New DeFi yield farming platforms have been coming thick and fast over the past month or so with new opportunities popping up almost every day. The latest offering garnering attention is Pickle Finance which aims to help mitigate the relative instability in stablecoins.
The majority of DeFi doppelgangers do mostly the same thing with a few slight variations. Essentially, offering a worthless governance token as an incentive to lure liquidity providers. In some cases, the token performs well for some time, while others dump just as quickly as they pump.
Pickle Finance is taking a slightly different, though highly-experimental, approach to stablecoins and their relative pegs.
Pickle Pegging Hopes on Stablecoins
Pickle has the grand plan of bringing the four largest stablecoins USDT, DAI, USDC, and sUSD closer to their peg by using the power of farming and ‘pVaults’, which have just been rebranded to ‘pJars.’
The project was announced on Sept 11 and has accrued over $50 million in liquidity over the weekend. Pickle’s token liquidity pools are boasting what have become the typical four-figure returns for DeFi.
The general idea is to offer greater rewards to below-peg stablecoin pools and fewer rewards to above-peg stablecoin pools. Capital movement between stablecoins is encouraged by distributing PICKLE tokens to Uniswap liquidity providers for stablecoin/Ethereum pools.
Using the slogan ‘Off-peg bad, on-peg good,’ Pickle Finance is looking to incentivize users to sell stablecoins that are trading above their peg and buy ones that are below it.
Stablecoins often trade above their pegs which provide good arbitrage opportunities for whales swapping large bags between them, however, this is of little benefit to the DeFi ecosystem as a whole as it exacerbates the problem. A stablecoin that isn’t stable is of little use to the rest of us.
When a stablecoin is above peg, the protocol will distribute fewer PICKLE tokens to that particular pool and more to other pools. As yield farmers chase the best returns, this creates sell pressure for the overvalued stablecoin and buying pressure for the others. There is also a ‘Pickle Swap’ feature, which enables liquidity providers to change positions from one stablecoin pool to another in a single click.
The native PICKLE token can be used for governance voting, but as with most other DeFi clones, it is likely that mostly just the whales exercise this privilege. Pickle Finance has taken this a step further though by introducing quadratic voting which lessens the control over heavy bag holders.
Ethereum co-founder Vitalik Buterin questioned the safeguards, if any, that are in place to prevent abuse of the system;
“Nice! How do you determine individual identities to prevent individuals from splitting their funds into many accounts to avoid being square-rooted?”
Pickle responded that as of yet, they cannot control it but wanted to make it more difficult for whales to game the system.
Within days of the launch, Dai started trading above its peg which spurred a governance vote to reduce rewards on that pool however it remains unclear as to whether this had a direct effect on Dai returning closer to its peg. Either way, the team did claim credit for it in a rather surreptitious way;
Pickle Jars to Seek Higher DeFi Yields
On Sept 15, Pickle Finance introduced something called ‘Pickle Jars’ which is the next iteration of their pVaults system. The unaudited contracts have been taken from Yearn Finance’s yVaults which have so far proved successful.
Each ‘pJar’ will employ a different alpha-seeking strategy such as flash loan arbitrage for the best returns. Collateral is deposited in exchange for a ‘pAsset’ which is then sent to the strategy with returns being distributed back to the pools, just as yEarn does with its popular yETH vault.
The fee structure allocates 3% to governance for subsidized gas, 0.5% to the function caller as a reward for triggering the strategy, 1.5% is used to buy and burn PICKLE tokens from the market, and there is a 0.5% withdrawal fee.
The first pJar will be using the Curve pool to generate more sCRV tokens. The following image breaks it down:
Initial tests indicate an annual percentage yield of 40.5% is achievable using this method.
The announcement added that new pJars will continually be introduced and implemented in the weeks and months to come. The team also stated that they know they cannot keep printing PICKLE to maintain the stability peg and will be updating their roadmap soon.
At the time of press, PICKLE tokens were trading at $55 according to Uniswap. Within three days of its launch, the token surged to top out at $80 before pulling back to current levels.
Uniswap also reports current liquidity of around $13 million and a daily volume of approximately $20 million.
As with many of the latest DeFi offerings, the anonymous team behind it has issued a warning that this is an experimental project and there is a very real risk of money loss.
The smart contracts are unaudited, there could be adverse effects on stablecoin pegs, and token pump and dumps, or ‘rug pulls’ as they’re called these days, are a real possibility.
Though, none of this is likely to deter the voracious droves of degens from flocking to the latest DeFi food frenzy for a quick fix.
What’s the tipping point for Bitcoin Futures on top derivatives exchanges like the CME, an exchange that has recorded a daily trading volume of over $300M and Open Interest of over $400M, consistently, for the past 3 months.
Well, a small shift in Open Interest or trading volume can have a cascading effect on Bitcoin Futures’ performance in the next 180 days. Such a shift will be influenced by several factors, and it begins at the tipping point. Three factors, to be more specific.
In the current phase of Bitcoin’s market cycle, these factors are more relevant for traders on derivative exchanges. This becomes more evident when the Liquidations chart for BitMEX is observed. Over the past 3 months, sell liquidations have paid for buy liquidations. However, over the last few days, this trend has been reversed, and buy liquidations have covered for sell liquidations on BitMEX.
The point here is to detect the source of the domino effect before the dominoes start falling. In the case of Bitcoin Futures, the tipping point may be closer than anticipated.
One of the top factors influencing the tipping point is the Law of the Few.
The Law of the Few states that “the success of any kind of social epidemic is heavily dependent on the involvement of people with a particular and rare set of social gifts.”
In the case of Bitcoin, institutional investors, derivatives traders, and whales fit the bill. The success of Bitcoin Futures in the global trading community heavily relies on institutional investors trading on CME. In fact, the daily trade volume and Open Interest on CME influence the trading sentiment across spot exchanges as well.
The last time a cascading effect was witnessed was when BTC Futures’ Daily Trading Volume hit $445M on CME and there was a rally all the way up to $614M. At the time of writing, the Daily Trading Volume was up 63.3%, when compared to the figures 6 months ago, and it has the potential to hit $614M with one move in the right direction.
This effect heavily relies on another key factor – The Stickiness Factor.
Back in 2017, when Google search results for “Bitcoin” and “Crypto” broke the record, the trading community witnessed a historic Bitcoin bull run and altcoin rally. Institutional interest and growth of Bitcoin derivative products ensued. A similar event transpired when Bitcoin Futures’ aggregated daily volume hit $184B on 27 July 2020. This event was a unique occurrence, and it made Bitcoin Futures stick in the portfolio of the average institutional investor and the derivatives trader.
The aggregate trade volume hasn’t dropped to pre-July 2020 levels since then. Despite drops in Bitcoin’s price on spot exchanges, Futures contracts continue to trade at a premium and there is more optimism. Volume is not directly impacted by Bitcoin’s price and when the spot market is riddled with bearish sentiment, long contracts continue feeding shorts on BitMEX. This stickiness is a driver of the aforementioned tipping point.
Inching closer to the tipping point, the powerful context is the rise of stablecoins and their instrumental role in lowering the barrier to entry on spot and fiat-crypto exchanges.
Over the past three months, stablecoins like USDT have added $100M in volume every day and their market capitalization and dominance have risen tremendously. In fact, Tether has also crossed a market capitalization of $15B.
This directly influences the tipping point for Bitcoin Futures as it makes Futures trading more accessible to traders. Bitcoin held on exchanges has nearly doubled over the past month, corresponding to an increase in Tether’s market capitalization and circulation. This resonates with derivatives traders who opt for physically-settled Bitcoin Futures contracts on exchanges like Bakkt. In fact, on Bakkt, the daily trade volume was upwards of $80M for the past week, while the Open Interest has been consistently above $10M.
All of these factors are highlighting a shift in derivatives traders’ strategy, while also underlining increased activity on derivatives exchanges. The race to the tipping point has begun – An increase in aggregate trading volume on physically-settled Futures contracts or CME may trigger the much-awaited domino effect.
Tron was observed to have hit a strong zone of resistance, before being rejected and pushed to the downside, at the time of writing. In fact, such bearish momentum appeared likely to continue for TRX. At a time when Ethereum was increasingly being criticized for high Gas fees and a congested network, it could have been Tron’s moment to shine, but things didn’t pan out that way at all.
Further down the charts, Synthetix continued making lower highs in its downtrend while VeChain broke out upwards after a few days of relative calm.
TRX was seeing oversold conditions a few days ago when its RSI hit a low of 23, before ascending just past 50. However, the RSI was unable to remain above 50, and its drop beneath the level highlighted the fact that TRX’s recent 12% surge from $0.263 to $0.296 was merely a bounce.
TRX found a zone of strong resistance at $0.3 and looked likely to drop towards the support at $0.265.
Interestingly, a recent Reddit post has raised questions about JustSwap’s vetting process, claiming that the Tron Foundation has whitelisted a DeFi project that has since pulled a $2 million exit scam. This, despite DappRadar listing the project as “high-risk.”
Synthetix underlined the possibility of dropping lower on the charts. The Directional Movement Index did not yet show a strong trend, but ADX (yellow) was inching towards 20 and could move further north. Also, the rising -DMI (pink) denoted a bearish trend.
Over the past week, every SNX bounce off the level of support has been overwhelmed by selling pressure. This can be expected to continue. With the price registering lower highs, the way down remained the path of least resistance for SNX.
The next level of support after $4.23 lay at $3.36, representing a 20% depreciation.
VeChain showed bullishness in the market after a period of consolidation. The Bollinger Bands expanded to indicate heightened volatility, while the price broke out towards the upper band. At the time of writing, the price was staying above the 20-period moving average, a moving average that could be tested as support as VET steadily climbs toward its resistance around the $0.158 zone.
The breakout was also accompanied by high trading volumes, legitimizing the breakout.
The Seoul Metropolitan Police Agency has summoned the chairman of Bithumb for interrogation regarding the alleged fraud. The chairman of the firm, Lee Jung-hoon has been accused of a lot of fraud activities. The fraud is related to the failed listing of the BXA token and defrauding the investors.
As revealed in earlier reports, this token has been promoted as the native token of Bithumb. However, the token has never been launched or listed on any platform. Due to the promotion of a fake token, Lee is now involved in a huge fraud, which includes the damages of around $25 million funds of the investors.
Seoul Police Conducted Initial Investigation at Bithumb Office
It needs to be mentioned that this police raid did not happen all of a sudden as earlier also Seoul police had investigated this case. The initial investigation that police conducted was on September 02, 2020 at the office of Bithumb. Lee has also been accused of using the investors fund purchasing the properties overseas or some other offshore investments.
According to the latest report, Kim Byung-gun who is another chairman of Bithumb, is also accused of getting involved in this BXA fraud along with Lee. However, the Seoul Police did not send any summon for investigation to Kim regarding this case.
Police Siezed The Shares Related to Lee
Along with this summon, the police has also siezed a lot of shares of the Bithumb Holdings that belonged to Lee. Not only this, the firm is also help responsible for a data breach incident which took place in 2017. Even though the exchange is accused of different allegations, it is still holding quite a firm position in the South Korean market. Not only in South Korea, it is still counted among the top ten largest crypto exchanges across the world. The daily trading volume of the exchange is around $250 million, which might be due to its huge user base.