Crypto Market Turmoil: $1.2B Liquidated as Prices Plummet

Market Outlook

The global crypto market is still enduring the downtrend, which is rolling over from last week’s rally. Market conditions were aggravated by the unsettling news related to Evergrande’s turmoil, alongside the growing uncertainty regarding a potential crypto crackdown in the US. Almost $1.2 billion worth of long-futures positions got liquidated during yesterday’s turbulent price action, causing major assets such as BTC and ETH to dump up to 20% in comparison to their established value 2 weeks ago, while spawning deeper losses of up to 30% - 40% for the relatively smaller assets. The total crypto market valuation stands at the critical $1.93 trillion mark, which could see the market lose another $300B if it loses this key level to find the next support at the 200 MA at the $1.6T mark.

Liquidations were predominantly present in assets that fared quite well over the past few weeks. For instance, Solana led the exacerbation with almost $20M of liquidated positions, while Avalanche, Cosmos, Cardano and Polkadot recorded $8.75M, $8.06M, $6.68M, and $5M worth of liquidations. The premise behind Solana’s trailblazing the cascade of liquidations was of no surprise as the network went into a grinding halt triggered by the blockchain’s inability to produce new blocks for almost 17 hours.

Even though the official technical post-mortem hasn’t been released yet, the network appears to have encountered a malicious Denial-of-Service attack (DOS). This attack was caused by trading bots aiming to venture into snipping the new Initial DEX Offering (IDO) of the Grape project launching on top of Raydium protocol, the Uniswap’s counterpart on the Solana ecosystem. The preliminary technical overview provided by the Solana Foundation explained that the explosive bot activity exceeded the network’s capacity of 50K transactions per second to reach 400K transactions per second. This induced the network to produce multiple forks of itself, meanwhile subsequently forcing nodes to go offline as they couldn’t agree on the network’s correct state. The network had since come back online following Anatoly’s calls to coordinate efforts and amongst the validators across Discord and Twitter.

Notable about this development is the vitality of battle-testing contemporary technologies such as Solana. It is now clearer that the theoretically-superior processing capabilities of the blockchain need to be revisited as 50,000 tx/s will not cut it for the network if it would really aim to target the market-share for platforms such as Nasdaq, and seek to onboard over a billion users.

Worth mentioning that other L1 projects such as Avalanche have managed to hold their position well amidst the market’s nosedive, a pattern that we at, 21shares, can attribute to the continued retail interest in capitalizing on the liquidity mining program launched a month ago, as discussed in the previous newsletter. Furthermore, Avalanche experiences a growing developer activity as evidenced by the latest $230M private sale round of the token led by Polychain and 3AC.

The user-oriented bridging experience, the act of transferring native assets from a particular base layer to another via sending a wrapped version of the token itself (like BTC on ETH), on Avalanche has played another factor in welcoming in about $1.3B of crypto assets and increasing the total value locked (TVL) on the blockchain to reaching almost $2.8B. This can be seen as an essential technical differentiation that may set Avalanche apart from Solana. For instance, the technically cumbersome process can discourage prospective DeFi users from migrating to novel and non-battle-tested chains.

Weekly Returns

The returns of the top five crypto assets over the last week were as follows — BTC (-8.86%), ETH (-13.28%), BNB (-12.1%), XRP (-16.03%), and ADA (-13.38%).

Net Inflows per 21Shares ETP

The net inflows of our ETPs combining $17.89 million in the past week, were as follows: AADA (+$2,378,214.49), ABCH(+$ 287,011.33), ABTC(+$ 2,383,273.44), ADOT (+$ 1,950,934.51), AETH (+$ 2,746,772.22), ASOL (+$ 4,003,100.37), AXLM(+$ 577,644.37), AXRP (+$ 1,597,278.82), AXTZ (-$927,957.18), HODL(+$2,205,450.09), MOON (+$690,985.37).

Media Coverage

Mark your calendars, because as of September 23, we’ll be listing our Solana ETP (Ticker ASOL FP in Euro and ASOL NA in USD) and Polkadot ETP (Ticker ADOT FP in EURO and ADOT NA in USD) on Euronext Paris and Amsterdam.

We are also thrilled to have selected Vinter, the specialised crypto asset index provider, for 21Shares’ existing and new range of crypto ETPs. Vinter will be responsible for administrating and calculating indices like our existing ETP crypto basket, the Sygnum Moon Winner.

"We continue to share our vision with the financial industry, and through this collaboration with Vinter, we are able to deploy this innovative set of indices precisely crafted to our clients’ requests and delivering strategies wrapped into an ETP,” said Hany Rashwan, CEO of 21Shares. “We remain ahead of the game with our range of crypto ETP. Our 15 ETPs and asset growth are a testament of the demand from investors requesting to get exposure to these new asset classes as well as investing in innovative indices."

Our team had a busy week full of networking. 21Shares’ Head of Switzerland, Sina Meier gave a panel about our ETPs at Asset Rush on September 15. A virtual “Blockchain Brunch” was also in effect last Saturday, hosted by our Head of Token Marketing Ronald AngSiy and our very own research analyst Zoe Ng. Over 150 brunchers made crypto friends, listened to guest speakers like Head of VC investments for Polygon and also explored internships and job opportunities.

As for upcoming events, 21Shares will be taking part in Crypto Awards 2021 on September 29 and 30 in London, celebrating innovation and excellence by exploring the most recent developments in AI, Blockchain, Cryptocurrencies, Digital Assets and Distributed Ledger Technology (DLT). We are supporting the Outstanding Contribution to the DeFi Sector Award; looking forward to recognizing an innovative DeFi organization/project that has made significant contributions to enhancing the DeFi sector.

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News

Coinbase Retreats from Lending Product Plans, Celsius Faces Scrutiny in Some States

What happened?

Regulatory environment in the US is heating up following the wrestling session between the Securities and Exchange Commission (SEC) and the Senate last week. After threats by the SEC, crypto exchange Coinbase, just announced that it is abandoning Lend, a product they hadn’t launched yet engineered to deliver high-interest returns on USDC, a feature the SEC considered as securities. Earlier, on September 17, New Jersey sent out an order to Celsius, one of the world’s largest cryptocurrency lending platforms, to halt the offering and sale of its interest accounts in the state, since they’re considered unregistered securities, according to the order. In the meantime, Texas went the extra mile and booked a court hearing next February for the same reason.

Why does it matter?

Senator Patrick Toomey was not so happy with the argument SEC Chairman Gary Gensler brought to the hearing. The senator voiced his frustration with the lack of clarity in the SEC’s framework to dictate what is a security and what isn’t. Although the Congress is nowhere near granting the SEC the power it desires to fully regulate crypto exchanges, the impact of Gensler’s controversial views on crypto lending are already being put into effect, curbing financial innovation and thus economic prosperity.

In our previous writings, our thesis at 21Shares reiterated that the regulatory clampdowns on the crypto space in one country will make its crypto workforce resort to another. To materialize our premise, we’re gathering insights through a thread of anonymous polls. Feel free to take this less than 60 second survey if you work in the DeFi space and are based in the US.