Markets

Crypto re-staking platforms grow as traders chase returns

Published

8 months ago

2 June, 2024

Crypto re-staking platforms grow as traders chase returns

LONDON >> More than $18 billion worth of cryptocurrencies have been transferred to a new type of platform that offers rewards to investors in exchange for locking up their tokens, in a complex scheme that analysts warn poses a risk to users and the crypto market.

The growing popularity of so-called “re-staking” is the latest sign of risk-taking in crypto markets as prices rise and traders seek yield. Bitcoin, the largest cryptocurrency, is near all-time highs, while ether, the second largest, is up more than 60% this year.

At the center of the re-staking boom is Seattle-based start-up EigenLayer. The company, which in February raised $100 million from the crypto arm of US venture capital firm Andreessen Horowitz, has attracted $18.8 billion worth of crypto to its platform – up from less than $400 million six months ago .

EigenLayer invented re-staking to expand a long-standing crypto practice called staking, its founder Sreeram Kannan told Reuters.

Blockchains are a type of database that involves many computers in a network, checking and confirming who owns which cryptocurrencies. To do this, owners of cryptographic tokens like Ether allow their assets to be locked as part of the validation process. Holders lose instant access to their tokens while staking, but earn a yield in return.

Some staking platforms also provide users with newly minted cryptocurrencies to represent the cryptocurrencies they have staked. Re-staking allows owners to take these new tokens and re-stake them with different blockchain-based programs and applications in hopes of greater returns.

The crypto world is divided over how risky re-staking is, with some experts saying the practice is too nascent to be known about.

But others, including analysts, fear that if new tokens representing re-stakes cryptocurrencies are used as collateral in the vast cryptocurrency lending markets, there could be endless cycles of lending based on a small number of underlying assets. This could destabilize broader crypto markets if everyone tries to exit simultaneously, they say.

“When there’s something that has guarantees, it’s not ideal, it adds a new element of risk that wasn’t there,” said Adam Morgan McCarthy, research analyst at crypto data provider Kaiko.

The appeal for investors is the yield: returns from staking on the Ethereum blockchain are typically in the 3% to 5% range, but analysts say returns could be higher for staking again as investors can earn multiple returns at the same time.

Re-staking is the latest development in the risky world of decentralized finance, or DeFi, in which cryptocurrency holders invest in experimental schemes in the hope of generating big returns on their holdings without having to sell them.

The EigenLayer platform has not yet paid out staking rewards directly to users because the mechanism to do so has not been developed. Users are joining the platform in anticipation of future rewards or other freebies known as airdrops.

For now, EigenLayer is distributing its own newly created token to people using the platform. Users hope that this token called “EIGEN” will be worth something in the future.

Kaiko’s Morgan McCarthy said the growth of re-staking platforms was driven by users seeking such airdrops, calling them “very, very speculative, this free money thing.”

“It’s very risky,” said David Duong, head of research at U.S. cryptocurrency exchange Coinbase, which offers staking but not re-staking.

“They are doing it preemptively now, (with the) expectation that they will be rewarded with something, but they don’t know what,” Duong said.

BETWEEN EIGENLAYER

EigenLayer was launched last year by Sreeram Kannan, a former assistant professor at the University of Washington in Seattle and part of a team that launched the first student-designed microsatellite in India, according to his academic website.

EigenLayer describes itself as a marketplace for validation services, connecting potential stakeholders with applications that need staked tokens.

New re-staking platforms have emerged, including EtherFi, Renzo, and Kelp DAO, which re-stake customers’ tokens on the EigenLayer for them and generate new tokens to represent these re-stake assets. These tokens can be used elsewhere, for example as collateral in loans.

Kannan said the goal of his platform is to let users choose where to stake their tokens and help new blockchain services grow, not to encourage more and more crypto-backed loans.

“We have no official relationship with any of these players… This is an emerging phenomenon,” he said.

Coinbase’s Duong says re-staking can bring “hidden risks” – if re-staking tokens are used in crypto loans, there could be forced liquidations and more volatility during market downturns, he wrote in a note.

The 2022 sell-off in cryptocurrency markets was exacerbated by high-risk lending as crypto tokens used as collateral rapidly lost their value following the collapse of Terra and Luna tokens.

Kannan distances EigenLayer from risks.

“The risk is not in the re-staking, but in the lending protocols. Lending protocols are misjudging risk,” he said.

Some experts are not worried about re-staking, noting that the money in re-staking protocols is minuscule relative to the global cryptocurrency industry’s $2.5 trillion in liquid assets.

Regulators have long been concerned that losses in the crypto world will spill over into broader financial markets.

“For now, we do not see any significant risk of contagion from the issuance reset to traditional financial markets,” said Andrew O’Neill, digital asset analytical lead at S&P Global Ratings.

Still, the crypto world is becoming increasingly linked to conventional finance and re-staking is attracting institutional investors.

Standard Chartered’s crypto arm Zodia Custody has seen significant institutional interest in staking, but considers re-staking a step too far because it is difficult to establish a “paper trail” of where assets go and how rewards are distributed , Chief Risk Officer Anoosh Arevshatian said.

Nomura’s crypto arm, Laser Digital, has partnered with Kelp DAO to reinvest some of its funds, Kelp DAO said in an April blog post. Laser Digital did not respond to a Reuters request for comment.

Crypto-focused Swiss bank Sygnum said it is staking customers’ crypto assets and expects “a new ecosystem around re-staking will emerge.”

Source

Markets

Crypto Markets Rebound as Spot Bitcoin ETFs Attract Massive Inflows

Published

6 months ago

17 July, 2024

FinCrypt Staff

Crypto Markets Rebound Ahead of Early Ethereum ETF Approval

This week saw $722 million worth of Bitcoin spot ETF inflows, including the largest daily inflow in a month.

Cryptocurrency markets rallied on Wednesday, driven by inflows into spot Bitcoin exchange-traded funds (ETFs).

The price of Bitcoin (BTC) is up 3% over the past 24 hours to last change hands at $65,200, according to CoinGecko. Ethereum (ETH) is up 2% and is trading at $3,471. Solana (SUN) and Polkadot (POINT) increased by 4%.

Bitcoin spot ETFs saw $422 million in daily inflows on Tuesday, the highest in the past 30 days, according to Far side data, . The all-time record for a single day was $1.05 billion on March 12.

Among Tuesday’s top contributors, BlackRock’s IBIT led with $260 million in inflows, followed by Fidelity’s FBTC with $61 million. This week has already seen more than $722 million in inflows.

Among the top 100 cryptocurrencies by market cap, Worldcoin (WLD) led with a 28% increase, followed by Helium (HNT) with 20% and Lido DAO (LDO) with 15%.

Worldcoin, a decentralized identity project led by OpenAI CEO Sam Altman, announced is extending the lockups for early investors and team members. This means that tokens will be gradually released through 2029, instead of the original 2027 plan. Token unlocks are generally seen as a negative because they increase supply and early investors can sell their tokens for profit.

Meanwhile, XRP, the token of the XRP Ledger network, jumped 8% after the CME and CF benchmarks introduced new indices and reference rates for XRP.

U.S. stocks faced a downturn on Wednesday. The S&P 500 fell 1%, while the Nasdaq Composite and Dow Jones Industrial Average both fell 2%.

Source

Markets

Altcoins on the cusp of a major breakout – WLD, AR, and INJ prices could surge by 20% in the coming days

Published

6 months ago

17 July, 2024

FinCrypt Staff

Altcoins on the cusp of a major breakout – WLD, AR, and INJ prices could surge by 20% in the coming days

Crypto markets appear to have been taken over by the bulls as major tokens have surged above their crucial resistance zone. Bitcoin surged above $65,000 while Ethereum was above $3,500, and XRP, which had remained passive for quite some time, surged over 40% in the past few days to hit $0.6. The uptrend has been captured in most altcoins, with Worldcoin (WLD), Arweave (AR), and Injective (INJ) leading the rally. Here’s what to expect for these tokens in the coming days.

Worldcoin (WLD) Price Analysis

O Worldcoin Price has been trading inside a descending wedge since it marked a new ATH near $12 in the final days of Q1 2024. The recent price action helped the price break out of the upper resistance of the wedge, breaking above the crucial resistance zone between $2.21 and $2.39. Market sentiments have changed, but technicals suggest that the bulls may remain passive for a while, which could offer some room for a bearish pullback.

The price broke out of the wedge with a significant increase in volume, but the current volume suggests that the bulls have taken a step back. Meanwhile, the RSI is about to reach the upper boundary, which could attract bearish forces. Additionally, the DMI has undergone a bullish crossover, but the decline in the ADX suggests that the rally may remain consolidated above the gains. Therefore, the WLD price is expected to maintain a horizontal consolidation between $3 and $3.3 and trigger a fresh rally to $4.4 during the next bullish rally.

Arweave (AR) Price Analysis

Arweave formed a strong base around $25, which helped the rally trigger a recovery during the bearish attack. Mt. Gox and German terror forced the price to fall below $20. However, the recent price action has brought the altcoin within the bullish range and raised expectations of maintaining a decent uptrend for a few more days.

AR price has hit one of the major resistances around $30 to $31.5, which could act as a strong base once overcome. The buying volume is slowly increasing, which could keep the bullish hopes for the rally high. Moreover, the supertrend has just flashed a buy signal, indicating a clean reversal of the trend. Therefore, AR price seems primed to maintain a healthy uptrend and rally above $40. However, if the bulls maintain a similar trend, making new highs above $50 may not be a tedious task for the bulls.

Price Analysis of Injective (INJ)

Injective price has been showing sharp strength since the beginning of the year and hence, the recent turnaround is expected to revive a good uptrend going forward. The bears engulfed the rally to a large extent, but the recent price action suggests that the bulls have regained their dominance. Therefore, INJ price is expected to maintain a strong uptrend with a bearish interference on the way down.

INJ price has surged above the lower support zone and has registered consecutive bullish candles. Although the volume is below the required levels, the OBV is maintaining a sharp uptrend. Furthermore, the Ichimoku cloud lead span B is heading towards the lead span A and a healthy crossover indicates the start of a new uptrend. However, INJ price may be out of the bears’ reach once it secures the resistance zone between $30.77 and $32.12, which seems to be on the horizon.

Source

Markets

Ethereum at $3.5K, Exchange Supply Hits 34-Month High

Published

6 months ago

17 July, 2024

FinCrypt Staff

Ethereum at $3.5K, Exchange Supply Hits 34-Month High

Ethereum (ETH) supply on exchanges has hit a 34-month high as the asset’s price surpassed the $3,500 mark.

ETH has risen 2.3% over the past 24 hours and is trading at $3,490 at the time of writing. The second-largest cryptocurrency — with a market cap of $419 billion — briefly touched an intraday high of $3,517 earlier today.

ETH Price, Whale Activity, RSI, and Exchange Supply – July 17 | Source: Santiment

Ethereum’s daily trading volume also increased by 7.6% to reach $19.8 billion.

According to data provided by Santiment, the supply of Ethereum on exchanges has reached $19.52 million ETH. This level was last seen in September 2021, when the asset was trading around the same price.

On the other hand, data from the market intelligence platform shows that the number of whale transactions has fallen by 12% in the last day — falling from 8,730 to 7,629 unique transactions per day.

The move shows that the supply of Ethereum on exchanges has been increasing with small deposits rather than large transactions from whales.

Additionally, the ETH Relative Strength Index (RSI) is currently hovering at the 60-mark, per Santiment. The indicator shows that Ethereum is slightly overbought at this price point, but it may not be in a critical position due to its large market cap.

One of the main drivers of Ethereum price increase is ETH spot expectations ETFs in the US Investment products are scheduled to start trading on July 23rd.

Source

Markets

Bits + Beeps: How to Play the ‘Trump Trade’ in Cryptocurrencies After the Assassination Attempt

Published

6 months ago

17 July, 2024

FinCrypt Staff

Bits + Bips: How to Play the ‘Trump Trade’ in Crypto After the Assassination Attempt

Also, how much will the Fed cut rates (and when)? What will be the inflows into ETH ETFs? And what is the near future for Bitcoin?

Posted on July 17, 2024 at 12:00 PM EST.

Listen to the episode at Apple Podcasts, Spotify, Capsules, Source, Podcast Addict, Pocket molds, Amazon Musicor on your favorite podcast platform.

In this episode of Bits + Bips, hosts James Seyffart, Alex Kruger and Joe McCann, joined by guest Jack Platts, dive into the market reaction to the recent assassination attempt on former President Donald Trump, analyzing how this event will influence the 2024 US presidential election and the cryptocurrency markets.

They also cover potential rate cuts: Could there be a cut in July? How big could the September rate cut be? Could the decision be influenced by the upcoming election?

They also give their predictions on what percentage of BTC ETF inflows the ETH ETFs will reach, and James talks about what he expects for Grayscale’s ETHE (hint: his outlook would be positive for ETH).

Finally, they delve into what’s next for Bitcoin as the German government runs out of BTC and Mt. Gox distributions begin. Just now?

Program Highlights:

Whether Trump’s shooting decided the election and whether the event caused a “flight to safety”
How election markets are becoming a place to watch election probabilities and whether cryptocurrencies “lean right”
Whether rate cuts will occur in July or September and by how much they will cut: 25 bps or 50 bps
How Joe sees the relationship between global liquidity cycles, rate cuts, and the potential rise of Bitcoin
What are the new updates about Ethereum ETFs and their expected launch?
Why Solana Hasn’t Performed Significantly Better Since Trump News
What Market Breadth Indicates About the Current Market Rally and the Impact of Rates on Small Caps
Everyone’s predictions on ETH ETF inflows and how much outflow we’ll see on Grayscale’s ETHE
What’s Next for BTC After German Government Exits Bitcoin and Mt. Gox Giveaways Starting This Week