First Mover: Latest Frenzy in DeFi Is Indexes From Binance, Centralized Exchanges

ALSO: Bitcoin prices stabilize above $11,300 after biggest plunge in two weeks

To view this email as a web page, go here.

August 26, 2020 Sponsored by By the CoinDesk Markets Team Edited by Bradley Keoun If you were forwarded this newsletter and would like to receive it, sign up here.  TODAY: Prices (since 00:00 UTC): Bitcoin $11,411 (+0.53%) | Ether $383 (-0.13%)  Bitcoin was slightly higher in early trading after prices fell 3.7% Tuesday in the biggest single-day decline in two weeks, triggering margin calls.  Binance's new "DeFi Index Futures" show the push by centralized crypto exchanges to cash in on this year's frenzy in so-called decentralized finance. What's Hot: FTX exchange just splurged $150 million on a crypto portfolio app, Visa may work with a bitcoin Lightning startup and Japan gets its own initial exchange offering. PRICE POINT Bitcoin was slightly higher around $11,300, stabilizing after Tuesday's 3.7% plunge – the biggest single-day decline in two weeks. Some $5.6 million in leveraged positions were automatically liquidated due to margin calls. As in traditional markets, crypto traders are looking ahead to a speech Thursday by Federal Reserve Chair Jerome Powell, where he is expected to address the central bank's plan for tackling future inflation.     U.S. stock futures were wavering early Wednesday. Eleanor Creagh, a market strategist at Saxo Bank, told Bloomberg TV that “equity remains the place for investors to escape the secular stagnation that we’re seeing within the real economy that this zero-yield world produces.” MARKET MOVES The fast-growing realm of decentralized finance – semi-autonomous exchanges and lenders erected from interconnected systems of digital tokens and coding atop the Ethereum blockchain – is one of the hottest corners of the crypto industry this year, with $7 billion of value locked, a 10-fold increase over the start of 2020.   Now, the big centralized crypto exchanges are finding a way to cash in on the mania, introducing indexes tied to the fate of "DeFi" tokens and new futures contracts and other types of derivatives. For traders, these indexes provide a way to speculate on decentralized finance without going all in on any single project. The latest announcement comes from Binance, the world's largest cryptocurrency exchange.  The company plans to offer "DeFi Index Perpetual Contracts," listed on Binance Futures, according to a press release Wednesday. The contracts will be denominated in the dollar-linked stablecoin tether and offer traders leverage up to 50 times their money down.     The "fully synthetic derivative product enables greater access to decentralized finance," Binance said in the release.  Ahem. Never underestimate crypto exchanges' creativity when it comes to adapting Wall Street-style financial engineering for use on the so-called digital rails.  FTX's DeFi Index Perpetual Futures have mostly gone up since launching in mid-June. (FTX/TradingView)  Binance's DeFi index consists of 10 tokens associated with DeFi, several of which rank among the year's best performers. They include Chainlink's LINK, Compound's COMP, Kyber's KNC, Aave's LEND, ZRX's 0x and MakerDAO's MKR.  According to the website DeFi Market Cap, tokens associated with the phenomenon now have a combined market value of $12.7 billion. Messari, a crypto-markets research firm, has compiled its own list of 30 tokens associated with DeFi. On average, they're up 13-fold in 2020. It almost makes bitcoin's 56% year-to-date gain look like dead money.   Top 10 DeFi tokens by market capitalization. (Messari) SPONSORED BY BITSTAMP Enjoy zero fee trading on all XLM, PAX and GBP pairs through September 1st! Now is the best time to join over four million traders and financial institutions that trust Bitstamp’s powerful platform, intuitive mobile app and industry-leading APIs. Bitstamp gives you all the trading tools to effectively execute your strategy: Unmatched order execution, powered by Nasdaq: Cutting-edge Nasdaq matching engine delivers optimal trading speed and efficiency in all market conditions. Tradeview interface: Our powerful trading interface offers advanced order types, live charting and an array of analytical tools. Available on web and mobile. Robust API connectivity: Our FIX, HTTP and WebSocket APIs are consistently rated as the fastest and most stable in crypto. Advanced custody solutions: Institutional-grade custody from BitGo with 98% of customer assets in cold storage and protected by BitGo’s insurance coverage. Download the Bitstamp app or visit Bitstamp.net/Pro to get started today! Learn More BITCOIN WATCH BitMEX sell liquidations. (Skew) Bitcoin’s latest price drop has a silver lining: It has forced out weak hands in the derivatives market and potentially opened the doors for a more sustainable rally to recent highs.  Bitcoin is currently trading near $11,400. Tuesday's 3.7% price drop triggered sell liquidations — the forced unwinding of long trades — worth nearly $50 million in perpetuals (futures with no expiry) listed on cryptocurrency exchange BitMEX, according to data source Skew. “The positives of last night's move was that it cleared out a lot of the weak leverage longs,” Singapore-based QCP Capital said in a Telegram post, in reference to the perpetuals liquidations.  Following Tuesday’s price drop, the cost of holding long positions in BitMEX perpetuals, known as the “funding rate,” has normalized. A high funding rate discourages new investors from entering the market and existing holders from boosting their long positions. “The unsustainably high funding rate has been pushed back to its typical baseline levels of 11% annualized,” QCP Capital said.  The funding rate had jumped to highs above 60% in annualized terms on Aug. 18, when bitcoin broke above $12,000. As a result, stronger buying pressure may emerge, leading to a re-test of recent highs above $12,000.  Read more: Bitcoin Drop Squeezes Out Weak Derivatives Positions – And That May Be a Good Thing – Omkar Godbole   TOKEN WATCH Aave (LEND): Decentralized lender passes MakerDAO to become No. 1 in DeFi rankings (CoinDesk) Wrapped bitcoin (WBTC): Fees on Ethereum blockchain are so elevated that BitGo is scouting for partners for new sidechain. (CoinDesk)  Ether (ETH): More than $1 billion of ERC-20 tokens vulnerable to "fake deposit exploit." (CoinDesk)   PAX Gold (PAXG): Crypto exchange Binance lists the gold-linked digital token as precious metal trades around $1,900 an ounce. (Paxos)   ANALOGS The latest on the economy and traditional finance Big companies load up on debt as borrowing costs fall, even amid recession (Bloomberg) U.S. consumer confidence unexpectedly falls to 6-year low as stimulus checks expire (Reuters) Stimulus-induced inflation puts $40 trillion of retirement savings at risk (Bloomberg) TWEET OF THE DAY WHAT'S HOT? FTX Exchange Trying to One-Up Binance's CoinMarketCap Acquisition (CoinDesk) FTX has acquired Blockfolio, the mobile news and portfolio tracking app, for $150 million. BitGo Might Do a Sidechain for WBTC as Fees on Ethereum Mount (CoinDesk) Pressure plaguing the Ethereum blockchain might prompt BitGo to build a sidechain to sidestep exorbitant fees. Bitcoin Lightning Startup LastBit Working With Visa to ‘Fast Track’ Card Payments (CoinDesk) LastBit’s hope is to allow users to harness the Lightning network to pay for just about anything. Japan’s First IEO to Launch via Crypto Exchange Coincheck (CoinDesk) One of the largest crypto exchanges in Japan is supporting the launch of the country’s first initial exchange offering. - Sebastian Sinclair   Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments. ATTENTION: Scammers have been sending fraudulent emails with links to sites disguised to look like coindesk.com. If you are in doubt about a link, type https://www.coindesk.com directly into your browser; do not copy and paste. Remember, if something seems too good to be true, it probably is. First Mover A newsletter from CoinDesk See previous editions Copyright © 2020 CoinDesk, All rights reserved.  Our mailing address is:  250 Park Avenue South New York, NY, 10003, US  Want to change how you receive these emails? You can update your preferences here.