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Why This Trader Thinks Ethereum Will Rocket To $300 and Defy Crypto Downtrend

Ethereum has declined over the past 24 hours alongside Bitcoin and the aggregated cryptocurrency market. Despite flashing some signs of strength in recent times, this has not been enough to break its tight correlation with BTC. Analysts do believe that the cryptocurrency is now positioning itself to post a massive upwards breakout in the days […]

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Ethereum has declined over the past 24 hours alongside Bitcoin and the aggregated cryptocurrency market. Despite flashing some signs of strength in recent times, this has not been enough to break its tight correlation with BTC.

Analysts do believe that the cryptocurrency is now positioning itself to post a massive upwards breakout in the days and weeks ahead.

This potential movement could be sparked by the heavy support that exists just below where it is currently trading at.

That being said, some analysts aren’t convinced that this support will hold upon another retest, and a break below it could prove to be dire for the cryptocurrency’s mid-term outlook.

Ethereum Plunges Below Long-Held Trading Range as Support Evaporates

At the time of writing, Ethereum is trading down over 3% at its current price of $227. This is around the price at which the cryptocurrency has been trading at for the past several days and weeks.

The latest decline seen by ETH has caused it to also shed 2% of its value against Bitcoin, with this decline putting an end to the outperformance it has been posting against BTC in recent times.

Today’s decline also marked an end to the multi-week consolidation phase that ETH had been caught within between $230 and $250. The longer it remains below the lower boundary of this previous range, the weaker it will likely become.

In the near-term, where Bitcoin trends will likely play a huge role in determining where the entire altcoin market goes next.

Because Bitcoin’s buyers have posted an ardent defense of $9,000 and is now navigating towards the mid-$9,000 region, it is a possibility that altcoins like ETH will also be able to recapture their previous trading ranges.

One analyst recently explained that he still anticipates ETH to descend towards $200 in the near-term. This level must be ardently defended by buyers, or else it could be in jeopardy of posting significantly greater losses.

“ETH / USD H4 TF – A lot more sideways PA than expected, I am short again looking for another touch of this ascending channel.”

Ethereum

Analyst: Defense of $200 Could Spark Intense Rally to $300

Another respected pseudonymous trader recently emphasized the importance of the $200 region, explaining that he believes that this is the level the crypto will visit before kicking off its next intense uptrend.

He notes that this could trigger a rally that leads Ethereum up towards $300.

“Buying the dip has been the way to go for the past 3 months. Nothing has changed so far. Getting ETH low $200s and aiming for $300,” he explained.

Featured image from Shutterstock. Charts from TradingView.

Source: https://www.newsbtc.com/2020/06/15/this-trader-thinks-ethereum-will-rocket/?utm_source=rss&utm_medium=rss&utm_campaign=this-trader-thinks-ethereum-will-rocket

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Valuing Open Source: Principles for Acquiring DeFi Projects

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As decentralized finance sees its first mergers and acquisitions, we’re left with a big question: How do you value an open-source project in a very new field like DeFi? 

The whole thing is fascinating, almost a contradiction! An analysis of the issues can help us sharpen a toolkit for understanding value creation and power in a world of open source, programmable blockchains and their assets. It can help us understand why things like “number of blockchain patents” are nonsense, and therefore suggest to financial incumbents a better way to be.

Lex Sokolin, a CoinDesk columnist, is global fintech co-head at ConsenSys, a Brooklyn, N.Y.-based blockchain software company. The following is adapted from his Fintech Blueprint newsletter.

The last time we had a corporate development discussion about tokens was in 2018. Messari CEO Ryan Selkis noted that a number of low quality projects sold their ICO tokens and received ether. So let’s say you sold 10 million of X, and got $10 million of USD equivalent denominated in ETH. As the market realized your project was worthless, let’s say X falls 90% in value. But the treasury still holds $10 million denominated in ETH. So the vulture fund strategy, copying a page from the book of 1980s traders and leveraged buy-out professionals, would be to buy up all the worthless X and somehow get control of the treasury. You pay $1 million USD equivalent for $10 million in treasury assets and profit.

This didn’t work for a few reasons. First, initial coin offering tokens did not have meaningful governance rights, or any enforcement mechanisms. If you buy them all, the only thing you hold is a bunch of digital pets. Yes, you could argue “reliance” to a court and extract damages or file injunctions. But it is highly unlikely that you would find suitable jurisdiction, and by the time you get it done, the house will have burned down. And second, ETH fell from over $1,000 to nearly $100. So the value of the honeypots became irrelevant.

Today, we no longer have ICOs, but we do have decentralized finance. And in the last six months, governance tokens over decentralized autonomous organizations (DAO) have become the standard playbook. 

Let’s unpack that. If you buy a container that gives you economic rewards based on the efforts of others, you are very likely buying a security. If that security is sold to you in a way that is not pursuant to securities laws of your resident jurisdiction, there’s a large liability on the issuer.

There have been some signs from regulators, however, that a token changes nature over the course of its lifecycle. It may add securities-like features, while starting out as an empty container. It may be at first motivated by usage (i.e., like a reward) and then become a participant in cash flow. The biggest lifeline came in 2018, when the Securities and Exchange Commission’s William Hinman introduced a concept of “sufficient decentralization,” per below. While far from gospel, many crypto entrepreneurs now believe that turning a protocol/project into a DAO gets the project over the safe line from securities registration. Time will tell whether relying on an SEC speech is valid defense.

It also helps that issuing governance tokens for a DAO creates market capitalizations and enterprise value for token holders. The main DeFi players of 2020 each have $100+ million or more in the market cap of their instantiated tokens. This has accrued from various distribution mechanisms that embedded financial assets as rewards for financial use. As an example, if you deposit your tokens for others to borrow in one venue you get rewards at some interest rate from the borrower.

See also: Lex Sokolin – The Smart Money Economy

According to Messari data, Uniswap and Aave are at $900 million, Yearn at $800 million, Maker at $560 million, Synthetix at $530 million, Compound at $470 million, Balancer at $100 million and Curve at $95 million. These numbers may change or go to zero. But currently, there is about $3.5 billion of enterprise value associated with the governance tokens of decentralized finance projects. Certainly there are many other projects, like Chainlink or Hegic or Ren, that are key to this space. But the above are the main DeFi machines in operation.

Now, $4.5 billion is a chunk of change. Envestnet is trading at $4 billion, Jack Henry at $12 billion, Temenos at $8 billion, Broadridge at $12 billion. These are your fintech industry comparisons.

When a large corporate tech player decides to buy up a competitor, the process is clear and well established. Generally, shareholders elect the board of directors, which governs the company and appoints executive management. Shareholders also vote for large, existential transactions that impact their stock holdings. The board applies business judgment to the corporate development path of the company, from issuing debt to buying back shares to investing in acquisitions. Within the company, executives focused on corporate development will hunt down targets and propose various transactions. Everyone knows what it means to maximize shareholder value, which largely boils down to maximizing EBITDA at some multiple in the market, without creating onerous debt.

But what about open-source financial protocols?

Decentralized M&A

Yearn is likely the most sophisticated financial DAO in existence. Whereas Compound and Aave match margin lend/borrow demand at particular interest rates, and Uniswap, Balancer and Curve create automated market making for on-chain trading, Yearn is a blockchain-native, fixed-income, active asset manager. For 2020 at least, Yearn is the Bill Gross of crypto, playing across trading fees, interest maximization, dividend farming, governance rewards and various other technological innovations that lead to capital appreciation.

The “funds” are called “vaults” or “pools” or “jars” and so on. They are just the equivalent of SMAs or fund interests, synthetically structured through code. The interesting thing is that the whole thing is open source, so in principle somebody could just copy the code base. And somebody did! The fork is called Pickle Finance and has between $100 and $400 million in assets. During DeFi’s summer run-up, forks generated trading returns by simply existing. However, over the long term, it is much more difficult to retain a community and assets. It is hard to maintain a thing that works in the highly adversarial DeFi environment, where protocols are under constant attack. A recent $20 million exploit left Pickle … in a pickle.

The recent news is that Pickle is going to be merging with Yearn. Given that the technical architecture is quite similar, and the experience of the developers is comparable, the core part of the merger is on-boarding Pickle developers to work on Yearn. This implies the Pickle protocol converges its path and community back to Yearn, and that Pickle-specific features will be an addition to, rather than a differentiator against, Yearn. Deeper DAO-related features will also be implemented based on a design from the Curve DAO. Holders can tweak the tokenomics of the machine in real time to create incentives in different dimensions (e.g., more issuance of rewards here, less here).

In a world where financial instruments are manufactured by machines on open-source rails, it is not the rails that are valuable.

This merger is not about the technology. It’s about the people writing code to create the technology, and who pays them what. If the incentives from Yearn cash flows are much higher than the incentives from Pickle cash flows, a lagging protocol can’t last long in an adversarial environment. Attackers prefer to go after those who have the least defense, not those who are most capitalized.

There is a fixed cost to defense, which creates competitive barriers and winner-take-all outcomes. And in a world where capital can move without friction between investment venues, a merger will also pull that community to follow you to the new protocol.

Notably, the governance tokens for Yearn had limited input on this “transaction” – in part because governance is not clearly, legally articulated, and in part because the transaction did not involve the sale and purchase of assets. The assets are open sourced, and people have the freedom and ability to switch what they decide to work on. Not only is capital movement much less restricted, but so is the stickiness of “employees.”

Another announcement quickly followed. Yearn is merging with Cream, a fork of Compound and Balancer, making it a combination of lending markets and an automated market maker. In this case, however, it seems that Yearn is delegating to Cream several strategic product developments, like leverage and a pool-agnostic (i.e., collateral agnostic) stablecoin. In traditional finance, we would call this a cash sweep account. The developer teams, again, are merging together. We assume the benefit to Cream is in part driven the lower the costs of potential errors, in addition to higher cash flow.

And another: Yearn and Akropolis. The latter had a $2 million hack earlier in the month, and going forward will play the role of institutional distributor of Yearn products as well as be part of investment strategy formulation. The same compensatory mechanism of issuing tokens to Pickle holders (i.e., a piece of something that looks like debt) will be applied to Akropolis holders.

See also: Lex Sokolin – How DeFi Can Avoid the Irrelevance of P2P Lending and Crowdfunding

And let’s not forget SushiSwap and Cover.

So what do we observe? Yearn is extending not just its technology but its economics and reputation to “bail out” multiple projects that have great teams but have all suffered in the recent past.

Takeaways

In a world where financial instruments are manufactured by machines on open-source rails, it is not the rails that are valuable. Yes, over time the rails become more sophisticated and are stress-tested by capital and hacking. But what actually holds “value” are (1) the communities that commit assets to protocols, and choose to align economic activity with some particular brand and (2) the entrepreneurs that have the very rare skill-set of building and securing such protocols.

See also: Lex Sokolin – The Revolution You’ve Been Awaiting: Fintech + DeFi

The community is the business asset. It generates cash flow. It improves governance. It fixes hacks. Notably, communities align to brand narratives and the celebrities and influencers that spearhead the narrative. Andre Cronje will represent Yearn, despite decentralizing maximally his project, and is the face of the fund. Popular confidence in his goodwill and judgment is the measure of the project. Similarly, confidence in Vitalik Buterin is correlated with confidence in Ethereum. There is something deeply conservative in the realization that these futuristic finance networks rely on philosopher kings and have increasing returns to scale.

But this was always the case. Humans need torchbearers: Steve Jobs, Elon Musk and the rest. In the case of DeFi, the torch itself is of a different kind. But it burns with the same flame.

Disclosure

Source: https://www.coindesk.com/principles-for-acquiring-defi-projects

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Swiss Wholesale CBDC Trial Shows ‘Feasibility’ for Central Bank Money on Distributed Ledger, BIS Says

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An under-the-wraps Swiss trial testing how central bank money can be linked to financial markets built on distributed ledger technology (DLT) yielded positive results, the Bank for International Settlements (BIS) announced Thursday. 

Launched by the Swiss National Bank (SNB) in collaboration with BIS’ Innovation Hub and Swiss stock exchange operator SIX, the project looked into the feasibility of using a wholesale central bank digital currency (CBDC) to settle digital assets as well as link DLT platforms to existing payment systems. 

According to the BIS report, the project has demonstrated feasibility for both approaches. Titled “Project Helvetia,” BIS said when using a CBDC limited to banks and financial institutions, a wholesale CBDC has potential advantages although it also raises some policy and governance challenges. 

On the flip side, while linking existing payment systems such as the SNB’s inter-bank payment network to digital asset platforms could avoid the hurdles raised by a CBDC, the findings noted it could also scale back the potential benefits of fully integrating distributed ledgers. 

“Overall, having tokenized cash and assets on a single DLT platform simplifies the settlement of transactions and supports a broad variety of use cases. However, issuing a w-CBDC is likely to require significant changes to the processes and operations of a central bank,” according to the BIS report.

The report added that while integrating DLT into existing payment systems would be a relatively simple approach and would resemble the current system, it would also cut back on efficiencies raised by integrated tokenized central bank money and securities because it would function more like a link than a common base. 

Noting that the experiment is no indication of the SNB’s intentions to issue a wholesale CBDC on SIX Digital Exchange’s (SDX) platform, the announcement said that different design choices to trade off some risks and benefits in issuing a CBDC would also need to be explored. 

SDX had said in a March report it plans to launch its blockchain-based stock exchange at the end of this year. Project Helvetia, said the report, was the first wholesale CBDC experiment by the Swiss central bank and complements the planned launch of of the blockchain-based SDX.

“If DLT can deliver significant improvements in securities trading and settlement, then the SNB will be prepared,” Andréa M Maechler, member of the SNB’s governing board, said in the announcement. 

Because the wholesale CBDC model used for this test functions more like swapping cash for tokenized money, it would likely have limited monetary policy implications. But the report also noted this model could potentially “lead to some segmentation of the money market, which could negatively affect [its] efficiency and liquidity.”

The report said the next step would be to better understand the policy and fiscal implications of integrating wholesale CBDCs into core banking systems and explore their functionality across borders.  

Source: https://www.coindesk.com/swiss-cbdc-trial-tokenized-central-bank-money

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Hackers Demand 200 Bitcoin Ransomware After Compromising Leading Israeli Insurance Company’s Sensitive Data

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A notorious hackers’ group called The Black Shadow has compromised one of the largest insurance companies in Israel – Shirbit. The attackers have already released sensitive client documents and have demanded a ransom in bitcoin, which could rise to $4 million by the end of the week.

Israeli Insurance Company Hacked

According to a local media outlet, the first confirmation of the hack came on Monday evening. Representatives of The Black Shadow group posted an initial batch of compromised documents on a Telegram channel.

Shirbit had contacted the National Cyber Directorate and Capital Market Authority to open an investigation. Shortly after, the organizations confirmed the breach and indicated that the hackers have also leaked numerous insurance details, alongside the initial documents.

According to the report, Shirbit has many high-profile customers, including government employees. Company CEO Zvi Leibushor said that the safety of its clients is Shirbit’s top priority.

“Shirbit has invested millions of shekels in securing databases and protecting against cyber-attacks and meets all the stringent regulatory requirements in this area.” He added that the firm has invested “all resources and efforts needed for an effective safe and rapid solution to this cyber-attack, whose real goal is to try to harm the Israeli economy.”

Demand Requested In Bitcoin

After releasing a small part of the compromised documents, The Black Shadow reps have contacted the victims to request 50 bitcoins (about $960,000 with today’s prices).

However, in case Shirbit failed to pay the attackers within the first 24 hours, the demand would double to 100 bitcoins. The procedure will repeat and double to 200 bitcoins if another 24 hours pass without payment.

Furthermore, the hackers threatened the insurance company that if it fails to transfer the funds by the end of this week, they will sell all compromised data to other bidders.

It’s worth noting that numerous other Israeli companies and high-profile individuals have recently become victims of similar hacks and demands.

CryptoPotato recently reported that 20 Israeli crypto executives, all clients of the local telecommunications giant Partner, were hacked by stealing their SMS messages.

Another coverage informed that a new type of ransomware attacked called Pay2Key has been executed against several Israeli companies in the second part of 2020. The perpetrators had requested the demand in bitcoins, similarly to the Shirbit hack.

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Source: https://cryptopotato.com/hackers-demand-200-bitcoin-ransomware-after-compromising-leading-israeli-insurance-companys-sensitive-data/

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