Monthly Archives: March 2023

USDC’s Depeg: Crypto Traders Make $16.5M in 24 Hours

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• Last weekend, USD coin (USDC) fell to as low 87 cents due to news of Circle Internet Financial’s exposure to Silicon Valley Bank.
• This caused a wave of USDC sales across decentralized-finance platforms and a surge in the withdrawal of tether (USDT) from Binance.
• Two high-frequency trading firms capitalized on USDC’s plight, with one wallet making $16.5 million in profit in a day by trading tether for USD coin and DAI.

USDC Plummets After News of Circle Internet Financial’s Exposure

Last weekend, the U.S dollar-pegged stablecoin USD coin (USDC) fell to as low as 87 cents on news that Circle Internet Financial, its issuer, had exposure to Silicon Valley Bank, which collapsed last Friday. This sparked a wave of USDC sales across decentralized-finance platforms and an increase in the withdrawal of tether (USDT) from crypto exchange Binance.

High-Frequency Trading Firms Take Advantage Of Price Drop

Two high-frequency trading firms were quick to capitalize on USDC’s plunge and take advantage of the arbitrage opportunity it presented when it traded below 90 cents – one wallet receiving $215 million worth of tether from Binance before executing 59 transactions that involved swapping USDT for USDC and the DAI stablecoin and making a profit of around $16.5 million according to CryptoQuant research.

Risk Involved With Trading Stablecoins

Despite this lucrative opportunity presented by USDC’s depeg, traders faced significant risk due to lack of available information surrounding the situation. Mike van Rossum, founder of trading firm Folkvang commented “Given what recently happened to FTX and other big crypto players, you can see why many wanted to be careful when taking positions” .

What Does The Future Hold?

It remains unclear how long this period volatility will last for but it is likely that high frequency traders are already looking ahead at potential arbitrage opportunities between different exchanges or even different currencies depending on market sentiment over the coming days/weeks/months .

Conclusion

The events that unfolded last weekend have highlighted both the risks associated with trading volatile assets like cryptocurrencies but also the huge rewards available if traders are able identify profitable trades quickly enough before markets move against them .

Stablecoin Rout Plagues Crypto: DAI Depegs to Lifetime Low

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• MakerDAO’s decentralized stablecoin, DAI, depegged to an all-time low of 88 cents on Saturday.
• The sudden collapse of tech-focused Silicon Valley Bank is being blamed for the drop in DAI pricing.
• Other algorithmic stablecoins like Curve 3pool and Tron’s USDD have also been knocked off their pegs.

Stablecoin Rout Plagues Crypto Markets

The crypto markets were hit with a sudden shock recently when tech-focused Silicon Valley Bank suddenly collapsed. Since then, many stablecoins have been affected by this incident and are now trading at all-time lows. The most prominent amongst these stablecoins is MakerDAO’s decentralized token DAI, which has dropped to an all-time low of 88 cents as a result of the market conditions.

USDC Exposure and Silvergate Liquidation

Traders are speculating that Circle, who issues USDC, has worse exposure to SVB than the $3.3 billion out of the total $40 billion backing USDC they previously disclosed. On top of this, Silvergate had gone into voluntary liquidation days prior to this event – further adding fuel to the fire regarding USDC exposure.

$563 Million in DAI Burned in 24 Hours

On-chain data from Dune shows that $563 million worth of DAI was burned in the last 24 hours alone due to traders fleeing from USDC and other related assets. This has caused the total market cap for DAI to fall down to a total of $4.9 billion as a result of this selloff.

Tron’s USDD Also Hit

Not only has DAI been affected by this incident – Tron’s USDD has also seen its peg broken after it dropped down 93 cents during Asian afternoon hours on Saturday. Tether remains pegged at 1 dollar however – despite the market chaos occurring around it with other algorithmic tokens such as Curve 3pool also seeing their liquidity pool take a hit due to traders fleeing USDC as well..

Conclusion

Crypto markets remain volatile following this incident – with many algorithmic tokens still feeling its effects even days later after it occurred. It will be interesting to see whether or not these tokens can recover following this period or if they will continue dropping further in value over time

Regulators Bring the Multichain Era to an End: What Now?

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• Regulators are making it difficult for enterprises to understand and implement multiple blockchain networks.
• It costs a lot of money to stay up-to-date with different blockchains, as they continuously evolve and change.
• There is also a lack of liquidity when transferring tokens between different chains.

The High Cost of Understanding Multiple Chain Environments

Regulators are bringing the multichain era to a close by making it difficult for enterprises to understand and implement multiple blockchain networks. EY (Ernst & Young) estimates that it costs around $500,000 to add a new chain to their Blockchain Analyzer platform and 10%-20% of that amount each year just to ensure they stay up-to-date with changes in the network. Ethereum has two to four hard forks a year which can make staying on top of updates challenging.

Lack Of Liquidity Between Chains

Liquidity is also an issue when transferring tokens between different chains. Polling Automated Market Makers (AMM) reveals how quickly liquidity declines when users move away from the Ethereum blockchain. Even though setting up network nodes isn’t too complicated, understanding how payments and transfers work within these networks requires further investment in time and resources from enterprises.

Transactions And Cryptography

When adding a new network, firms must look into the transaction processing model (how transactions are initiated, recorded, processed & reported), the cryptography that underpins those transactions and any associated risks with different steps in the process. If businesses want to audit their activity then control points need to be identified so verification can take place.

EY’s Approach To Adding A New Chain

At EY, teams take an in depth look at all aspects of adding a new chain including transaction processing models, cryptography underpinning those transactions as well as risk identification across each step in the process so audits can be performed successfully if needed.

Conclusion: The Multichain Era Is Coming To An End

The cost associated with understanding multiple chain environments means enterprises are likely going become reluctant when it comes to exploring new chains or updating existing ones which will unfortunately bring an end to this multichain era we’re currently experiencing