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With Crypto In The Red, It’s A Blue Blue Blue Post-Christmas

It’s halfway through the last week of the year, and a huge sell-off throughout the crypto market seems to have been sparked by a post-Christmas depression. 

The sudden plunge comes as the market heads towards options expiry. A total of 129,800 options contracts worth almost $6 billion are due to expire Friday. As a result, Bitcoin ($BTC.X) will tend to move towards the “max pain” mark, followed by a major trend shift a few days later.

Bitcoin ($BTC.X) dropped below $48,000 today. Ethereum ($ETH.X) fell 2%, trading at $3,700. The post-holiday downturn spread across the entire market with all the major cryptocurrencies ending in the red.

As we approach the cusp of the new year, let’s see how crypto is wrapping up 2021: 

  • The world’s biggest New Year’s Eve party is coming to the metaverse
  • ProShares files a Metaverse ETF application with the SEC
  • Crypto 101: What is a Liquidity Pool?
  • A class-action lawsuit has been proposed against Voyager over its trading fees

Here’s how the major cryptocurrencies are performing:

Bitcoin (BTC)
$47,193.65
-1.15%
Ether (ETH) $3,706.86 -2.86%
Binance Coin (BNB)
$518.05
-3.49%
Solana (SOL)
$170.44
-5.17%
Cardano (ADA)
$1.34
-5.48%
XRP (XRP)
$0.8193
-4.62%
Terra (LUNA)
$83.65
-2.86%
Polkadot (DOT) $26.85 -4.99%
Avalanche (AVAX)
$103.68
-4.12%
Dogecoin (DOGE) $0.168 -3.84%

Metaverse

Join The Most Exciting New Year’s Party Happening in the Metaverse

The world’s biggest New Year’s Eve party is now happening in the metaverse. DCG, the market leader in digital assets, and global real estate firm Jamestown have partnered to recreate One Times Square (the site of the New Year’s Eve Ball Drop Celebration) in Decentraland, the leading decentralized virtual world.   

Dubbed “MetaFest 2022,” the event will include NFT art galleries, VIP rooftop lounges, and virtual music performances. 

Jamestown, the owner of One Times Square, will replicate the 26-story tower at the heart of New York’s New Year’s Eve ball drop in Decentraland: ‘‘Recreating One Times Square in the Decentraland metaverse is part of a larger digital asset strategy to evolve and enhance our physical real estate for Web 3.0 and open new pathways for our assets to exist in multiple metaverses in the future,” said Michael Phillips, President of Jamestown.

It’s not the first time Jamestown has bet on the metaverse. Last year, the firm debuted the app VNYE, which offers a virtual space in which users can experience New York traditions ​​like exploring the Times Square Plazas, collecting confetti to earn points for additional avatar customizations, and visiting the observation deck at One Times Square to view the virtual world of Times Square from above.

MetaFest 2022 will feature music and entertainment acts, VIP lounges on the rooftop, CryptoArt galleries, and immersive games. Through livestreams of New York City, virtual billboards will connect the event to its physical counterpart. Along with One Times Square, the area consists of approximately 170 LAND parcels, which include five buildings, each with a distinct exterior aesthetic and an active interior.

This event coincides with the real Times Square Ball Drop, which will feature only 15,000 socially distant and fully vaccinated attendees due to an increase in the COVID-19 outbreak. There’s no doubt that this trend is an extension of the ongoing metaverse trend where the value of virtual real estate continues to rise in popular games like Decentraland and The Sandbox.


ETF

ProShares Plans to Launch a Metaverse ETF 

After becoming the first firm to win SEC approval for a bitcoin futures ETF (exchange-traded fund), ProShares is now betting for a Metaverse ETF.

According to Bloomberg, if approved, the ProShares Metaverse Theme ETF will track the performance of the Solactive Metaverse Theme Index (SOMETAV), which includes companies exposed to the metaverse industry.

The index gives the ETF exposure to U.S. companies listed on the Nasdaq or the New York Stock Exchange. Solactive’s Metaverse Theme Index includes tech giants such as Apple, Microsoft, Intel, Meta Platforms (formerly Facebook), and Nvidia. 

Metaverse, which is an online virtual world that incorporates augmented reality, virtual reality, 3D holographic avatars, video, and other means of communication, has seen a surge in investment recently. By getting approval for a metaverse-focused ETF, ProShares will join firms in South Korea and Canada that launched Meta ETFs earlier this year.


Crypto 101

What is a Liquidity Pool?

Even if you’re new to crypto, you’ve probably heard of decentralized finance. Decentralized finance aims to create a new financial system that is open to everyone and does not require banks to act as intermediaries. With DeFi, buyers and sellers can trade freely without banks or middlemen using software written on blockchains, also known as smart contracts. This type of transaction is between two parties, also known as peer-to-peer transactions.

Before addressing investors trading in a free market where there are divisions which lead to liquidity issues/price disagreements, it’s important to understand how a traditional (or centralized) exchange works. 

You may be familiar with centralized cryptocurrency exchanges such as Coinbase or Binance, which use the order book model for their trading. This is also how traditional stock exchanges work, such as NYSE or Nasdaq. 

In the order book model, buyers and sellers place orders together. In order for trades to happen, both buyers and sellers need to agree on the price. Buyers can make higher bids or sellers can lower prices to achieve this.

But what happens if no one is willing to place orders at a fair price? What if there are not enough coins available? This is a common issue with centralized crypto exchanges like Coinbase or Binance, where liquidity issues occur from time to time. 

To solve this, decentralized crypto exchanges (like Uniswap) maintain liquidity pools to ensure the exchanges have enough tokens to trade. In simple terms, liquidity pools are collections of funds locked in a smart contract to guarantee liquidity on a decentralized exchange.

How does LP work?

To make this simple, let’s use Ether ($ETH.X) and Tether ($USDT.X). One $ETH.X can be purchased for 1,000 $USDT.X. Each liquidity provider contributes equal amounts of $ETH.X and USDT to the pool, so anyone depositing 1 $ETH.X would have to match it with 1,000 $USDT.X.

Liquidity in the pool makes it so that $ETH.X can be traded for $USDT.X using the funds deposited, rather than waiting for a counterparty to match their trade.

Those who provide liquidity receive rewards for their contributions. Upon depositing, they receive a new token representing their stake, called a pool token. USDTETH, for example, is the pool token in this example. In order to withdraw a stake in a liquidity pool, a user burns the tokens in that pool.

Uniswap, the largest decentralized exchange and operator of some of the largest liquid pools, is the basis for the example above. A liquidity pool ensures a near-continuous stream of liquidity to decentralized exchanges, which is the biggest benefit. 

But there is a bit of a risk.

DeFi users are at risk for smart contract failure if the underlying code isn’t audited or secure. Additionally, liquidity providers can suffer an impermanent loss of deposit value when the price fluctuates. If the liquidity provider stakes their deposit for an extended period of time, it may be possible to offset some or all of the loss with transaction fee rewards.

Moreover, small pools can experience slippage due to the pricing algorithm if someone wants to make a large trade suddenly. In 2020, bZx, a decentralized lending protocol, was hacked, and users exploited smaller liquidity pools as part of a larger market manipulation attack.


Crypto Lawsuit

Voyager Faces a Class Action Lawsuit Over Alleged Trading Fees

A proposed class-action lawsuit claims that cryptocurrency broker Voyager Digital Ltd. misled customers by charging hidden fees on transactions. According to the lawsuit, while Voyager advertises that its trades are “100% commission-free,” there are “secret commissions” embedded in the pricing of every trade that “in most cases exceed the commissions charged by its competitors.”

A 30-year-old man named Mark Cassidy filed the suit in federal court in Miami. He said he traded crypto initially on Robinhood but stopped after the SEC accused the trading app of trade charges. The offer of no-commission trades enticed him to Voyager, but he became suspicious after noticing wide bid-ask spreads.

“They’re basically ripping people off small pieces at a time,” he told Bloomberg News, adding that the experience made him wary of crypto in general.

As part of the lawsuit, the Dallas Mavericks and their billionaire owner Mark Cuban are also mentioned. Cuban’s support of and the Mavericks’ recent partnership with Voyager exhibit Voyager’s practice of misleading investors with false promises of opportunities to profit from the cryptocurrency market, according to the court filing

Voyager’s complaint cites preliminary analyses conducted by two experts: Richard Sanders, lead investigator at blockchain forensics company CipherBlade, and Stephen Castell, chairman of the UK-based Castell Consulting. Castell predicted in his report that the platform’s users would be owed a total of $1 billion in damages. 

Bloomberg News interviewed Voyager’s chief communications officer, Michael Legg, who said the action was “absolutely spurious and without any merit.” “We look forward to dealing with this matter through the appropriate legal channels,” he said

The lawsuit follows a proposed class-action lawsuit against Robinhood Markets Inc. regarding its payment for order flow. The SEC alleged that Robinhood failed to notify customers that it sold their stock orders to Wall Street firms, which led to client trades being executed at inferior prices compared to those of its competitors. The trading app agreed to pay a $65 million fine in December 2020 to settle the charges. 

This lawsuit is just the latest in a long line of investors taking action against online brokers over money they claim to have lost to ‘deceptive business practices.’