counterfeiting. To stop this from happening, Zcash was designed so that the protocols for proving are complicated and done by multiple people instead of just one.

The Zcash team went to great lengths to make sure that the cryptocurrency couldn’t be counterfeited by implementing a false-proof system. However, there is another issue with Zcash that investors should be aware of. For the first several years after its creation, every block mined will have a 20% tax levied on it – this is known as the “founder’s tax” and goes towards compensating the developers behind Zcash.

Some people have said that the Zcash founders could make an infinite number of extra tokens without anyone else knowing. So, we don’t exactly know how many Zcash tokens there are right now.

In 2019, some developers started to improve zk-SNARKs by removing the reliance on a trust setup. Suterusu, one of these teams, developed zK-ConSNARK. This system is supposed to work without needing a trust setup, can provide privacy protection for popular blockchains like Bitcoin, and has less inflation than any other existing cryptocurrency.

Posted in Crypto educationTagged Zk-SNARK

Crypto Charts: Last week’s winners and loosers

Posted on November 15, 2022 by admin
Crypto Charts: Last week’s winners and loosers

Turning to the charts…

No it’s not going to be pleasant, we can see that BTC is bleeding hard and that’s because it finally broke a massive bear flag that had been forming on the monthly.

Previous zones of support and resistance suggest we could drop to 14K or 15K in the coming weeks before falling to the final destination 10K to 12K so buckle up.

Last week’s top performing cryptos were Trust Wallets (TWT) token, Pax Gold, GMX, Dex’s GMX token, Gemini’s GUSD stablecoin and Fey protocol’s Fey USD stablecoin.

Starting with Trust Wallet it’s TWT token seems to have pumped because of the sudden shift towards self-custody in the crypto community caused of course by all the FTX Alameda situation.

On-chain data confirms that large amounts of BTC and ETH have left exchanges over the last week.

Now I must admit that I don’t really trust the TWT tokens price action because it’s been up only since the start of 2020.

Almost all its trading volume is happening on Binance which makes sense since the exchange bought the wallet and made it its native wallet.

So I’d be careful with this one.

Next up we have Pax Gold or PAXG which is a gold back token issued by Paxos the same company that issues Binance’s BUSD stablecoin.

As expected Pax cheese rally is due to a rally in the price of gold plus a bit of extra volatility from crypto holders fleeing to safety in times of crypto market chaos.

Because I’m not all that familiar with the gold market it would be unwise for me to do any kind of analysis on the price of PAXG, all I will say is that gold tends to rally during times of general economic stress and you’ll recall that we are on the brink of a global recession.

Then there’s the Gmxdex’s GMX token which is probably rallying because crypto holders have switched from using centralized exchanges to decentralized exchanges as a result of last week’s events.

To clarify GMX is a decentralized exchange on arbitrim one of Ethereum’s many layer twos.

Funnily enough gmx’s limited price history again makes it hard to assess where the token will go next.

The longer term charts suggest it is in a slow but steady uptrend, note that this could change on a dime if DeFy related regulations are introduced in the United States and this is a very real possibility.

The same applies to stable coins and this is one of the reasons I’ve been watching them very closely.

Lately the slight increase in the price of Gemini’s GUSD stablecoin seems to be because of the billions of dollars that are being rotated out of Tether’s USDT and into other stable coins namely Circle’s USDC.

And finally we have Fey protocol’s Faye USD stablecoin which is a decentralized stable coin.

I must say that it’s done a good job of maintaining its Peg so far.

This could change as the bear market gets worse but I reckon there’s a bullish case to be made for the decentralized stable coins that survive the purge.

One thing’s for sure and that’s that centralized stable coins will come out the other side of the bear market more powerful than ever.

Posted in crypto market

The Things to Know About Bear Markets

Posted on November 4, 2022November 1, 2022 by admin
The Things to Know About Bear Markets

Although it may not seem like it, most asset classes are currently in a bear market. Keep reading to learn eight key things about bear markets so as to improve your trading strategy.

The stock market usually experiences a bear market about once every three to five years. A bear market is when the prices of stocks drop by 20% or more from their peak, and it typically lasts for several months. Even though we’re in a bear market right now, there are still eight important things to remember.

Bear markets are a crucial component of the market cycle. If we look at history, stock market winters occur every 5 years on average. Similarly, it appears that crypto winters also follow this pattern–with bear markets appearing after around 3.5 years have passed.

Bear markets aren’t fun, but they do give assets the time needed to recover and prepare for the next bull market.

While the stock market generally corrects by 36%, Bitcoin goes as low as 86%.

In the current bear market, someassets have fallen by more than the index. For example, Microsoft is down around 40%.

Another key distinction between stock and crypto winters is the length of bear markets. In general, bear markets in the stock market are shorter than bull markets (usually lasting around 10 months whereas bull markets last an average of 32 months). This indicates a time of prolonged growth followed by a sudden drop.

Bear markets in crypto last about as long as bull markets, at 19 to 26 months each. However, crypto winters begin sharply but take more time to settle at the lows before starting a new run.

It’s hard to predict a bear market before it happens, even though there are always signs. Most people don’t manage to see the crash coming until it’s too late.

We believe that it is more beneficial to keep milking the cow until it stops producing than to worrying about it constantly. You should use your energy to make profits when the market is doing well and create a risk management system for when the market crashes.

Down to the nitty-gritty!

Time is one of the most critical factors in investing, whether you’re putting your money into stocks or cryptocurrency. It might seem like things are going bad if a bear marketdrags your portfolio down, but if you zoom out and look at a larger time frame, you’ll probably see it start to turn around. In fact, historical data shows that even though the S&P 500 has had negative returns in one out of every three quarters over the last 20 years, holding onto investments for 10 years has resulted in positive returns 94% of the time!

If you’re holding Bitcoin with a long-term outlook, you’re more likely to see an increase in value (as shown in the graph below). Buying Bitcoin within the last year may have resulted in a loss, but if history repeats itself, you could be back in the green at some point soon.

As anyone will tell you, it’s tough to forecast a bear market. It’s similarly hard to understand when the market reaches its lowest point. Usually, the bottom happens when people think conditions will continue deteriorating.

When the market plummets, a lot of people sell their assets at a loss. “Crypto is dead” or “the stock market has finally burst” will become too common. But if we look at it from another perspective, investing during these times might not be such a bad idea after all.

This is the first time that both crypto and stock markets have entered a bear market simultaneously. However, as you can see from the chart below, the 2016-2017 crypto bull run started when the stock market was already in a bearish phase.

Although in the past crypto and the stock market have seldom moved together, recently they have become more correlated than ever. Only time will tell how long this trend will continue.

After a long period of decline in the cryptocurrency market, many altcoins are abandoned. This was especially apparent during the previous bull market, where coins that failed to hit new highs became less popular as newer projects gained more attention. This happens because investors tend to flock towards digital currencies with more innovative features and potential for growth.

When acurrency or “crypto” bull run occurs, it usually happens because of the strength of the story or narrative behind that currency. Older coins don’t have as strong of narratives as newer coins do at this point in time, but that is changed expected to change over time. The industry will become more sophisticated and nuanced, which will be evident by Ethereum’s recent performance in light of its launch date in 2015. It was one fo the top performers duringthe most recent market growth spurt..

To end on a high note, if you manage to stick around during a bear market, generally you are rewarded with profit. As we stated earlier, time is of the essence. If you can be patient enough to get through the tough times without giving up, the next bull run will probably bring success your way.

Be persistent, invest in what shows potential, and be patient for the next market boom!

Posted in crypto market

Crypto Regulations Updates

Posted on October 15, 2022October 11, 2022 by admin
Crypto Regulations Updates

When it comes to crypto regulations some of the most concerning involve the concept of on-chain censorship, this is when minors or validators enforce the laws of a country on the cryptocurrency blockchain they’re securing.

There were concerns that Ethereum validators would begin censoring sanctioned transactions once Ethereum’s transition to proof of stake was complete, this is because the biggest Ethereum validators are based in the USA.

Some of you may know that around 45 percent of Ethereum validators are now censoring Tornado Cash related transactions on the Beacon Chain what some of you may not know is that this on-chain censorship isn’t because of the validators per se but the Mev software providers that they’re using now for those unfamiliar maximal extractable value or Mev is basically where miners or in this case validators have the power to rearrange transactions in blocks before they’re added to the blockchain.

Now this is obviously bad which is why software exists to minimize the practice that is the TLDR.

The most popular Mev software for Ethereum is Flashbots which essentially swore to comply with the Tornado Cache sanctions back in August as such any Ethereum validator leveraging Flashbots has been knowingly or unknowingly censoring Tornado Cash related transactions.

Now it should take you no more than two seconds to realize that this on-chain censorship is a very slippery slope, today it’s enforcing sanctions against objectively Bad actors tomorrow it could be enforcing KYC on Ethereum wallets or IRS reporting for all East transactions above a certain amount.

Now the mere Prospect of such a progression was more than enough to push Flashbot’s co-founder Stefan Gosselin over the edge in his debate about on-chain censorship with his colleagues.

As far as I understand he was against the company’s on-chain censorship and his colleagues were in favor, now if you want evidence that enforcing sanctions on chain is the start of a slippery slope look no further than Dapper lab’s recent response to Europe’s new crypto sanctions on Russian citizens.

The company straight up blocked Russians from accessing their crypto Wallets on the flow blockchain.

Now to clarify it’s not entirely clear, whether the crypto wallets in question were custodial or not there do not seem to be many details about this now but it appears the ban applies to Dapper labs’s custodial wallet which is the main gateway to access the flow blockchain.

Truly scary stuff.

Posted in crypto market, TaxTagged Crypto, Regulations, Updates

Turning to the charts

Posted on September 28, 2022 by admin
Turning to the charts

Turning to the charts we can see that the massive bear flag on BTC’s monthly chart broke to the downside last week unless we suddenly see some biblical reversal driven by an unforeseen macro Factor later this week.

BTC could fall to the 10K level in October or November so brace yourselves.

Last week’s top performing cryptos were Reserve rights, XRP, Algorand, Compound and Chiles.

Starting with Reserve rights the RSR coin appears to have rallied because the project will be deploying a new protocol sometime next month.

Now as you can see RSR’s Bollinger Bands and RSI are flashing oversold on the weekly time frame.

I expect to see a reversal in the coming days especially with all the resistance around these price levels.

Next up we have XRP which rallied on the speculation that the SEC’s case against Ripple will soon be resolved.

I reckon this depends on the outcome of the SEC’s case against Library which should be announced this week and will set a precedent for current and future crypto crackdowns.

Like RSR, XRP is looking extremely overbought on the weekly and there is lots of resistance around the 50 Cent range.

The charts suggest that XRP will see a correction fairly soon.

Let’s just hope that it doesn’t line up with an undesirable outcome in the library case.

As for Algorand you’ll know ALGO rallied on the release of State proofs.

Believe it or not but the weekly chart suggests ALGO could continue its rally.

The question is whether there will be a catalyst for this rally to continue.

In the absence of such a catalyst it’s hard to see how this upside move would play out.

Now when it comes to Compound the COMP token rallied on the news that the compound D5 protocol opened its doors to institutional borrowing and lending.

Like ALGO, COMP seems to have more room to the upside on the weekly chart, however it is Again difficult to see which Catalyst could take it to the upper Bollinger band range and the 80 range on the RSI.

Last but not least we have Chili’s which has been a top performing crypto for many weeks.

Now this seems to be because cryptocurrency exchanges continue to list Chile’s fan tokens as a result CHC is extremely overbought on the weekly.

If it’s another top performing crypto next week I will be extremely surprised and that is putting it lightly.

Posted in Bitcoins, crypto market

Are Bitcoins subject to taxes?

Posted on September 6, 2022 by admin
Are Bitcoins subject to taxes?

The IRS has not yet addressed Bitcoin. After more than a decade since the creation of Bitcoin, there is still much uncertainty about how it should be taxed. The cryptocurrency was intended to serve as a means of everyday transactions, but it has yet to take hold as a currency. Meanwhile, speculators and traders have grown interested in making a quick profit by trading its volatility.

The Internal Revenue Service acknowledged cryptocurrency transactions in its notice 2014-21, treating them as assets similar to property. The agency continued by stating that in 2019, it would begin including a question on the Form 1040 to determine whether the tax payer had any cryptocurrency transactions during said year.

Depending on the type of transaction, assets may be taxed in different ways. However, Bitcoin has several exceptions due to its unique characteristics and use cases.

Bitcoin is now available on exchanges and has been linked to a variety of major world currencies, such as the US dollar and the euro.

When the government recognized bitcoin’s rise in popularity, it stated that bitcoin-related transactions and investments cannot be characterized as unlawful.

 

Posted in Bitcoins, TaxTagged Bitcoins, Tax

Last week crypto market’s cap

Posted on August 23, 2022August 24, 2022 by admin
Last week crypto market’s cap

Last week the total crypto market cap fell by 20 with many altcoins losing a lot more.

The crypto dip arguably began on Tuesday which makes sense given that the crypto market is highly correlated to the Nasdaq tech stock index.

If that didn’t give it away the Nasdaq also began to dip on that day. As to why the Nasdaq was dipping the answer appears to have been concerns around the quarterly earnings reports for some of the largest big box stores namely Walmart which revealed that although it had crushed expectations for the third quarter it was nonetheless starting to see consumer weakness.

The US recently entered a technical recession following two consecutive quarters of negative GDP growth. Some economists are waiting on more data to make the declaration and the warnings in Walmart’s earnings is one such data point.

Then another kick to the markets came on Wednesday when Target another US retail giant reported a massive loss in profits due to an overstock of supply. Basically Target purchased a lot of stuff thinking that people would buy but discretionary spending is down because of inflation leading to an overstock.

Now if you’ve been watching the charts you’ll know the real dip – the dip of the dip – if you will came on Thursday that’s because the jobless claims in the United States came in well below expectations which would normally be a good thing, but in the current financial system it’s the worst news in the world. That’s because the federal reserve is tasked with doing two things keeping inflation under control and ensuring that employment is strong.

Confirmation that employment is strong at least on paper gives the Fed the wiggle room it needs to keep raising interest rates to fight inflation lo and behold one of the Fed’s officials came out shortly afterwards to confirm that the central bank would continue to hike interest rates aggressively in September leading to a massive dip across the board as investors price in future pain.

Then as a poisoned cherry on top SEC chairman Gary Gensler published an opinion piece in the Wall Street Journal which confirmed that the infamous regulator will continue to crack down on the industry.

Never mind the possibility of Celsius starting to sell some of the BTC its mind as part of its bankruptcy process.

So this begs the question of whether last week’s dip was a correction or the beginning of new lows. So far it looks like it was a standard dip and we’ll know for sure later this week when a bunch more macro factors occur that could make or break the crypto market.

 

Posted in crypto market

How do borrowing and lending work in DeFi?

Posted on August 2, 2022August 1, 2022 by admin
How do borrowing and lending work in DeFi?

How do borrowing and lending work in DeFi?

Exchanges and speculators are the most common reasons for users to desire a DeFi protocol loan.

The most common purpose for wanting to borrow crypto assets via a DeFi network is for trading and speculation. If you’re bullish on ETH and have $200 worth of USDC or Dai, for example, you may use that to purchase additional ethereum.

This enables the speculator to convert their 450 ETH position, which is equivalent to levering, into a larger position. The advantages of doing so through DeFi lending platforms are that as a borrower, you do not give up custody of your collateral to an institution where you may face counterparty risk (instead, you face a different protocol risk).

A benefit of using the Dark net is that it maintains anonymity and prevents KYC requirements.

What are flash loans?

Aave’s flash loans, for example, are one such innovation in the DeFI space. This opens the door to a wide range of transactions that were previously impossible due to banking system friction. To summarize, flash loans are unsecured loans available on demand and repaid within the same blockchain transaction.

Arbitrage is a popular application for flash loans. For example, if someone can discover a mispricing in the market for 1 DAI = 0.95 USDC on Curve. Someone may use a flash loan to borrow 100,000 DAI on AAVE, purchase 100,000 USDC on Balance and sell for 105,263 DAI on Curve (100,000/0.95). After reimbursing the 100,000 DAI loan with a 0.09 percent flash lending fee (i.e., repaid back 99,930), the would-be arbitrageur would make a profit of 5,173 DAI (105,263-99,930).

DeFI’s open-access nature makes it possible for anybody to take advantage of this pricing disparity, as opposed to traditional finance, where many arbitrage chances might go overlooked if individuals do not have the financial or technical ability to combine both buy and sell legs of the trade in a timely manner. It’s worth noting that there are other factors to consider while performing arbitrage, such as slippage, gas costs, and miner extractable value (MEV) front-running dangers.

Another significant application for flash loans is refinancing. Debt re-financing may be familiar to anybody who has switched a mortgage from one bank to another. Perhaps a user at Compound borrows DAI at an interest rate of 10% but then learns that Aave is currently offering a loan at only 5%. A flash loan might enable the user to pay back the loan on Compound, withdraw the collateral, deposit it with Aave, and take out a loan there at a rate of 5%. Furthermore, users with a leveraged trading position created using borrowed money that is then lent out at Compound may refinance instantly without having to sell or unwind both trades. In this case, the user has moved their loan (as well as collateral) from Compound to Aave.

In a similar scenario, if a user borrows money using ETH as collateral at Compound and then pays back the loan, withdraws the ETH, converts it to Balanc3 on Uniswap, and reclaims the loan again but this time with Balanc3 as deposited collateral instead of ETH, they are referring to collateral swapping. The amount of the loan at Compound is essentially unchanged in this example; it has simply been refinanced with BAL as provided security instead of ETH.

Another scenario is self-liquidation. If your collateral in ETH is approaching the protocol’s auto-liquidation threshold for DAI loans, you may desire to borrow instantly to avoid paying the liquidity fee from the system (who liquidates your collateral at a discount). If you don’t have enough DAI money to repay your loan and don’t want to increase your position, you can borrow Dai to pay off your loan and get back your ETH deposit, minus flash loan fee.

DeFi lenders enjoy attractive interest rates, which may be 5-30% annualized yield in comparison to less than 1% in fiat currencies. This allows cryptocurrencies to produce a passive income on their investments without having to sell them. Another incentive for engaging in DeFI lending is to avoid capital gains taxes on cryptocurrency holdings. By not selling crypto assets, keeping unrealised potential profits and lending on DeFI platforms

Posted in DeFi, Loans

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