Markets

Cryptocurrency “re-staking” platforms grow as traders chase higher returns

Published

8 months ago

31 May, 2024

Cryptocurrency “re-staking” platforms grow as traders chase higher returns

London: More than Rs 15,01,42,59,00,000 ($18 billion) worth of cryptocurrency has been moved to a new type of platform that offers investors rewards in exchange for locking up their tokens, in a complex scheme that, according to analysts, represents a risk threat to users and the cryptocurrency market.

The growing popularity of so-called “re-staking” is the latest sign of risk-taking in cryptocurrency markets as prices rise and traders chase 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 raised $100 million from the crypto arm of US venture capital firm Andreessen Horowitz in February, has attracted $18.8 billion in cryptocurrencies to its platform, up from less than $400 million six months ago .

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

Blockchains are a kind of database, involving many computers in a network that monitor and confirm who owns which cryptocurrencies. To do this, owners of crypto tokens, such as Ether, allow their assets to be locked as part of the validation process. Holders lose immediate access to their tokens as long as they participate in staking, but in exchange they earn a return.

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

The cryptocurrency world is divided over how risky re-staking is, with some industry insiders saying the practice is too nascent to know.

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

“When you have something that has collateral upon collateral, 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 attraction for investors is the yield: returns from staking on the Ethereum blockchain are typically between 3% and 5%, but analysts say returns could be higher for re-staking, as the investors can earn multiple returns at once.

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 large returns on their holdings without having to sell them.

However, the EigenLayer platform has yet to pay out staking rewards directly to users, because the mechanism to do so has not been developed. Users join the platform in anticipation of future rewards or other freebies known as airdrops.

For now, EigenLayer has distributed its 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 has been fueled by users seeking such launches, calling it “really, really 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’re doing it preemptively right now, (with the) expectation of being rewarded with something but they don’t know what,” Duong said.

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 micro-satellite in India, according to his academic website.

EigenLayer describes itself as a marketplace for validation services, connecting would-be stakers with applications that need staking tokens.

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

Kannan said the goal of his platform is to allow users to choose where to stake their tokens and help the growth of new blockchain services, not to increasingly incentivize cryptocurrency-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 could pose “hidden risks”: If re-staking tokens were used in crypto lending, there could be forced liquidations and increased 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 the Earth and Moon tokens.

Kannan distances EigenLayer from risks.

“The risk is not in the re-staking but rather in the lending protocols. The lending protocols are incorrectly pricing the risk,” he said.

Some experts are not concerned about re-staking, pointing out that the money made from re-staking protocols is tiny compared to the $2.5 trillion in net assets of the global cryptocurrency industry.

Regulators have long been concerned about losses in the cryptocurrency world spilling over into broader financial markets.

“For now, we see no significant risk of contagion from repositioning of issues in traditional financial markets,” said Andrew O’Neill, analytical head of digital assets at SP Global Ratings.

However, the world of cryptocurrencies is becoming more and more connected to traditional finance and re-staking is gaining traction among institutional investors.

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

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

Cryptocurrency-focused Swiss bank Sygnum said it stakes customers’ crypto assets and expects “a new ecosystem to emerge around re-staking.”

Published May 31, 2024, 09:16 IST

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Markets

Bitcoin, Ethereum See Red as Markets Crash on Volatility

Published

6 months ago

1 August, 2024

Financial Block Staff

Bitcoin, Ethereum See Red as Markets Crash on Volatility

Bitcoin AND Etherealalong with the rest of the top 10 cryptocurrencies by market cap, appear to be in hibernation on Thursday morning.

At the time of writing, the Bitcoin Price is still below $65,000 and 2.2% lower than it was this time yesterday, according to CoinGecko data. Things are worse for the Ethereum Pricewhich is 3.7% lower than 24 hours ago at $3,185.22. The drop in ETH’s price is identical to that of Lido Staked Ethereum (stETH), a liquid staking token for Ethereum.

In recent days, falling prices have led to the liquidation of derivative contracts worth $225 million, according to Coin glassAnd about half of that, about $100 million, was liquidated in the last 12 hours.

When a trader is liquidated, it means that their position in the market has been forcibly closed by an exchange or brokerage due to a margin call or insufficient collateral. Margin is especially important when it comes to leveraged positions, which allow traders to control a multiple of their deposit, such as opening a $10,000 position with only $1,000 in their account.

Now that Bitcoin has been in the red for three days in a row, there is a chance that the world’s oldest and largest cryptocurrency could sink even further, BRN analyst Valentin Fournier said in a note shared with Decrypt.

“Bitcoin has closed in the red for three days in a row, with one-way trading showing limited resistance from bulls. Ethereum had a slightly positive Monday with strong resistance from bears who have won the last two days,” he wrote. “This momentum could take BTC to the $62,500 resistance or even the $58,000 territories.”

Looking ahead, Fournier said BRN’s strategy will be to “reduce exposure to Bitcoin and Ethereum and find a better entry point after the dip.”

This is despite Federal Reserve Chairman Jerome Powell’s comments yesterday on interest rates being widely regarded as accommodating and indicative of FOMC rate cuts in September.

Singapore-based cryptocurrency trading firm QCP Capital said the rally in stocks, which sent the S&P 500 up 1.6% from Wednesday’s close, was not felt in cryptocurrency markets.

“Cryptocurrencies have seen a broad sell-off overnight and into this morning,” the firm wrote in a trading note. “The market remains poised as traders pay close attention to daily ETH ETF outflows and further supply pressure from Mt Gox and the US government.”

Meanwhile, the other top-ranking coins are showing mixed performance.

Solana (SOL) is down 7.2% since yesterday to $169.13. Things are even worse for its most popular meme coins. In the past 24 hours, the most popular meme coins Dogwifhat (WIF) are down 12% and BONK (BONK) is down 9%, according to CoinGecko data.

Their dog-themed competitor, Ethereum OG Dogecoin (DOGE), the only meme coin in Coingecko’s top 10, is down nearly 4% since yesterday and is currently trading at $0.1205.

XRP (XRP) dropped to $0.608, which is 7% lower than it was at this time yesterday.

Binance’s BNB Coin (BNB) has kept pace with BTC and is currently trading at $571, down 2.4% from yesterday. Toncoin (TON), the native token of The Open Network, is down just 0.4% over the past day.

This leaves the stablecoins USDC (USDC) and Tether (USDT), both of which are stable as they maintain their 1:1 ratio with the US dollar.

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Markets

XRP Market Activity Drops During Ripple-SEC Talks: Price Steady

Published

6 months ago

1 August, 2024

Financial Block Staff

Ripple (XRP) Market Witnesses Calm During SEC-Ripple Meeting

The Securities and Exchange Commission (SEC) will hold another closed-door meeting with Ripple on Thursday, as the market hopes for a possible resolution to the legal battle between the two entities.

However, the cryptocurrency market remains relatively bearish, with the price and trading volume of XRP down in the last 24 hours.

Ripple holders take no risk

At press time, XRP is trading at $0.60. The altcoin’s price has dropped 6% over the past 24 hours. During that time, trading volume was $27 million, down 27%.

The SEC met before with the digital payment company on July 25. While the outcome of that meeting remains unknown, the Sunshine Act Notice for Thursday’s meeting includes one additional topic of discussion from the July 25 closed meeting: the instituting and resolving injunctive relief. That has market participants speculating whether a settlement is imminent.

In an exclusive interview with BeinCrypto, Ryan Lee, Lead Analyst at Bitget Research, noted that:

“This meeting will discuss possible resolution options for the Ripple Lawsuit. The founder of Ripple Labs said that a legal settlement could be announced soon. If an official settlement plan is released, it could positively impact XRP’s price movement.”

However, an assessment of XRP’s price movements on a 4-hour chart shows a spike in bearish bias as the market awaits the outcome of this crucial meeting. Its Moving Average Convergence/Divergence (MACD) indicator readings show that its MACD line (blue) has crossed below its signal line (orange).

XRP 4 Hours Analysis. Source: Trading View

Traders use this indicator to gauge price trends, momentum, and potential buying and selling opportunities in the market. When an asset’s MACD is set this way, it is a bearish signal that suggests selling activity is outweighing buying momentum.

Additionally, the altcoin relative strength index (RSI), at 46.08, is currently below its neutral 50 line and in a downtrend. This indicator measures overbought and oversold market conditions for an asset.

To know more: How to Buy XRP and Everything You Need to Know

xrp rsi XRP 4 Hours Analysis. Source: Trading View

At 43.83 at the time of writing, XRP’s RSI suggests a growing preference among the market participants for tok in distribution.

XRP Price Prediction: Derivatives Traders Exit Market

The XRP derivatives market has also seen a decline in trading activity over the past 24 hours. According to Coinglass, derivatives trading volume has plummeted 18% and open interest has dropped 10% during that period.

Open interest refers to the total number of outstanding derivative contracts, such as options or futurethat have not yet been resolved. When it drops, traders close their positions without opening new ones. This is a bearish signal that reflects a lack of confidence in any potential positive price movement.

According to Lee, the outcome of the meeting with the SEC “would have a significant impact on the price movement of the token.” If the outcome is favorable, the price of the token could rise towards $0.75 in August.

To know more: Ripple (XRP) Price Prediction 2024/2025/2030

XRP Price Prediction XRP 4 Hours Analysis. Source: Trading View

On the other hand, if no favorable resolutions are reached, the price could plummet to $0.50.

Disclaimer

In line with the Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto strives to provide accurate and unbiased reporting, but market conditions are subject to change without notice. Always conduct your own research and consult a professional before making any financial decisions. Please note that our Terms and conditions, Privacy PolicyAND Disclaimers They have been updated.

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Markets

Bitcoin’s Dominance Hits Three-Year High, But Analysts Say Altcoins Are Ready to Rebound

Published

6 months ago

1 August, 2024

Financial Block Staff

Bitcoin's Dominance Hits Three-Year High, But Analysts Say Altcoins Are Ready to Rebound

Bitcoin is now the dominant force in the cryptocurrency market, surpassing 53% of the total cryptocurrency market, a stronger share than it has been in the past three years.

Bitcoin’s market cap now stands at $1.27 trillion, second according to CoinGecko data. In contrast, the total cryptocurrency market cap is $2.43 trillion, with Ethereum occupying 15.9% of the market, worth $389 billion.

Bitcoin’s rise to dominance this year is unusual, as altcoins typically do better than Bitcoin in a bull market. While meme coins made a strong comeback during Bitcoin’s rally to all-time highs earlier this year, the so-called “wealth effect” It has not been appreciated as much by mid-range coins, such as Ethereum and Cardano.

“ETF flows fundamentally alter market dynamics,” he wrote Meltem Demirors, former chief strategy officer at CoinShares, tweeted Wednesday: “BTC gains no longer translate to alts and the longer tail of crypto.”

Bitcoin’s takeover has continued even as the market cap of Tether (USDT) continues to grow, the world’s largest stablecoin and the third-largest cryptocurrency after BTC and ETH. Stablecoins are backed by fiat currencies and are excluded from some measures of Bitcoin dominance due to fundamentally different value models.

The surge continued to pace even after the launch of Ethereum spot ETFs last week, which ironically culminated in a news sell-off event, and net outflows from new investment products since they were launched. This went against the predictions of K33 Search so far, which predicted that ETFs would catalyze ETH’s growth over the next five months.

Despite the poorer performance of the alts, there is reason to believe that they are ready to bounce back very soon.

CryptoQuant CEO Ki Young Ju said Tuesday that whales are “preparing for the next altcoin rally,” as limit buy orders for assets other than BTC and ETH are on the rise.

The executive shared a chart showing how the “cumulative difference between purchase volume and sales volume” has increased in recent months.

“The indicator measures the difference between buy and sell orders over a year,” CryptoQuant told Decrypt. A buy/sell order is a pre-set request to buy or sell a cryptocurrency if it hits a certain price level, which creates resistance and support levels.

“If the trend is up, it means that more people are placing buy orders, showing strong interest in buying,” CryptoQuant said.

By Ryan-Ozawa.

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Markets

XRP and SOL Retrace as BTC Price Drops to 2-Week Lows (Market Watch)

Published

6 months ago

1 August, 2024

Financial Block Staff

Bitcoin Returns Toward $60K, XRP Defy Negative Sentiment (Market Watch)

After Monday’s crash, in which BTC fell by several thousand dollars, the scenario has repeated itself once again in the last 12 hours, with the asset falling to a 2-week low of $63,300.

Alt coins followed suit, with most of the market in the red today. SOL and XRP lead the way from the higher cap alts.

BTC Drops To $63.3K

After a violent Thursday last week, when BTC crashed to $63,400, the asset went on the offensive over the weekend and surged above $69,000 on Saturday, as the community prepared for Donald Trump’s appearance at the 2024 Bitcoin Conference in Nashville.

His speech was followed by more volatility before the cryptocurrency settled around $67,500 on Sunday. Monday started off rather optimistically for the bulls as bitcoin hit a 7-week high of $70,000.

However, he failed to maintain his run and conquer that level decisively. On the contrary, he was rejected bad and dropped to $66,400 by the end of Monday. Tuesday and Wednesday were less eventful as BTC remained still around $66,500.

The last 12 hours or so have brought another crash. Bears have pushed the leading digital asset down hard, which has fallen to a 2-week low of $63,300 (on Bitstamp), leaving over $200 million in liquidations.

Despite the current rebound to $64,500, BTC’s market cap has fallen to $1.270 trillion, but its dominance over alts is recovering and has reached 52.6%.

Bitcoin/Price/Chart 01.08.2024. Source: TradingView

The Alts are back in red

Ripple’s native token has been at the forefront of the market challenge in recent days as pumped up to a multi-month high of over $0.66. However, its run was also interrupted and XPR fell by more than 6% in the last day to $0.6.

The other big loser among the larger-cap alternatives is SOL, which has lost 8% of its value and is now struggling to get below $170.

The rest of this altcoin cohort is also in the red, with ETH, DOGE, BNB, AVAX, ADA, SHIB, and LINK all seeing drops between 2 and 5%.

The total cryptocurrency market cap lost another $70 billion overnight, falling below $2.4 trillion today on CG.

Cryptocurrency Market Overview. Source: QuantifyCrypto SPECIAL OFFER (sponsored)
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Disclaimer: The information found on CryptoPotato is that of the authors cited. It does not represent CryptoPotato’s views on the advisability of buying, selling, or holding any investment. We recommend that you conduct your own research before making any investment decisions. Use the information provided at your own risk. See Disclaimer for more information.

Cryptocurrency Charts by TradingView.

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