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Perfect storm leads to big sell-off for Bitcoin and DeFi: Weekly recap

A sharp correction in equities markets led Bitcoin price and DeFi tokens to sell-off sharply but have investors turned bearish?

Republished by Plato

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Digital asset markets were on a parabolic surge until investor confidence took a major hit to close out the week with a bearish tilt due to a perfect storm of negativity.

Before reading the rundown, catch up on the most-read stories centered around the price of Bitcoin, the macroeconomic picture and the DeFi phenomenon gaining traction. 

A significant drop in equities markets was led by blue-chip stocks that had been at all-time highs. As this occurred, many tokens tied to DeFi platforms corrected sharply, most notably, SushiSwap (SUSHI) which lost nearly 40 percent of its value. 

Daily cryptocurrency market performance

 Daily cryptocurrency market performance. Source: Coin360

The correction in traditional markets appears to have influenced Bitcoin’s (BTC) more than 10 percent drop before a small bounce back to the $10.3-$10.4K range. 

More isn’t always merrier

Technology stocks that led US equities to record highs this summer reversed sharply this week, sending the Nasdaq Composite index tumbling almost five percent in its biggest fall since June. 

Apple’s shares lost eight percent — wiping more than $150 billion from the iPhone maker’s value — while Amazon, Alphabet and Microsoft all fell more than four percent. 

As a result, the VIX index jumped above the 30-point mark for the first time since mid-July, and the equivalent volatility index for the Nasdaq shot up to more than 40 points — nearly double its mid-August low.

Historically, the VIX has only surged into the 30s a handful of times in the past and almost always leads to a significant retracement.

It is a reminder that crowded trades bring a lot of volatility when someone begins to unwind their positions. Digital asset traders are more than aware of such dynamics and while the bulls may be feeling particularly salty about the reversal of fortunes, the pull-back offers an opportunity to rebuild.

The futures curve also flattened aggressively as leverage buyers were the first ones to look for cover, and there are plenty of opportunities in the options market to take advantage of market mispricing.

Are DeFi tokens the new pink sheets?

Ethereum transactions soared to multiple new all-time highs for the second time in three weeks and Uniswap V2: Router 2 is now the lead contributor to gas usage, according to Etherscan. The decentralized exchange is followed by Tether (USDT); and then the latest DeFi sweetheart that is SushiSwap: MasterChef LP Staking Pool.

And so, Tether has finally been dethroned from its top spot as the main contributor of gas usage. 

Total value locked (USD) in DeFi

Total value locked (USD) in DeFi. Source: Defi Pulse

The fact that it was toppled by none other than a DeFi platform speaks a lot for the recent growth of the industry and, as it stands, over $9.34 billion is locked across various platforms. Currently, Aave, Maker and Uniswap constitute about $1.5 billion TVL each. 

On the one hand, DeFi is a high risk, high reward market, but so is trading small-cap (pink sheet) stocks. Both clearly have a market, and always will among those with an appetite for risk.

Is relief from high gas fees on the way?

The ongoing focus on DeFi and the recent hyperactivity on Ethereum has resulted in sky-high congestion and gas fees. This led Ethereum founder Vitalik Buterin to point out several solutions through rollups and sharding.

ZK-Rollups are a zero-knowledge proof technique that helps rollup or batch many transactions into a single transaction, and therefore, helps reduce congestion on the Ethereum blockchain. Less congestion means lower fees.

Optimistic and ZK roll ups can increase capacity from ~15 tx/sec to ~3000 tx/sec by doing most of the transaction processing on layer 2. Sharding, on the other hand, increases the capacity of the base layer by ~100x. 

This could lead to a 100x decrease in fees, though realistically in the long term it would not decrease quite as much because the demand for Ethereum is also likely to increase.

The only solution to high transaction fees is scaling and Tether, Gitcoin and other apps are doing the right thing by migrating to ZK rollups. A positive development is that Tether is now planning to add support for another Layer-2 scaling solution (ZK-Rollups).

Source: https://cointelegraph.com/news/perfect-storm-leads-to-big-sell-off-for-bitcoin-and-defi-weekly-recap

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PlusToken Crypto Scammers Slammed With 11-Year Jail Sentence

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Principal actors in the PlusToken Ponzi scheme have bagged 11-year prison sentences in China. The scheme managed to defraud investors of billions of dollars in various cryptocurrencies.

End of the Road for PlusToken Scammers

According to the South China Morning Post on Dec. 1, principal members of the PlusToken scam project were sentenced to 11 years imprisonment by a Chinese court. The suspects were found guilty of duping investors of $2.25 billion worth of crypto tokens.

As previously reported by CryptoPotato, authorities arrested 27 key members of the crypto Ponzi scheme in July, in addition to apprehending 82 other individuals linked to PlusToken.

Later in November, Chinese law enforcement seized $4 billion worth of crypto from operators of the fraudulent project. According to court documents, the confiscated cryptocurrency tokens included 94, 775 BTC, 79,581 BCH, 833,083 ETH, 74,167 DASH, 1.4 million LTC, 6 billion Doge, 27.6 million EOS, and 213,724 USDT.

The clampdown of the PlusToken scam project is in line with China’s agenda to rid the country of fraudulent schemes. Also, the latest development signals a win for authorities as the PlusToken platform was one of the largest Ponzi schemes in China.

What Happened?

PlusToken, founded by Chen Bo back in 2018, had all the hallmarks of a classic Ponzi scheme, with funds generated from later investors used to benefit early investors. Chen and other operators employed social media and offline activities to get members, who in turn paid for membership fees up to $500 worth of bitcoin and other crypto tokens.

Between 2018-2019, the platform had over 2.5 million members, with rewards based on the number of new recruits that others brought on board. Meanwhile, the total number of funds generated from members was reportedly over $2.2 billion worth of crypto.

Also, court documents alleged that Chen Bo spent some of the funds on extravagant lifestyles, buying expensive cars and properties for himself and his relatives.

In addition to the PlusToken founder and other key members spending time behind bars, the ringleaders were slammed with fines. The PlusToken scammers were fined between 120,00 yuan ($18K) and 6 million yuan ($912,922),

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Source: https://cryptopotato.com/plustoken-crypto-scammers-slammed-with-11-year-jail-sentence/

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Cryptocurrency Asset Management Provider NYDIG Raises $100M From a Single Investor

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NYDIG, the cryptocurrency asset management company, has raised $100 million from a single investor. The firm collected the amount during its newly-announced fund Digital Assets Fund II, after the previous fundraising project, named Digital Assets Fund I.

$150M In Just Two Crypto Investment Funds

According to officially published documents filed with the U.S. Securities and Exchange Commission, the New York-based digital asset firm revealed that it raised $100 million from only one investor on their recently announced project Digital Assets Fund II.

The operation follows its forerunner Digital Assets Fund I, which raised $50 million from investors in November. The amount has been reportedly collected from just two investors and was to invest mainly in Bitcoin.

The $50 million fundraise in November came after a quadrupling in NYDIG clients. The firm offers investment, brokerage, treasury, and technology solutions for Bitcoin to its institutional allocators, corporations, investment advisors, etc.

Another Publicly-Owned Company to Own a Big Pile of Bitcoin

As CryptoPotato recently reported, less than two months ago, asset manager Stone Ridge bought 10,000 bitcoins worth about $115 million through its subsidiary NYDIG. The new digital assets-oriented investment was reportedly to serve as a primary treasury reserve asset for the company.

Co-Founder and CEO of NYDIG, Robert Gutmann, said that considering that Bitcoin switches to a mainly institutionally-owned asset, “the company has a better position than ever” to be the leading provider of BTC solutions to a variety of banks, corporations, and institutions.

Speaking on the Bitcoin investment, Gutmann also said that the NYDIG is proud to facilitate one of the largest commitments of treasury assets to the cryptocurrency to that date. He added that he sees demand for the company’s full suite of corporate treasury and investment solutions accelerating.

In another significant recent Bitcoin purchase in October, Jack Dorsey’s Square reportedly bought $50 million worth of the most influential and valuable digital asset right now. Thus, it became the second publicly-traded company to do so in recent months after MicroStrategy.

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Source: https://cryptopotato.com/cryptocurrency-asset-management-provider-nydig-raises-100m-from-a-single-investor/

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TrustToken and Syscoin Partner on a Stablecoin Bridge

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Decentralized marketplace and e-commerce protocol Syscoin has partnered with the stablecoin platform TrustToken.

The goal of the collaboration is to speed up payments and to provide further solutions to Ethereum’s blockchain. It also means that the five stablecoins of TrustToken, namely TUSD, TGBP, THKD, TCAD, and TAUD, will run on Syscoin’s blockchain and be available for users.

A Collaboration Between Syscoin and TrustToken

According to a release shared with CryptoPotato, the popular decentralized marketplace and e-commerce protocol Syscoin has teamed up with stablecoin platform TrustToken.

Right off the bat, this means that the stablecoins provided by the platform will now run on Syscoin’s blockchain as well. These are TUSD, TGBP, THKD, TCAD, and TAUD.

Stablecoins have grown in popularity over the past few months, mainly because of the DeFi boom, where they are used to enable staking, liquidity provision, and so forth. However, there was also an obvious challenge with all of it – scaling. Supposedly, Syscoin is intended to help with that. Using Z-DAG (Zero Confirmation Directed Acyclic Graph), the protocol claims to be able to settle transactions in less than 10 seconds with comparatively low fees.

The partnership will also enable users to mine two cryptocurrencies at the same time – SYS and BTC.

Distribution of the Roles

While Syscoin’s task would be scalability, TrustToken comes in for the stablecoin part. It’s a platform that aims at an open financial system through a selection of stablecoins.

The stablecoins it offers are collateralized, and it has also partnered with Chainlink, as well as other protocols.

The overall partnership is aimed at creating a solution for scalable and secure token payments at a lower risk interoperability with Ethereum’s network. It should make TrustToken’s stablecoins function quicker and cheaper following the enabling of the bridge.

Speaking on the matter was Syscoin’s Foundation Chairman Jag Sidhu, who said:

“Digital assets have growing needs for better usability, robust decentralized security, and a scalable way of ensuring every transaction complies with regulations. Syscoin uniquely aligns with all of these requirements. We look forward to TrustToken’s family of stablecoins becoming future-proof and gaining significant advantage with Syscoin.”

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Source: https://cryptopotato.com/trusttoken-and-syscoin-partner-on-a-stablecoin-bridge/

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