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No more wrapped Bitcoin? This DeFi platform brings native BTC lending to Ethereum

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Until recently, the majority of Bitcoin (BTC) lending took place on centralized platforms. This was predominantly because of the cumbersome process involved in tokenizing Bitcoin into a wrapped ERC-20 version before it could be deposited on the Ethereum (ETH) network.

The resulting implication of this inconvenience was not just the additional transaction fees and slippage incurred but a fragmented decentralized finance (DeFi) ecosystem. Currently, only 1% of Bitcoin is circulating on Ethereum.

BiFi is a platform that facilitates real Bitcoin lending on DeFi by connecting the Bitcoin and Ethereum networks directly. The platform describes itself as “like Compound or Aave, but with real, native Bitcoin.” Instead of going through the process of wrapping their Bitcoin, users can use their native BTC from their Bitcoin wallet to lend and borrow ERC-20 assets.

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With BiFi’s native Bitcoin lending service, Bitcoiners can engage with DeFi protocols without the need for third-party custodians and merchants. In eliminating the need for wrapped BTC, BiFi expects “a massive influx of BTC holders into DeFi” that will shape the future of the industry. 

Multichain lending with maximum security

BiFi claims to have been designed with a “security-first mindset.” Using BIFROST’s multichain technology and a combination of cryptographic proofs, BiFi ensures the security of its protocol.

The key aspect here is the fact that the Bitcoin and Ethereum networks are connected directly. Both these blockchains already have a large number of nodes ensuring their computational integrity.

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We build cryptographic proofs to verify the accuracy of transactions that occurred on the Bitcoin network and verify it on-chain on Ethereum smart contracts. It may be more expensive to perform on-chain verifications, but this computational integrity technique is the most secure way thus far,” said BiFi in a blog post.

The platform also makes use of fraud proofs to verify that the actions of the relayer are correct. It does this by creating cryptographic proofs and verifying them on-chain.

A DeFi future without fragmented liquidity

Since its launch in January 2021, BiFi’s Total Value Locked across staking, lending and pooling services has crossed $219 million. The platform also has a flash loan-based leveraged yield farming and trading service — BiFi X.

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“Connecting Bitcoin and Ethereum network is a huge step forward. Yet BIFROST will connect more networks and BiFi will offer lending and financial services to expand the DeFi ecosystem to turn DeFi into future finance,” commented Dohyun Pak, the CEO of BiFi and BIFROST.

The project’s next launch will be a multichain wallet, which it expects to release in Q3 2021. Users will be able to store BTC, ETH, BNB, ERC-20 tokens and BEP-20 tokens.

In 2022, BiFi aims to expand to more networks for multichain DeFi lending from EVM to non-EVM. Through a “Multichain Dev Suite,” developers will be able to operate DApps among all cross-EVM and non-EVM networks, expanding the multichain DeFi ecosystem.

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Ultimately, BIFROST envisions a future without isolated capital markets on numerous chains. To make this happen with the main goal of solving one of DeFi’s biggest challenges – interoperability – the project allows capital to flow freely between blockchains without any wrapping, bridging or custodians. Built upon its “Universal Multichain Middleware,” BiFi is the multichain DeFi platform that will not isolate capital markets on numerous chains.

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Wen moon? Data shows pro traders becoming more bullish on Bitcoin price

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MicroStrategy’s purchase of 7,002 BTC might have helped boost Bitcoin price today, but derivatives data also shows that pro traders are becoming more bullish.

The $4,700 Bitcoin (BTC) price spike on Nov. 29 was likely a great relief for holders, but it seems premature to call the bottom according to derivative metrics. 

This should not come as a surprise because Bitcoin price is still 15% below the $69,000 all-time high set on Nov. 10. Just 15 days later, the cryptocurrency was testing the $53,500 support after an abrupt 22% correction.

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Today’s trend reversal was possibly encouraged by MicroStrategy’s announcement that it had acquired 7,002 Bitcoin on Monday at an average price of $59,187 per coin. The listed company raised money by selling 571,001 shares between Oct. 1 and Nov. 29, raising a total of $414.4 million in cash.

More bullish news came after German stock market operator Deutsche Boerse announced the listing of the Invesco Physical Bitcoin exchange-traded note or ETN. The new product will trade under the ticker BTIC on Deutsche Boerse’s Xetra digital stock exchange.

Data shows pro traders are still neutral-to-bullish

To understand how bullish or bearish professional traders are positioned, one should analyze the futures basis rate. That indicator is also known as the futures premium, and it measures the difference between futures contracts and the current spot market at regular exchanges.

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Bitcoin’s quarterly futures are the preferred instruments of whales and arbitrage desks. Even though derivatives might seem complicated for retail traders due to their settlement date and price difference from spot markets, the most notorious benefit is the lack of a fluctuating funding rate.

Bitcoin 3-month futures basis rate. Source: Laevitas.ch
The three-month futures typically trade with a 5%–15% annualized premium, which is deemed an opportunity cost for arbitrage trading. By postponing settlement, sellers demand a higher price and this causes the price difference.

Notice the 9% bottom on Nov. 27, as Bitcoin tested the $56,500 support. Then, after Monday’s rally above $58,000, the indicator shifted back to a healthy 12%. Even with this movement, there is no sign of excitement, but none of the past few weeks could be described as a bearish period.

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Lending markets provide additional insight

Margin trading allows investors to borrow cryptocurrency to leverage their trading position, therefore increasing the returns. For example, one can buy Bitcoin by borrowing Tether (USDT), thus increasing the exposure. On the other hand, borrowing Bitcoin can only be used to short it or bet on the price decrease.

Unlike futures contracts, the balance between margin longs and shorts isn’t necessarily matched.

OKEx USDT/BTC margin lending ratio. Source: OKEx

When the margin lending ratio is high, it indicates that the market is bullish—the opposite, a low lending ratio signals that the market is bearish.

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The chart above shows that traders have been borrowing more Bitcoin recently, because the ratio decreased from 21.9 on Nov. 26 to the current 11.3. However, the data leans bullish in absolute terms because the indicator favors stablecoin borrowing by a wide margin.

Derivatives data shows zero excitement from pro traders even as Bitcoin gained 9% from the $53,400 low on Nov. 28. Unlike retail traders, these experienced whales avoid FOMO, although the margin lending indicator shows signs of excessive optimism.

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Bitcoin, Ethereum and Two Smart Contract Competitors Are the Winners Among Institutional Investors, According to Crypto Asset Manager CoinShares

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Leading digital asset manager CoinShares says institutional investors have a strong appetite for Bitcoin (BTC) and three leading smart contract platforms.

According to the firm, the overall crypto market correction has left investors hungry for more.

“Digital asset investment products saw inflows of US$306m last week suggesting [a] continued appetite for digital assets.”

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As usual, BTC led all digital assets in terms of capital inflows, this time in the wake of a new exchange-traded product (ETP) set to launch on the Deutsche Borse exchange.

“Bitcoin saw the largest inflows in 5 weeks totaling US$247m following the launch of another investment product in Europe. This brings the 11 week run of inflows to US$2.7bn.”

BTC is trading at $58,475 at time of writing, up nearly 6% on the day.

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The leading smart contract platform Ethereum (ETH) concluded a strong month of inflows with a week totaling over $23 million.

“Ethereum saw inflows totaling US$23m last week, marking its 5th consecutive week of inflows.”

This week’s big winners in inflows relative to assets under management (AuM) also include the scalable smart contract platform Solana (SOL) and the interoperable blockchain Polkadot, which is designed to support multiple layer-1 smart contract protocols.

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“In terms of inflows relative to AuM, Polkadot and Solana continue to be the winners, with inflows representing 8.6% (US$11.5m) and 5.9% (US$14.6m) of AuM respectively last week.”

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Source: CoinShares

Ethereum is currently trading at $4,453.79, up 7.5% in the last 24 hours. SOL and DOT are trading at $211.48 and $36.82, respectively, at time of writing.

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Nayib Bukele sends cryptic response to Bank of England over Bitcoin law criticism

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  • Nayib Bukele questions England love for El Salvador over Bitcoin adoption.
  • England expreses concern over El Salvador Bitcoin law.
  • Outside England IMF also criticized El Salvador over Bitcoin law.

After he expressed concerns over Bitcoin adoption in the country, El Salvador President Nayib Bukele has sent a cryptic response to the Governor of the Bank of England, Andrew Bailey.

Over the weekend, Bailey said he is not a fan of bitcoin or its growing adoption in countries like El Salvador. He expressed concerns while speaking at Cambridge University, asking if Salvadorians are aware of Bitcoin’s volatility.

“It concerns me that a country would choose it as its national currency,” Bailey said in response to a question at an appearance at the Cambridge University student union on Thursday. “What would worry me most of all is, do the citizens of El Salvador understand the nature and volatility of the currency they have.”

Bank of England is not the only international body to express concerns over Bitcoin adoption by El Salvador. Since June, when the Central American country announced its Bitcoin intention, numerous global financial organizations have tried to warn the country not to do it.

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Outside the Bank of England, the IMF also criticized the move by the country.

Nayib Bukele’s cryptic, Ironic response

While addressing Bailey’s most recent comments, President Bukele responded in a tweet pointing at the “genuine” concerns that the BOE has for the people of El Salvador.

“Bank of England is “worried about El Salvador’s adoption of Bitcoin? Really?

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I guess the Bank of England’s interest in the well-being of our people is genuine. Right?

I mean, they have always cared about our people. Always.

Gotta love Bank of England,” he wrote.

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El Salvador adopted Bitcoin as its legal tender months back, and according to Nayib Bukele, there has been progress since the country made the move.

For instance, the nation has used the aforementioned volatility, especially when the price dips, to accumulate more portions of the asset and to use the profits when the price increases to make plans for buying pet hospitals or new schools.

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El Salvador adopted Bitcoin as its legal tender months back, and according to Nayib Bukele, there has been progress since the country made the move.

For instance, the nation has used the aforementioned volatility, especially when the price dips, to accumulate more portions of the asset and to use the profits when the price increases to make plans for buying pet hospitals or new schools.

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