Welcome to the 25th edition of ‘The Digital Asset Digest’. Over the last few weeks, we’ve been hinting at an interest in DeFi, and in this new edition, we have a breakdown of yield farming and how people can make money. This will feel elementary, but we promise to address more complex topics going forward.
Welcome to the first edition of our DeFi column. Decentralized finance has quickly taken over the news cycle with new protocols like yearn.finance and BurgerSwap taking the world by storm. But what does this all mean?
Today, we’re going to focus on yield farming, a term you’ve probably seen bouncing around for months now, but maybe not quite understood. We’ll go more into the other ways to make money in the DeFi world in our next column, but for now, all you need to know is there are 4 key ways to earn in the DeFi space:
- Loaning tokens
- Providing liquidity to trading pools
- Staking coins
- Investing in governance tokens
In the case of the original yield farming protocol, Compound, when you loan or borrow funds, governance tokens ($COMP) are issued to you as a reward for using the platform. The scarcity of these tokens and ability to vote makes them function much like equities.
So it is liquidity mining when you opt to participate in the platform, receive a yield, and also trade Compound. A solid markup is available trading the COMP you receive, and the yields on your loaned funds are much higher than traditional money markets.
Source: ARS Technica
“If an American buys bitcoin, ether, or another cryptocurrency and then sells it later at a profit, she or he will typically owe capital gains tax on the difference. But blockchains do not have the tax reporting infrastructure that has become standard for conventional financial institutions. So the IRS doesn’t have an easy way to figure out who has received a cryptocurrency windfall. In the early years of the bitcoin boom, many taxpayers failed to report large bitcoin-related profits.”
“Excitement for the upcoming project quickly reached a fever pitch, with the community FOMOing roughly $15 million into the EMN protocol. However, the protocol was quickly exploited and drained … before the hacker bizarrely opted to transfer $8 million of the funds back to Cronje’s yearn deployer account by the time the developer had woken up:”
“What’s also clear is that Armstrong believes he’s far from alone among his C-Suite peers – not just at Coinbase or in the crypto industry, but among executive teams across corporate America. By sharing his position publicly, Armstrong obviously hopes it resonates and catches on, perhaps lighting the spark of some kind of backlash to the cultural moment that has, among other things, seen Scientific American take a position on the presidential race for the first time in its 175-year history.”
“The biggest debate in the crypto space over recent years has been about if Bitcoin is a medium of exchange or not.
Prominent individuals that have commented on the matter include Jack Dorsey, the chief executive of Twitter and Square, and many commentators and investors online. Dorsey, for one, thinks that Bitcoin should be used as a digital currency, recently telling Reuters it’s the “best iteration” of a native internet currency he’s seen.”
INDUSTRY WIDE SNAPSHOT
Source: Parsec Research
“Successful market making shops have two unique characteristics, first they have very high sharpes. Metrics like sharpe or sortino ratios are usually not emphasized in crypto, largely because holding crypto obliterates any sharpe regardless of how many 10x’ers are caught. But underlying model assumptions notwithstanding, high sharpe strategies are great because they can be levered up to an almost arbitrary risk threshold. ”
In our most recent article on the Global Digital Assets blog, we gave an update on yearn.finance. The article explains what it is, how it’s changing the crypto landscape, and gives our predictions on the future of DeFi as it relates to this revolutionary finance platform.
Read it here!
Source: Trading View
Bitcoin has finally left the $10,400 range and jumped up to $10,800. Occurring just over 24 hours ago, this jump could represent a new normal for Bitcoin. The behemoth cryptocurrency has been lingering around $10,400 for an uncomfortably long time. Now, it might finally be beginning to make moves.
Last week, we talked about the lack of movement we were seeing in the Bitcoin world. We expected a slightly bigger swing, but this will do. You can see how the RSI jumped into overbought territory during the pump, but price still maintained around $10,800 afterward.
Fundamentally, there was nothing that would have caused that jump in price, so we view it as price dynamics playing out rather than anything with some sort of hidden meaning. Bitcoin is still performing in the same constraints as before, so we’ll stick with our prediction of a $2k price swing in either direction over the next week.
This concludes another issue of the ‘Digital Asset Digest’. We hope you enjoyed this week’s edition. We are constantly making changes and are always open to feedback.
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