Ethereum Merge | The Most Anticipated Event In Crypto, Video

What is The Merge all about?

Motivations behind this upgrade
Mechanics
Client Diversity
Merge implications
Common misconceptions
Potential risks

full video here

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03/08/202203/08/2022

End of easy money in crypto: 20% returns over in CeFi, DeFi lives on

The death of easy money: Why 20% annual returns are over in crypto lending

KEY POINTS

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Developers gathered for various crypto events in Paris last week told CNBC the days of cheap money in crypto are over.
Much of the lending corner of the crypto market operates in a black box.
Voyager Digital and Celsius competed for users on APY, but a lot of the so-called yield they offered customers wasn’t real..

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Celsius and Voyager Digital were once two of the biggest names in the crypto lending space, because they offered retail investors outrageous annual returns, sometimes approaching 20%. Now, both are bankrupt, as a crash in token prices — coupled with an erosion of liquidity following a series of rate hikes by the Federal Reserve — exposed these and other projects promising unsustainable yields.

″$3 trillion of liquidity will likely be taken out of markets globally by central banks over the next 18 months,” said Alkesh Shah, a global crypto and digital asset strategist at Bank of America.

But the washout of easy money is being welcomed by some of the world’s top blockchain developers who say that leverage is a drug attracting people looking to make a quick buck — and it takes a system failure of this magnitude to clear out the bad actors.

“If there’s something to learn from this implosion, it is that you should be very wary of people who are very arrogant,” Eylon Aviv told CNBC from the sidelines of EthCC, an annual conference that draws developers and cryptographers to Paris for a week.

“This is one of the common denominators between all of them. It is sort of like a God complex — ‘I’m going to build the best thing, I’m going to be amazing, and I just became a billionaire,’” continued Aviv, who is a principal at Collider Ventures, an early-stage venture capital blockchain and crypto fund based in Tel Aviv.

Much of the turmoil we’ve seen grip crypto markets since May can be traced back to these multibillion-dollar crypto companies with centralized figureheads who call the shots.

“The liquidity crunch affected DeFi yields, but it was a few irresponsible central actors that exacerbated this,” said Walter Teng, a Digital Asset Strategy Associate at Fundstrat Global Advisors.

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The death of easy money

Back when the Fed’s benchmark rate was virtually zero and government bonds and savings accounts were paying out nominal returns, a lot of people turned to crypto lending platforms instead.

During the boom in digital asset prices, retail investors were able to earn outlandish returns by parking their tokens on now defunct platforms like Celsius and Voyager Digital, as well as Anchor, which was the flagship lending product of a since failed U.S. dollar-pegged stablecoin project called TerraUSD that offered up to 20% annual percentage yields.

The system worked when crypto prices were at record highs, and it was virtually free to borrow cash.

But as research firm Bernstein noted in a recent report, the crypto market, like other risk-on assets, is tightly correlated to Fed policy. And indeed in the last few months, bitcoin along with other major cap tokens have been falling in tandem with these Fed rate hikes.

In an effort to contain spiraling inflation, the Fed hiked its benchmark rate by another 0.75% on Wednesday, taking the funds rate to its highest level in nearly four years.

Technologists gathered in Paris tell CNBC that sucking out the liquidity that’s been sloshing around the system for years means an end to the days of cheap money in crypto.

“We expect greater regulatory protections and required disclosures supporting yields over the next six to twelve months, likely reducing the current high DeFi yields,” said Shah.

Some platforms put client funds into other platforms that similarly offered unrealistic returns, in a sort of dangerous arrangement wherein one break would upend the entire chain. One report drawing on blockchain analytics found that Celsius had at least half a billion dollars invested in the Anchor protocol which offered up to 20% APY to customers.

“The domino effect is just like interbank risk,” explained Nik Bhatia, professor of finance and business economics at the University of Southern California. “If credit has been extended that isn’t properly collateralized or reserved against, failure will beget failure.”

Celsius, which had $25 billion in assets under management less than a year ago, is also being accused of operating a Ponzi scheme by paying early depositors with the money it got from new users.

CeFi versus DeFi

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So far, the fallout in the crypto market has been contained to a very specific corner of the ecosystem known as centralized finance, or CeFi, which is different to decentralized finance, or DeFi.

Though decentralization exists along a spectrum and there is no binary designation separating CeFi from DeFi platforms, there are a few hallmark features which help to place platforms into one of the two camps. CeFi lenders typically adopt a top-down approach wherein a few powerful voices dictate financial flows and how various parts of a platform work, and often operate in a sort of “black box” where borrowers don’t really know how the platform functions. In contrast, DeFi platforms cut out middlemen like lawyers and banks and rely upon code for enforcement.

A big part of the problem with CeFi crypto lenders was a lack of collateral to backstop loans. In Celsius’ bankruptcy filing, for example, it shows that the company had more than 100,000 creditors, some of whom lent the platform cash without receiving the rights to any collateral to back up the arrangement.

Without real cash behind these loans, the entire arrangement depended upon trust — and the continued flow of easy money to keep it all afloat.

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End of easy money in crypto: 20% returns over in CeFi, DeFi lives on

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01/08/2022

PGF7T crypto info, Web3, NFTs, Dapps 💎

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Price: PGF7T

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29/07/202229/07/2022

‘Crypto Doesn’t Care About Fundamentals.’ Is That Sustainable?

A tiny fraction of cryptocurrencies from the last bull market reached all-time highs this cycle. So, what are they really worth? And why?

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Cash flows and revenues may be bearish for digital assets, as they place caps on their potential valuations in line with traditional companies with far slower growth trajectories
“The nature of crypto is that it cares about growth potential,” one portfolio manager said

Most cryptocurrencies die.

It’s well known among those who’ve witnessed more than one cycle. Hundreds, if not thousands, of tokens surge, alongside bitcoin and ether, but rarely — or, often never — reclaim all-time highs.

Just 26 of the top 200 digital assets by market capitalization went on to set new highs after the peak of the last bull market in January 2018.

Half were layer-1 tokens, such as litecoin, ether and cardano. Five were governance tokens conferring voting rights powering decentralized finance protocols, such as Gnosis and district0x.

It’s not a rosy picture. But the outlook deteriorates further in denominating how much a cryptocurrency is worth in bitcoin terms, instead of the customary dollar.

Switch to bitcoin pricing, and only six of those cryptocurrencies exceeded their previous peak over the same time period: dogecoin, binance coin, chainlink, decentraland, vechain and enjin coin.

A small selection of winners, representing just 3% of the top 200 digital assets. There’s no clear trend linking them, either.

Dogecoin is literally a “to-the-moon” self-parody, while layer-1 token vechain is powered by the “blockchain for supply chains” meme.

Binance coin boasts some staying power buoyed by enticing burn mechanisms. Chainlink has, arguably, more utility than most, supporting a stretching ecosystem of data feeds and price oracles, which connect various blockchains and smart contracts to execute transactions without third-party validators.

Decentraland and enjin coin’s success, industry participants say, can be explained in part by the metaverse brouhaha and blockchain-powered gaming dapps (decentralized applications) expected to soon grow in popularity.

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Such spurious connections suggest most digital assets inevitably crescendo in a bull market, but quickly go kaput once the hype fades — destined to never revisit their glittery glories to render top-buying bagholders whole.

So, how does one equitably price digital assets? What is crypto worth, really?

Considering the top 200 coins from the previous bull market are down more than 90%, in dollar terms, from all-time highs, how and why do markets decide how low they go?

Cash flows are bearish for digital assets

Token Terminal is one platform pitching ways to figure it all out. It offers a range of metrics that aim to compare various protocols, echoing traditional company valuation methods in price-to-earning ratios and total revenues.

“Looking backwards, especially comparing the 2018 bull market to what we witnessed in 2021, it’s very difficult to really build any sort of thesis for why certain tokens succeed,” Oskari Tempakka, Token Terminal’s growth lead, told Blockworks.

The platform gauges protocols that generate cash flow alongside blockchain startups that operate entirely on-chain. It wasn’t possible to value protocols based on those factors during the last bull market, Tempakka said, as it was only halfway through 2020 — during DeFi summer — when the first applications built on Ethereum actually started generating positive cash flows to the protocol.

The conclusion: Analyzing the highest-flying cryptocurrencies from the last bull, whether dollar valuation or bitcoin, on a fundamental basis is essentially impossible.

Still, half of the top 200 digital assets which recorded fresh all-time highs throughout the most recent cycle were layer-1 assets.

Layer-1s, the backbone of digital assets, outperformed this time around on the back of healthy name recognition and the efforts of legions of developers, as well as market makers and deep-pocketed traders favoring assets with more liquidity.

There has to be a sizable market capitalization for a $1 billion-plus hedge fund to bother trading an asset — or else move the price needle so much in building a long or short leg that profits become obsolete.

“I’d say the thesis behind layer-1s is that you’re essentially building an infinitely scalable settlement layer for any other applications being built on top,” Tempakka said. “It’s easier to build a more bullish thesis without a valuation cap than it is for a pure application — that’s how we’re looking at layer-1s right now, at least the ones that actually are able to generate cash flow and capture that value.”

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Cash flows are actually bearish as they relate to trying to put a price tag on cryptoassets. They’re not bearish in and of themselves as a metric, but industry participants argue that crypto’s rapid growth trajectory demands a different framework.

Applying convention fundamental stock-picking techniques would never work with venture capital-backed startups, they say — so why should it work when it comes to digital assets?

If it’s possible to value a cryptoasset based on conventional fundamentals, then a relatively apples-to-apples comparison to a real-world company ought to be possible, too.

“Crypto doesn’t care about fundamentals, traditional sense of cash flows,” Hassan Bassiri, vice president of portfolio management at digital asset manager Arca, told Blockworks. “The nature of crypto is that it cares about growth potential.”

Added Bassiri: “Say something like Aave or Yearn is trading at a 1,000 price-to-sales ratio but its fintech competitor neobank is trading at 200 — is the cryptocurrency worth a 5x multiple on that?”

Tapping cash flows to value digital assets — just like an Amazon or a Tesla stock — implies they can’t go up forever, a notion akin to kryptonite for crypto die-hards.

Indeed, cash flows provide one method of valuing digital assets, which automatically means they can’t go up forever, a notion akin to kryptonite for cryptocurrency investors.

The result: a volatile, topsy-turvy market that prioritizes social sentiment and glamor over Econ 101.

Markets driven by fundamentals are on the horizon

If looking to the past doesn’t illuminate how traders appraise digital assets, who’s to say which projects out of a sea of many hopefuls have a realistic shot at outlasting the bear market?

One cause for optimism, according to Bassiri: More and more protocols are working to tie real-world use cases to on-chain yield. Case in point: MakerDAO’s recent move to float a $100 million loan denominated in the token DAI to 151-year old Huntingdon Valley Bank, with the potential to increase the credit revolver to a staggering $1 billion over 12 months.

Token Terminal’s Tempakka is vying for the prospects of a future in which the majority of top tokens are driven by measurable fundamentals — and they must generate sustainable cash flows to power that model.

“If you’re a traditional private equity investor, you’re getting to a stage where you can look at the revenue data of crypto protocol and actually build a strong investment thesis around it,” Tempakka said.

In other words, it’s slowly — then, perhaps, all at once — becoming possible to rationalize crypto plays on something more tangible than hype or belief.

Many an institutional digital assets-focused trader would argue that world is already here. Crypto hedge fund firms build complicated quant models around social sentiment and ebbs and flows in trading volumes.

But those players are often the first to admit those convictions that construct strategies change rapidly in cryptoland. Fundamental metrics are, finally, becoming a powerful standby for sophisticated investors — consider the rise of discretionary strategies — but, for now, they’re just one piece of the overall puzzle.

The remainder is filled in by deep research probing the ins-and-outs of developer teams and their abilities, or lack thereof, to meet the lofty, winding road that lies before them.

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