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99% gone in 60 seconds: How a Polkadot trader may have crashed DOT futures

Republished by Plato

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On March 5, Polkadot (DOT) experienced a flash crash at Binance perpetual futures which resulted in the contract trading as low at $0.20. While this could have been an honest fat-finger trading mistake, a number of indicators point to a planned-attack.

While no hard evidence will likely ever emerge, the open interest increase just 24 hours ahead of the event indicates that an attacker could have generated a $8.3 million profit by manipulating Binance’s matching engine.

DOT perpetual futures on Mar. 4, USD pricing. Source: Binance

As shown above, during the 3-minute candle, $20.4 million worth of DOT contracts traded. Although the swift downside move was a 99.5% flash crash, it did not result in cascading liquidations.

Futures contracts liquidations are calculated using the price of spot exchanges. Thus, a flash-crash exclusively on futures prices would not impact most traders. According to Binance:

“The Price Index is a bucket of prices from the major Spot Market Exchanges, weighted by their relative volume.”

As per Binance’s support website, Polkadot coin-margined futures index price is composed of Kraken (DOT/USD), Binance (DOT/USD), Binance (DOT/BTC), OKEx (DOT/BTC) and Huobi’s (DOT/BTC) market.

It is worth noting that this specific contract is coin-margined instead of the more liquid Tether-settled one. Cointelegraph recently analyzed those differences, stating that the Tether-based contract “doesn’t need an active hedge to protect collateral (margin) exposure, thus it’s a better choice for retail traders.”

Data uncovers the planned ‘attack’

For an attacker to set up this trade, the first step would be building a leveraged long position while simultaneously creating short exposure using another account.

To create a flash crash while risking the minimum amount possible, preferably, this event should take place not more than a couple of days ahead of the planned ‘attack’.

DOT/USD perpetual futures open interest. Source: Binance

As depicted above, DOT/USD perpetual futures open interest grew from 1.92 million DOT to 3.34 million some 30 hours ahead of the flash crash, equivalent to a $47 million increase.

To differentiate the attack from a regular leveraged-long, one should track the long-to-short ratio. To maximize gains from the flash crash, the attacker would have created a substantially higher short leveraged amount, thus impacting the long-to-short ratio.

DOT/USD perpetual futures long-to-short ratio. Source: Binance

The data above shows that the average 4.25 ratio favoring longs was severely impacted during the open interest increase. This would confirm the theory of a coordinated attack.

How the trade is executed

By holding a considerably larger net short position when both accounts are combined, the attacker would profit from a flash crash. All this entity needs to initiate the event is to market sell the net long position. This move would trigger a substantial sell order, crashing the futures contract. Meanwhile, the other account, previously net short, would score big.

762,000 DOT contracts traded during the 3-minute flash-crash candle at a $26.73 average price. Considering the change in the long-to-short ratio, the attack most likely created a $30 million long position. Meanwhile, the secondary account held a $10 million net short exposure.

Although far from the 99.5% price crash, this 19% drop from $33 likely generated a $9.5 million gain for the account holding the $10 million short exposure if 5x leverage was in play. On the other hand, the collateral lost for the $30 million long position amounts to $1.2 million is 25x leverage was deployed.

It is important to emphasize that holders of Binance DOT futures contracts were unlikely affected by the flash crash. Therefore, the attackers’ net long account should be holding a negative balance, which the Binance insurance fund will likely cover.

The above calculations are mere speculations based on exchange-provided data. As previously mentioned, it is unlikely that hard evidence of this attack will ever surface.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

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Source: https://cointelegraph.com/news/99-gone-in-60-seconds-how-a-polkadot-trader-may-have-crashed-dot-futures

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Bitcoin Bull Mike Novogratz Predicts Existential Crisis Unless the US Creates a Digital Dollar

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Mike Novogratz, a veteran investor, and a huge Bitcoin supporter noted the U.S. is currently in a good economic position. Still, the nation can face a major competitive disadvantage unless it engineers a digital dollar soon.

The Importance Of An E-Dollar

Novogratz, chief executive of digital merchant bank Galaxy Digital GLXY, underlined the value that a digital dollar could bring to the US. In a Friday interview with MarketWatch, he stated:

”To me it is an existential crisis, we need a digital dollar.”

Furthermore, the investor expressed his view over the current COVID pandemic and the negative impact on the U.S. market and the world, in general. He referred to the trillions of dollars of monetary and fiscal spending done to help eliminate the worst of the economic aftershocks the disease caused:

”If our fiscal and monetary policy starts looking like it’s from a Banana Republic…you are going to run into some Minsky moment where confidence breaks down.”

With his statement, Mike Novogratz referenced Hyman Minsky, who exposed a view in the recent past that a period of distortions in the financial system eventually ends very badly.


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The existence of a digital dollar sounds even more important after some stock-market investors have been warning about a surge in US inflation in the past weeks.

The Competition With China

During the interview, Novgorotz claimed that while in the U.S., the development of an e-dollar is still under question and researches, China has fired the first salvo on the digital currency front.

The biggest economy in Asia conveys great support to its digital yuan. According to some experts in the field, its new currency is a weapon that the country can use to compete with the U.S. and other developed economies.

As CryptoPotato recently reported, PayPal CEO Peter Thiel said that Bitcoin could be used as a Chinese financial weapon against the U.S.

In the meantime, Novogratz said that there is ”zero evidence of the Chinese government buying Bitcoin” much less weaponizing it, referring to the comments made by Peter Thiel:

”Sometimes he likes to say things that are provocative.”

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Source: https://cryptopotato.com/bitcoin-bull-mike-novogratz-predicts-existential-crisis-unless-the-us-creates-a-digital-dollar/

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Blockchain

Ripple becomes tidal wave, leads weekend pump and notches legal victories

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Amid a weekend pump carrying multiple cryptocurrencies higher, Ripple’s XRP looks to be leading the way with a push as high as 30% on the daily — carried on the back of a string of legal victories and rumors of relisting at some exchanges. 

Where Bitcoin and Ethereum are up merely 2.7% and 3.4% respectively on the day, XRP climbed to $1.36 before retreating to $1.32, where it sits at the time of publication. The digital currency is now up 111% on a 7 day basis, and a staggering 544% on the year. The recent push has also buoyed XRP back into the top 10 cryptocurrencies by marketcap, behind only BTC, ETH, and BNB at #4.

The rally flies in the face of a lawsuit from the Securities and Exchange Commission, which charges that XRP’s $1.3 billion ICO was an “unregistered securities offering.” The news led multiple exchanges to delist the currency, and XRP lost its place as the 3rd largest currency by marketcap, at time looking as if it would even fall out of the top ten. 

The bad news for XRP didn’t stop with the SEC, either. In March Ripple CEO Brad Garlinghouse announced that the company would be “winding down” its relationship with Moneygram — a once highly-touted partnership that investors often pointed to as proof of the digital currency being on a path towards becoming “the standard” for payments and settlement.

Despite the deluge of negative headlines, it appears all buyers needed was a small ray of hope to jump back in — and they’ve gotten exactly that. Ripple lawyers have notched two victories in their legal battle against the SEC, including winning access to internal SEC discussion history regarding cryptocurrencies, and a court denied the SEC the ability to disclose the financial records of two Ripple execs, including Garlinghouse.

Ripple executives themselves seem heartened by the news, with CTO David Schwartz saying the US isn’t “prepared” to regulate cryptocurrencies (a possible dig at the ongoing legal proceedings).

All in all, it’s just another week for one of the most controversial cryptocurrencies in the space.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/ripple-becomes-tidal-wave-leads-weekend-pump-and-notches-legal-victories

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Blockchain

Why this OlympusDAO’s product could be amongst DeFi most lucrative

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Taking the market by storm, OlympusDAO’s native OHM is up 95.8% this week alone and 31.1% in the past two weeks. At the time of writing, OHM is trading at $812,76 with 7.3% profits in the 24-hour chart.

With a market cap of just $68 million, OlympusDAO might have gone unnoticed by many investors. However, it has a mechanism called Bonds which promises to be one most important and lucrative in the DeFi sector.

According to research firm Messari, this protocol is attempting to create a stable currency backing every OHM with DAI and OHM-DAI. The objective is to maintain a “fundamental check on inflation” and a currency with an undiluted purchasing power.

Unlike Tether and other stablecoins, OHM is not pegged to any other asset. Its stability is achieved via the DAO (Decentralized Autonomous Organization) when it alters variables to obtain more profitability for stakers.

This is done via the sales contract connected to the protocol’s treasury and a liquidity pool (OMH-DAI) on decentralized exchange Sushiswap, as shown below. Messari explains:

When OHM trades above 1 DAI, the protocol mints and sells new OHM. When OHM trades below 1 DAI, the protocol buys back and burns OHM. In each case the protocol makes a profit. Olympus DAO distributes these profits 90% to OHM stakers pro rata and 10% to a DAO.

OlympusDAO OHM
Source: Messari

How OlympusDAO’s bonds operate

The Bonds are a treasury component to get liquidity with it users can trade Stake Liquidity Provider tokens to get OHM directly with the protocol, as an OlympusDAO developer explained.

Once the trade is completed there is a vesting schedule of 5 days. During this time, the user can redeem the tokens but has incentives to get them at a discount. The latter is determined by the number of bonds in the protocol, more bonds are equal to a lower discount.

Via this mechanism, as the developer said, OlympusDAO restrains its own growth, to have become “steadier”.

The liquidity from a bond is locked in the treasury and used to back new $OHM. That liquidity now belongs to the market and, by extension, the token holders. The more liquidity the protocol builds up, the more confident holders can feel.

The users are basically contributing to OlympusDAO by adding liquidity. In retribution, the user gets a reward in OHM at a much cheaper price during a specific period. That way, both the user and the protocol can benefit.

OlympusDAO offers LP a variety of strategies around OHM which they can leverage to obtain a bigger profit than on the spot market. The developer claims:

All of this serves to create a long-term, sustainable bootstrapping mechanism for the protocol, with participants as the main beneficiaries. A good system shouldn’t offer one opportunity to “make it”; it should offer them in perpetuity with diminishing returns. This is how you produce wealth; slowly, through compounding gains.

Ethereum is trading at $2096,58 with a 1.2% profit in the 24-hour chart, after dropping from its ATH at $2,198.

OlympusDAO OHM Ethereum ETHUSD
ETH with small profits in the 24-hour chart. Source: ETHUSD Tradingview

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.newsbtc.com/news/why-this-olympusdaos-product-could-be-amongst-defi-most-lucrative/

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