Bitcoin Resilient Despite DeFi Hack

GB Market Commentary 11/08/2021

by Marcus Sotiriou

The worst ever hack in Decentralised Finance occurred yesterday, where over $600 million was stolen. Also, the Senate approved the US infrastructure bill with no amendments, which would dramatically impact innovation for crypto in the US - so it is now up to the House of Representatives to pass through the proposed legislation. Despite this, Bitcoin continues to show incredible resilience as it is attempting to close the third consecutive day above the 200-day moving average today. The market may be anticipating the House of Representatives to decide to include positive provisions suggested by Senators Wyden, Toomey and Lunis.

On-chain metrics show that big money has been buying Bitcoin since May 19th, entities with 10K-100K BTC have added +269,450 to their holdings which is worth $12.1B. These entities have between $450M-$4.5B of their capital allocated to Bitcoin. The 50-day moving average is anticipated to cross the 200-day moving average over the weekend unless there is a significant drop in price beforehand, resulting in a golden cross (opposite of the death cross).

Yesterday, Polynetwork was attacked by a hacker who stole $611 million. Polynetwork is a cross-chain protocol that operates on Ethereum, Binance and Polygon. Some blockchain companies have speculated the cause of the hack. Chinese blockchain security firm, BlockSec, claimed the attack might have been triggered with the leak of private keys or through a bug during Poly’s signing process. Another Chinese security firm called Slowmist obtained information from their Chinese exchange partner Hoo to determine that have the attackers used the privacy token Monero as their original funds. Even with the investment risks that DeFi presents, there is currently $80.25bn of value locked in DeFi smart according to DeFi Pulse, representing a 406 per cent increase since the start of the year.

Cardano finally moves ahead with the Alonzo upgrade rollout as its final ‘Purple’ phase is underway. The Alonzo Purple update means that the Cardano testnet can support smart contracts for the first time. Smart contracts on the Cardano mainnet are targeted for the end of August/early September. After the initial onboarding phase, IOHK (the research company who funds the Cardano ecosystem) will hard fork the network and open the Alonzo Purple testnet to any developer. ADA is up around 20% today in anticipation of the long awaited smart contract integration, which will allow Cardano to directly compete with Ethereum.

The famous boxer Manny Pacquiao has announced that he will be releasing an NFT collection on the Ethernity platform. This comes after Lionel Messi announced last week that he will also be launching an NFT collection, which was mentioned in Monday’s commentary. AXS, which is another NFT related token, has risen to being the 31st biggest cryptocurrency by market capitalisation, since being ranked 235th on May 16th. This parabolic rise has been due to the dramatic increase in revenue in the Axie Infinity game, as it has just reached a milestone of more than $1 billion in total sales. The token reached a high of $77 today, from the low of $2.86 in May.

Interest in the cryptocurrency industry from institutions continues to pick up as the 5th largest bank in the US, PNC, are working with Coinbase on an undisclosed crypto project. A source has claimed that PNC plan to offer crypto investment services to clients. Have been hunting fro someone to lead their digital assets and blockchain strategy with a job description as follows: “The role will work on scaling operations for our Cryptocurrency investment capability as well as managing all operational aspects pertaining to new Cryptocurrency initiatives.” I think in the next 5 years, every bank will be offering some form of cryptocurrency related services. Furthermore, AMC, who are the largest cinema operator in the world, have announced that they are accepting Bitcoin for payment for its movies by 2022. There may not be many people wanting to use Bitcoin for this purpose, but this social proofing for another household name to accept the asset is impactful. Lastly, the car insurance company Metromile announced they have bought $1 million worth of Bitcoin.