- The Newsletter by Tokenize Xchange (Vol.133| April 2021)
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Maker made history in 2017 as the first blockchain-based protocol to launch a major automated cryptocurrency-lending platform, helping to initiate a boom in what’s known as decentralized finance, or DeFi.
Now Maker is paving the way for what might become another source of growth in the now-$60 billion DeFi industry: lending against trillions of dollars of “real-world” assets like residential properties, in competition with banks and other financiers. In this case, “real world” refers to collateral other than cryptocurrencies.
The proposal, passed April 14 and executed two days later, allows the Tinlake blockchain protocol to serve as a bridge between New Silver, a real estate loan company, and MakerDAO. Two tranches of interest-bearing tokens will be issued under the Ethereum blockchain’s ERC-20 token standard — DROP and TIN — against non-fungible tokens (NFTs) based on individual deposits from New Silver.
“This is DeFi taking on traditional finance,” Sébastien Derivaux, a community member of MakerDAO, told CoinDesk in an email. Initially, the project will finance loans to renovate houses in the U.S., he said.
The latest move to add real-world assets “greatly increases the addressable market for collateralized loans,” said Jack Purdy, an analyst at the cryptocurrency research firm Messari. Such increases in turn should help to increase the supply of dai, “preventing the price from consistently exceeding the peg.”
The market capitalization of dai is now over $3 billion, after tripling this year, reflecting exploding demand, according to the cryptocurrency data provider Glassnode.
According to data from The Block, Maker is also the most profitable DeFi protocol by far.
“Many people have dismissed Maker because it moves slow and isn’t the most exciting project,” Ryan Watkins, another analyst at Messari, told CoinDesk. “But it is the most widely integrated protocol in DeFi, produces the most tried-and-trusted decentralized stablecoin and generates the most earnings for token holders in all of DeFi.”
Derivaux said that more “value investors” from traditional finance are now coming to Maker, on the heels of its token burning commitment.
Notably, Citigroup wrote about the report last week, calling referring to MakerDAO as “the decentral bank.” An instant rally ensued in Maker’s price.
Bitcoin’s (BTC) near 15% selloff earlier this week occurred as leveraged long positions were quickly liquidated. Since then, the market appears to have stabilized, suggesting “the worst of liquidations are behind us,” analysts for the big U.S. bank JPMorgan wrote Wednesday.
- “A recovery in the hashrate and signs of more efficient arbitrage trading suggests liquidity should continue to improve from here.”
“Going forward, bitcoin liquidity should remain robust and resilient; depth on major exchanges has continued to drop less and recover faster than other asset classes.”
The report also mentioned the unique value of 24/7 access to consistent and stable liquidity pools in cryptocurrency markets, which could encourage overall stability.
The sell-off was “likely exacerbated by the prevalence of high-frequency market making, which we estimate makes up ~80% of on-screen liquidity on major cryptocurrency exchanges and is prone to runs when threatened by a spike in volatility.”
“Though it will take a few days to play out, history suggests liquidity should recover quickly.”
The contents of the JPMorgan report were reported earlier by Bloomberg News.
Some fans of the joke cryptocurrency dogecoin had positioned Tuesday as a day to send its prices skyrocketing — to $1, or maybe just a meme-y 69 cents. On the meme-y date of April 20, or 4/20.
Prices for the eight-year-old cryptocurrency, ticker DOGE, had surged more than 60-fold this year to a market value of more than $40 billion. So it seemed like anything was possible. Social media posters dubbed it “dogeday.”
But as of midafternoon, the joke appeared to be on the dogecoin holders. As of press time, the token, symbolized by the Shiba Inu dog breed, was down 28% on the day, to the decidedly unremarkable price of 29 cents.
“Many retail crypto traders were hoping for today to be a successful ‘Dogeday’ by sending dogecoin to the moon,” wrote Edward Moya, senior market analyst for the brokerage Oanda. “Some were eyeing the $0.50 level as an area to take some profit, with others having outlandish hopes of a skyrocketing move to the $1 mark. The current retail fervor probably won’t completely give up on dogecoin, but a sell-the-event reaction could be in the cards.”
The DOGE dump came even as at least one analyst, Bloomberg Intelligence’s Mike McGlone, wrote that the cryptocurrency might be due for further gains.
“Gaining somewhat of a global cult following, we see little to stop DOGE from continuing to appreciate, at least in the near term,” McGlone, a commodity strategist known for his prescient bitcoin price predictions last year, wrote Tuesday in a report. “Dogecoin may be casino-like fun.”
Active Dogecoin addresses has hit an all-time high. Source: Coin Metrics.
It was a shot of water in the face for DOGE fans who may have instead been looking for a treat — in the form of fast profits or instant fortunes.
A remaining question is whether this year’s gains in dogecoin might draw fresh capital and labor to the project, similar to the way last year’s pump in GameStop shares led to a $1 billion capital raise, a search for new management and potentially a transition to an e-commerce strategy. At one point, dogecoin had a market value bigger than the centuries-old U.K. bank Barclays.
Within broader digital-asset markets, the DOGE frenzy appeared to spread to decentralized finance (DeFi), where several imitator tokens have chalked up staggering single-day gains.
The first is SHIB (get it? Shiba Inu?), a decentralized experimental token nicknamed the “dogecoin killer,” trading on the decentralized exchange Uniswap. The token, launched under the Ethereum blockchain’s ERC-20 standard, has rallied over 5,000% in the past four weeks and rose 95% on Monday alongside DOGE’s rally to record highs near 43 cents. The coin has registered a trading volume of over $200 million in the past 24 hours, Uniswap data shows.
Another coin, weed doge (WOGE), launched this week, allegedly in a bid to donate funds to people considered unjustly jailed for marijuana-related offenses. WOGE rallied 1,058% from to $0.0950 on Monday though was last seen trading near $0.0170 on Uniswap.
“Since DOGE has been taking care of us and providing us with godly profits this bull run, we also wanted to create a meaningful coin that gives back to the people in a handful of ways,” says a post on CryptoMoonShots Reddit page.
Most of this ridiculousness is seen as evidence of froth in cryptocurrency markets, at a time when bitcoin prices have doubled this year — ostensibly as a hedge against inflation, in the wake of trillions of dollars of money printing by the Federal Reserve and other central banks.
Bloomberg’s McGlone noted that dogecoin had demonstrated “divergent strength” as bitcoin’s price has retreated in recent days. The report was published prior to Tuesday’s losses in dogecoin.
But sometimes, apparently, the DOGE doesn’t come when called.
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- Date of publication:
- Thu, 04/22/2021 - 20:58
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