Makering it Through the Trough - Unqualified Opinions

it's not all bad

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Over 90% of small cap cryptoassets are now down 90% or more from their all time high. It is a stark contrast to last year when a 10x seemed like the norm and you had once in a life time events like Verge [TBI Note: Dogecoin Dark!!!] returning 1,280,244% for the year.

One of our favorite custom screens on OnChainFx has become the “max pain” dashboard created by Ryan Sean Adams. It tracks the basics of how far a token has fallen from its all time high, a “breakeven” multiple, and some basic price and return data. We check this out often, not just to alleviate our pain of bitcoin’s mere 80% downdraft (good relative performance!), but to wade through the wreckage for signs of life and projects that will come out the other side of the bear market.

One of the things that struck me when poking around today, was the relatively strong performance of the Maker token, which has held up well despite the crypto carnage.

For the unfamiliar, MakerDAO is a “stablecoin” that allows users to lock up collateral (Ether) in exchange for a fixed price currency (Dai). The Maker token serves both a governance function - vote on the management of the ecosystem - and a financial function - stake tokens to earn a share of fees paid by Dai borrowers (stablecoin users) in return for serving as a backstop to Dai’s dollar peg.

If (when!) the value of MakerDAO’s collateral falls too fast, it could explode. (For more details we highly recommend you check out the profile from our community member Roy Learner.) And in fact, prior to the bear market, many had questioned how well Maker would hold up in a volatile selloff and prolonged bear market, when the price of collateral (ETH) would fall rapidly and many platform loans would need liquidation.

With ETH falling from $1,400 to under $100 this year we certainly saw a test of what Maker could do. So far the peg has held around $1.00 even as the amount of Dai has ballooned to $60+ million. So what gives?

It turns out that the Maker system has been a great tool for speculators looking to create leverage or hedge. A good example would be a trader that creates a 200% collateralized contract and uses their Dai to purchase more ETH. Because the collateral requirements are so large, the risk has been relatively low that Maker token holders would need to step in and support the market. Currently, ETH would need to fall below ~$95 before a significant string of contract liquidations would begin.


For more reading, check out our resource page on stablecoins. It’s everything you need to know to determine whether you agree with Chris Burniske and his thoughts on DAI as a superior internet currency to Bitcoin’s gold, and Ethereum’s oil


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News & Analyses

Messari Compression Algorithm

Content and thoughts from around the web as summarized by the Messari team.

🔻 [Analysis] Token liquidity plummets – Diar

Even though cryptocurrency prices have plunged 80-95% from the start of the year, traders aren’t taking the bait. Trading volumes have plummeted across major exchanges with 60% of listed cryptocurrencies trading below January levels. Order books are now filled to the brim on the sell side. (Messari | Source)

🏦 [Analysis] How Silvergate became the leading bank for crypto startups

Silvergate is currently the leading bank for crypto startups in the U.S., with prominent clients including CoinbaseGeminiKraken, and bitFlyer. As revealed in the bank’s IPO prospectus, the bank works with 483 crypto startups that contributed roughly $1.7 billion in deposits to the balance sheet as of Q3 2018. (Messari | Source)

Quick Bits (Don't read that, I read it for you)

Choke Points (Exchange News)

  • 👍Members of VanEck, SolidX, and the Cboe BZX Exchange met with U.S. Securities and Exchange Commission (SEC) staff earlier this week to present a new argument on why the bitcoin market is ready for an exchange-traded fund (ETF). (Messari | Source)

  • 📈 Bitmain has launched a new index as a benchmark for investors. The Bitmain Crypto Index tracks the performance of some of the “largest and most liquid” cryptocurrencies, and is denominated in U.S. dollars. (Messari | Source)

Startup Signals (ICOs, Cryptos, and Startups)

  • 😯 ConsenSys is restructuring, according to a letter circulated to staff on Friday. Lubin admitted that while individual projects within ConsenSys remain agile, the company as a whole has grown unwieldy. (Messari | Source)

  • 🆕  The U.S. Patent and Trademark Office has awarded the Intel a patent outlining a processor which claims to be able to conduct “energy-efficient high performance bitcoin mining,” specifically naming the SHA-256 algorithm used by bitcoin. (Messari | Source)

The Powers That Be (Legal/Reg/Policy)

  • 👮 The FBI has arrested the CEO of cryptocurrency platform AriseBank after he was indicted over an alleged multi-million dollar scam. Jared Rice has now been charged with three counts of securities fraud and three counts of wire fraud. (Messari | Source)

  • 🚨 Huo Xuewen, chief of Beijing’s Municipal Bureau of Finance, has warned projects against holding security token offerings (STOs). At a recent wealth management forum hosted by the bureau on Saturday, Huo said that STO fund-raising activities are “illegal,” at least in Beijing. (Source | Messari)

Did I miss something?

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Podcast Recap

🎧 ICYMI on the Messari podcast, This week, Katherine sat down with Messari’s own Dan McArdle to talk about the recent downturn in crypto markets. Dan shared his thoughts on what is now the fourth "crypto recession" for him, and where he thinks things might head in the short to medium term.

Listen and subscribe to all of our podcasts— on Apple Podcasts here, Spotify here, and Google play here.

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