First Mover: Bitcoin rises to new 2020 high as Harvest Debacle provides expensive DeFi lessons


Bitcoin reached a new 2020 high of around $ 13,420 after climbing in nine of the past 11 days.

The recent rally in cryptocurrency despite the stall in US equities has reignited speculation that prices for the two asset classes are starting to diverge after a recent period in which they appeared highly correlated.

“We discussed the potential for decoupling from traditional financial markets,” analysts from blockchain data firm Glassnode wrote on Monday. “It’s too early to tell.”

Matt Blom, Diginex’s head of sales and trading, said bitcoin bulls could try to push prices above $ 13,863 by the end of October, the current record for a month-end price. Next, the next price target would be the 2019 high of $ 13,868.

In traditional markets, US stock futures indicated a higher opening, even as lawmakers left Washington for an election campaign, an apparent death knell for the latest efforts to pass an economic stimulus package ahead of the elections. November 3.

The market moves

The rapidly evolving realm of decentralized finance, or DeFi, has attracted huge sums of money from venture capitalists and traders this year. At the last count, about $ 11 billion worth of bitcoin and other cryptocurrencies had been wedged into blockchain-based semi-automatic trading and lending platforms as collateral, a 16-fold increase since the beginning of the year.

But every month or so, the fledgling industry produces such a sudden and strange debacle that sane observers have no choice but to step back and remember that the whole exercise is really just one giant game, played with. real money. Or a laboratory. Or both.

This was the case with the latest exploit to target DeFi: the withdrawal of the equivalent of $ 24 million in digital tokens from a protocol called Harvest Finance.

As reported by CoinDesk’s Will Foxley, an attacker used a complex and sophisticated strategy involving “flash loans” and a series of arbitrage operations involving the DeFi Uniswap, Curve and Harvest protocols. Huge amounts of stablecoin tether (USDT) and USD (USDC) have been trading back and forth, swinging their prices wildly and allowing the attacker to profit from the resulting distortions.

Prices for Harvest’s tokens, FARM, plummeted 65% and total collateral in the project plummeted to $ 430 million from around $ 1 billion. The attacker eventually traded the proceeds into bitcoin.


The rapid sell-off in prices for Harvest’s FARM tokens shows the extreme risks of investing in DeFi.
Source: CoinGecko

There was really no hacking involved, just an exploitation of the Harvest system, which is really just a bunch of computer programming. Apparently it wasn’t illegal, so a debate on ethics and optics ensued on Twitter. Harvest officials called it an “engineering mistake” in a blog post on Medium. They have pledged to explore “repair methods”, but this is yet to be determined.

Later on Monday, Jesse Powell, CEO of cryptocurrency exchange Kraken, unleashed an F-bomb Twitter tirade against “DeFi scams,” concluding with the kind and shrewd motto that “taking your losses is the only one. way to lighting “, as reported by Sebastian Sinclair of CoinDesk.

The lesson is that DeFi’s high profits come with the risk of not only bad directional bets, but also the possibility that some more experienced users are playing by different rules. In a market built entirely on a set of codes, what is allowed and what is possible are really the same thing.

One of the reasons innovation happens so quickly at DeFi is that there is no investor protection regulator. This is the trade-off: portfolio losses are written off in the name of development.

Read more: $ 24M Attack triggers $ 570M “Bank Run” in the latest DeFi exploit

Bitcoin clock


Bitcoin daily price chart.
Source: TradingView

Bitcoin jumped to a 16-month high despite renewed coronavirus-induced risk aversion in global equity markets.

The leading cryptocurrency reached a high of $ 13,450 just minutes before press time, a level last seen in July 2019, surpassing the previous 15-month high of $ 13,300 reached last week.

The upward move looks impressive as European equity markets are trading red on coronavirus concerns. The price divergence comes amid new signs of growing institutional interest in bitcoin, with several public companies disclosing investments in the cryptocurrency in recent weeks.

The rally looks set to continue as data on the chain shows no signs of investor trepidation due to the no-risk sentiment in equities. The number of on-chain daily deposits in cryptocurrency exchanges fell Monday to a nine-month low of 26,889 and the total number of bitcoins held in the exchanges slipped to a new two-year low of 2,478,799 BTC, according to the data source. Glassnode.

Investors typically move coins from their wallets to exchanges to liquidate holdings when they expect the price to drop, and take their coins directly into custody when cryptocurrency is expected to rise.

“The decline in transfers to exchanges despite the reduction in risk in equity markets is a bullish sign,” Matthew Dibb, co-founder and COO of Stack Funds, told CoinDesk in a WhatsApp chat, adding that the cryptocurrency is likely to see further strength. next weeks.

Read more: Bitcoin hits 16-month high despite sell-off in global equities

What’s new

JPMorgan’s wholesale payments token, JPM Coin, to see use by a large tech firm starting next week, executive tells CNBC (CoinDesk)

Singapore Bank DBS Seems to Plan Digital Asset Exchange, Cashed Web Page Shows (CoinDesk)

The Huobi exchange allows customers to use credit or debit cards to purchase cryptocurrencies without redirecting to the third party payment portal (CoinDesk)

The US government pursues civil confiscation request on over 300,000 tether after hack thefts were reported earlier this year (CoinDesk)

Wyoming governor says state has opportunity to capitalize on crypto and blockchain technology before some other major blue chip company or university (CoinDesk) does

PayPal’s new encryption service could create tax headaches for users, even if they’re just buying a cup of coffee (CoinDesk)

DeFi Notional protocol allows users to lend and borrow cryptocurrencies at fixed rates instead of the more typical floating rates (CoinDesk)


The latest news on traditional economics and finance

There is a new “big short” trade forming on Wall Street: bets against US Treasuries (Bloomberg)

Wall Street’s “fear level” has jumped to its highest point in nearly two months due to uncertainty surrounding the upcoming US presidential election scheduled for November 3 (Reuters)

Volkswagen CEO Says Auto Industry Doesn’t Need Another Round of Stimulation (FT)

Ant Financial IPO Subscriptions Outperformed Institutional Investor Shares Within Hour (Nikkei Asia)

A few cents on the dollar is as good as it is for JC Penney’s bondholders, Neiman Marcus (Bloomberg):


The falling values ​​of the credit-default swap auctions show how frayed recoveries on tightened corporate debt are becoming.
Source: Bloomberg

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