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Binance & Coinbase: Crypto Crossover

“Just because most people think it’s a bad idea to stand in front of a bus and you’re a contrarian thinker, it doesn’t mean it’s a good idea to stand in front of a bus.” – Howard Marks

We just returned home after attending Consensus Singapore (Invest Asia, to go by its proper name). The ‘mojo’ was definitely down from the last time around, if anecdotal chatter is to be believed.  It was mostly exchanges, custody solutions, security, and auditing providers and blockchain software providers for the most part. The following graphic is worth sharing.

The picture speaks for itself; For all the hype, most of the current value in blockchain is currently being captured by exchanges, and by Bitcoin itself. Dapps, DeFi etc are still in their embryonic stages, and it will take a few cycles before true ‘unicorns’ emerge from here. Enterprise blockchain efforts look reasonably promising, for all the early flak that they received. Most VC returns in blockchain have been through exchange investments, once you discount the scammy excesses of ICOs and token-flipping, in which most early VCs in this space vigorously took part.

In a major announcement, the leading cryptocurrency exchange Binance announced that it would open registrations for US-based users starting this Wednesday. The crypto giant has mostly stayed out of the purview of US regulators so far by restricting US-based users from trading on its platform. However, by partnering with California-based money services operator BAM Trading Services, Binance is all set to lock horns with Coinbase, Poloniex and other leading US exchanges as it looks to capture a significant share of the market in perhaps one of the most active markets for cryptocurrency trading. While the current exchange supports over 500 crypto-to-crypto trading pairs, the US version of the exchange will initially offer trading, withdrawal and deposit services for just 6 pairs of currencies, with USDT one among the six. It is interesting to see Binance.US support USDT given the ongoing tussle between NY General Counsel and Bitfinex – the issuer of USDT – over illegally servicing US customers and defrauding investors.

Similarly, Coinbase is seemingly taking a leaf out of the Asian exchanges’ playbook as the company is currently in plans to launch a proprietary exchange token and is also looking at launching a platform for Initial Exchange Offerings (IEOs). As we opined earlier in one of our deep dives, IEOs are becoming a popular capital formation layer for emerging token projects. IEOs are for the most part ICOs in a new bottle, but the prospect of strong multifold returns post listing attracts significant interest from speculative investors, often resulting in most IEOs being oversubscribed and price appreciation for proprietary exchange tokens due to hoarding. Exchange tokens by their very design with dividend-like cash yield have the features of security tokens, so it will be interesting to see how the US regulator would look at the biggest US crypto exchange launch its own exchange token.    

(Because regular programming was interrupted due to some travel, we are including DeFi metrics watch with today’s edition).

DeFi Consolidation:
The last few months have witnessed some major events in the DeFi space. Compound is growing at a tremendous pace after a few tweaks to its protocol and is the latest DeFi protocol after MakerDAO to reach the “$100 million in loans originated” club. As we already discussed in one of our earlier editions, the demand for crypto borrowing is purely driven by speculation as traders are ready to pay hefty annual interest rates of up to 14-15% and borrow capital with the hope of turning a profit through trading. The interest rate disparity between fiat USD and its crypto equivalent is so wide that there should be a natural inflow of fiat capital into stablecoins to capture the interest rate spread. 
Ethereum Locked in DeFi
MakerDAO still accounts for a lion’s share of ETH locked up in collateral, with more than 1.39 million of ETH locked up. Compound showed a strong w/w growth of 4% in ETH locked up, while Augur improved by 4%.

Lightning Network Growth:

Capacity per channel fell by 0.4% w/w. The total number of nodes increased w/w by 1%, and the total number of channels was flat w/w.

(For reference, some previous articles on LN, here).
DEX Tracker:
Trading volumes on DEXs have increased on a w/w basis, with the average daily trading volume averaging 35k ETH for this week. IDEX remains the biggest DEX in terms of trading volume and DAI is the highest traded cryptocurrency on DEXs.

(For reference, some previous articles on DEXs, here and here).

Crypto Loans Tracker:

Compound Loans:

Total loans issued on Compound for the last week stands at approx. $2.6 million for the week, a strong decrease from $5.7 million in the previous week. WETH is the most borrowed cryptocurrency on Compound followed by DAI and BAT.

dYdX Loans:

Total loans issued on dYdX for the last week stands at approx. $2.6M for the week, a 50% decline from $5.2M last week. DAI is the most borrowed cryptocurrency on Compound followed by WETH and USDC.

MakerDAO Loans:

DAI loans issued on MakerDAO for this week stand at ~$2.1M, a slight decrease from $2.4M last week. The total outstanding DAI debt currently stands at ~$86 million.

(For reference, some previous articles on MakerDao, here and here).You can also check out last week’s Metrics Watch here.

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