Last week saw ETH fundamentals strengthen amid a Bitcoin bull run, even as DeFi TVL struggled to regain momentum. In this piece, we’ll take a look at how the end to Uniswap’s UNI liquidity mining may free up $1.1 billion in ETH as well as the various other factors that may impact price action in the coming days.
Bitcoin’s Bull Run Continues to Impact Markets
Bitcoin analyst Josh Ranger pointed out that November could mark the first month in years where Bitcoin has closed above the previous monthly all-time high, which historically has led to a major uptrend.
With major institutions like Microstrategy and PayPal integrating or investing in Bitcoin, the fundamentals for the dominant cryptocurrency are looking very strong.
Historically, Ethereum and Bitcoin have been highly correlated, with Ethereum often setting the pace. However, research shows that the correlation has been decreasing over time, with ETH becoming more independent recently.
It’s possible that ETH will mimic major movements in Bitcoin price and vice versa, but the gradually reduced correlation means ETH fundamentals are all the more important in the next major BTC bull run.
Factors Influencing ETH Prices
Bison Trails’ Protocol Specialist Elias Simos highlighted the growth of above-average ETH addresses recently. Addresses with over 32 ETH have resumed an uptrend with over 5% growth each month, with ETH being moved from exchanges in the latter half of the year.
As Simos points out, this could be due to the building interest in ETH 2, with existing funds being re-allocated in anticipation of the upcoming launch which is now set for December 1. Nearly 20% of the required deposits have been made so far.
Many of the fundamentals are increasingly promising for ETH bulls. Over 1 billion DAI are now in circulation as DeFi TVL continues to inch upwards. PayPal has integrated ETH as well as BTC, with weekly buying limits raised last week from $10,000 to $15,000.
However, last week also saw the failure of critical Ethereum infrastructure provider Infura, which crashed and caused a delay in the price feeds for ETH and many ER-20 tokens among other things. Major crypto exchanges like Binance and Bithumb were forced to disable withdrawals until service resumed. Note that this issue was not related to the Ethereum blockchain itself – a misunderstanding that has circulated widely on Twitter.
Volatility Ahead As UNI Ends Farming
On Tuesday November 17th, Uniswap farming comes to an end, potentially freeing up $1.1 billion in ETH.
Four Uniswap liquidity pools have been paying ETH rewards since September 17 with 583,333 UNI earned each week per pool. The $2.4 billion in rewards helped raise Uniswap to the top of the DeFi leaderboard by total value locked.
It’s possible that token prices will see rocky price action as liquidity exits Uniswap (as much as 2.5% of the total ETH market cap) and is either sold or moved to other income-generating applications. A dramatic drop in the total value locked of Uniswap could also spark fear among investors, particularly if the liquidity migrates to farm rewards at a competitor, SushiSwap
At the time of writing, there are no plans to open new liquidity pools or extend farming, raising the question of what will happen to the funds tied into the incentivized pools. A sell-off is certainly on the cards, and many traders will be watching the UNI event with interest to see how it impacts ETH price.
Two Hacks Mark A Rocky Week For DeFi
The DeFi ecosystem was shaken by two major security breaches leading to the theft of $8 million. In total, $100 million was lost this year to DeFi hackers.
Despite being audited twice for vulnerabilities, the Akropolis code was exploited on November 12. Armed with $800,000 in borrowed capital, a hacker took out a flash loan and double-minted crypto on the lending platform several times, siphoning $2 million in DAI from Akrpolis’ saving pools. No user funds were affected and Akropolis has appealed to the hacker for the return of the funds.
On November 14, the Value DeFi protocol suffered a flash loan attack mere hours after tweeting about the project’s flash-oan attack prevention. A net sum of $6 million was taken in the attack, and the VALUE token dropped 30% before recovering somewhat.
The attacks come just two weeks after the $34 million Harvest Finance hack. The rate of DeFi attacks highlights the security issues still present in the ecosystem and market sentiment is likely to be affected.
BitGive is organizing the De-Phi Crypto for Good Conference on November 18 to discuss the “many ways that crypto and blockchain can dramatically transform people’s lives for the better.” The De-Phi (Decentralized Philanthropy) Crypto for Good Conference features keynote speakers from the United Nations World Food Programme and Vesper among other projects.
BlockDevs Asia is hosting the sixth Blockdevs.Asia Tech Talks event on November 19 to share news and insights on blockchain development.