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Altcoin Roundup: Stablecoin pools could be the next frontier for DeFi

In times like these, when the entire cryptocurrency market is down and there is nary a sector-wide runup to be found, traders have to dig into data to see how the market dynamics may have changed to pinpoint signs of new growth. 

Stablecoins are the newest trend to emerge in the decentralized finance (DeFi) arena due to the resiliency they bring to the sector, especially since protocols that are more reliant on the dollar-pegged assets continue to offer token holders low-risk yield opportunities in turbulent market conditions.

Possible evidence of stablecoins rising influence can be found in the difference between the decline in Ether’s (ETH) price and the total value locked in smart contracts. The price of Ether declined by 20% more from its peak than the decline in the total TVL of the DeFi sector.

TVL in smart contracts vs. Ether price decline. Source: Glassnode

When one takes into account that most of the crypto market saw price declines on par with what Ether experienced, the fact that the DeFi TVL fell less percentage-wise than the price of Ether points to the stability offered by stablecoins.

Stablecoin marketcap increases tenfold

The total amount of stablecoins available in the market has skyrocketed from under $15 billion to more than $113 billion over the past year, led by Tether (USDT) and USD Coin (USDC), bringing an increased level of liquidity to DeFi protocols.

Top seven stablecoins by market capitalization. Source: CoinGecko

The top stablecoins are included in a large percentage of the liquidity pool (LP) pairs available on DeFi platforms, as well as being included as a standalone token that users can deposit on protocols, such as Aave, to earn a yield. This further makes them an integral part of the burgeoning DeFi ecosystem.

Stablecoins have, in fact, led to the creation of a specialized subset of DeFi protocols, which focus on yield farming stablecoins and provide a safer way for investors to earn a yield while minimizing risk.

Early on in the DeFi craze, protocols attracted new users and deposits by offering high yields that were typically paid out in the native token of the protocol.

With a majority of DeFi tokens now down at least 75% from their all-time highs, according to data from Messari, many of the gains that users thought they made through staking and providing liquidity have evaporated, leaving little to show for the risks taken on these experimental platforms.

The battle for stablecoin liquidity

The rise of successful stablecoin-focused protocols such as Curve Finance, which is a decentralized exchange for stablecoins that uses an automated market maker to manage liquidity, platforms such as Yearn.finance, Convex Finance and Stake DAO battle to offer the best incentives that will attract a larger share of the Curve ecosystem.

Supplying stablecoins to Curve, or as a stablecoin LP like as a USDC/USDT pair, amounts to the blockchain version of a savings account. Many of the top protocols, including the three listed above, offer between 10% and 30% yields on average for stablecoins deposits.

Related: How stablecoins stay stable, explained

Thanks to smart contracts, users can make deposits to automated, compounding stablecoin liquidy protocols, reducing the stress of the daily market gyrations.

Total market capitalization of the top 100 DeFi tokens. Source: CoinGecko

The aftermath of the May 19 sell-off is still impacting investors, and in times like these, the yield opportunities provided by supplying stablecoins to DeFi protocols is an attractive way to diversify a crypto portfolio and hedge against market downturns.

Want more information about diversification into the above-mentioned projects?

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Altcoin Roundup: Stablecoin pools could be the next frontier for DeFi

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Altcoin Roundup: Post-crash prices give investors a chance to build a diversified portfolio

Welcome to Cointelegraph Market’s Altcoin Roundup, an in-depth newsletter that focuses on investing from the perspective of fundamental analysis and seeks to identify emerging blockchain projects and tokens that fill niche demands within the growing cryptocurrency market.

The concept of multi-sector investing has long been advocated in traditional finance as the conventional approach to building a balanced portfolio. Typical allocations include representation of stocks, government and corporate bonds, commodities and real estate.

Now that the cryptocurrency market has grown to a multitrillion-dollar ecosystem with numerous emerging assets, clear sectors are beginning to emerge. Savvy crypto investors looking to apply portfolio diversification practices to their holdings should begin to pay attention.

Total cryptocurrency market capitalization. Source: CoinMarketCap

The previous Altcoin Roundup discussed some of the top layer-one solutions and coins like Polkadot/DOT, Cosmos/ATOM and Solana/SOL that have been gaining prominence over the past year, but these projects could also fall under the large-cap investment umbrella alongside high-profile assets like Bitcoin (BTC), Ether (ETH) and Cardano’s ADA.

Once an investor has an adequate representation of blue-chip projects, other emerging sectors like decentralized finance (DeFi), oracles and stablecoins can be considered.

DeFi: Uniswap, Aave and PancakeSwap

Decentralized finance emerged during the summer of DeFi in 2020, and the sector helped kick off the current bull market by bringing a new level of excitement to the crypto ecosystem, which was in need of the next big innovation.

One of the best metrics used to demonstrate the rising success of DeFi as a whole is the total value locked (TVL) ranking, which collectively reached an all-time high at $157.63 billion on May 14, according to data from Defi Llama, and stands at $116.62 billion at the time of writing.

Total cryptocurrency market capitalization. Source: CoinMarketCap

The release of Uniswap’s decentralized exchange (DEX) interface — which enabled new projects to immediately launch and made tokens available to the general public — helped ignite a wave of growth and innovation across the market that continues to expand to this day.

In less than a year, Uniswap evolved into the top DEX serving the crypto community, seeing an all-time record of $5.74 billion in 24-hour trading volume during the market sell-off on May 19 and $5.37 billion in total volume locked on the platform.

Daily DEX volume. Source: Dune Analytics

The vast array of liquidity pools is the primary allure for investors looking to diversify their crypto portfolio. Through these pools, stakers have the ability to earn a yield by providing liquidity for the exchange in return for a portion of the trading fees. A number of pools offer staking returns ranging from 25% to 2,000%, and traders are able to select pools based on a variety of factors, including their appetite for risk.

While Uniswap has led the way for DEXs, there are other options like Aave’s lending platform that has emerged as the highest-ranking DeFi protocol by total value locked, with more than $14.1 billion in TVL at the time of writing.

Aave’s recent decision to offer layer-two (L2) access on Polygon has brought renewable energy to the AAVE ecosystem, as traders and liquidity gladly migrated to the lower-fee environment offered on Polygon. This resulted in a significant boost in TVL for both AAVE and Polygon’s native token, MATIC, which is now the second-ranked protocol by TVL, with $11.08 billion locked on the protocol.

Every balanced portfolio also has a small 1% to 5% allocation reserved for higher-risk assets, and the crypto market has no shortage of high-risk, high-growth assets.

For tokenholders who are open to a little more risk in return for higher yields, the Binance Smart Chain-based PancakeSwap boasts a TVL of $7.67 billion, and offers annual percentage rates (APR) of up to 482.54%, according to the project’s website, with all rewards paid out in the protocol’s native CAKE token.

Stablecoins are the new “savings accounts”

Though a token that stays pegged to a fixed value may not sound like the most attractive opportunity for investors, stablecoins have evolved to play a crucial role in the functioning of the wider cryptocurrency ecosystem.

Stablecoins often serve as the backbone of trading pairs on centralized and decentralized exchanges, as well as offering traders a simple way to lock in gains.

The two most prominent stablecoins are Tether (USDT) and USD Coin (USDC), which have circulating supplies of $60.9 billion and $21.6 billion tokens, respectively. Tether is currently the most traded crypto token, boasting 24-hour trading volumes that range from $100 billion to $290 billion.

Tether (USDT) vs. USD Coin (USDC) vs. DAI circulating supply. Source: CoinGecko

Other popular stablecoins include Binance USD (BUSD), the stablecoin created for use within the Binance Smart Chain ecosystem, as well as the algorithmically controlled stablecoin DAI, which is minted via pledging collateral on the Maker protocol.

For those looking to earn a little extra yield while in the safety of stablecoins, there are multiple options available such as depositing tokens into a lending protocol like AAVE to earn up to 5% on deposits or the decentralized stablecoin exchange Curve, which offers yields of up to 50% for some stablecoins pools offered.

Other popular options include supplying liquidity for the various decentralized exchanges like PancakeSwap, which offers 8.64% for its DAI-BUSD liquidity pool, or QuickSwap, which offers a reward plus fee of the annual percent yield of 15.01% for its USDT-USDC pool and 26.75% for its DAI-USDC pool.

Oracles

In a world that is becoming increasingly dominated by digital data, no cryptocurrency portfolio would be complete without access to an oracle provider. These entities are the industry’s heavyweights that facilitate the secure exchange of data and information within the cryptocurrency ecosystem, as well as wider financial markets.

Currently, Chainlink is one of the most dominant oracle projects and a key player that comprises a thriving open-source community of data providers, node operators, smart contract developers, researchers and security auditors.

While the Chainlink network doesn’t currently offer a direct way to earn a yield through a simplified staking or governance mechanism, it is easy for tokenholders to put their stash to work in DEX liquidity pools and DeFi protocols like Aave.

For investors who are not ready to trust decentralized exchanges and DeFi platforms, centralized yield-bearing companies like Nexo, Celsius and BlockFi are also available for crypto investors looking to earn a return on their holdings.

Centralized exchanges like Coinbase and Binance also offer direct staking capabilities. For example, investors could stake BAND for up to 11.7% APR on major exchanges.

As a result of the May sell-off, which saw more than $1.2 trillion in value wiped out of the cryptocurrency market, many of the top projects are now well below their all-time high values and trading at what some investors would describe as “bargain bin” prices.

While market participants remain unsure as to which way prices are headed in the short term, it would be wise to investigate these opportunities sooner rather than later, as the notoriously volatile crypto market can make significant moves at the drop of a hat.

Want more information about diversification into the above mentioned projects?

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Altcoin Roundup: Post-crash prices give investors a chance to build a diversified portfolio

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Bitcoin correction heralded as a ‘BTD’ opportunity, but what about DeFi?

Cryptocurrency investors are still picking up the pieces from the May 19 market-wide implosion which saw Bitcoin (BTC) drop to an unexpected low at $30,000. Post-mortem analysis now shows that the correction catalyzed a mad dash among traders running for the exits as the cascading sell-off resulted in a record 10,525 BTC liquidated across all exchanges. 

Altcoins were quick to follow suit as they joined Bitcoin in its plunge and hardly a token was left unscathed by the downturn as a wider-sell-off rippled across the market, resulting in a $437 billion haircut to the total market capitalization to $1.672 trillion, its lowest level since April 25.

Total cryptocurrency market capitalization. Source: CoinMarketCap

Decentralized finance (DeFi) took an especially hard hit as many of the lending protocols offer flash loans and other forms of leverage to users.

With Bitcoin and Ether (ETH) accounting for a large portion of the funds locked on such protocols, their rapid price decreases resulted in a similar decline in TVL across the DeFi sector which fell by 21.5% to $114.15 billion according to data from Defi Llama.

Total value locked in DeFi. Source: Defi Llama

The AAVE lending platform, which is currently the highest-ranked DeFi platform in terms of TVL according to DeFi Llama, saw its TVL decrease by 16% alongside a 26% decline in the price of AAVE token to $460. In the same time, MakerDAO (MKR), the second-ranked platform, saw its TVL fall by 26% with the MKR token shedding 16.5% in value.

AAVE/USDT vs. CAKE/USDT vs. COMP/USDT vs. MKR/USDT vs. UNI/USDT. Source: TradingView

And it wasn’t just the DeFi lending platforms that took a hit. Uniswap, the top-ranked decentralized exchange (DEX) saw its TVL decline by 17.4%, while its token value fell 26% to $25.60, its lowest level since the beginning of March.

SushiSwap (SUSHI) and PancakeSwap (CAKE), Uniswap’s direct competitors, experienced similar declines in TVL as well as token prices, with the price of CAKE falling by 25% and SUSHI collapsing by 30%.

Of course, no market downturn would be complete without some nefarious actors getting involved as was the unfortunate case for the Binance Smart Chain-based Venus (VXS) lending platform. The protocol suffered a series of price manipulations that resulted in more than $200 million worth of DeFi liquidations and over $100 million worth of bad debt on the protocol.

As a result of the attack and the overall market downturn, XVS price dropped 50% to mark a swing low at $55 and the total value locked on the protocol decreased by 46%.

In the course of a few days, the market went from chatter about the possibility of the ‘summer of DeFi 2.0’ to blood on the streets and concerns of an impending multi-year bear market. This is just the latest example of why investors shouldn’t get too comfortable in the crypto market because circumstances can change at the drop of a hat.

Despite the current downturn, DeFi’s transformational journey to reshape financial markets is just beginning and this correction could present a rare bull-market buying opportunity for those who are brave enough to recall Warren Buffet’s famous line which urges investors to:

“Be greedy when others are fearful, and fearful when others are greedy.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Bitcoin correction heralded as a ‘BTD’ opportunity, but what about DeFi?

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What is SHIB (Shiba Inu) Coin? Why it is called as ‘Dogecoin Killer’ cryptocurrency?

What is SHIB (Shiba Inu) Coin Why it is called as ‘Dogecoin Killer’ cryptocurrency

Just when you think, okay things can’t get any ridiculous, Shibe Inu ($SHIB) comes wagging its tale in the scene of cryptocurrency. Although Bitcoin, Ethereum, and a few other cryptocurrencies have a plausible use case, the meme-worthy nonsense around crypto’s altcoins is hitting epic new heights.

Last week, as Elon Musk prepared to host Saturday Night Live, the Dogecoin ($DOGE) hysteria resulted in a massive price increase. In a skit with his mother, he discussed his favorite dog-themed cryptocurrency. 

But can you remember the iconic Shibu Inu meme? The dog who was the face of Dogecoin. Well now, its own cryptocurrency and is still acing the internet game. Dogecoin does not seem to be the only meme cryptocurrency anymore. Shiba Inu coin is based on Ethereum and is the fastest-growing cryptocurrency in the top 100 by market capitalization. Shiba Inu coin, positioned as a Dogecoin replacement, has returned 1,970.57% in the last seven days.

Dogecoin’s mascot is a Shiba Inu dog, so the current crypto SHIB has shamelessly plagiarised the meme currency in order to soar on its bandwagon.

Since exponential growth is popular among newly launched cryptocurrencies, the surge should not come as a surprise and should be the only reason to invest in this coin. This is because they have a lower monetary worth. According to CoinMarketCap, the value of Shiba Inu is currently $0.00000163, relative to $0.0000006 in mid-April.

One significant distinction between the two currencies is that Dogecoin is a coin, while Shiba Inu is a token. Cryptocurrencies have their own blockchains, while crypto tokens are designed on top of an established network. SHIB tokens are used to purchase Shiba Inu coins.

Shiba Inu dubbed the “Dogecoin Killer,” is quickly gaining popularity among Chinese cryptocurrency traders.

SHIB, according to its creators, will develop its own ecosystem. ShibaSwap, a decentralized exchange on the Ethereum network where group members can trade, purchase, sell, and HODL for prizes, can bring this to reality. It’s also billed as an artist incubator, implying that non-fungible tokens (NFTs) can play a major role in the ecosystem.

Apart from that, there isn’t much more about SHIB. They’re cryptocurrency tokens, according to the company’s website, and they enable users to carry trillions of them.

Shiba Inu’s reputation has been soaring as a result of the recent notoriety and excitement around Dogecoin. It totally ripped off from Dogecoin’s popularity.  It’s been so famous that it’s now listed on Binance and FTX, as well as OKEx, KuCoin, and Poloniex.

What is SHIB (Shiba Inu) Coin? Why it is called as ‘Dogecoin Killer’ cryptocurrency?

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IDEX’s ‘hybrid liquidity pool’ aims to tackle some of DeFi’s biggest problems

IDEX, a San Francisco-based decentralized exchange, has unveiled new protocol upgrades designed to solve two of the biggest issues with DeFi — slippage and front-running. 

The exchange claims that its Hybrid Liquidity protocol solves these challenges by combining an order book and trading engine with the liquidity pools of an automated market maker, or AMM.

“The novel exchange design protects users from the most glaring pitfalls of AMMs, including failed trades and front-running, by instantly executing trades against the best combination of limit orders and pooled liquidity,” the company said, adding:

“This approach generates higher returns for liquidity providers while also allowing for more advanced trades like stop-loss and limit orders.”

IDEX cites research from Dune Analytics showing that up to 5% of transactions on Ethereum-based decentralized exchanges fail due to complications like “too much slippage or insufficient gas prices.” Data from Etherscan and Dune Analytics also show that roughly 22% of Uniswap transactions between Apr. 15-21 failed.

Uniswap is the second-largest decentralized exchange by trading volume, according to Coingecko. Mdex takes the top spot, based on 24-hour transactions as of Thursday.

DeFi, which stands for decentralized finance, is one of the biggest trends in the cryptocurrency market, but the industry’s rapid growth over the past 12 months hasn’t come without complications. Exorbitant costs, smart contract risks and the higher likelihood of user error are just some of the biggest pain-points dragging on adoption. Security is also an issue, as evidenced by the theft and exploitation of hundreds of millions of dollars worth of DeFi assets.

Nevertheless, DeFi remains on track to grow considerably during the next leg of the bull market. Currently, more than $137 billion has been locked into the ecosystem, according to industry data.

IDEX\’s ‘hybrid liquidity pool’ aims to tackle some of DeFi’s biggest problems

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