Daily Markets Update - September 7, 2020 -Got Sushi?

Markets have slightly recovered after going through an overdue correction which saw the overall market-cap fall below $300B for the first time since late June of this year.

  • $BTC dominance however is on the rise again, up to 57.4%, after dipping to 2020’s ATL of 56.0% during the heights of the initial DeFi run several weeks ago.

  • This recent large sell off saw $BTC hold 10K support levels, currently trading horizontally at 10,200 levels off 31B traded volumes with targets of

  • For $BTC Futures, over 1B of open interest was removed/liquidated since the sell off from last week, dropping from 5B -> 4B. 

August’s Bitcoin Rally Led to Record Crypto Derivatives Volumes

Trading volumes for crypto derivatives rebounded to record levels as bitcoin’s rally to $12,000 spurred on speculation, according to a newly released report.

  • CryptoCompare said crypto derivative volumes rose 54% to more than $710 billion in August in its monthly Exchange Review.

  • That’s a new all-time high, with August’s figures now far exceeding the $602 billion monthly volumes reported in May.

  • Spot markets also experienced a surge in activity, with August trading volumes coming to $820 billion – nearly $400 billion up from July’s numbers.

India should legitimize bitcoin by regulating it like a corporate stock and define cryptocurrency crimes to deter misuse of the technology, according to think-tank founder Deepak Kapoor.

  • Since it is similar to other financial assets, “Bitcoin should be traded like a stock. That is the only legal status that it can get, and it should get this status,” Kapoor, who created the BEGIN India think tank, told BusinessWorld on Monday.

  • Kapoor was against the idea of legalizing bitcoin as currency, though.

  • “You make it legal and you might put the entire economy of the country at stake,” he argued, describing bitcoin as a “private currency.”

  • Nischal Shetty, CEO of Mumbai-based crypto exchange WazirX, opposed the idea of regulating bitcoin like stocks.

  • “Bitcoin is not a slice of a company that you can buy or invest in. Rather, it is seen as an asset, like gold for example. Hence, it can’t be seen a stock,” Shetty told CoinDesk.

  • Kapoor’s call for regulation came as part of an interview about fears around the use of cryptocurrencies in terrorism financing schemes. 

  • The U.S. recently seized millions of dollars in bitcoin and more than 300 cryptocurrency wallets controlled by the terrorist organizations al-Qaeda and Hamas.

  • Kapoor pointed out India is yet to officially recognize cryptocurrency-based crimes.

  • “I would want senior people from investigative and law enforcement agencies to first at least know about it and to know what is the world moving towards,” he said.

  • At present, the regulatory environment in India remains uncertain, with the government said to have been considering an outright ban.

  • As per a Nikkei article retweeted by Syed Akbaruddin, India’s former UN envoy, the government is now preparing to debate the possible cryptocurrency options.

  • Ratan Sharda, author, editor and TV panelist told BusinessWorld for the same article that banning would not work, and the ideal way is to make cryptocurrencies legal and ensure everything is tracked.

  • “Just like you cannot ban porn, you cannot ban cryptocurrency,” Sharda said.

  • The Internet and Mobile Association of India (IAMAI) is currently developing a code of conduct for cryptocurrency firms in the nation that would include .

  • “This will also curb illegal activities as well as scams,” said Shetty, whose exchange is a member of the association.

  • Despite the regulatory uncertainty, cryptocurrency exchanges servicing Indian clients have been witnessing solid growth since the March overturning of a central bank ban on banking services for crypto companies.

Liquidation tracker:

→ Sep 3rd - 192m Longs liquidated→ Sep 4th - 22.7m Longs liquidated → Sep 5th - 54.5m Longs liquidated

ETH blockchain congestion finally clears up as ETH fees have dropped back down to the 90-100 Gwei levels. At its highest we saw anywhere between 300-400 Gwei. $ETH has lost 25% in value over the past five days from 480 highs to current 350 levels. Currently within a range bound between 350-360 with its next support level at 337. 

Alts and DeFi watch:

  • SushiSwap founder Chef Nomi relinquishes control of the sushi protocol to FTX’s Sam Fried-Bankman with plans to give the project back to the community via multi-sig access to leaders elected by the community. Price of sushi dropped to lows of $1 before tripling back to $3 on this news.

  • $LINK rebounded up 25% over the past two days from 10 to 13 levels. 

  • $YFI’s 3 day slump took the protocol’s value to 17K before regaining some momentum back to 24K levels

SushiSwap investors were handed a raw deal over the weekend after the pseudonymous founder of the $1.27 billion, 1.5-week-old decentralized finance (DeFi) protocol cashed out.

A fork of DeFi darling Uniswap, SushiSwap is the brainchild of a pseudonymous founder, Chef Nomi, who took the former project an extra yard by adding rewards for providing liquidity to the exchange through a liquidity provider token (LP), called sushi (SUSHI), that earns a portion of the AMM’s revenue.

In essence, AMM’s provide the infrastructure to match lightly traded tokens with liquidity. A variant of other decentralized exchange (DEX) experiments, Uniswap has grown to be the largest AMM with volumes nearing those of centralized exchanges such as Coinbase Pro.

The episode underscores the complexity, creativity and unpredictability of the white-hot DeFi space, where more than $8 billion worth of cryptocurrency is currently locked up in smart contracts, according to DefiPulse

But, as sushi investors discovered Saturday, putting money into an unaudited contract controlled by an unknown founder was not a great idea after Chef Nomi unexpectedly sold his share of LP tokens Saturday. 

As reported by The Block, Chef Nomi swapped his Sushi LP tokens for some 37,400 ether (ETH) worth about $13 million in what bears strong resemblance to an “exit scam.”

The sushi token immediately fell 73% in price, dropping from $4.44 to $1.20 over the subsequent 18 hours, according to CoinGecko. The token is now trading hands at $3.16 as of publishing time.

Control-C, Control-V

Long story short, adding a native token to an AMM was a good idea, or at the very least one that sparked digital bread and circuses.

Chef Nomi launched the Uniswap rival Aug. 28. 

Eleven days later on Sept. 6,  $1.27 billion is “locked” in Sushi contracts. That’s equivalent to 77.4% of Uniswap’s tradable assets, according to Sushiboard

Read more: Uniswap Rises to Top of DeFi Charts Thanks to Rival Looking to Unseat It

SushiSwap’s transcendence to DeFi unicorn was made possible through an innovative leaching of its rival, Uniswap. Chef Nomi bootstrapped SushiSwap by leaning on Uniswap’s popularity within DeFi circles. 

In a technique called “Zombie mining,” SushiSwap gave extra LP tokens for users providing liquidity to the ether (ETH)/sushi pool on Uniswap. LP rewards, moreover, were ten times higher than they would normally run up to a certain time. That created a mad rush to earn LP tokens through farming Sushi on Uniswap as shown by an exponential rise in Uniswap volume late last week.

Zombie mining has an end game. Chef Nomi planned on “migrating” the liquidity created on Uniswap through token dispersals to SushiSwap once enough volume was created. As CoinDesk reported Friday, that day moved to Sunday as the AMM continued to attract outsized demand.

'Chef Nomi sucks'

But then everything changed when Chef Nomi attacked. 

The founder, who ostensibly became a multi-millionaire by merely copying and pasting Uniswap’s code, shortly became the center of a Twitter doxxing campaign. His identity has yet to be confirmed.

Meanwhile, Chef Nomi, DeFi founders and sushi investors became engaged in verbal sparring.

Chef Nomi declared his intention to stick with the Sushi protocol and that his Sushi sale was well within his rights as a founder.

Others, such as FTX CEO and sushi investor Sam Bankman-Fried, were not enthused about that decision: “First of all, Chef Nomi sucks,” he tweeted Sept. 5.

Read more: Yearn, YAM and the Rise of Crypto’s ‘Weird DeFi’ Moment

Yet the clock kept ticking on the planned migration from Uniswap to SushiSwap. And, at this point, virtually no one trusted Chef Nomi to undertake the transfer in an honest fashion.

Through push and pull, Chef Nomi decided to give up his keys to the SushiSwap contract he and he alone held. To boot, the contract to the $1.25 billion protocol was given to none other than Bankman-Fried, who canceled the migration.

The entire exchange took place on Twitter Sunday with Chef Nomi lamenting his position. “Again I did not intend to do any harm. I’m sorry if my decision did not follow what you expected,” he tweeted.

As of now, Bankman-Fried controls the SushiSwap contract. In a Discord message, he said he plans to move the contract to a multi-signature contract until the project can be fully decentralized into the hands of SushiSwap LP token holders, similarly to other DeFi protocols.

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