Connect with us

Blockchain

Liquidity mining is booming — Will it last, or will it bust?

Republished by Plato

Published

on

By the end of 2018, many crypto skeptics had their “I told you so” moment, as many initial coin offerings, or ICOs, failed to deliver on their promises. Between 2017 and 2018, 3,250 projects were launched via ICO and $21.4 billion was collected from investors. But by early 2018, a study revealed that nearly half of 2017’s ICOs had failed — with another 13% considered “semi-failed” — dealing financial blows to coin purchasers anticipating gains. Many projects achieved very high returns initially, only to see coin values fall precipitously thereafter. 

Related: Did you fall for it? 13 ICO scams that fooled thousands

It’s important to note that many other ICOs were successful, launching projects that are still thriving today (Chainlink being one such stalwart example). Despite the successes, however, investors have been hesitant to forget the less fortunate tales — over the past couple of years, ICOs have slowed to a trickle.

Perhaps skeptics celebrated a bit prematurely. While ICOs may not have proven to be the optimal funding mechanism for decentralized projects, the fundamental promise behind these innovations remains. Innovations continue, and a new methodology for bootstrapping — liquidity mining — has moved in to fill the gap.

Related: DeFi liquidity pools, explained

In liquidity mining, a project offers its tokens to anyone willing to deposit their funds into a smart contract. Let’s look at a hypothetical example: “Cranberry Finance” offers the liquidity provider token “Cranberry Coins” to any user who deposits Cranberry and Ether (ETH) on Uniswap. In addition to earning fees collected from each trade between Cranberry and ETH on Uniswap, everyone who stakes their liquidity provider tokens in a smart contract can earn more coins from the project. Depending on the price of Cranberry Coins, the rate of Cranberry rewards, and the amount of liquidity provided, the annualized returns from liquidity mining programs can range from double-digit yields on the lower end to annual percentage yields of over 10,000% for riskier projects.

The proliferation of both liquidity mining and decentralized finance, or DeFi, has surprised even eternal industry optimists (myself included). Today, the market capitalization for DeFi stands at over $80 billion, with a total value locked of over $67 billion (compared with the $5.4 billion raised by ICOs in all of 2017). While liquidity mining was only first implemented at scale in mid-2020, it is clear a new boom has been born.

For many though, questions remain: Will this boom eventually bust? Will investors looking for high yields once again be left holding the bag?

ICOs and liquidity mining share some elements in common: The onus is still on the investor, as it always is, to know what they are investing in and assume the risks (and the risks are real). But I believe the answer to the above questions is that there are fundamental differences between ICOs and liquidity mining, differences that make liquidity mining a more sustainable funding model for long-term value creation, for both the project developers and their investors. Let’s explore how ICOs and liquidity mining differ.

Contrasting the native elements: ICOs vs. liquidity mining

ICOs provided a mechanism for distributing tokens, gaining funding and building a coin user base. However, some of the flaws inherent in the system became evident. Investors typically saw high returns immediately following the ICO, but values often dropped thereafter. Because the tokens themselves conferred no legal rights, income-generating capabilities beyond the market value of the coin, nor governance over the project, there was little incentive for many to continue to hold tokens. Many investors took early gains and cashed out, which did little to support coin growth. Some ICO projects were proven to be scams, affected by hacks, or poorly conceived projects with inadequate management teams that spent invested capital on extravagances.

Liquidity mining operates on a fundamentally different principle. As trading volume on decentralized exchanges surpasses centralized exchanges, a token’s marketability is dependent on having sufficient liquidity on a decentralized exchange; yet, it can be a challenge to attract liquidity to support an exchange, derivatives contract, lending platform, etc. Distributing tokens to liquidity providers is the primary mechanism for initially inviting the needed liquidity. The tokens have more value than the face value of the coin by offering yield — and often governance rights — incentivizing both a sense of ownership in the project and longer-term retention. More liquidity attracts more users, and more users provide more financial payback to liquidity providers, creating a continuous positive feedback loop.

It’s also important to note that the characteristics of the growth of DeFi and the ICO bubble are quite different. While often unsavvy retail investors dove headfirst into the ICO boom cycle, we are seeing fewer investors with more highly specialized industry knowledge of the market embracing DeFi. That said, FOMO — the fear of missing out — is human nature. There will always be those who are so tempted by the potential gains, they can’t resist the urge to “ape” in.

Not all that glitters is gold: Thoroughly research projects

While I believe that liquidity mining and DeFi are, in general, based on solid fundamentals, not all projects are created equal. I am neither an investment advisor nor a tax attorney and can’t tell you which projects are more advisable than others.

I will, however, recommend that any investor understands full well what they are getting into. Each project has differing leadership, governance structures, marketing plans, innovations, security frameworks, and plans to build and incentivize community involvement. All of these factors are important to consider in any investment decision.

Gold, silver, crypto, DeFi: Change is inevitable but rarely linear

The history of what we consider currency — and the staccato pace of innovation — teaches us that change will continue, but not always in a predictable fashion. While the methods for gaining investments for blockchain projects have gone through some starts and stops, I believe liquidity mining is here to stay.

That isn’t to say another mechanism won’t eventually take its place if it proves to serve the community even better — after all, that is the essence of innovation.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Willy Ogorzaly is the senior product manager at ShapeShift, an international, noncustodial cryptocurrency leader. He is responsible for advancing product strategy, defining new features and solutions, and ensuring new products meet the needs of an evolving, innovative and dynamic crypto and DeFi landscape. Before joining ShapeShift, Willy co-founded Bitfract (acquired by ShapeShift in 2018), the first tool enabling trades from Bitcoin into multiple cryptocurrencies in a single transaction.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cointelegraph.com/news/liquidity-mining-is-booming-will-it-last-or-will-it-bust

Blockchain

Grayscale Adds $1 Billion in Bitcoin, Nears $50 Billion in Total AUM

Republished by Plato

Published

on

Investment giant Grayscale recently added another $1 billion worth of Bitcoin in almost 24 hours. Now, the firm nears the $50 billion mark with $46.1 billion in total assets under management (AUM)

AUM Growing

As reported by CryptoPotato recently, the investment firm increased its total AUM by more than $3 billion, shortly after expanding its crypto-trust offerings by adding five new tokens for their eligible accredited investors. 

The Grayscale Bitcoin Trust (GBTC) accounts for $38.1 billion (82.64%) of Grayscale’s total AUM, while the Ethereum Trust (ETHE) accounts for $6.6 billion (14.26%). The remaining trusts, including Bitcoin Cash and Litecoin, account for the rest.

Notably, tokens such as Filecoin, Livepeer, Basic Attention token, MANA, and LINK saw a surge in price after Grayscale announced adding them into the list of offered trusts. The company expanded its total number of trusts to 14 after CEO Michael Sonnenshein explained they see many clients seeking exposure to more crypto assets.


ADVERTISEMENT

Grayscale Confirms Its Intentions to Launch a BTC ETF

Grayscale has confirmed its plans to convert its most popular investment product, the GBTC, into a Bitcoin Exchange-traded fund —after posting several ETF-related job positions on its careers page. Although, the firm does not consider that the current regulation weather in the United States is suitable for such a fund.

Unlike other investment giants that have filed for an ETF using S-1 forms, Grayscale will remain committed to converting GBTC into an ETF as the US’s regulatory environment gets clearer.

Founded in 2013, Grayscale has become the most prominent digital asset manager for accredited investors seeking exposure to bitcoin and other crypto assets. The institutional demand for BTC accelerated at the beginning of this year, according to Sonnenshein, adding that demand is nowhere near decreasing.

SPECIAL OFFER (Sponsored)

Binance Futures 50 USDT FREE Voucher: Use this link to register & get 10% off fees and 50 USDT when trading 500 USDT (limited offer).

PrimeXBT Special Offer: Use this link to register & enter POTATO50 code to get 50% free bonus on any deposit up to 1 BTC.

You Might Also Like:


Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://cryptopotato.com/grayscale-adds-1-billion-in-bitcoin-nears-50-billion-in-total-aum/

Continue Reading

Blockchain

Why ADA could run hotter than Bitcoin and make 10x gains

Republished by Plato

Published

on

After breaking in the crypto top 10 by market cap and with 3.597% gains over the past year, Cardano (ADA) seems to be laying low. At the time of writing, ADA trades at $1,24 with 1.7% profits in the daily chart and 6.4% in the weekly chart.

Cardano ADA ADAUSDT
ADA moving sideways in the 24-hour chart. Source: ADAUSDT Tradingview

Cardano’s native token and its platform are moving towards a major milestone. Targeting a Q3 entry into DeFi with Hard Fork Combinator Alonzo.

Bullish investors are betting on ADA’s further appreciation. Analyst Justin Bennett claims this token next rally will happen by the end of April. Around this time IOG should be stress-testing its smart contracts platform, Plutus.

A day ago, Bennet said to be building a “sizeable” ADA position and set support at $1.10 to $1.30. Over the next month’s, according to the analyst, ADA could go as high as $10.

On the Cardano’s native token recent price action, the analyst said it moving sideways is an indication of a “fair game”, a sign that ADA’s price is not overvalued. Bennet added:

ADA moving sideways for 6 weeks tells me the market doesn’t believe it’s overvalued at all. I don’t buy markets that are going vertical. I buy markets that went vertical recently and have since gone sideways for over a month. That’s a recipe for the next leg higher.

By the end of the month, ADA could target $2, as indicated by the chart below, and then could go for a higher price at $3 in the coming months.

Cardano ADA ADAUSDT
Source: Justin Bennett

In the 2017 bull run, ADA peaked at $1,18 therefore Bennet claims it could a 10x from its current price. Comparing ADA to Bitcoin, the analyst said the latter has “never done less than” a 10x profit in a bullish cycle. He added:

We know alts run hotter than Bitcoin. Translation: $10 $ADA is conservative, and $20 – $30 wouldn’t surprise me.

Smart contracts capabilities closing in on Cardano

Cardano’s next protocol upgrade is set to make it “the leading smart contract platform”, according to Olga Hryniuk from IOG. Outlining Alonzon’s roadmap and launch, Hryniuk wrote:

Throughout March and April, the IO Global team has been gradually combining the Alonzo rules with the Cardano node and ledger code (…). We expect the Alonzo upgrade (hard fork) to happen in late summer, and we will announce a firm date in April’s Cardano360 show.

In the crypto space, many believe Ethereum’s high fees are pushing users towards cheaper options. Cardano’s platform promises this with higher security for its smart contracts and EVM compatibility.

If Ethereum’s competitors, like Binance » Read more

” href=”https://www.newsbtc.com/dictionary/coin/” data-wpel-link=”internal”>Coin (BNB), performance is any indication of where ADA could go, then investors should pay attention to BNB’s rally.

With a 70.6% increase in just one month, BNB seems pegged to smash all resistance and keep scoring all-time highs. It remains to be seen if ADA will follow and take a place amongst DeFi giants.

Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://www.newsbtc.com/news/why-ada-could-run-hotter-than-bitcoin-and-make-a-10x-gains/

Continue Reading

Blockchain

Litecoin Price Analysis: 11 April

Republished by Plato

Published

on

The Litecoin market has been seeing significant growth in price since the beginning of the year. At the time of writing, LTC was returning 93% year-to-date to its investors.

LTC was being traded at $257.39 with a market capitalization of $17.22 billion. The digital asset just saw a bullish breakout, however, will it be able to maintain this high value going forward in the market?

Litecoin 1-day chart

Source: LTCUSD on TradingView

The Litecoin price was building higher within an ascending channel and witnessed a strong surge as the price broke out of the channel. LTC saw the price surge from $163 to $258 within 16 days and turned the prevalent bearishness into a bullish market.

However, LTC has been closely trading to the resistance at $258 and if it rejects this price level, the value may trade lower.

Reasoning

The surge in the value of the digital asset has resulted in increased volatility in the market. The divergence of Bollinger Bands has been an indicator of the rise in volatility, while, the signal line moved under the candlesticks. The signal line will be acting as a support if the price pushes lower.

Meanwhile, the relative strength index was noting that the digital asset was close to becoming overbought as its value hit 68. The market has been witnessing selling pressure evolve at this stage and if it escalates, the RSI will be pushed towards the equilibrium zone.

While the market switches trends, the momentum has remained high owing to the recent surge. The bullish momentum could help the asset to maintain its high value, but the rise in selling pressure could result in a correction.

Crucial level

Entry-level: $240.99
Take Profit: $191.84
Stop-level: $268.88
Risk to Reward: 1.76

Conclusion

The current Litecoin market has been fairly bullish. However, a rising sell-off could push the price of the digital asset lower under $200. With 50 moving average and the signal line extending support close to $200, the price may not drop beyond this point.


Sign Up For Our Newsletter


Coinsmart. Beste Bitcoin-Börse in Europa
Source: https://ambcrypto.com/litecoin-price-analysis-11-april

Continue Reading
Blockchain4 days ago

Decentralized oracle solution Umbrella Network adds Huobi as validator node

Blockchain3 days ago

XRP Price Analysis: 08 April

Blockchain3 days ago

$48B Asset Manager Millennium Management Dabbles With Bitcoin

Blockchain3 days ago

Binance Smart Chain Daily Transactions 200% More Than Ethereum’s

Blockchain3 days ago

America’s Second-Oldest Bank State Street to Enable Crypto Trading on its Platform

Blockchain3 days ago

Digital yuan campaign planned for contested island in the South China Sea

Blockchain3 days ago

Polkadot Price Analysis: 08 April

Blockchain3 days ago

Tesla’s landlord accepts crypto; will Elon Musk pay rent in Bitcoin?

Blockchain3 days ago

Bitcoin exchanges just saw massive Tether stablecoin deposits

Blockchain4 days ago

Why JP Morgan’s CEO calls Bitcoin regulation a “serious issue”

Blockchain3 days ago

Bitcoin Miners Hit Jackpot as Hash Rate Peaks Again

Blockchain3 days ago

Phemex Launches OTC Trading, Enables Crypto Purchase with Bank Transfers

Blockchain4 days ago

Miners are hoarding Bitcoin from record daily earnings

Blockchain3 days ago

Man Gets 12 Years in Prison After Trying to Buy Lethal Chemical Weapon With Bitcoin

Blockchain4 days ago

Crypto sentiment falls even as Bloomberg tips Bitcoin will hit $400K

Blockchain4 days ago

Revolutionizing the crypto-market in India with CryptoBiz exchange

Blockchain3 days ago

Cardano’s Anti-Counterfeit Solution Sees First Successful Implemetation

Blockchain4 days ago

Tendermint acquires B-Harvest, creator of Cosmos-based Gravity DEX

Blockchain4 days ago

Ontology’s cross chain DeFi lending platform Wing is now live on Ethereum

Blockchain3 days ago

Ether price takes on Bitcoin — What’s behind the sharp rise in demand?

Trending