Tether fires back against report it is using reserves for investments and making crypto-backed loans

“If those loans fail, even a small percentage of them, one Tether would become worth less than $1,” said Bloomberg reporter Zeke Faux.

Tether (USDT), the largest stablecoin issuer by market capitalization, has refuted the details of a Bloomberg story on its reserves holdings.

In a Thursday report, Bloomberg journalist Zeke Faux made numerous claims against Tether, including that its chief financial officer Giancarlo Devasini has used the company’s reserves to make investments, that seem to contradict Tether’s public position that the holdings were fully backed at all times. In addition, Faux alleges that Tether has invested in Chinese firms and issued crypto-backed loans “worth billions of dollars.” According to the report, he was only able to confirm one bank in the Bahamas was working directly with Tether.

“Tether still hasn’t disclosed where it’s keeping its money,” said Faux. “If Devasini is taking enough risk to earn even a 1% return on Tether’s entire reserves, that would give him and his partners a $690 million annual profit. But if those loans fail, even a small percentage of them, one Tether would become worth less than $1.”

Tether called the report a “tired attempt” to undermine the company based on “innuendo and misinformation.” The stablecoin issuer challenged the credibility of Faux’s sources as an attempt “to discredit Giancarlo Devasini and Tether’s executives” and continued to claim its USDT tokens are “fully backed,” citing its quarterly assurance reports.

In February, Tether and Bitfinex agreed to pay New York state $18.5 million in damages and provide extensive reports on its finances as part of a settlement with the New York Attorney General’s Office — the most recent audit was filed with information reported as of June 30. Authorities had claimed Tether misrepresented the degree to which its USDT tokens were backed by fiat collateral.

Related: Stablecoins under scrutiny: USDT stands by ‘commercial paper’ tether

The Bloomberg report comes as many speculate whether China’s second-largest property developer, Evergrande Group, will default on $300 billion in debts. According to Faux, Tether denied holding any debt from Evergrande but would not confirm whether it held commercial paper from other Chinese firms.

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Altcoin roundup: There’s more to DeFi than just providing liquidity

Bitcoin price is down but crypto investors still have a plethora of yield opportunities thanks to DeFi.

The growth of the decentralized finance (DeFi) sector has been a recurrent headline throughout 2021 and to date, hundreds of billions of dollars in crypto assets are locked on protocols across numerous blockchain networks and earning a yield for their holders. 

What started off as a simple Ethereum-based swap interface that allowed ERC-20 tokens to be exchanged in a decentralized manner, called Uniswap, has exploded into a vast ecosystem full of decentralized exchanges, yield farms, lending protocols and staking platforms.

As development continues and older protocols become more established, newer projects have emerged to incorporate more pieces from the traditional financial realm into the DeFi arena as digital technology slowly transforms the global financial system.

Here’s a look at some ways for users to get involved with DeFi outside of simply staking in liquidity pools or depositing to a lending protocol.

Decentralized derivatives trading

Cryptocurrency derivatives exchanges have long been a target for regulators, and once defiant exchanges like BitMEX and Binance have found themselves bending to the will of the law and modifying their operating practices as they seek a more legitimate standing.

This has furthered the necessity for crypto traders to have a decentralized option and led to the creation of protocols like dYdX and Hegic, which offer similar services without the target that is a centralized structure for regulators to come after.

DYdX is a non-custodial perpetuals trading platform built on a layer-two protocol that operates on the Ethereum network and offers users access to up to ten times leverage on futures contracts for more than twenty cryptocurrencies.

Hegic is an on-chain options trading protocol that utilizes hedge contracts and liquidity pools to offer options contracts that last up to 90 days and can payout in Ether (ETH), Wrapped Bitcoin (WBTC) or USD Coin (USDC).

Both of these platforms offer users access to these advanced trading products without the need to divulge their identities, as is required on the centralized counterparts.

Bonding, rebase and ultra-high APY tokens

One topic that is increasingly popping up more in financial discussions is the concept of how to create a decentralized reserve currency that is free of the control of any government or centralized financial institution.

Olympus aims to address this issue through a decentralized autonomous organization (DAO) platform which offers staking and various bond offerings including the ability to bond Ether, MakerDAO (DAI), Liquidity USD (LUSD) and Frax (FRAX).

The bonding process on Olympus is basically a cross between a fixed income product, a futures contract and an option. Bonders are provided with a quote outlining terms for a trade at a future date and include a predetermined amount of the protocol’s native OHM token that the bonder will receive once the vesting period is complete.

Funds that are raised by bond offerings go into the Olympus treasury as collateral to back the OHM tokens that were minted, helping to provide the underlying value behind the OHM token which allows it to be used as a reserve currency or medium of exchange.

The only other projects that have a treasury that provides the underlying value for each token are stablecoins, but as the name implies their price is fixed whereas the price of OHM can increase, offering a new avenue of yield for users.

Once bonding is complete, users can sell their OHM on the open market or stake them on the Olympus protocol for a current yield of 7,299%.

Related: CFTC renewed: What Biden’s new agency picks hold for crypto regulation

Crowd loan participation on Polkadot and Kusama

Another way crypto holders can put their assets to work while also helping the cryptocurrency ecosystem expand is through participating in the parachain auctions in the Polkadot and Kusama ecosystems through a process known as a crowd loan.

In the auction process, different projects vie for one of the limited parachain slots that connect the project directly to the main Kusma or Polkadot network, facilitating the interconnection of all parachains in the ecosystem.

With crowdloans, users who hold the native KSM and DOT tokens can “contribute” them towards the pool that a project uses to secure a parachain slot, and they will have their tokens returned after a specified lock-up or bonding period that can last for up to one year.

In exchange for their contribution and inability to earn staking rewards for the period that the tokens are locked up, users receive a specified number of tokens for the new protocol which can then be used in the ecosystem or sold on the market.

This approach offers a less risky yield opportunity for token holders, as all principal contributions are locked in a smart contract and returned after the stipulated lock-up period. And by the nature of the parachain auction process, there have been well-developed projects with larger communities that have secured parachain slots, increasing the chance that their tokens will maintain or increase in value as long development for the protocols stays active.

Aside from the threat of regulation, the DeFi ecosystem is showing few signs of slowing its integration of the best parts of the traditional financial system and developing innovative protocols that level the playing field for retail investors.

Want more information about trading and investing in crypto markets?

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Analyst says DeFi and stablecoins held up well as crypto markets imploded

DeFi showed tremendous strength during last week’s sell-off as DEX activity and stablecoin stability prove the sector may be ready for mass adoption.

The decentralized finance (DeFi) sector faced its first real challenge during last week’s market sell-off that saw more than $1 trillion wiped from the global cryptocurrency market cap as traders feverishly ran for the safety of stablecoins amid tumbling prices. 

Despite rapidly declining token prices, the nascent DeFi sector held its own as decentralized exchanges experienced a record $11.7 billion in trading volume on May 19. Uniswap (UNI) led with $5.7 billion in volume, followed by SushiSwap (SUSHI) which saw $2.8 billion in 24-hour trading volume.

Daily DEX volume. Source: Dune Analytics

According to the recent DeFi Uncovered report from Glassnode, blue-chip DeFi tokens including, UNI, SUSHI, Maker (MKR), Aave (AAVE) and Compound (COMP) have largely mirrored the decline of Ether (ETH) over the past two weeks, “showing relatively high beta to ETH but not exceeding the decline from ATH by more than 15% from the decline of ETH.”

New users increase despite declining TVL

The pullback in prices, combined with users removing liquidity and rotating into stablecoins led to a 42% decline in the total value locked on smart contracts, which also closely tracked the falling price of Ether.

Total value locked in smart contracts vs. ETH/USD. Source: Glassnode

TVL is intrinsically tied to the underlying value of the deposited tokens and given that Ether is one of the main tokens locked across DeFi platforms, the falling TVL has less to do with users removing funds and is mostly related to the pullback in prices.

Throughout last week’s downturn, the percentage of the Ethereum supply locked in smart contracts remained above 23% while the supply on exchanges “jumped from 11.13% to 11.75%.”

Despite falling prices, new users continue to enter the DeFi ecosystem and the total number of unique 30-day traders on the top DEXs surpassed the 1 million mark for the first time amid last week’s sell-off.

Unique DEX traders. Source: Glassnode

Uniswap is the clear leader with 815,000 unique users between April 24 to May 23, while 1inch (1INCH) came second with 78,200 users and SUSHI ranked third with 10,900 users.

Stablecoins hold their pegs

Much of the strength seen in DeFi during the sell-off can be attributed to the healthy stablecoin market and the ability for major stablecoins like USD Coin (USDC), Tether (USDT) and Dai (DAI) to maintain their dollar peg “for the majority of the crash with volume-weighted average prices (VWAP) staying at $1.00 the majority of the time.”

DAI price vs. USDT price vs. USDC price. Source: Glassnode

The performance of DAI was seen as “especially positive for DeFi” according to Glassnode, as its circulating supply was able to adjust accordingly in response to collateral requirements and protocol stability. The report also highlighted that reclaimed collateral and DAI were removed from the supply as redemptions were claimed by collateral holders.

Posey said:

“This behavior allows collateral to stay healthy, liquidations remain at a healthy level, and DAI to maintain its peg.”

The one stablecoin that struggled to maintain its peg was TerraUSD (UST), which lost its peg on May 18 as the value of its collateral from LUNA fell below that of the stablecoin it collateralized. This led to “unhealthy behavior in its lending market Anchor (ANC),” causing a higher than average number of liquidations on the protocol’s native lending platform.

Overall, stablecoins performed their intended function and pegs held steady across the ecosystem with the on-chain stablecoin transfer volume reaching a record $52 billion during the height of the sell-off.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Celo rallies 50% as excitement builds for the upcoming ‘Donut’ hardfork

CELO price gained 50% ahead of the network’s May 19 ‘Donut’ hardfork which will help increase interoperability and lower gas fees.

Decentralized finance (DeFi) has emerged as a transformational force for not just the cryptocurrency market, but for financial markets in general in 2021 thanks to the ease of access and security offered by blockchain-based protocols which operate on smart contracts.

One project that is looking to take the simplicity of DeFi to the next level is Celo (CELO), an open blockchain ecosystem that makes financial tools accessible to anyone with a mobile phone. 

Data from Cointelegraph Markets Pro and TradingView shows that the price of CELO rallied 50% from a low of $4.29 late on May 16 to an intraday high at $6.70 on May 18 on the back of a 740% surge in 24-hour trading volume. 

CELO/USDT 4-hour chart. Source: TradingView

A quick scroll through the project’s twitter feed shows that excitement in the Celo community has been building in recent weeks due to the upcoming ‘Donut’ hardfork that is scheduled for May 19.

According to documentation from the team, the hard fork will unlock numerous benefits to Celo users, including increased gas efficiency, improved proof-of-stake interoperability and the ability to connect with many of the Ethereum (ETH) tools available like MetaMask.

Some of the other layer-one protocols that the upgrade will help Celo more smoothly interoperate with include Cosmos (ATOM), NEAR and Solana (SOL).

Bullish momentum for CELO was picked up in the VORTECS™ data from Cointelegraph Markets Pro, which began to detect a positive outlook for the token on May 13, prior to the recent price rise.

The VORTECS™ Score, exclusive to Cointelegraph, is an algorithmic comparison of historic and current market conditions derived from a combination of data points including market sentiment, trading volume, recent price movements and Twitter activity.

VORTECS™ Score (green) vs. CELO price. Source: Cointelegraph Markets Pro

As seen in the chart above, the VORTECS™ Score rose into the green zone on May 13 and remained elevated for two days with a high score of 73 coming on May 14, roughly 67 hours before CELO price rallied 50% higher.

With DeFi still in its infancy and interoperability arising as a go-to feature for any network with long-term aspirations, Celo appears well-positioned to experience further growth and token appreciation thanks to its focus on catering to smartphone users and aiming to make interacting with DeFi globally accessible and user friendly.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

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Stablecoin RAI launches, a pure, decentralized alternative for DeFi

The RAI stablecoin will attempt to bring stability to DeFi markets with the long-term goal of becoming a stable global reserve asset not tied to any nation’s currency.

New Ethereum-backed stablecoin RAI hopes to be the savior of the DeFi sector by providing a truly decentralized stablecoin alternative. 

Developed by blockchain startup Reflexer Labs, RAI is not pegged to any fiat currency and its monetary policy is managed by an on-chain, autonomous controller. It’s a fork of Maker’s DAI. RAI co-founder Ameen Soleimani explained:

“RAI is an asset backed only by ETH, governance-minimized, and programmed to maintain its own price stability without needing to peg to an external price reference like the USD.”

Soleimani believes that RAI, which he dubbed “A Money God,” has far greate potential than simply improving the DeFi sector, adding:

“Our aspirations for RAI, however, are more profound — if RAI fulfills its purpose within DeFi and starts to earn global adoption, it could prove to be a viable solution to the Triffin Dilemma, and bring credible neutrality to the administration of a stable global reserve asset.”

The Triffin Dilemma consists of potentially contradictory incentives which arise when an asset, like the USD, serves both as national currency and for international reserves.

Announced today, the asset has launched on the Ethereum blockchain and is available via Uniswap v2, with liquidity mining pools set to be announced in the coming weeks. Prior to a strong liquidity pool, the team admitted that “the controller will be weaker than usual.”

While it’s a stable, it’s not pegged to the value of USD and initially, RAI’s redemption price will be set at $3.14. One immediate use-case in decentralized finance, or DeFi, the team predicts will be a method to avoid liquidation on strong price fluctuations for Ethereum and other cryptocurrencies.

How is RAI different?

Stablecoins like Tether (USDT) are centralized and pegged to US dollars, while even Maker’s DAI accepts centralized stablecoin USDC as collateral. This makes true decentralization finance acolytes concerned as centralized coins can be censored. RAI only uses ETH as collateral.

RAI’s ability to maintain a stable price despite fluctuations in the value of its ETH backing revolves around its PID Controller — a control loop mechanism similar to a car’s cruise control.

The asset has two prices, a redemption price and a market price. When the market price deviates from the redemption price, an interest rate for those who have staked Ethereum is set to oppose the price move, incentivizing users to return RAI to the target price.

Soleimani, who is also the CEO of the crypto cam site SpankChain explained that, “It works kind of like a spring: the further the market price of RAI moves from the target price, the more powerful the interest rate, and the greater the incentive to return RAI to equilibrium.”

Soleimani added that the redemption price, also known as the initial target price, does not really matter because, “RAI only cares about relative stability.”

During the testing phase conducted throughout 2020, which used Proto RAI tokens, the asset’s price managed to maintain a volatility level of 4% or lower with an average price of around $2. During the same period, Ether’s price grew by more than 250%.

Last week, Reflexer Labs announced a $4.14 million series A funding round led by Pantera Capital and Lemniscap. This round was preceded by an investment raise of $1.68 million in August 2020 led by Paradigm.

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