DeFi picks up the pace as alternate blockchains and NFTs boom

On the back of the incredible crypto market recovery and the boom in NFT markets, the DeFi market has grown 18% in October.

As September ended, the cryptocurrency markets recovered from the so-called “September curse” handsomely to hit a market capitalization of $2.32 trillion. The decentralized finance (DeFi) market has been an integral part of this growth. The total value locked (TVL) in DeFi protocols grew more than 20%, from $113.5 billion on Sept. 28 to hit $137 billion on Oct. 6, as per data from Dappradar.

Even the Bank of America (BoA) — a global banking giant — has revealed its bullish outlook on DeFi and nonfungible tokens (NFTs). In an Oct. 4 report by BofA Securities — a subsidiary of BoA — the firm evaluated the scope of crypto assets beyond “just bitcoin.”

(Bitcoin’s strength) can execute automated programs (smart“Tokens such as Ether, Cardano, Solana, and others with blockchains that can do more than securely record payments contracts) such as making a payment after an event. his is Decentralized Finance (DeFi) where smart contracts automate manual processes of traditional finance”, the report states.

It also compared tokenization to the early days of the internet and spoke of the decentralization and tokenization of many aspects of finance as it currently exists. 

Cointelegraph discussed the rapid expansion of the DeFi markets with Johnny Kyu, the CEO of crypto exchange KuCoin. He explained:

“The popularity of the DeFi market is growing as more people are starting to understand that a smart contract can be a worthy alternative to a traditional loan or bank deposit. The amount of funds locked in DeFi reflects market adoption among private investors who are moving their money from the traditional financial system to the decentralized industry.”

While the DeFi sector’s TVL has seen a bump from the massive price increase of various projects’ native tokens, Kyu also attributes the growth to the attractive rates offered by DeFi platforms.

A recent report by Dappradar revealed that the TVL in the industry gained 53.45% quarter-on-quarter in Q3 2021. In September, the unique active wallets (UAW) linked to any decentralized application hit a daily average of 1.7 million. The quarterly average UAW is 1.54 million.

Cointelegraph spoke with Balancer Labs CEO Fernando Martinelli about the importance of the DeFi base that Ethereum established. He said, “A new wave of DeFi projects is building on top of the infrastructure the first generation has established, bringing new use cases and more advanced products to DeFi power users.”

Martinelli said that greater institutional involvement is driving up the TVLs in well-established “safe” protocols. Furthermore, the large yields offered by DeFi platforms are shifting retail investors from centralized platforms into the DeFi space. This rising adoption across various categories of investors is enabling DeFi to move to the next phase of its growth.

The next generation

The DeFi ecosystem began on the Ethereum blockchain because of the smart contract functionality it offered. However, several other blockchain networks have since deployed smart contract functionality on their networks through layer-1 or layer-2 solutions. The most prominent of these networks are Binance Smart Chain, Solana, Avalanche, Terra and Polygon. Most recently, the Cardano network witnessed smart contract deployment as a part of the Alonzo hard fork.

Even though the growth of these networks could be seen perceived to be organic, there is one major issue with the Ethereum blockchain that could have contributed to this growth: gas fees. The EIP-1559 proposal that came as part of the London hard fork included the burning of ETH tokens in an attempt to make ETH “ultrasound money” eventually, improve scalability and reduce gas fees.

However, even though the fees are not as absurd as they used to be during the peak of the bull run in May, there have been a few instances in the last several weeks where the average transaction fee in the Ethereum network took a huge spike. Notably, on Sept. 7, the fee went to $21.29, and on Sept. 27 the gas price went to a four-month high of $25.43.

Martinelli said, “There is little doubt that high gas fees on Ethereum — particularly severe recently due to the congestion from NFTs — has helped spur on the rapid adoption of other networks. (..) Layer 2 solutions are helping Ethereum scale, and we’re excited to see ongoing developments in this space.”

The continued popularity of NFTs is also a significant driver of this growth. The aforementioned report by Dappradar mentioned that the NFT space has seen exponential growth as well. In Q3, the market generated over $10.67 billion in trading volumes, thus entailing a 704% increase from the second quarter and a massive 38,060% increase year-on-year. 

While earlier in the year, most of the major NFT sales were on the Ethereum blockchain, now blockchains like Binance Smart Chain, Solana, Polygon, Avalanche and Tezos are beginning to catch up. Recently, an NFT from the biggest collection in the Solana ecosystem, Solana Monkey Business, sold for 13,027 Solana (SOL), currently worth more than $2.1 million, breaking the platform’s previous NFT record.

Shane Molidor, the global head of business development at crypto trading platform AscendEX, spoke with Cointelegraph about the potential of NFTs:

“Due to the rapid growth of the market, some may say the market is a bubble, but I believe that NFTs offer enormous value propositions beyond just the collectivity of JPEGs or images. NFTs can be used to record the ownership of not only digital items but collectibles, fractionalized assets, and even virtual worlds.”

Mistakes, bugs and hacks

The rapid expansion of the DeFi ecosystem is not without its setbacks. Due to a combination of lack of understanding and scrupulous players, there have been several exploits and hacks throughout the growth phase.

On Sep. 30, DeFi interest rate protocol Compound Finance announced that there was a token distribution bug in its newly implemented Proposal 062. This flaw accidentally rewarded users with $70 million in COMP tokens. In the aftermath, another $65 million COMP tokens are at risk as the update in the code wouldn’t take effect for the next three days due to a time-lock. In total, the bug put $162 million “up for grabs,” making it an extremely costly mistake. On Oct. 7, the protocol passed a proposal to fix this issue.

In another instance of a technical error, the cryptocurrency exchange Bittfinex paid a transaction fee of over $23 million to transfer $100,000 of Tether (USDT) on the Ethereum blockchain to a layer-2 subsidiary platform, DiversiFi. However, the goodwill of the miner prevailed as he returned the funds to the exchange.

Despite the lucrative nature of the DeFi markets, such widely covered instances of hacks, bugs and mistakes could serve as deterrents for institutional investors and retail investors alike. Retail investors are even more susceptible to such events of financial loss due to the lack of sophistication and knowledge that institutional investors possess. Thus, they often serve as a benchmark for retail investors. Molidor told Cointelegraph:

“Institutional and retail entrance into DeFi is almost like a feedback loop. As more retail users enter the space and [the] market cap grows, institutions start to examine the industry more closely to explore economic opportunities. As institutions enter DeFi, the space is then given more visibility. From this visibility, DeFi enters the mainstream discourse, and yet again, more retail users become familiar with the benefits and economic rewards DeFi provides.”

But these negative instances are only a small part of the picture evolving in the DeFi market, which is attempting to revolutionize finance. The user’s independence and the innovation that DeFi protocols offer to investors will only serve to further grow the space.

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VORTECS™ Report: How this quant-style indicator foreshadowed Axie Infinity’s rally to a new ATH

AXS wrested control of the 2021 bull market to become one of the top-performing tokens, and Cointelegraph’s Markets Pro indicators accurately tracked each step of the journey.

Every week, subscribers of Cointelegraph’s Markets Pro data analytics platform receive a detailed breakdown of the top performers of the week and the VORTECS™ Score indicator’s performance in tracking potential bullish and bearish developments.

Here are some of the highlights of the latest report:

  • Axie Infinity Shard (AXS) recorded a new all-time high following a strong VORTECS™ Score.
  • Three out of ten top price movers flashed a VORTECS™ Score of 80 or higher before peaking.
  • NewsQuakes™ alerts gave traders an early signal for NEAR’s and RAY’s double-digit rally.
  • The all-time top VORTECS™ Scorers’ average gains against Bitcoin (BTC) demonstrated that the greatest returns come 24 and 72 hours after assets flash scores of 80 and 90.
  • Community members shared information on interesting tokens and successful trading strategies.

AXS charts its own path to the moon

The stellar run of Axie Infinity’s AXS to a new all-time high at $155.27 also shocked many investors, and it deserves particular attention.

The asset’s whirlwind appreciation follows its growing utility in the virtual Axie Infinity universe where players breed, trade and battle nonfungible token (NFT)-based creatures called Axies to earn AXS alongside another token called Smooth Love Potion (SLP). There are now more than 1.85 million active players in the game, which marks a 4,500% increase since April 2021.

Clearly, the asset has seen quite a few explosive rallies on its way to the current valuation. The data generated throughout this time allowed the VORTECS™ indicator, exclusive to Cointelegraph, to get exceptionally good at recognizing the telltale signs of AXS’ breakouts.

The VORTECS™ Score, exclusive to Cointelegraph Markets Pro, is an algorithmic comparison of historical and current market and social conditions around a coin calculated from a combination of variables including market sentiment, trading volume, recent price movements and Twitter activity.

While the indicator will not tell investors when to go long or short, it can provide insights that are based on historically bullish or bearish conditions for a particular coin. According to the algorithm, the higher the score, the more likely it is that the observed conditions will be historically favorable for the next 12 to 72 hours.

In the case of AXS, historical precedent seems to be particularly instructive.

VORTECS™ Score (green) vs. AXS price, Sept. 25 – Oct. 2. Source: Cointelegraph Markets Pro

Between Sept. 25 and Oct. 2, AXS gained 76.67% against the U.S. dollar and 56.05% against Bitcoin, reaching a new all-time high above $117.

AXS saw its VORTECS™ Score peak at 87 on Sept. 26 when its price was $63.15, and the model recognized a historically bullish setup of market dynamics and social sentiment. The breakout began some 2 1/2 days later when the token began to steadily climb from $65 to $117 on Oct. 2.

All-time-high scorer

With an overall 60 days during which its VORTECS™ Score hit 80 or higher, AXS remains the second-best all-time performer in terms of high-score days, trailing only THORChain’s RUNE.

However, AXS’ average returns following high scores are much better than those of RUNE.

On average, AXS gained 4% 24 hours after its VORTECS™ Score hit 80, 7% after 48 hours and 10% after 72 hours. When looking at the occasions when the coin hit the 90 VORTECS™ Score mark, the coin’s average returns are even more impressive: 7% after 24 hours, 13% after 48 hours and 21% after 72 hours.

VORTECS™ Score (green) vs. AXS price, Sept. 29 – Oct. 5. Source: Cointelegraph Markets Pro

The token’s price plateaued on Oct. 2 and 3 after recording its then-all-time high above $117. With the price still flat, AXS’ VORTECS™ Score began sharply rising again, crossing the 80 threshold when it traded for $105 and surging to 96. Fifteen hours after hitting 80, AXS price reached a record $153.70.

Currently, AXS’ VORTECS™ Score is again in the high eighties, so it is quite possible that the feast is not over yet.

Cointelegraph is a publisher of financial information, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risk including the risk of permanent and total loss. Past performance is not indicative of future results. Figures and charts are correct at the time of writing or as otherwise specified. Live-tested strategies are not recommendations. Consult your financial advisor before making financial decisions.

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VORTECS™ Report: This key trading algo spotted bullish altcoin setups even as BTC price fell

Even in a red market, solid gains can be made. Here’s how Cointelegraph’s unique trading tools highlighted the assets with the strongest historical outlook.

Last week was challenging for crypto traders, with Sept. 24’s FUD-triggering crypto-ban news out of China wiping out much of the gains investors managed to rake in earlier in the week. Between Sept. 18 and Sept. 25, the top 100 altcoins shed as much as 14.4% of their aggregate value, while Bitcoin (BTC) lost 12.5%.

The number of altcoins posting double-digit returns was unusually low as well. Data from Markets Pro, Cointelegraph’s subscription-based data intelligence platform, shows that only eight assets out of the hundreds tracked gained more than 10% against the U.S. dollar.

While trading is an activity marked by a steady flux of gains and losses, how can investors spot ahead of time the coins that are well-positioned to weather the storm?

The top performers of a tough week

The table below lists the eight altcoins that managed to secure a robust return even amid the sea of red that swept through the market last week.

COTI continued its winning streak, boosted by the recent release of the Coti Treasury white paper, the asset’s listing on Crypto.com and anticipation of a new stablecoin partnership with Cardano.

CELR’s momentum accelerated following the launch of Celer Network’s cross-chain cBridge 2.0, which is designed to facilitate the transfer of digital funds between major blockchains.

The third best performing asset of the week, Trace (TRAC), is the native token of OriginTrail, a blockchain ecosystem and protocol that aims to improve global supply chains by providing infrastructure for trusted data exchange. The token’s valuation has recently been growing on the back of a series of bullish developments, such as United States home improvement business Home Depot’s adoption of the SCAN Trusted Factory solution built on OriginTrail.

TRAC and REN also posted very high VORTECS™ Scores last week. The VORTECS™ Score is a machine learning algorithm that compares historical and current market conditions around crypto assets to help traders make more informed decisions.

The model considers a host of quantitative indicators — including market outlook, price movement, social sentiment and trading activity — to generate a score that assesses whether the current conditions for a coin are historically bullish, neutral or bearish.

Here is how it worked for TRAC and REN last week.

VORTECS™ caught the early signs of a breakout

The VORTECS™ model is optimized to detect patterns of social and market activity that in the past have consistently appeared 12 to 72 hours before the coin’s price shot up. A score of 80 or higher indicates that the observed conditions have a strong history of preceding price increases.

TRAC price vs. VORTECS™ Score. Source: Cointelegraph Markets Pro

The price of TRAC was volatile throughout the week against mostly favorable — low to mid-seventies — VORTECS™ Scores. The peak score of 81 briefly flashed late on Sept. 21 (red circle in the chart), indicating the model’s rising confidence that the patterns of market and social activity around the coin looked historically bullish.

Despite a price downturn that had begun shortly after the peak VORTECS™ Score was registered, TRAC soon saw its fortunes reverse, kicking off a two-day rally from $0.37 to $0.56.

REN price vs. VORTECS™ Score. Source: Cointelegraph Markets Pro

The price of REN had been steadily declining in the first half of the week against the backdrop of a sequence of very strong VORTECS™ Scores.

REN eventually bottomed out at $0.70 before starting to climb again, and the week’s second sequence of VORTECS™ Scores registering 80-plus showed up shortly thereafter. Savvy traders know that an asset whose VORTECS™ Score remains high for a long time — even while the price is flat — can present an excellent profit opportunity.

Sure enough, toward the end of Sept. 23, REN’s price exploded from $0.81 to reach a peak of $1.13 some 29 hours later.

Digital assets do not always behave in ways similar to what has been observed in the past, especially during market downturns.

After all, out of last week’s eight best performers, only two coins generated familiar bullish patterns before their prices exploded. However, the additional insight that the VORTECS™ Score supplies to traders can be indispensable in a situation when very few coins can be expected to beat the struggling market.

Cointelegraph is a publisher of financial information, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risks including the risk of permanent and total loss. Past performance is not indicative of future results. Figures and charts are correct at the time of writing or as otherwise specified. Live-tested strategies are not recommendations. Consult your financial advisor before making financial decisions.

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Here’s why Avalanche, OriginTrail and Coti hardly budged as Bitcoin fell to $40K

Market corrections are scary, but savvy altcoin traders also know it is an opportunity to secure hefty gains — here’s how.

Admittedly, the last few days have not been not the most pleasant time for crypto traders as the price of Bitcoin (BTC) price fell short of breaking the $50,000 threshold, then slid to the low-$40,000 range and pulled the majority of altcoins down with it.

Despite this sharp downturn, a handful of tokens seemed to do much better than the rest of the market by posting weekly gains in their BTC and U.S. dollar-denominated pairs.

Some traders looking to rack up their Bitcoin holdings cannot be bothered to follow an altcoins’ price dynamics against the dollar. For them, BTC slumps like the recent one can be seen as a profit opportunity, but how does one tell what coins are likely to perform well when BTC is on its way down?

AVAX: Powered by the news

Avalanche (AVAX) has added 28.19% in its dollar pair and 43.46% against BTC over the past week. Furthermore, on Sept. 17, the price of AVAX rose from 128,600 satoshis (sats) to 153,600 sats on the news of a partnership between the Avalanche Foundation and DeFi liquidity hub Kyber Network.

AVAX price vs. VORTECS™ Score. Source: Cointelegraph Markets Pro

As AVAX’s price was coming down from this first peak, the pattern of market and social conditions around the asset’s price movement, trading volume, tweet volume and sentiment began to strongly resemble the patterns observed in previous dramatic price increases.

This was indicated by the coin’s algorithmic VORTECS™ Score — an indicator exclusively available to CT Markets Pro subscribers — going above 80, which can be seen on the dark green line marked by a red circle on the chart.

Scores of 80 and above indicate the model’s high confidence that the pattern is consistent.

Indeed, several hours after the VORTECS™ Score line had turned dark green, AVAX’s rally resumed. It was undercut by the market-wide slump in the early hours of Sept. 20, but the token’s individual bullish momentum was so strong that it rebounded in less than a day, trading at 156,900 sats on Sept. 22.

TRAC: A long turnaround

In the last seven days, OriginTrail’s Trace (TRAC) token has been up 6.02% against the U.S. dollar and 18.11% against Bitcoin.

TRAC price vs. VORTECS™ Score. Source: Cointelegraph Markets Pro

On Sept. 16, social and market variables around TRAC formed a historically favorable arrangement, and the coin’s VORTECS™ Score reached the value of 85 against the price of 852 sats. The algorithm is trained to detect conditions that have consistently preceded previous rallies by 12 to 72 hours, so sometimes price movement action can come days after a favorable score is registered.

This turned out to be the case with TRAC’s price action this week. Roughly 70 hours after the peak VORTECS™ Score showed up, the coin soared from 740 to 1088 sats in 24 hours. The Sept. 20 market flash crash took its toll on TRAC, but it recovered quicker and harder than most and secured positive weekly returns against both BTC and the dollar.

COTI: Enough momentum to weather the storm

COTI generated an extra 12.55% against the dollar and 26.51% versus BTC this past week.

COTI price vs. VORTECS™ Score. Source: Cointelegraph Markets Pro

The coin’s VORTECS™ Score briefly went beyond 80 briefly on Sept. 17 in the middle of a rally that took it from 668 to 926 Sats. COTI’s momentum began to recede before the Sept. 20 rout, with the asset trading at around 800 sats early that day. Yet, the robust market and social outlook detected earlier ensured that the asset’s recovery was smooth: The coin recouped much of the losses over the next two days.

While the VORTECS™ Score is by no means a prediction of future price movement, it can alert investors to historical trends that can be profitably incorporated into a trading strategy. 

Cointelegraph is a publisher of financial information, not an investment adviser. We do not provide personalized or individualized investment advice. Cryptocurrencies are volatile investments and carry significant risks including the risk of permanent and total loss. Past performance is not indicative of future results. Figures and charts are correct at the time of writing or as otherwise specified. Live-tested strategies are not recommendations. Consult your financial advisor before making financial decisions.

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Pro traders know it’s time to range trade when this classic pattern shows up

Traders analyze bearish and bullish rectangles to spot trend changes and range trade stocks and cryptocurrencies.

A bull trend is formed when demand exceeds supply and a bear trend occurs when sellers overpower the buyers. When the bulls and bears hold their ground without budging, it results in the formation of a trading range.

Sometimes, this leads to the formation of a rectangle pattern, which can also be described as a consolidation zone or a congestion zone. Bearish and bullish rectangles are generally considered to be a continuation pattern but on many occasions, they act as a reversal pattern that signals the completion of a major top or bottom.

Before diving in to learn more about the bullish and bearish rectangle patterns, let’s first discuss how to identify them.

Basics of the rectangle pattern

A rectangle is formed when an asset forms at least two comparable tops and two bottoms that are almost at the same level. The two parallel lines can be used to join the high and the low points, forming the resistance and support lines of the rectangle.

The duration of the rectangle could range from a few weeks to several months and if this time is shorter than three weeks it is considered a flag. Typically, the longer an asset spends in consolidation, the larger is the eventual breakout or breakdown from it.

Bullish rectangle pattern

Bullish rectangle pattern. Source: TradingView

As shown above, the asset is in an uptrend but after the rally, some bulls took profits and this created the first reaction high. After the price corrects, several dip buyers jump in and arrest the decline, which forms the first trough.

As demand exceeds supply, the asset attempts to resume its up-move but when the price nears the previous reaction high, traders book profits again. Joining these two high points with a straight line forms the resistance of the rectangle. When the price turns down, buyers defend the earlier reaction low and this forms the support.

It is difficult to predict the direction of the breakout beforehand and the price could trade between the support and the resistance for a few weeks or even months. For this reason, it is better to wait for the price to escape the rectangle before turning bullish or bearish.

In the above example, the price breaks out of the resistance of the range as demand exceeds supply. This could result in the resumption of the uptrend.

Bearish rectangle pattern

Bearish rectangle pattern. Source: TradingView

As shown in the above example, the asset is in a downtrend but when the price reaches a level deemed as undervalued by traders, dip buyers absorb the supply and form a reaction low. Bulls then attempt to reverse the direction but the sentiment is still negative and traders sell on rallies, forming the reaction high.

Traders again buy the dip when the price reaches the first reaction low but the bears stall the recovery near the earlier reaction high. Thereafter, the price gets stuck between the parallel lines, forming a rectangle.

The bearish rectangle pattern completes when the price breaks and closes below the support of the range. This generally results in the resumption of the downtrend.

A bullish continuation rectangle pattern

THETA/USDT daily chart. Source: TradingView

THETA had been in an uptrend before hitting resistance near $0.80 on Sep. 30, 2020. On the downside, buyers stepped in and arrested the correction near $0.55. Thereafter, the price remained stuck between these two levels until Dec. 15, 2020.

The THETA/USDT pair broke above the rectangle on Dec. 16, 2020, which indicated that the bulls had overpowered the bears. This signaled the resumption of the uptrend.

THETA/USDT daily chart. Source: TradingView

To arrive at the target objective of the breakout from the rectangle pattern, calculate the height of the rectangle. In the above case, the height is $0.25. Add this value to the breakout level, which is $0.80 in the above example. That gives the target objective at $1.05.

After a long consolidation, when the uptrend resumes, it may overshoot the target by a huge margin as is the case above. Traders can use the target as a reference point but the decision to close or hold the trade should be taken after considering the strength of the trend and signals from other indicators.

The same processes apply to bearish rectangles as shown below.

LTC/USDT daily chart. Source: TradingView

Litecoin (LTC) had been in a strong downtrend, dropping from $184.98 on May 6, 2018, to $73.22 on June 24, 2018. The buyers stepped in at this level and attempted to form a bottom but the bears were in no mood to relent. They stalled the recovery at $90 on July 3, 2018. Thereafter, the LTC/USDT pair remained range-bound between these two levels until Aug. 6, 2018.

The bears reasserted their supremacy and pulled the price below the rectangle on Aug. 7, 2018. This resumed the downtrend.

LTC/USDT daily chart. Source: TradingView

The target objective following the breakdown from a bearish rectangle is calculated by deducting the height of the rectangle from the breakdown point. In the above case, the height of the rectangle is $17. Deducting it from the breakdown level at $73 presents a target objective at $56.

The rectangle as a reversal pattern

ETH/USDT daily chart. Source: TradingView

Ether (ETH) topped out at $1,440 in January 2018 and started a strong downtrend, which reached $81.79 in December 2018. This level attracted strong buying from the bulls and the ETH/USDT pair made a sharp recovery. However, bears stalled the recovery near $300 in June 2019. Thereafter, the pair remained stuck between these two levels until July 24, 2020.

The bulls pushed the price above the rectangle on July 25, 2020, which suggested the start of a new uptrend. The bears tried to pull the price back below the breakout level at $300 but failed. This showed that the sentiment had turned positive and traders were buying the dips. The pair resumed its uptrend in November 2020.

Although the pattern target of the breakout from the rectangle was only $518.21, the pair rose to an all-time high at $4,372.72 in May.

Key takeaways

The rectangle pattern is a useful tool because it can act both as a continuation pattern and a reversal pattern. If the rectangle is large, traders may buy near the support and sell near the resistance.

To benefit from the rectangle and avoid getting whipsawed, traders can wait for the price to break and sustain above or below the pattern before establishing positions.

The target objective should only be used as a guide because when the price breaks out of a long rectangle it tends to overshoot the target objective by a huge margin.

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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