Mining difficulty saw a sharp rise yesterday as Bitcoin saw its “Thanksgiving price slump” over the weekend
The rise in mining difficulty comes as Bitcoin tries to settle just above $18,000 following a week of massive surges and dips. Last week, Bitcoin price broke into the $19,000 level but plunged to below $17,000 afterwards.
Data from crypto analytics firm Glassnode showed mining difficulty on the network was approaching its all-time high after an 8.9% increase yesterday alone. This sharp swell put the current difficulty level within 5% of its all-time high value that was seen last month. The network’s hash rate is now north of 130 EH/s.
“#Bitcoin mining difficulty increased by 8.9% today. It is now only 4.4% below its ATH,” the on-chain analytics firm posted on Twitter.
The possible effects of the increase in mining difficulty
Judging from history, an increase in mining difficulty has signified the onset of the bullish run. This was the case in 2013 and also in 2016. At the moment, it remains uncertain if the recent upswing in BTC price to within range of its all-time high is a long-term bull cycle.
Although Bitcoin had a great upward momentum last week, its price plummeted by slightly over 10%; the result of several Bitcoin whales transferring their holdings onto exchanges. Bitcoin price, as of writing, is $18,650 — up 4.96 % in the last 24 hours.
The increased mining difficulty on the network can have a huge impact on the cryptocurrency. It could potentially result in higher fees for users as well as increased block generation time. It could also lead to an increase in the number of unmined transactions in the crypto’s mempool.
Bitcoin isn’t the only crypto seeing a rise in mining difficulty
Ethereum also posted an increase in mining difficulty recently. Glassnode revealed that the mining difficulty for the blockchain surpassed a two-year high at the end of last week. This came after ETH price dropped from over $600 at the start of the week to $513 by mid-week.
“#Ethereum $ETH Mining Difficulty just reached an ATH of 3,719,917,244,648,520. Previous ATH of 3,696,664,670,930,580 was observed on 04 August 2018,” Glassnode alerts wrote.
Ethereum is currently changing hands at $586.04, having climbed up 8.30% in the last 24 hours.
Ripple CEO believes the company’s operations would not be affected even if XRP is declared as a security
Ripple has been a subject of debate in the last few months as its future in the US remains unclear. The company’s chief executive Brad Garlinghouse previously declared that Ripple would relocate if the regulatory environment around cryptos in the US remained hostile.
Speaking in an episode of the Pomp Podcast, the CEO explained the impacts the native token XRP would have if it is declared as a security. Garlinghouse admitted it would be difficult to perceive XRP as a security. He explained that the position would be going against the grain of the current perception in the G20 markets.
“You know if XRP were deemed a security here in the US that, you know, we have other G20 markets that have taken a different view. I’m not aware of any market globally that thinks that XRP is a security,” he asserted.
Even so, the CEO stated that the company would thrive even if XRP is designated as a security by the US Securities and Exchange Commission (SEC).
Garlinghouse went on to shed some light on the matter by explaining that the majority of RippleNet customers were based out of the US. As such, the declaration of XRP as a security would not impede the company’s operation. In a hypothetical scenario where XRP is declared as a security by the SEC, the investors would be required to have a broker-dealer registration with the commission.
Although the token’s status has been a hot topic recently, a final decision on it hasn’t been arrived at yet. Among those pushing for its security designation is 40-year trading veteran Peter Brandt. Others, such as Congressman Tom Emmer have voiced their views that XRP is not a security.
Earlier this week, XRP’s price rallied to almost $0.75 on Tuesday. The coin has since retreated to a price of $0.51 as of writing, which represents a drop of 0.715% in the last 24 hours. Trading volume over the past 24-hours has also dipped to $21.7 billion.
Uniswap is moving down the rankings as the exchange continues to bleed liquidity after the end of its farming period
The former world leading decentralised exchange by volume has now moved down to the fifth place in the rankings. The exchange has continued leaking liquidity since the end of farming on 17 November. Uniswap has a total locked value (TVL) of $1.14 billion as of writing, having plunged 11.70% within the last 24 hours.
In the first week of November, the exchange had a TVL of $2.753 billion. This figure had risen to $2.9 billion by the second week before hitting $3 billion on 12 November. The exchange started losing collateral as the end of the farming period neared. On 18 November, the exchange had lost almost half of its value. Overall, Uniswap liquidity has plummeted by 60%.
But there is one positive metric on the exchange – trading volumes. According to Token Terminal, Uniswap trading volumes have remained steady during this period.
The financial metrics provider compared Uniswap’s liquidity loss and its trading volume, sharing the findings via a Twitter thread.
“Trading volume (GMV) does not seem to correlate with TVL or the liquidity deposited into the trading pools. To a certain extent, TVL is required to reduce slippage in an AMM-style DEX, but it is a less accurate metric when measuring the actual performance of a DEX,” a section of the thread read.
According to the analytics provider, the loss of liquidity [total value locked] did not impact the trading volume [gross merchandise value]. The total trading volume on the exchange for the past month is about $10 billion. Its competitor and ‘clone’ SushiSwap has a $1.4 billion trading volume in the same period.
Uniswap fork and rival protocol SushiSwap were among the biggest beneficiaries of the liquidity outflow from Uniswap. However, the protocol has lost most of the collateral it gained, moving from a total value locked of $1.08 billion on 23 November to $535 million as of writing.
It is hard not to make a case that Uniswap is the largest decentralised exchange, at least in terms of trading volume taking into account it has lost over half of its collateral.
New research shows indexes based on DeFI tokens are not diversified enough for the advanced investor
The research claims that indexes have overexposure to a few DeFi tokens, which invalidates the whole point of diversification. This makes them ‘poor’ investment options for advanced investors looking to manage their risks.
The DeFi boom seen in the third quarter of the year saw many indexes crop up in the sector. The idea behind indexes is to get broad exposure without doing the tedious work of buying the assets individually.
Popular analytics provider, DeFi Pulse, launched their index in September when the hype around DeFi peaked. However, Roberto Talamas, an analyst at Messari, believes that the DeFi Pulse Index leans more on some assets than others.
“The DeFi Pulse Index (DPI) now has over 35M in assets showing increased demand for crypto indexes. While DPI is a good investment for beginners, it may not provide the diversification that sophisticated investors demand, leaving them overexposed to individual DeFi assets,” he posted on Twitter.
Talamas further pointed out that although these indexes have the benefits of broad exposure and lower fees, they can be less than ideal. He argued that they are often heavily weighted towards some assets, thus reducing the diversification benefits.
The analyst studied the DeFi Pulse Index, and after evaluating the product, he discovered that only four assets represent 77% of the portfolio. These assets are Synthetix’s token that holds 13.29%, Yearn Finance’s token that accounts for 17.87%, Aave’s token, which represents 20.18%, and Uniswap’s token that controls 26.12%.
Talamas highlights that any significant movement from either of these assets impacts the index performance heavily due to their immense contribution.
Interestingly, this analysis is true for many other DeFi indexes. Synthetix’s sDEFI, for instance, is concentrated with only four tokens. These are SNX, Compound, Kyber Network, and Maker that collectively account for about 60% of the portfolio.