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Compound Finance to impose lending caps in light of failed Aave exploit

On Nov. 28, users of decentralized finance, or DeFi, lending platform Compound Finance passed a proposal to impose restrictions on the maximum borrowing of 10 tokens on the protocol. The proposal was put forth by financial modeling firm Gauntlet and passed with a majority "Yes," although total turnout amounted to less than 7% of the COMP tokens in circulation. 

Most notably, tokens such as Uniswap (UNI) and COMP had their borrow limits slashed from 11,250,000 and 150,000 to 550,000 and 18,000, respectively. Other less liquid altcoins on Compound, such as year.finance (YFI), had its borrow cap reduced from 1,500 to just 20. Coins such as wrapped Bitcoin (WBTC), which previously had no borrow limit on Compound, have been slapped with a ceiling of 1,250 on maximum borrow.

According to Gauntlet, the proposal would prevent "insolvency risk from liquidation cascades," "price manipulation Mango squeeze exploits," "risk of high utilization," and "risk from shorting assets from a short position on Compound of significant size relative to the circulating supply of the asset." Although the related incident was not directly referenced, Gauntlet also conducted modeling and risk assessment for DeFi lending protocol Aave. 

On Nov. 22, it was uncovered that Mango Markets hacker Avraham Eisenberg attempted to exploit the protocol by shorting high amounts of Curve (CRV), which was an illiquid token on Aave at the time, and forcing the protocol to liquidate the position at a loss due to significant slippage. However, it turned out that the slippage was far less than expected, resulting in an estimated $10 million loss after a CRV short squeeze.

Gauntlet then proposed to freeze a series of tokens on Aave V2 that may be at risk of an exploit due to lack of liquidity. Currently, the Compound Finance protocol has $654.7 million in total borrowings collateralized by $2.146 billion worth of assets. 

Price analysis 11/28: SPX, DXY, BTC, ETH, BNB, XRP, ADA, DOGE, MATIC, DOT

China witnessed a spike in Covid cases and that has resulted in strict lockdown restrictions in several parts of the country. This triggered widespread protests in China and has possibly pulled the global stock markets lower. 

In addition to the turmoil in China, the cryptocurrency markets, which are already in a bear grip, are reeling under pressure from the Chapter 11 bankruptcy filing by BlockFi and its subsidiaries. Bitcoin (BTC) is down 21% in November, on track to its worst November performance since 2018.

Daily cryptocurrency market performance. Source: Coin360

The sharp fall in Bitcoin’s price has drastically reduced the number of wallets holding more than $1 million worth of Bitcoin. There were 112,898 millionaire wallets on Nov. 8, 2021, but Glassnode data shows that as of Nov. 25, only 23,245 wallets boast of a Bitcoin balance worth $1 million or more.

Could the weakness in the S&P 500 index (SPX) pull Bitcoin below $16,000? Let’s study the charts to find out.

SPX

The recovery in the S&P 500 index has risen close to the downtrend line. The bears are likely to defend this level as they had done on two previous occasions.

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Dogecoin jumps after Elon Musk shares glimpse into Twitter 2.0 plans

Billionaire entrepreneur Elon Musk has confirmed that he intends on integrating payments into what he describes as Twitter 2.0 — “The Everything App” —  fuelling a short-lived 19.4% price surge for meme-inspired cryptocurrency Dogecoin (DOGE).

The new Twitter CEO revealed his plans in a Nov. 27 tweet to his 119.2 million followers, in which he shared several slides from a recent “Twitter company talk.”

While Musk made no mention of DOGE in the tweet or in the attached slides, this didn’t appear to stop some investors from being hopeful that Dogecoin would be involved in some way.

According to data from CoinGecko, Dogecoin’s (DOGE) price surged 19.4% from $0.089 to $0.107 over several hours after the tweet before cooling off to $0.096 at the time of writing.

Other plans listed as part of Musk’s vision for Twitter 2.0 included "Advertising as Entertainment," “Video,” “Encrypted DMs,” “Longform Tweets” and “Relaunch Blue Verified.”

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Crypto Twitter calls for calm after wETH insolvency joke goes viral

An inside joke about the “insolvency” of Wrapped Ethereum (wETH) over the weekend has forced influencers to explain it was just a “shitpost” after members of the community took it as real. 

The wETH insolvency FUD (fear, uncertainty and doubt) seemingly began to make the rounds on Nov. 26, with false rumors alleging that wETH isn’t backed 1:1 by Ether (ETH) and is insolvent.

Blockchain developer and contributor to the ERC-721A token standard “cygaar” was one of the first to spread the joke, before confirming in a subsequent post that it was in fact a “shitpost” to see who was reading his content.

In fact, only a day before, cygaar tweeted that “WETH cannot ever go insolvent” and that “WETH will always be swappable 1:1 with ETH.”

Ethereum bull and host of The Daily Gwei Anthony Sassano also joined in on the wETH joke with his own parody post on Nov. 27, but had to clarify later that the initial post was “shitpost/ meme” after reading the replies.

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Bitcoin price consolidation has shifted traders to these 4 altcoins

Bitcoin (BTC) has been trading in a tight range since Thanksgiving Nov. 24, as traders are uncertain about the next directional move. Usually, in a bear market, analysts tend to become uber-bearish and project targets that tend to scare away investors.

The failure of Bitcoin to start a strong recovery has given rise to several bearish targets, which extend up to $6,000 on the downside.

Although anything is possible in a bear market, traders who have a long-term view could try to accumulate fundamentally strong coins in several tranches. Because a bottom will only be confirmed in hindsight and trying to time it is usually a futile exercise.

Crypto market data daily view. Source: Coin360

In a bear market, all coins do not bottom at the same time. Hence, along with keeping an eye on the broader cryptocurrency market, traders should closely follow the coins of their choice.

The cryptocurrencies that lead the market out of the bear phase generally tend to do well when the next bull market begins. Let’s look at the charts of the cryptocurrencies that are trying to start an up-move in the short term.

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New York's mayor seeks balance with regulators after PoW mining moratorium

New York City mayor Eric Adams is still focused on making New York a crypto hub, but he believes that goal can be combined with statewide efforts to curb environmental costs related to crypto mining, according to reports on Nov 25. 

The comments follow the new law signed by New York governor Kathy Hochul, banning proof-of-work (PoW) mining activities for two years in the state. The mayor, known as a crypto proponent, said in June he would ask the governor to veto the bill.

The city will work with legislators to find a balance between the crypto industry development and legislative, Adams told The NY Daily News:

“I’m going to work with the legislators who are in support and those who have concerns, and I believe we are going to come to a great meeting place.”

The PoW mining moratorium will not only prohibit new mining operations but also refuse the renewal of licenses to those who are already operating in the state, as reported by Cointelegraph. Any new PoW mining operation in the state could only operate if it uses 100% renewable energy.

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A US Senate hearing will discuss FTX, New York bans proof-of-work and FTX evaluates its assets: Hodler’s Digest, Nov. 20-26

Coming every Saturday, Hodler’s Digest will help you track every single important news story that happened this week. The best (and worst) quotes, adoption and regulation highlights, leading coins, predictions and much more — a week on Cointelegraph in one link.

Top Stories This Week

Tornado Cash developer Alexey Pertsev to stay detained until next year’s hearing

Amid an ongoing investigation into crypto mixer Tornado Cash, the product’s developer, Alexey Pertsev, will be subject to at least another three months of detainment, as per a court ruling this week. Earlier in 2022, United States authorities flagged Tornado Cash as a tool nefarious parties allegedly used to launder funds. Pertsev was detained for suspicions of foul play, although the situation has drawn controversy.

US Senate committee schedules FTX hearing for Dec. 1, CFTC head to testify

A U.S. senate hearing slated for Dec. 1 will aim to look into FTX and the events surrounding its downfall. Titled “Why Congress Needs To Act: Lessons Learned From The FTX Collapse,” the hearing will feature Commodity Futures Trading Commission Chairman Rostin Behnam, among other witnesses. According to recent documentation from FTX’s Chapter 11 bankruptcy case, FTX Trading Ltd. owes a combined sum of more than $3 billion to its 50 largest creditors.

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Alameda Research withdrew $204M ahead of bankruptcy filing - Arkham Intelligence

Alameda Research withdrew over $200 million from FTX.US before it filed for bankruptcy, according to analysis from blockchain firm Arkham Intelligence disclosed on Nov. 25. 

In a Twitter thread, Arkham revealed that Alameda Research, FTX's sister company, pulled $204 million from eight different addresses of FTX US in a variety of crypto assets, the majority of them stablecoins, in the final days before the collapse.

Among the withdrawn funds, $116 million, or 57.1%, were in stablecoins pegged to the US dollar, including USDT, USDC, BUSD, and TUSD. Arkham's analysis also showed that $49.49 million (24.2%) of the funds was in Ether (ETH), and $38.06 million, or 18.7%, was in wrapped Bitcoin (wBTC). 

"The withdrawn wBTC was sent to the Alameda WBTC Merchant wallet, and then bridged in its entirety to the BTC Blockchain.", said Arkham, adding that of the $204 million transferred, $142.4 million, or 69%, was sent to wallets owned by FTX International, "suggesting that Alameda may have been operating to bridge between the two entities."

Of the Ether transferred, $35.52 million was sent to FTX and $13.87 million was sent to a large active trading wallet. The firm noted that it's "unknown whether the almost 14M in ETH was sent to 0xa20 as part of a trade, or as an internal fund transfer within Alameda."

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How bad is the current state of crypto? On-chain analyst explains

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Despite the market downturn and the widespread negative sentiment in the industry in the wake of the FTX collapse, on-chain data still show reasons to be bullish on Bitcoin. 

As pointed out by on-chain analyst Will Clemente, it’s enough to look at the long-term holders’s Bitcoin positions: they reached an all-time high despite their profitability being at an all-time low.

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Price analysis 11/25: BTC, ETH, BNB, XRP, ADA, DOGE, MATIC, DOT, LTC, UNI

FTX’s collapse dealt a major blow to the already fragile sentiment among cryptocurrency investors. Although a quick recovery is unlikely, Blockchain analysis firm Chainalysis said that the crypto universe could emerge stronger from this crisis. Chainalysis’ research lead Eric Jardine arrived at the conclusion after comparing FTX’s fall to that of Mt. Gox.

Another calming statement came from Bloomberg Intelligence exchange-traded fund analyst James Seyffart, who said that there was a “99.9% chance” that the Grayscale Bitcoin Trust (GBTC) held the Bitcoin (BTC) it claimed. He added that GBTC was “unlikely” to be liquidated.

Daily cryptocurrency market performance. Source: Coin360

The negative events of the past few days do not seem to have scared away the small investors who remain on an accumulating spree. According to blockchain analytics company Glassnode, the number of wallets holding at least one Bitcoin or more soared in November and reached 950,000.

Could Bitcoin and altcoins extend their recovery in the near term? Let’s study the charts of the top-10 cryptocurrencies to find out.

BTC/USDT

Bitcoin rebounded off $15,476 on Nov. 21, indicating that lower levels are attracting buying by the aggressive bulls. The relative strength index (RSI) has formed a bullish divergence, suggesting that the bears may be losing their grip.

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StarkNet makes Cairo 1.0 open source in first step toward community control

Zero-knowledge (ZK)-Rollup tech company StarkWare has officially open sourced its new programming language compiler, Cairo 1.0, which will soon be supported on Ethereum layer-2 scaling solution StarkNet in Q1 2023. 

The news was announced by StarkWare — the company behind StarkNet — in a Nov. 25 Twitter post. StarkWare’s rollup technology and recursive proofs offer the potential to compress millions of transactions on L2 into a single transaction on Ethereum, however the project has been criticized for maintaining control over its IP, not least of all by its more open source focused competitor zkSync.

StarkWare described open sourcing Cairo as a “milestone move” in its quest to hand over more control and intellectual property rights to its community and developers. Cairo is a programming language written specifically to harness the power of zk rollups and validity proofs.

StarkWare stated that developers can now experiment with Cairo 1.0 by compiling and executing simple applications until it is fully supported on StarkNet in Q1 2023.

At that point Cairo 1.0 will enable faster feature development and allow for more community involvement, according to Starkware Exploration Lead and former Ethereum core developer Abdelhamid Bakhta.

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WEMIX token plunges 70% after it's delisted by Korean exchanges

South Korea’s largest crypto exchanges have announced they will delist WEMIX (WEMIX) — the native token of gaming company Wemade’s blockchain platform Wemix — alleging the firm provided “false information” in response to an investment warning it was issued.

Bithumb, Upbeat, Coinone, Korbit and Gopax — which are part of a collective called the Digital Asset eXchange Alliance (DAXA) — announced on Nov. 24 that they would terminate contract support for WEMIX, with trading set to end on Dec. 8.

In the investment warning issued Oct. 27, DAXA alleged that there was considerably more WEMIX in circulation than Wemix had disclosed, and Wemix had pledged to work with DAXA to alleviate these concerns.

After news of the decision to delist broke, WEMIX Communication released a statement claiming it had sincerely responded to requests and concerns raised by DAXA and corrected a number of issues where they believe the circulating supply had been overstated the group, adding:

“The WEMIX team does not acknowledge or agree with the unreasonable decision made by the Digital Asset eXchange Alliance (DAXA)... It is crucial to note that the Foundation has not circulated a single WEMIX more than what we have officially disclosed thus far.”

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CrossTower eyeing further crypto acquisitions outside of Voyager bid

Crypto exchange CrossTower Inc., which is currently bidding for the assets of Voyager Digital, is reportedly window shopping for other crypto company acquisitions. 

In a Nov. 24 Bloomberg report, CrossTower CEO Kapil Rathi revealed that the company is looking to pick up firms with a “good set of customers” and a “good balance sheet” despite the current bear market, stating:

“We’re in a great place to either acquire entities who have a good set of customers with them and a good balance sheet [...] so we are openly looking at different types of companies from an organic growth perspective.”

In September, CrossTower was one of the companies reported to be competing to acquire the assets of bankrupt crypto lender Voyager Digital, along with FTX and Binance.

FTX Trading eventually became the winner of the Voyager bid on Sept. 27 with the sale valued at $1.4 billion.

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Aussies warned to avoid crypto paper wallets they find on the street

Australians have been warned to stay away from suspicious-looking fake Bitcoin paper wallets, which work by luring victims into accessing a lucrative crypto wallet but will ultimately drain them of their own crypto holdings.

According to a Nov. 22 post on the Facebook page of the NSW Police Force, the scam starts as a paper cryptocurrency wallet with a QR code, which is made to appear like a legitimate Bitcoin paper wallet.

These are strewn by scammers in public locations such as streets or parks.

An example of the scam crypto paper wallets. Source: NSW Police Force 

An individual that locates the paper wallet and scans the QR code is directed to click on a link to access a crypto wallet with up to $16,000 Australian dollars ($10,000).

The person is then asked to pay a withdrawal fee and provide their own wallet credentials that will purportedly allow them to transfer the balance into their own crypto wallet.

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Sam Bankman-Fried still speaking at events and the community is furious

Former FTX CEO Sam Bankman-Fried has once again attracted the ire of the crypto community — this time over his slated appearance at an upcoming New York City conference on November 30. 

Vocal members of Crypto Twitter have questioned why the former CEO of the now-bankrupt exchange continues to walk free given the events over the last month.

In a Nov. 23 Twitter post, Bankman-Fried announced he will be speaking with New York Times journalist Andrew Sorkin at the DealBook Summit “next Wednesday.”

The news was confirmed publicly by Sorkin, who said: “There are a lot of important questions to be asked and answered. Nothing is off limits.”

In the wake of the FTX collapse, some in the community had wondered whether Bankman-Fried would honor his conference engagements, including his one at the DealBook Summit.

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Tether vs. USD Coin on-chain data reveals two very different stablecoins

USD Coin (USDC), a stablecoin issued by the U.S.-based Circle Financials Ltd, is taking the lead over its top rival, Tether (USDT), when it comes to institutional adoption, according to on-chain data.

USDC daily transfer volumes are higher

The market capitalization of USDC tokens in circulation comes to be around $44 billion versus USDT's $65.42 billion. However, USDC's daily transfer value on the Ethereum blockchain has been consistently higher than USDT throughout 2022, data from Glassnode shows.

For instance, as of Nov. 22, the USDC daily transfer was around $14 billion compared to USDT's $5 billion.

USDC vs. USDT daily transfer volume. Source: Glassnode

In other words, USDC users engage in relatively higher capital transfers compared to USDT users, suggesting that USDC is increasingly the stablecoin of choice among high net-worth entities including institutional whales, hedge funds, family offices, crypto exchanges, etc.

Related: 82% of Tether reserves held in ‘extremely liquid’ assets, according to attestation


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New York AG pushes prohibition of crypto purchases via retirement funds

The turmoil surrounding crypto exchange FTX and Sam Bankman-Fried (SBF) reaffirmed regulators’ belief about the need for stricter oversight across the crypto ecosystem. Seeking investor protection against a similar fallout, New York Attorney General (NYAG) Letitia James recommended prohibiting crypto investments in defined contribution plans and individual retirement accounts (IRAs).

In a letter addressed to the members of the U.S. Congress, James requested legislation that would bar U.S. citizens from purchasing cryptocurrencies and digital assets using their funds in IRAs and defined contribution plans such as 401(k) and 457 plans. However, a survey from October 2022 showed that nearly 50% of U.S.-based investors want to see crypto become a part of their 401(k) retirement plans.

James further pitched the rejection of two acts — the recently proposed Retirement Savings Modernization Act and the Financial Freedom Act of 2022 — that are aimed at allowing investments in digital assets. While highlighting SBF’s involvement in running a Ponzi Scheme and misappropriating users’ funds, James jotted down four primary reasons explaining her call to exclude digital assets from IRAs and defined contribution plans, as explained below.

First and foremost, the NYAG pointed out the importance of protecting retirement savings in the long term. Secondly, she highlighted Congress' historical obligation to protect the retirement funds of U.S. citizens. James used narratives including frauds and lack of sufficient guardrails as her third reason to prohibit crypto investments. The final concern was around the volatility and custodial and valuation uncertainties.

On the other hand, the NYAG clarified that there is a distinction between digital assets and blockchain technology. She does believe that U.S. citizens should be allowed to purchase stakes in publicly traded blockchain-based businesses in retirement accounts.

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Argentina’s fan token sinks 31% after World Cup loss against Saudi Arabia

Argentina’s shock 2-1 loss to Saudi Arabia in the opening match of the FIFA World Cup has plummeted the price of the Argentine Football Association Fan Token (ARG), in line with the hopes of the nation’s die-hard soccer fans. 

With the ARG token priced at $7.21 at kick-off, the poor performance by the Lionel Messi-led soccer team saw the token’s price fall 31% to $4.96 by the end of the match before rising to $5.22 at the time of writing, according to data from Coingecko.

By contrast, the floor price of "The Saudis," a Saudi Arabian-themed nonfungible token (NFT) collection unrelated to the soccer team, skyrocketed 52.6% from 0.196 Ether (ETH) to 0.3 ETH over the same time before cooling off to a price of 0.225 ETH, around $250.

The collection's sales volume also spiked 990% over the last 24 hours, closing in on 24.5 ETH as per OpenSea data.

Despite the built-up hype for the FIFA World Cup, which officially kicked off on Nov. 20, cryptocurrency research firm Delphi Digital noted that the fan engagement platform Socios' native token Chiliz (CHZ), in addition to other soccer-based tokens representing participating nations, has also cooled off considerably over the last few days:

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Ethereum bears have the upper hand according to derivatives data, but for how long?

Ether (ETH) price experienced an 11.9% decline from Nov. 20 to Nov. 22, bottoming at $1,074 — the lowest level seen since July. Currently, investors have reason to be concerned after crypto lending company Genesis reportedly faced difficulties raising money, triggering rumors of insolvency on Nov. 21. 

However, a spokesperson for Genesis told Cointelegraph that there were no plans for imminent bankruptcy because the company continues to hold discussions with its creditors.

Unease about the centralization of decentralized finance (DeFi) surfaced after Uniswap Labs changed the privacy policy on Nov. 17, revealing that it collects publicly-available blockchain data, users' browser information, operating systems data and interactions with its service providers.

Adding to the fracas, the hacker behind the FTX exchange theft of $447 million has been spotted moving their Ether funds. On Nov. 20, the attacker transferred 50,000 ETH to a separate wallet and converted it to Bitcoin using two renBTC bridges.

Traders fear that the hacker might be suppressing Ether's price to profit using leveraged short bets. The rumor was raised by @kundunsan on Nov. 15, even though the Twitter post did not gain exposure.

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Litecoin hits fresh 2022 high versus Bitcoin — But will LTC price 'halve' before the halving?

Litecoin (LTC) has emerged as one of the rare winners in the ongoing cryptocurrency market meltdown led by the FTX exchange's collapse.

LTC price outperforms BTC, ET

The 2011-born altcoin rallied nearly 16% month-to-date (MTD) to reach $62.75 on Nov. 22, outperforming its top rivals, Bitcoin (BTC) and Ether (ETH), which lo approximately 25% and 30%, respectively, in the same period.

LTC/USD daily price chart. Source: TradingView

Furthermore, the LTC/BTC price also rallied to new heights, gaining 50% in November to establish a new yearly high of 0.003970 BTC on Nov. 22.

As Cointelegraph reported, Litecoin diverged from the broader cryptocurrency market downtrend earlier this month with its halving slated for August 2023. LTC has also received an endorsement from none other than Michael Saylor for being a Bitcoin-like "digital commodity." 

Nonetheless, signs of bullish exhaustion are emerging.

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