Category: Cryptocurrency

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Amid the crypto frenzy, a tokenized hedge fund named Ethena has captured attention by offering a 37% yield through its USDe token, attracting billions of dollars in tokens and generating widespread market buzz. However, alongside the excitement, skepticism looms regarding the sustainability of such high yields.

Ethena’s USDe token, labeled as a synthetic dollar, achieves its impressive yield through a crypto version of the basis trade, exploiting price differences between spot and futures markets. This strategy, known as a cash-and-carry trade in crypto, has proven highly profitable recently amid surging token prices and soaring funding rates, which are the interest paid by bullish traders to maintain futures positions.

While high yields are enticing, they often come with elevated risks, as seen in the crypto-market turmoil of 2022 when inflated rates on the TerraUSD token proved unsustainable. Although Ethena’s design differs from Terra’s, investors remain cautious about potential risks in an asset class notorious for unexpected downturns.

Ethena operates as a tokenized hedge fund, managing a complex trading strategy across multiple crypto exchanges. The worst-case scenario, according to Robert Leshner, a partner at fintech venture fund Robot Ventures, is underperformance relative to implied funding rates across exchanges.

Here’s how Ethena works: Traders generate USDe tokens by depositing stETH and other accepted tokens into an automated system. Ethena Labs, the entity behind USDe, then opens short positions via Ether futures and perpetual swaps across various exchanges, including Binance. These short positions allow holders of sUSDe, a derivative of USDe, to benefit from high funding rates, which have exceeded 100% annualized in the current bull market.

Ethena’s rapid growth since its inception last year has been remarkable, with over $2 billion worth of cryptocurrencies deposited into the project, according to DefiLlama. This surge is fueled by the demand for high yields following the fallout of lenders like Genesis and BlockFi in 2022.

Despite its success, Ethena faces inherent risks, including funding risk if rates turn negative, exchange risk in the post-FTX crypto market, custodial risk relying on third-party partners, and collateral risk due to its reliance on stETH. However, the team behind Ethena remains optimistic, emphasizing that most risks are either unlikely or manageable.

While some experts remain cautious about potential downsides, Ethena’s team asserts its commitment to transparency and risk mitigation. As the crypto market continues to evolve, Ethena’s performance will be closely monitored to assess its resilience amidst changing market conditions.

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Gunzilla Games has revealed a groundbreaking integration with OpenSea, enabling players to trade in-game assets on the NFT marketplace. This integration will debut with Gunzilla’s upcoming video game, “Off the Grid.”

In a statement, Gunzilla Games announced that OpenSea will incorporate the gaming developer’s GUNZ blockchain, which operates on a custom Avalanche subnet. This integration aims to establish a compliant and transparent NFT marketplace for trading in-game items. Players and OpenSea users will have the opportunity to trade in-game NFT items for any game built on the GUNZ blockchain, utilizing the GUN token as the exclusive method of payment.

OpenSea CEO Devin Finzer expressed enthusiasm for partnering with Gunzilla Games, praising their commitment to exceptional gameplay and advanced in-game economies that prioritize player experience.

“Off the Grid,” Gunzilla Games’ battle royale title, will be the first game to leverage this integration. Set for release on PC, PlayStation, and Xbox consoles later this year, “Off the Grid” could become the first video game on both Sony’s PlayStation and Microsoft’s Xbox to enable players to own and trade digital assets as NFTs.

This announcement aligns with recent patent filings by Sony Interactive Entertainment, indicating interest in NFTs for transferring assets across games and console generations.

Gunzilla Games co-founder and CEO Vlad Korolov emphasized the significance of this partnership, stating that the launch of “Off the Grid” will offer a preview of the future of gaming economies.

In response to inquiries regarding regional restrictions on trading “Off the Grid” NFTs, Gunzilla Games stated that in-game assets held by players in regions where the game debuts will be tradable on OpenSea. The company plans to issue separate announcements about the specific rollout of GUNZ across different regions.

Last month, Gunzilla Games announced a $30 million funding round co-led by CoinFund and Avalanche’s Blizzard Fund, with ambitions to develop the first blockchain-based AAA video game targeted at mainstream gamers.

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Zeta Markets, a decentralized derivatives protocol operating on Solana, has introduced its native governance token, Z, as part of a broader strategic initiative. The token launch coincides with plans to roll out Solana’s inaugural layer 2 scaling solution, according to a press release from Zeta Markets.

The Z token, with a total supply of 1 billion, aims to foster community engagement and participation within the Zeta ecosystem. As an integral part of the protocol, the token will enable users and community members to influence important decisions and receive additional rewards through staking.

Initially, 10% of the Z token supply will be distributed via an airdrop to active Zeta traders, stakers, and strategic Solana community participants. Active traders will receive 50% of the initial distribution based on their Z-score, while stakers will receive 40%. The remaining portion will be allocated to selected Solana community members.

Moreover, Zeta Markets plans to allocate 30% of the token supply to incentivize market makers, who play a crucial role in maintaining liquidity and optimal trading conditions on the platform.

Tristan Frizza, the Founder of Zeta Markets, expressed enthusiasm for the token launch, emphasizing the protocol’s commitment to democratizing decentralized finance (DeFi). Frizza highlighted Zeta’s track record of facilitating billions in trading volume and its aim to offer a transparent and user-centric DEX experience.

With over $21 million worth of cryptocurrencies locked in Zeta Markets, the platform ranks as the fifth-largest derivatives platform on Solana, according to DeFiLlama data.

The introduction of the Z token marks a significant step towards empowering the Zeta community and shaping the future trajectory of decentralized finance on Solana.

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Senator Elizabeth Warren is challenging the push for a stablecoin bill without anti-money laundering laws, citing national security risks in a letter addressed to House Financial Service Committee leaders Patrick McHenry (R-NC) and Maxine Waters (D-CA).

In her letter, Warren warns of potential risks associated with stablecoin regulation, emphasizing concerns about consumer protection, banking system stability, and national security threats.

The letter comes amid discussions about McHenry’s “Clarity for Payment Stablecoins Act,” which proposes increased regulation for stablecoins akin to traditional financial institutions.

Warren’s advocacy for the Digital Assets Anti-Money Laundering Act (DAAMLA) was reinforced during a recent Senate hearing, where she underscored the importance of anti-money laundering laws in stablecoin regulation efforts.

Long known for her stance against cryptocurrencies, Warren’s proactive measures reflect her commitment to imposing stringent oversight on the crypto industry, particularly regarding illicit financial activities.

Despite the pushback, stakeholders like Circle CEO Jeremy Allaire remain optimistic about the passage of stablecoin legislation in 2024, highlighting ongoing momentum in regulatory discussions.

Warren’s letter underscores her unwavering dedication to crypto regulation, although the outcome of legislative consensus remains uncertain.

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In the fund’s prospectus, Defiance highlights the distinctive characteristics and risks linked to daily leveraged investment outcomes, advising investors of the amplified volatility and riskiness compared to non-leveraged alternatives. It acknowledges the possibility of its ETF underperforming against tracked assets over extended periods, particularly if Ether futures remain stagnant or see modest gains beyond a single day, thus catering to investors actively managing their portfolios.

Advancements in Leveraged Crypto ETFs

Recently, Defiance submitted a filing for its 2X Short MSTR ETF, introducing a leveraged short position on MicroStrategy, a company often perceived as a leveraged bet on Bitcoin. However, this move drew criticism from industry figures like Blockstream CEO Adam Back.

Following suit, ProShares filed for their own 2X and -2X spot Ether ETFs, indicating a burgeoning interest in leveraged crypto offerings.

The Significance of Ether Futures ETFs

The launch of Defiance’s 2X Ether Strategy ETF comes on the heels of the SEC’s approval of Ether futures ETFs for public trading in October. This spurred a wave of applications from various asset managers, echoing the trend following the approval of the inaugural 2X Bitcoin futures ETF in June.

Although initial Ether ETFs saw modest trading volumes compared to Bitcoin counterparts, their approval signaled a potential shift in the SEC’s stance on crypto ETFs. Subsequently, Bitcoin spot ETFs were introduced, garnering considerable investor attention and inflows.

Currently, investors await the SEC’s verdict on ETH spot ETFs, with skepticism prevailing regarding their imminent approval.

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Over the past 24 hours, the top ten memecoins native to the Solana network have all seen declines, accompanied by a decrease in the value of Sol, the network’s native cryptocurrency, by over 3%.

Among the notable decreases, Dogwifhat saw a decline of 5%, while Bonk experienced a drop of 3.5%. Book of Meme faced a significant downturn of 10%, and Jeo Boden’s value decreased by 1.3%. Cat in a Dogs World suffered the most substantial decline, plummeting by 18.9%, followed by Popcat with an 18.0% decrease. Myro encountered a 5.0% drop, while Wen and Slerf both experienced declines of 14.4% and 7.4%, respectively. Additionally, Catcoin saw a decrease of 7.7% in its value.

As a result, the entire Solana memecoin market cap now stands at $8.3 billion, constituting 12% of the total memecoin market value, estimated at around $64 billion, according to Coingecko data.

Furthermore, the daily moving average of non-vote transactions on the Solana network has fallen to approximately 24 million, marking a multi-week low. This decline in transactions coincides with congestion on the Solana network, attributed to spam transactions.

Despite the decrease in memecoin prices, the popularity of on-chain memecoin trading on Solana led to a new all-time high in on-chain volumes, measured in U.S. dollar terms, on Friday.

Solana Liquidations Spike

Sol, the native cryptocurrency of the Solana network, experienced a decline of over 3% in the past 24 hours, trading at $175 at 9:22 a.m. ET, according to The Block’s Price Page.

Notably, Sol long positions bore the brunt of Monday’s market volatility, with over $4.33 million in Sol long liquidations recorded in the past 24 hours out of a total of $4.81 million in liquidations across the wider cryptocurrency market, which saw over $173 million in liquidations over the same period, according to Coinglass data.

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Pre-halving volatility continued to dominate the crypto market on Tuesday as prices reversed course from Monday’s spike, leading to Bitcoin (BTC) plunging below $69,000 while altcoins faced significant declines.

Stocks also trended lower for most of the trading day, with investors waiting on the sidelines ahead of tomorrow’s Consumer Price Index (CPI) report, which is expected to provide insights into the potential trajectory of U.S. interest rates. Currently, the market anticipates a 57% chance of a rate cut in June and a 74% likelihood of a cut in July.

Despite this, a rally into the close managed to lift the S&P and Nasdaq out of negative territory, while the Dow finished flat.

Data from TradingView indicates that Bitcoin has been on a downtrend since reaching its peak at $72,800 on Monday, experiencing a 6.82% decline to reach a low of $68,200 on Tuesday afternoon. However, dip buyers subsequently pushed it back above $69,000, and at the time of writing, BTC trades at $69,030, marking a 3.75% decline over the past 24 hours.

Market analyst Bloodgood commented on the current macro environment, describing it as oscillating between hope for a perfect soft landing and fears of inflation, with sentiment appearing to lean towards the bearish side recently.

He highlighted the significance of tomorrow’s CPI release and cautioned about potential surprises regarding inflation, advising caution, especially for those with leveraged positions.

Regarding Bitcoin, Bloodgood noted a lot of indecision lately but expressed confidence in the bulls’ control due to the upward drift and higher lows being printed. However, he emphasized the challenge at the current All-Time-High, slightly above $73,700.

Bloodgood also touched on the unusual aspects of this bull market cycle, including the attention garnered by memecoins and the ongoing rise of gold. He urged traders to focus on the current chart rather than relying on fractal patterns or previous cycles to predict future movements.

In conclusion, Bloodgood suggested that capital might rotate towards technically impressive projects later in the cycle, despite the current dominance of memecoins.

According to Michaël van de Poppe, founder of MN Trading, Bitcoin is likely to trade sideways and consolidate in the near term until sometime after the halving.

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After Bitcoin soared to its March all-time high above $73,000, profit-taking by long-term holders has started to decrease, as per a recent report from Glassnode.

While Bitcoin’s March all-time high prompted significant profit-taking by long-term holders, this activity has begun to taper off, the Glassnode Insights report noted on Tuesday.

Typically, profit-taking, especially by long-term holders, intensifies around all-time high breaks but has been cooling down in recent weeks, according to the report.

The balance of assets between long-term Bitcoin holders and new demand indicates that the current market is entering the early stages of a euphoria or price discovery phase. However, historical analysis suggests that such phases are prone to price corrections, with drawdowns exceeding 10% being common, and many surpassing 25%.

Since Bitcoin’s all-time high in March, there have been only two significant corrections of around 10% or more, the report highlighted.

The upcoming Bitcoin halving is currently a major driver of market speculation. Sunny Lu, Founder of VeChain, emphasized how regulatory developments would impact Bitcoin’s trajectory post-halving.

Comparing the current cycle to the previous one, Lu highlighted the impact of regulation on pivotal price moments. Regulatory actions have been instrumental in driving significant price movements since the last halving in May 2020.

Lu pointed out that the approval of spot Bitcoin ETFs in March of this year triggered the latest price peak, following previous peaks after the Coinbase IPO in April 2021 and the approval of Bitcoin futures ETFs in November of the same year.

He emphasized a shift in focus from solely considering supply dynamics to broader macroeconomic factors in understanding the halving’s impact. The evolving narrative now encompasses not only the halving’s mathematical effect on supply but also macro forces influencing prices.

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Worldcoin, the digital identity and cryptocurrency project led by OpenAI CEO Sam Altman, is introducing new features to bolster personal data protection and enhance age verification processes.

On April 9, Worldcoin unveiled two updates: the option to unverify World IDs through permanent iris code deletion and the introduction of in-person age verification checks.

World ID holders now can unverify their World ID, which acts as a digital passport verifying an individual’s humanity using “orbs,” devices that scan users’ eyeballs to confirm their authenticity.

Unverification of the World ID involves the permanent deletion of the user’s iris code, a numerical representation of their unique iris texture, ensuring that individuals can only verify one World ID.

Upon deletion request, the user’s World ID becomes invalid. To prevent fraud, a six-month “cool-off” period is mandated, ensuring individuals cannot immediately re-verify their humanness.

After the cool-off period, users’ iris codes are permanently deleted and rendered unrecoverable.

The development of Worldcoin’s unverify option involved collaboration with third-party privacy and security experts, including the Bavarian State Office for Data Protection Supervision (BayLDA), serving as Worldcoin’s lead supervisory authority in the European Union.

The second update introduces in-person age verification checks to ensure the platform’s accessibility exclusively to individuals aged 18 years and above.

This update incorporates on-site age verification checks at all orb locations prior to World ID verification. Third-party personnel will conduct the verification before granting entry to the venue.

Worldcoin spokesperson stated, “Worldcoin has always required that individuals be a minimum of 18 years old to obtain a World ID,” emphasizing that users have been prompted to confirm their age in the app, aligning with the practices of widely used applications.

Altman launched Worldcoin in July 2023 intending to establish a “global financial and identity network based on proof of personhood.”

While receiving mixed reactions from the community, Worldcoin has faced scrutiny over concerns regarding centralization, privacy, and security. Governments, including the European Union and Kenya, have expressed skepticism and initiated investigations into Worldcoin’s operations due to privacy concerns.

Despite challenges, Worldcoin maintains its commitment to operating lawfully in all available locations and ensures compliance with relevant laws.

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