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MakerDAO May Onboard USDC as DAI Collateral Support to Combat Mounting Liquidity Risk

The share plunge of the cryptocurrency market has severely hit MakerDAO, the leader in the decentralized finance (DeFi) ecosystem. Last week its market value fell sharply from 889M to $246M which brought together Maker’s developer community who have recently discussed adding support for Circle’s USDC as collateral to hedge against the liquidity risk.

MakerDao Foundation’s Developer Team hosted a public meeting this morning where the discussion focused on the code on the collateral adaptor for USDC.

According to the official thread, adding the stablecoin as collateral will help to create liquidity for Maker’s Dai stablecoin and push the Dai peg back towards $1 – “The mechanism of this looks like: Lock USDC -> Mint Dai -> Sell for USDC -> Repeat.”

The thread also states USDC collateral, “ Will allow Vault Holders to close their Vaults without eating the loss on the Dai peg being high against USD.”

Diluted DAI

First on the list of the author’s perceived negatives of adding USDC support would be the reduced decentralized purity of Maker’s Dai. Introducing a US dollar backed stablecoin could also hold a regulatory risk and may result in Circle blacklisting the locked up collateral due to KYC concerns.

During the call, a MakerDAO representative dismissed the Dai dilution argument stating, “ DAI is decentralized because there is no central authority that mints or custodies or approves people’s access to it. The individual does all of it for themselves, that’s why the community is driving the parameters of the systems (per the discussions in forum).”

The representative emphatically summarised, “To say that DAI is not decentralized because of some of the assets that might back it would be erroneous.”

Finding a New Peg for Dai

As reported by Blockchain.News on March 13, following the global stock market crash, the price of multi-collateral DAI (MCD) lost the dollar peg and reached USD 1.07.

To restore the pegging between MCD and USD, the MakerDAO community also has proposed the reduction of DAI Saving Rate (DSR) which brings more DAI in circulation and thus moving the DAI price closer to the $1 peg.

The Maker Foundation have confirmed that they are now making the technical preparations to onboard Circle’s USDC as collateral, but no strategy to restore Dai’s peg has received a confirmation vote yet from Maker’s governance council.

Image via Shutterstock

BitMEX Research: Inflation Aftermath of Coronavirus Financial Crash Will Be Bitcoin's Greatest Test

In the aftermath of the current Coronavirus market crash and the subsequent incoming inflation that will be caused by the response of the Federal Reserve and Central banks, Bitcoin will face its truest test and be presented its biggest opportunity to prove itself in its short lifetime, according to new research from global crypto exchange BitMEX.

Bitcoin Could Anchor the New Economy

BitMEX Research published their analysis , Inflation is Coming, on March 17, outlining that the global response to the pandemic and disruption will, “mark a significant economic regime change from monetary policy to central bank funded fiscal expansion” from which intolerable market inflation will rise. It will be within this oncoming financial environment that Bitcoin’s true nature should finally be revealed.

Central banks and governments have been fast to respond to the disruption caused by the Coronavirus. The analysis highlighted, “In the US the Federal reserve has lowered interest rates to near zero (0% to 0.25%), announced the purchase of at least $500bn of treasuries and $200bn of mortgage backed securities, and also reduced the commercial bank reserve requirement to absolute zero.”

Bitmex believes that there are further measure to come, but it is clear that these attempts to restabalize the broken system are, “the last major throw of the dice from central bankers. Monetary policy will not be enough.”

The researchers claim that not only will inflation come, “it will be a shock” as inflation has been low and stable for 30 years and our collective memory does not nor recall the consequences of digging ourselves into such a financial hole. Although they do not specify exactly when the inflation will hit, BitMEX predict it will be “similar to the 1970s where it went as high as 15%.”

US Consumer Price Inflation YoY

Source – Bloomberg

The analysis by BitMEX’s research arm stated, “ In our view, in this changed economic regime, where the economy and financial markets are set loose, with no significant anchor at all, not even inflation targeting, it could be the biggest opportunity Bitcoin has seen, in its short lifetime.”

Bitcoin’s Value and Trading in CrisisIn a recent interview with Blockchain.News, FXCM’s Managing Director Michael Kamerman addressed Bitcoin’s potential to be an alternate store of value to gold, He said, “There are two parts to this question. First, is Bitcoin a “safe haven?” My answer is, no, not yet. It has the characteristics of what would be a “safe haven” asset but if you look at the way it moves on a chart, it is not a “safe haven” instrument.” He added, “I think as Bitcoin is more widely adopted, investors and traders will wake up to its “safe haven-like” qualities – but it is too early now.”

Prior to the recent stock market crash which sent equities plummeting, traders hardly had a trouble-free environment to operate within. Over the last year, market participants have also had to contend with a China-US trade war, Brexit uncertainty and Coronavirus disruption, making investment anything but straightforward.

On his observations regarding traders’ movements over the last year of rising uncertainty, Kamerman said, “I would not say our customers are shifting their investment sentiments, but instead remain opportunistic. If forex is moving, they trade forex. If Bitcoin is moving, BTC/USD is all the rage. Recent volatility has benefitted our cryptocurrency product line in that our number of active crypto traders is up. Data does not show our customers choosing crypto over forex or vice versa. Customers just want to trade what is moving.”

Why Energy Experts are Watching the Crypto Market Closely

The oil market is currently witnessing a tussle between Russia and Saudi Arabia on the issue of oil production to counter the slowdown of the US Market.

If the rumors are to be believed, the Iranian Government is making efforts to use cryptocurrency to bypass the sanctions which resulted from their involvement in the manipulation of the oil market. If one takes a closer look, China, Russia, and Iran have been some of the most active countries taking a keen interest in the cryptocurrency space. They are also some of the top oil-producing countries in the world.

Many cryptocurrencies, particularly Bitcoin operates on ‘Proof-of-Work’ algorithms which require energy for mining.

“Big crypto mining pools are rejecting Iranian miners because of sanctions We don’t give a damn about sanctions. If we get sanctioned we’d just shut down the company and open a new one.” as stated by Mikhael Jerlis, CEO of the Russian EMCD.IO mining pool

The three years of the proxy war between Saudi Arabia and Iran in Yemen has left the oil market in chaos. The catalyst appears to be the attacks executed by Houthi rebels at Red Sea’s Bab al-Mandeb Strait resulting in Saudi Arabia halting its oil supplies. This is why the crypto savy alliance of Russia, China and Iran are keeping a close watch on US sanctions and Saudi Arabia’s oil movement.

How Cryptocurrency Kicks In?

It is interesting to address that Bitcoin or for that matter, any other cryptocurrency can replace the ‘dollar’ in the oil market since Bitcoin is the least correlated asset in the glocal economy as compared to the oil market. Despite the havoc ‘Coronavirus’ is creating on the global GDP (reportedly $2.7 Trillion Loss), Bitcoin doesn’t seem to be shaken off from its steady route, having gained twice the market price of $7,900 as compared to last year’s market price.

“You could argue they [gold and the dollar] are inversely correlated. That could be an indication of how bitcoin will be impacted if it’s deemed to be a store-of-value asset class.” Aboualfa said.

However, he also mentioned that Bitcoin/cryptocurrency is looked upon as ‘sanction play’ and not any store-of-value asset class.

Apart from bypassing sanctions via playing with Bitcoins, another factor that makes the energy experts keep a close watch on the crypto market is their deep pockets in the crypto markets. Bitcoin, like any other asset, is currently without a doubt a ‘hot stock’ which is wanted by everyone. Whether or not it is going to make a big mark in the future, its potential to earn you big money in the current case scenario is very real.

On 7th March 2020, Bitcoin took a big hit as its price crumbled to $7,500 from a soaring $9,100. A total of $26 Billion was completely wiped off from the cryptocurrency market. Such a reaction came soon after the oil market plunged 24%, the worst day since 1991. The US West Texas Intermediate Crude posted their report on Monday with a drop as low as 24.59% settling for $31.13/Barrel. The drop in terms of absolute dollars was $10.15.

Apart from the drop on 7th March, Bitcoin again faced a nose crushing fall on 12th March where the price fell below $3,000 bouncing back to struggling $5,500. The reason for such a fall was again attributed to the poor stock market condition in US and fall in Oil Price, not to forget the COVID-19 outbreak.

Source: CoinMarketCap

Such kind of dips in the crypto markets (triggered by oil market) are huge opportunities for the big corporate giants and energy experts with a vested interest to buy crypto assets at low prices and make a profit out of it once the market is on the rise again.

Jehan Chu, co-founder of Kenetic Capital said,”For those who have long term investment horizons, bitcoin is absolutely a buy during these dips. We can expect more of this volatility sparked by macro health and financial shocks, but ultimately long term investments in the digital future and it’s key asset Bitcoin will be a winning strategy”

In order to maximize profits and take the full advantage (even when oil market is down), energy experts are keeping a close watch on the crypto market as part of their asset portfolio diversification.

Image via Shutterstock

COVID-19 Market Climate Perfect Catalyst for Bitcoin Demand Says Binance.US CEO

The coronavirus panic-driven frenzy to acquire assets of lasting bona-fide value has put the traditional gold market to the test and may be creating the perfect catalyst for Bitcoin according to Binance.US CEO Catherine Coley.

COVID Grounds Gold

Gold is the world’s traditional safe-haven asset but according to a report by Bloomberg on March 26, the commodity is struggling under the combined weight of coronavirus fears and central bank money printing.

As the coronavirus has grounded most airlines and continues to wreak havoc on logistics and supply chains, moving physical bars of gold has become the challenge.

In the report, Vincent Tie, Sales Manager, Silver Bullion Pte Ltd was quoted saying “Since last week, face masks, hand sanitizers, toilet rolls, and bullion have something new in common – they run out when everyone tries to buy them.”

Coronavirus may Create Perfect Climate for Bitcoin

After initially trading down heavily in correlation with equities and other risk-on assets, the price of gold has bounced back over 10% in the past week.

The price patterns of the traditional safe haven asset, since the markets began to crash, have resembled those of Bitcoin, which also fell precipitously before recovering.

Typically people buy gold futures due to the inconvenience of having gold bars physically delivered. But with a slowdown in the deliverability of gold bars due to airport disruption comes the risk that futures prices may rise excessively over gold prices.

The coronavirus pandemic is a black swan event and the entire global market is in new territory, but gold has not proven immune to that. However, many crypto industry insiders believe that cryptocurrency and Bitcoin have the potential to benefit.

The combination of the digital nature of Bitcoin, the search for value in the troubled markets and gold’s inability to effectively meet demand could be the catalyst that the original cryptocurrency needs, according to Catherine Coley the CEO of Binance.US.

Coley said, “Despite the market downturn, Binance.US is seeing unprecedented trading volumes, with especially active trading in Bitcoin. We are also seeing heightened interest in stablecoins as investors recognize the importance of hedging volatility during highly uncertain times.” She added, “ Bitcoin has always been built on the idea of a need to send and receive value in a safe and secure way and that’s not going anywhere.”

Coming Inflation Shock Will be Bitcoin’s Safe Haven Catalyst

While we will have to wait and see if the confusion in the gold market brings the Bitcoin safe have narrative to fruition, recent research by BitMEX see Bitcoin achieving its potential during the times of shock inflation they have predicted will follow the central banks’ stimulus packages and excessive currency creation.

The BitMEX Research published their analysis, Inflation is Coming, on March 17, outlining that the global response to the pandemic and disruption will, “mark a significant economic regime change from monetary policy to central bank funded fiscal expansion” from which intolerable market inflation will rise. It will be within this oncoming financial environment that Bitcoin’s true nature should finally be revealed.

The researchers claim that not only will inflation come, “it will be a shock” as inflation has been low and stable for 30 years and our collective memory does not nor recall the consequences of digging ourselves into such a financial hole. Although they do not specify exactly when the inflation will hit, BitMEX predicts it will be “similar to the 1970s where it went as high as 15%.”

The analysis by BitMEX’s research arm stated, “In our view, in this changed economic regime, where the economy and financial markets are set loose, with no significant anchor at all, not even inflation targeting, it could be the biggest opportunity Bitcoin has seen, in its short lifetime.”

Image via Shutterstock

Barstool Sports Founder Dave Portnoy to Dump Bitcoin and Chainlink (LINK) After $25,000 Loss

Online sports celebrity and founder of Barstool sport Dave Portnoy announced that he might be quitting crypto trading, after purchasing $200,000 in Bitcoin and a huge quantity of other cryptocurrencies such as Chainlink (Link) just a week ago.

Portnoy took to his Twitter account on August 21 and said that he sold off all of his holdings in cryptocurrencies, which he recently bought on August 13. He stated that he now owns zero Bitcoin (BTC).

Panic Selling Ruins Bull Run

Portnoy hosted the Winklevoss twins at his home on August 13, who explained to him thoroughly how cryptocurrency trading works. The meeting event enabled the Gemini co-founders to introduce Portnoy into crypto trading. Cameron and Tyler Winklevoss not only explained the basics of Bitcoin to Portnoy but also taught him how to trade on the Gemini cryptocurrency exchange.

Portnoy had already deposited $250,000 into his Gemini account before the twins had arrived. The meeting with the twins then resulted in Portnoy investing $200,000 worth of Bitcoin and allocating $50,000 to Chainlink (LINK). A few days later, he boasted on social media, touting that he was the king of Bitcoin after gaining $98,000 in profits from BTC cryptocurrency.

He then began to annoy Bitcoin users by trying to promote small-time altcoin Orchid (OXT) on social media and urged his followers to buy the cryptocurrency. Since Portnoy has more than 1.7 million followers on social media, his promotion of the cryptocurrencies appears to have influenced the valuation of certain cryptos on the markets. But the more seasoned crypto investors on Twitter did not seem to take the bait.

Portnoy’s purchase of $50,000 worth of Chainlink token (LINK) did not go as planned as the altcoin saw a 30% decline amid a market correction for the decentralized oracle network. This resulted in a loss of $25,000 for the “Davey Day Trader”, an incident that angered him. Consequently, he announced that he might well be done with cryptocurrencies, for good.

Common Trading Tips Traders Ignore

The rule of “buy low” and “sell high” is the basic formulae for trading. This applies to a pattern of crypto prices, which shifts between certain price points. Portnoy appears to not have followed this simple rule, with Bitcoin bulls such as crypto analyst Scott Melker criticizing the Barstool Sports founder for his market trading tactics. Certain analysts referred to Portnoy’s “pump and dump” strategy as was criticized by Bitcoin bulls such as devaluating for the crypto community.

This case scenario seems to be of bad timing and unfortunate, as Portnoy purchased cryptocurrencies at the top of the current bull cycle, but panicked when the assets began to decline in value on the crypto market.

His initiation into cryptocurrency trading has put a spotlight on the reality of price volatility that still exists in markets. The crypto community responded by labeling him as weak for not being able to tolerate the downsides of cryptocurrency trading.

3 Reasons Behind Bitcoin and the Crypto Market's Sudden Crash

Bitcoin whales have been shorting the market.

On Nov 21, crypto analyst Willy Woo indicated that “old hands have been selling into this rally since the start of November.” Old hands selling is a bad sign that may mean that a price drop may be coming soon.

Bitcoin whales stir movement on the market

On Nov 22, Crypto Quant CEO Ki Young Ju indicated that “When whales are active (over 90%) on Coinbase, the $BTC price will likely be going sideways or bearish.” Typically, whales can acquire Bitcoin at a much lower price. They simply cash out to guarantee enough profit when the market becomes overheated.

The 2017 Bitcoin surge followed by its crash may be related to Bitcoin whale manipulations. According to University of Texas professor John Griffin and Ohio State University’s Amin Shams, the Bitcoin bull run in 2017 may be driven by Bitfinex. They said through an academic paper:

“This one large player or entity either exhibited clairvoyant market timing or exerted an extremely large price impact on Bitcoin that is not observed in aggregate flows from other smaller traders.”

Although there are more and more investors interested in Bitcoin (BTC) and other cryptos, the current price action of BTC seems to be primarily driven by institutional and big players. This year, Grayscale and its Bitcoin trust have been really eye-catching, as it has secured the largest Bitcoin amount seen by any institutional investor up to now. MicroStrategy and Square’s big Bitcoin buy-ins are also influential pulses that have driven Bitcoin’s price up as well.

Bitcoin economy fits billionaire investor George Soros’ quote perfectly. The philanthropist stated:

“Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend, and step off before it is discredited.”

Possible crypto regulation time bomb

There may be a series of crypto regulations upcoming in the US. Coinbase CEO Brian Armstrong has allegedly heard rumors that the Trump Administration may soon issue a huge and strict crypto wallet regulation on United States traders with privacy-invading data collection requirements.

On Oct 8, the U.S. Department of Justice published a “Cryptocurrency Enforcement Framework” that put cryptocurrency under strict regulations, similar to policies revolving around fiat money.

Google Trends indicate Bitcoin is booming

On Nov 25, CNBC’s Brian Kelly warned of a Bitcoin short-term correction that could see its price plummet to $12,000.

An explanation may be that altcoins rose much more than Bitcoin in price, which could serve to attract more funds into altcoin speculations. Whenever Bitcoin crashes, altcoins get pulled down as well.

Another reason is that searches for “buy bitcoin” on Google Trends have exploded to new highs, which means rising demand from retail investors. But this may not be a good sign. As Kelly said:

“Whenever you get that big of an address growth implied, that is a caution sign.”

Will Terra’s UST and LUNA Crash Cause a Shift to ‘Cryptos that have Stood the Test of Time’?

LUNA has left crypto enthusiasts’ mouths agape because they could never imagine in their wildest dreams that one of the top ten cryptocurrencies could collapse to near-zero overnight.

LUNA and TerraUSD (UST) are the native tokens of the Terra blockchain network developed by South Korean fintech firm Terraform Labs.

LUNA sent shockwaves to the crypto market because it nearly lost 100% of its value by hitting an all-time low of $0.027 on May 12 from the all-time high (ATH) price of $119.18 recorded nearly a month ago on April 5, according to CoinGecko.

Source: TradingView

As one of the top ten cryptocurrencies, LUNA’s market capitalisation had surpassed $40 billion, but the present crash drove it to lows of $349,000.

The algorithmic UST stablecoin on the Terra network was not spared either because it nosedived to historic lows of $0.29 on May 11. The stablecoin’s ATH was recorded on January 11, 2021, when the price soared to $1.09, according to CoinGecko.

What caused the crash?

Things started going south when UST’s price experienced a free fall to the extent that leading crypto exchange Binance temporarily halted its withdrawals together with that of LUNA.

Anshul Dhir, the co-founder and COO of EasyFi Network, opined:

“Terra’s fall could be attributed to large scale selloffs of the LUNA tokens owing to the reported “de-peg ” of the algorithmic stable coin. This selloff must have also got exacerbated with the market already being in a largely bearish mode.”

The algorithmic nature of UST could have triggered the crash because its value is not directly pegged to the US dollar, according to Ransu Salovaara, the CEO of decentralised finance platform Likvidi. He added:

“It’s important now to acknowledge that Terra is a so-called algorithmic stablecoin, not directly backed by USD. The most popular stable coins like Tether (USDT) and USDC are actually backed by USD in the bank and both of those survived the market sell-off well.”

Therefore, the current crash shows the problems associated with algorithmic-based stablecoins because they are at the experimental stage.

Dhir pointed out:

“Experimental algorithmic stable coins are volatile and it is believed that it will take some time to find a good algorithmic stable coin. Over a period of time such programmable money should be possible which ultimately is the end goal of decentralized finance.”

Explaining the current fiasco, Do Kwon, the founder of Terraforms Labs, took to Twitter and tweeted:

“The price stabilization mechanism is absorbing UST supply (over 10% of total supply), but the cost of absorbing so much stablecoins at the same time has stretched out the on-chain swap spread to 40%, and Luna price has diminished dramatically absorbing the arbs.”

Was Do Kwon the face behind the failed algorithmic Basis Cash stablecoin?

Former Terra employees claimed that Do Kwon, the company’s CEO behind the Terra network, was one of the pseudonymous co-founders of the failed algorithmic Basis Cash (BAC) stablecoin.

Hyungsuk Kang, a former Terraform Labs engineer, noted that BAC was a side project. He added:

“Basis Cash wasn’t tested at the moment, and we weren’t even sure it would work. Kwon wanted to just test it out. He said that this was a pilot project for doing that.”

Launched in late 2020 on the Ethereum (ETH) network, Basis Cash was deemed a game-changer that could revive the decentralised finance (DeFi) Sector.

However, BAC never saw the light of day because it dropped below the $1 peg and traded below the 1 cent mark on May 12 by hovering around $0.0059, according to CoinGecko.

Just like UST, Basis Cash had to maintain the $1 threshold through code and not collateral. Therefore, history seems to be repeating itself concerning LUNA and UST.

‘Cryptocurrencies that have stood the test of time’

On January 3, 2009, Bitcoin’s genesis block was mined, setting the ball rolling on what the crypto space would offer.

Thirteen years down the line, Bitcoin’s dominance in the crypto sector continues to be felt even though its journey has not been smooth sailing.

For instance, as the coronavirus (COVID-19) pandemic continued to wreak havoc in early 2020, Bitcoin shed off more than 50% of its value in less than 48 hours on March 12, commonly called the ‘Black Thursday’ based on the global stock market crash.

As panic selling engulfed the market, Bitcoin’s price nosedived to $3,800 from around $8,000.

However, these scenes did not stop BTC from attaining the then all-time high (ATH) of $64,800 a year later in April 2021.

A month later, the leading cryptocurrency found itself on the receiving end after plummeting by more than 50% to hit lows of $30K based on Chinese authorities’ intensified crackdown on crypto mining.

Nevertheless, Bitcoin scaled the heights to set a new ATH of $69,000 in November 2021.

Despite the present bearish picture, Bitcoin has shown that it’s a hard nut to crack based on the ups and downs endured in its 13-year journey.

Veteran trader Peter Brandt believes Bitcoin is the face of crypto. He pointed out:

“This decline is just plain Lunatic LUNA. I have spoken open about my distrust of altcoins and that crypto is Bitcoin and Bitcoin is crypto. The problem is that distrust in that which is distrustful can spill over into that which is trustworthy (Bitcoin).”

Source: TradingView

Ethereum has also been in existence for close to seven years, and it is crafting a name for itself in the DeFi sector.

Therefore, the LUNA and UST crash might shift the narrative to more established cryptocurrencies that have stood the test of time.

South Korea Launches “Emergency” Inspection of Crypto Exchanges Following Terra Crash

Financial authorities in South Korea have beefed up crypto exchange inspections to boost investor protection following the recent collapse of LUNA and TerraUSD (UST) tokens

Per the announcement:

“The Financial Services Commission and the Financial Supervisory Service (FSS) have recently asked local cryptocurrency exchange operators to share information on transactions linked to TerraUSD and Luna, including the volumes of their trading, their closing prices, and the number of relevant investors.”

The financial watchdogs are also scrutinizing what caused the recent market crash and creating countermeasures for future events.

Confirming the ongoing inspection, an official of a local crypto exchange stated:

“Last week, the financial authorities asked for data on the number of transactions and investors and sized up the exchanges’ relevant measures. I think they did it to draw up measures to minimize the damage to investors in the future.”

Nearly 200,000 investors in Korea are speculated to have invested in LUNA and UST.

Despite the Terra tokens being invented by a Korean national, the authorities are taking the case seriously because they were traded globally. Do Kwon, the CEO of Terraform Labs, is the face behind the Terra blockchain.

The Terra ecosystem has been making headlines over the past week because LUNA collapsed to near-zero overnight despite being one of the top ten cryptocurrencies.

Kwon has proposed hard forking the Terra blockchain so that the troubled network can be salvaged, and if his suggestion is implemented, the new chain is set to go live on May 27.

Following the Terra crash, Kwon has been the centre of scrutiny, with some quarters suggesting that he was one of the pseudonymous co-founders of the failed algorithmic Basis Cash (BAC) stablecoin.

Therefore, history seems to be repeating itself because Basis Cash had to maintain the $1 threshold through code and not collateral, just like UST.

Crypto Market Crash Leaves Investors Counting Losses

Over the previous two years, a boom in crypto prices minted a generation of millionaires and billionaires. Some industry executives and even regular investors acquired extraordinary wealth out of cryptocurrency trading.

But of late, the crypto market has crashed. Last week, central bank interest rates tightening reports, inflation concerns, and the collapse of the algorithmic stablecoin TerraUSD and its LUNA token, helped ignite a wider meltdown, plunging Bitcoin price and wiping $300 billion in value from the wider crypto economy. The recent crypto market crisis has not only hurt investors but also erased billions of dollars from their fortunes.

Lost opportunities

Vitalik Buterin, co-founder of Ethereum, is one of the heavyweight investors who faced the wrath. After Ethereum’s price surpassed $3,000 and hit a high of over $4,800 in November last year, Vitalik possessed a digital wallet whose ETH contents were valued at about $1.5 billion.

But on Friday last week, Buterin revealed on social media that he is no longer a billionaire. Due to the ongoing market sell-off, Ether has lost 60 % of its value, trading at around $2,028 during the intraday on Monday Asia section, according to Coinmarketcap.

Changpeng Zhao, founder of Binance – the world’s largest crypto exchange – also has seen more than $80 billion, or 84% of his wealth, evaporate this year.

A few days ago, Mr. Zhao tweeted that Luna’s collapse made him “poor again” after losing billions of dollars in crypto following a market crash, which has wiped out the fortunes of several investors.

On Monday last week, Zhao mentioned that Binance held 15 million Luna tokens. In early April, Binance’s Luna holdings were worth $1.6 billion when the token hit its peak price. But its recent crash saw that value fall to about $2,200 the previous week.

Managing a down cycle

There are many ways for crypto investors to prepare for a market crash. The golden rule of investing in a risky asset class like crypto is to only invest money that an investor can afford to lose. It is advisable to ensure that crypto-only represents a small percentage of overall investments. High-risk investments like cryptocurrency should only make up a small portion of a total portfolio.

There are various ways an investor can calculate how much he or she wants to allocate, depending on their risk tolerance, crypto knowledge, and the degree to which they believe cryptocurrency could outperform stocks. The crucial thing is diversification.

Investing in cryptocurrencies with long-term potential is a great way to guard against panic selling when prices fall. Research can help identify crypto coins with the best chance of long-term survival.

JPMorgan Sees Retail Demand Improving, Ending ‘Intense Phase’ of Deleveraging

JPMorgan Chase & Co. (JPM), a US investment banking giant, issued a report on Thursday stating that demand among retail investors in the crypto market is improving. The report further said that the ‘intense phase’ of deleveraging appears to have passed.

In the report, the bank stated: “The extreme phase of backwardation seen in May and June, the most extreme since 2018, appears to be behind us.”

The prices of Bitcoin and Ethereum have increased 30.82% ($23,143.38) and 72.86% ($1,585.38) since plunging to record lows of $17,600 and $876 in June. These improvements have come as investors grow more optimistic that inflation could slow down and consumer spending remains healthy.

JPMorgan further disclosed that the recovery in asset prices is not witnessed in the crypto fund or futures space. This indicates that retail investors drive the demand, the bank explained. JPMorgan noted: “smaller wallets have seen an increase in ether or bitcoin balances since the end of June at the expense of larger holders.”

According to the bank’s report, in recent weeks, crypto markets have recovered as investors anticipate a software update known as the Ethereum “Merge,” which sets the transition of the blockchain from the proof-of-work to a proof-of-stake consensus mechanism expected to take place on September 19.

As a result, Ethereum network activity has risen alongside increased investor sentiment, JPMorgan stated.

The bank also said the recovery in staked ether (stETH) is a good indication of how the deleveraging event devastated firms like Terra, Celsius, and Three Arrows Capital is now over.

Staked ether (stETH) is a token (from Lido decentralised finance and staking protocol) that is supposed to be worth the same as Ether (ETH). Just like the collapse of TerraUSD, in the past few months, stETH had been trading at a widening discount to the second-largest cryptocurrency and thus caused the flames of a liquidity crisis in the crypto market.

But now things have positively changed as stETH slowly repegs with Ether (ETH) as total staking assets rose on DeFi liquidity giant Lido. stETH-ETH peg has improved to 0.9778, with the stETH price trading closer to Ether (ETH) price at $1,463.83 and $1,593, respectively.

Last month, the Lido’s staked Ethereum depeg caused massive crypto selloffs and market crashes. With the stETH-ETH peg improving further, the possibility of market recovery appears in sight.