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Yearn’s Ethereum Liquidity Vault Survives First Major ETH Price Dump

The hottest thing to emerge for Ethereum holders this week has been Yearn Finance’s yETH high-yield farming pool. It has survived its first tribulation as ETH prices dumped 14% on the day. This week, Yearn Finance’s DeFi platform, which recently launched insurance incentives, unveiled two new high yielding vaults for Ethereum holders. One is for […]

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The hottest thing to emerge for Ethereum holders this week has been Yearn Finance’s yETH high-yield farming pool. It has survived its first tribulation as ETH prices dumped 14% on the day.

This week, Yearn Finance’s DeFi platform, which recently launched insurance incentives, unveiled two new high yielding vaults for Ethereum holders. One is for ETH and the other for wETH (wrapped Ethereum).

It has been called a ‘beast for ETH stacking,’ and a ‘black hole for ETH,’ by industry experts suggesting that once Ethereum has been deposited, holders will be reluctant to withdraw it and lose out on such impressive yields.

Within the first day of launch, over $100 million in liquidity had been deposited, which worked out to be more than 230,000 ETH at the time. Vault yields were as high as 95% APY, which would almost double the ETH deposited in a year.

Ethereum InvestmentEthereum Investment

Yearn Vault Inner-Workings

The vaults use collateral deposited in ETH or wETH to mint Dai from a MakerDAO smart contract using a collateralized debt position (CDP) at a 200% collateralization ratio. This is to protect it from liquidation should the price of ETH go down, which it has done quite violently over the past 24 hours.

In reaction to the launch, MakerDAO governance proposed an executive vote to increase the ETH debt ceiling from 420 million to 540 million. This would effectively enable more Dai to be minted for use in these DeFi vaults. Industry analysts observed that this was also bullish for MakerDAO and Dai.

The Dai stablecoin is then deposited in the yDAI vault and used as collateral on the high-yield Curve.fi Y liquidity pool to generate CRV. This is a stablecoin pool consisting of unequal weights of DAI, USDC, USDT, and TUSD, returning yCRV tokens representing the stake in the pool.

The yETH vault is now earning trading fees from the Curve pool and staking the yCRV tokens on the Curve DAO in order to farm CRV. The yETH vault periodically sells the CRV tokens for ETH on the open market through decentralized exchanges and deposits that allow ETH to flow back into the vault, increasing all yETH holders’ overall stakes.

The benefit for Ethereum holders and liquidity providers is that they do not have to do a thing and the entire process is automated. There is no need to research the best pools, harvest tokens, or pay gas fees at each transfer. It is basically a case of sitting back and accumulating ETH over time, hence the ‘black hole’ analogy.

Ethereum ETHEthereum ETH

This type of strategy would not be possible using traditional finance and is just one example of how the DeFi space has evolved this year.

There are a couple of caveats as usual. Firstly there is a 0.5% withdrawal fee that Yearn Finance imposes. Secondly, gas fees are off the chart at the moment so it will cost relatively more to make the initial deposit and withdrawal. As with most things DeFi related, it benefits the whales more than the minnows.

The third drawback is that it still carries quite a high risk due to the collateralization ratios. As pointed out by Anthony Sassano in his Daily Gwei newsletter this week, the major risk of this strategy is if the MakerDAO CDP falls to below a 150% collateralization ratio due to the price of ETH falling fast.

If this happens, the yETH vault may be liquidated resulting in the loss of ETH for liquidity providers. This would not happen instantly however as there is a mechanism that allows debt repayment. MakerDAO has a built-in system called the oracle security module (OSM) that essentially gives CDP/vault owners one hour to pay down their debts.

Over the past 24 hours, Ethereum prices have dumped around 14% and the yETH vault has not been liquidated, proving that the mechanism is working as intended.

Surviving the First Price Crunch

Ethereum prices have collapsed from around $450 at the same time yesterday to around $390 at the time of press.

ETH pricesETH prices
ETH/USD – TradingView

The move has knocked 14% off the price of Ethereum taking it back to support levels. It has been largely induced by Bitcoin which again failed to break the psychological $12,000 barrier and dumped back to $10,100.

At the time that prices started to plummet, Yearn Finance paused yETH deposits after 70 million Dai had been minted in order to balance between best profits and best risk adjustment.

The yETH vault survived the crunch and has actually increased in terms of liquidity as ETH has got cheaper.

Crypto investor Andrew Kang [@Rewkang] observed how it survived the crash and made three rebalances in order to pay 2.7 million Dai back into the collateralized debt position:

At the time of press, there was 375,000 ETH deposited in the vault earning around 73% according to Yearn Finance stats.

Ethereum prices may well correct further, but Yearn Finance appears to have its finger on the pulse and has managed one 15% slide without hassle. Additionally, collateral continues to increase in the yETH vault indicating investor confidence in the product.

DeFi Markets Beat a Retreat

The crypto market crash has resulted in the first major decline in DeFi total value locked since March. An all-time high of $9.5 billion was hit on Sept 2 according to DeFi Pulse.

DeFi TVLDeFi TVL
DeFi TVL – DeFi Pulse

Traders and yield farmers have been pulling out since the top, resulting in an 8% decline to around $8.75 billion. Over the past 30 days, DeFi markets are still up a whopping 92%, so a correction was inevitable.

Uniswap is the top protocol in terms of TVL at the moment with $1.68 billion and a market share of just below 20%. Maker and Aave, coming in second and third places respectively have declined in TVL while Curve and Yearn have increased slightly, mostly due to the yETH vaults launched this week.

Additionally, it appears that yield farmers could be slowly wising up to the dodgy DeFi food meme tokens that have flooded the scene in recent weeks.

Source: https://beincrypto.com/yearns-ethereum-liquidity-vault-survives-first-major-eth-price-dump/

Blockchain

Five Reasons Ethereum Has Entered a New Bull Market

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Ethereum is currently retracting sharply from its previous and 30-month peak of $620. Even with a decline of around $100 to today’s prices of $525, ETH is still up over 300% since the beginning of the year.

The confirmed genesis of the long-awaited Beacon Chain, which is Phase 0 of the even longer awaited Serenity ETH 2.0 upgrade, has no doubt driven momentum but it is not the only strong point for Ethereum.

Over 5 Reasons to be Bullish on Ethereum

DTC Capital’s Spencer Noon has pulled out a few key charts to back up the notion that we are definitely in a bull run for Ethereum.

Active addresses on the network are the first metric as it now has just under 500,000 per day. This is almost double what it was at the same time last year.

In terms of fees paid, Ethereum dwarfs everything else in the crypto space with 80 billion gas now being used on a daily basis. The analyst exclaimed that this is;

“A clear sign that it is the most useful network in the world.”

Over $16 billion in stablecoins have now been issued on Ethereum, a figure that has gone parabolic since the start of this year which is a sign that there is a major demand for digital dollars.

The DeFi effect has been huge as, despite a number of rivals and ‘killers’ emerging this year, Ethereum remains the foundation of the entire ecosystem. Ethereum’s largest use case has gone parabolic as there are now ten times more DeFi users than there were a year ago.

Total value locked across the DeFi space has surged almost 2000% since the beginning of 2020 to reach $14 billion with five billion dollar plus protocols which is a sign that the space is maturing.

And There’s More …

The amount of Bitcoin tokenized on Ethereum is also at record highs with 152,000 BTC, or $2.7 billion worth at today’s prices wrapped on the Ethereum network.

The DEX effect cannot be overlooked either as decentralized exchanges on Ethereum have done $20 billion in volume over the last 30 days. This has brought their combined total to $86 billion this year;

“A sign that DEXs can compete with the top centralized exchanges.”

As reported by CryptoPotato, Ethereum social sentiment and searches are also at their highest levels since early 2018 as the mainstream media and the masses start paying attention.

This latest pullback may settle below $500, but there is little doubt it will provide a buying zone for ETH which still has a long way to go.

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Source: https://cryptopotato.com/five-reasons-ethereum-has-entered-a-new-bull-market/

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Coinbase CEO Fears Rumored Regulations Proposed By The Trump Administration

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Coinbase’s CEO Brian Armstrong has sent a letter to the US Treasury Secretary Steven Mnuchin regarding new rumored regulations on self-hosted cryptocurrency wallets. Armstrong believes that if implemented, the new legislation could harm users and, ultimately, the role of the US in the cryptocurrency financial field.

New Regulations On Self-Hosted Crypto Wallets?

The CEO of the largest US-based digital asset exchange took it to Twitter to outline the potential importance of these regulations if indeed implemented. The rumors indicate that the current Treasury Secretary Mnuchin plans to make them official before the end of his term.

Armstrong explained that self-hosted cryptocurrency wallets (also referred to as non-custodial or self-custody wallets) are “a type of software that lets individuals store and use their own cryptocurrency, instead of needing to rely on a third-party financial institution.”

They enable users to access basic financial services through this technology – “just like anyone can use a computer or smartphone to access the open market.”

Should the proposed regulations become official, they would require financial institutions, including Coinbase, to verify the recipient (owner) of the self-hosted wallet. Meaning, it would collect identifying information on that party before completing the transaction.

According to Armstrong, such requirements would lead to several potential issues because “it is often impractical to collect identifying information on a recipient in the crypto-economy.”

Some of those issues could affect users that send cryptocurrencies to various merchants online or to other people in emerging markets, where “it is difficult or impossible to collect meaningful know-your-customer information.”

Even simpler transactions like upvoting some content on Reddit or transferring an item in a game would also require the verification of the recipient, which makes the process prolonged and complicated.

The US Will Suffer The Most

Armstrong believes that the impact of these “barriers” would prompt US-based users to initiate fewer transactions. This would “effectively create a walled garden for crypto financial services in the US, cutting us from innovation happening in the rest of the world.”

US customers would turn to foreign cryptocurrency companies to access such services, which could put the country’s status as a financial hub at risk in the long-run.

“If this crypto regulation comes out, it would be a terrible legacy and have long-standing negative impacts for the US. In the early days of the internet, there were people who called for it to be regulated like to phone companies. Thank goodness they didn’t.” – added Armstrong.

He also asserted that Coinbase and other cryptocurrency companies have sent a letter to the Treasury last week to articulate these concerns. However, he hasn’t specified if the Treasury has responded in any way yet.

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Source: https://cryptopotato.com/coinbase-ceo-fears-rumored-regulations-proposed-by-the-trump-administration/

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Cointelegraph Consulting: Overwhelming bullish sentiment once again proves costly

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According to data collected from 1000+ crypto social media channels, the average crowd sentiment towards Bitcoin adapted from slightly bullish to overwhelmingly bullish over the days leading up to Thursday’s dramatic pullback, mirroring the levels previously observed during its May and August price tops, respectively. 

The latest findings by Santiment, published in Cointelegraph Consulting’s biweekly newsletter, indicated that with both short-term and long-term Bitcoin holders in a position of +15% and +63% profit, the likelihood of profit-taking became high. To make matters more ominous, the funding rate on Bitcoin’s derivatives market was at a three month high on Bitmex, Kraken, and Binance. The funding rate is the price paid by one side of perpetual contracts to the other, helping to keep the price of contracts trading close to the underlying reference price. A large funding rate is a sign that there is a large increase in long predictions on the exchanges, which can accelerate the frequency of mass-liquidations in the event of a price correction.

Other news from around the legislative and enterprise blockchain world showed fashion is becoming a target for blockchain solutions with VeChain powering a streetwear collection and IBM reaching a partnership with a textile giant. Japanese financial giant SBI announced their Bitcoin lending service, showing that the DeFi lending trend might be leaking into traditional institutions.

Read the full newsletter edition here for more news and signals, complete with detailed charts and images.

Cointelegraph’s Market Insights Newsletter shares our knowledge on the fundamentals that move the digital asset market. With market intelligence from one of the industry’s leading analytics providers, Santiment, the newsletter dives into the latest data on social media sentiment, on-chain metrics and derivatives.

We also review the industry’s most important news, including mergers and acquisitions, changes in the regulatory landscape, and enterprise blockchain integrations. Sign up now to be the first to receive these insights. All past editions of Market Insights are also available on Cointelegraph.com.

Source: https://cointelegraph.com/news/cointelegraph-consulting-overwhelming-bullish-sentiment-once-again-proves-costly

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