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RSK-based DeFi protocol launches innovative decentralized exchange concept

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DeFi protocol Money on Chain, a lending platform and stablecoin issuer based on Bitcoin (BTC) sidechain RSK, announced Wednesday the launch of TEX, an automated token swap platform based on an order book with a unique twist.

Instead of being available instantaneously, orders are processed in batches according to a slightly variable interval of a few minutes. Each execution, called a tick, matches the orders submitted to the blockchain.

Each trade occurring in a given tick is performed at the same average price between all orders submitted by traders. Limit orders submitted by users indicate the maximum or minimum acceptable price. For example, a limit order to sell Bitcoin for $18,000 will not be triggered if the average price is $17,900.

As Max Carjuzaa, CEO of Money on Chain, explained to Cointelegraph that the system also uses an oracle system for more fine-tuned control. With so-called market maker orders, traders express a price with a certain percentage offset from the reference rate obtained by the oracle. This ensures that the orders will track the changes in price occurring between ticks.

The design of the system was inspired by the London Spot Fix, a pricing mechanism for gold where a committee decides on the price of gold two times per day.

Automated market makers like Uniswap are often seen as a necessity in light of the slow performance of blockchain-based systems. When asked if these concerns drove the design of TEX, Carjuzaa replied:

“No, the primary reason it was adopted is fair price discovery. The method used in the TEX is a way to avoid front-running and ensure fair price discovery, even at low volume.”

Front-running and price discovery are often considered major issues in AMM exchanges, but Carjuzaa also believes the system “needs much less liquidity to operate.” For the same liquidity, he claims AMMs will have more slippage compared to TEX. This benefit is “especially important in a new network, and enables organic liquidity growth.”



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Bitcoin Sell-Off Triggers Classic Bearish Reversal Pattern; $20K Next?

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An overnight sell-off in the Bitcoin market Monday brought its prices down from an intraday high of $34,888 to as low as $31,435.

The approx 10 percent decline occurred as traders’ anxieties mounted over a JPMorgan report that cast doubts over Bitcoin’s potential to retest $40,000. According to Nikolaos Panigirtzoglou, the lead strategist at JPMorgan & Chase, one of the major catalysts behind Bitcoin’s supersonic rally was the Grayscale Bitcoin Trust, which amassed about $20 billion worth of BTC during its 1,000 percent price rally.

Nevertheless, the last couple of weeks saw a decline in the New York fund—of about 22 percent—that surpassed Bitcoin’s very own downside correction of 17 percent.

Mr. Panigirtzoglou added that a drop in Grayscale’s accumulation spree might hinder Bitcoin’s attempt to reclaim $40,000 or the levels above it, adding that “the near-term balance of risks is still skewed to the downside.”

Bitcoin Descending Triangle

The bearish fundamental risked activating a classic bearish reversal pattern that has emerged on the Bitcoin charts lately. The BTC/USD exchange rate has been forming a sequence of higher lows on repeated upside rejections while holding its footing at a horizontal support area. The pattern appears like a Descending Triangle.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin’s Descending Triangle pattern risks crashing price to near $20,000. Source: BTCUSD on TradingView.com

In retrospect, a Descending Triangle’s formation in an uptrend points to a reversal.

Most traders look to open a short position following a high-volumed breakdown from the pattern’s lower trendline support. Typically, the price target is as much as the Triangle’s maximum height. In Bitcoin’s case, it is more than $11,000 that puts the cryptocurrency at risk of slipping below $20,000.

Nevertheless, certain adjustments to the support trendline change the entire bearish setup by turning Descending Triangle into a Bull Pennant.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin’s Bull Pennant setup expects the price to surge by another $20,000. Source: BTCUSD on TradingView.com

So it appears, Bitcoin has simultaneously formed lower highs alongside the higher lows, forming a Symmetrical Triangle in an uptrend. In retrospect, it is a bullish continuation pattern that could have traders open long positions following a high-volume breakout above the Triangle resistance trendline.

The Pennant’s upside target is as high as the flagpole formed before it (~$20,000). That puts Bitcoin en route to at least $50,000 should the bullish bias sustain.

Bullish Fundamentals

Fundamentals that could trigger Bitcoin’s Bull Pennant include the US coronavirus stimulus, the Federal Reserve’s pro-inflation policies, and a bearish outlook for the US dollar. That has prompted many corporations and investors to seek hedge in Bitcoin due to its similarities with safe-haven gold.

“We’re talking about Bitcoin over the next three, five, ten years slowly inching away at gold’s market capitalization,” Vijay Ayyar, head of Asia Pacific with Singapore-based crypto exchange Luno, told Bloomberg Tuesday. “If that happens, you are way over $50,000.”

BTC/USD was trading above $32,000 at the time of this writing.



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Glassnode predicts BTC break-out as investors refuse to realize losses

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On-chain metrics are indicating that continued downward pressure on the price of Bitcoin would result in many investors facing losses.

A Jan. 25 report published by crypto data aggregator Glassnode has noted that Bitcoin’s adjusted Spent Output Profit Ratio, or aSOPR, suggests that a further decrease in prices will leave many investors in the red according to when their holdings last moved on-chain.

Despite the metric suggesting few investors are sitting on paper-profits, Glassnode interprets the data as bullish, stating:

“In order for SOPR to go lower, investors would have to be willing to sell at a loss, which is unlikely given the current shape of the market […] We have been looking for this reset in order to generate some stability in the market and pave the way for the next bull run.”

Glassnode describes the indicator as representing the profit-ratio of coins based on the price of Bitcoin when they were last moved on-chain. As aSOPR is an on-chain metric, BTC circulations on centralized exchanges are not counted.

While SOPR should typically oscillate near 1, the extreme bullish momentum of recent months saw Bitcoin’s aSOPR spike above 1.15 for the end of December and the first half of January.

However, during bullish market conditions, values of aSOPR below 1 are rejected as traders are reluctant to sell at a loss.

Glassnode noted the aSOPR chart suggests that the current correction is coming to an end. From peak to trough of its recent, Bitcoin had corrected 31% when it fell just below $29,000 on Jan. 22. Bitcoin was trading hands for $31,750 at the time of writing.

On Jan. 25, Glassnode also reported that 2.3 million BTC or 12.6% of Bitcoin’s circulating supply moved on-chain while BTC was trading above $30,000, flagging the activity as bullish:

“This is substantial, given that BTC crossed $30k just this year. It suggests investors are injecting capital, and therefore confidence in further price appreciation.”





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Reddit investing group triggers crypto-style 860% rally in GameStop stock

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Since Jan. 22 GameStop has been attracting a lot of attention from the mainstream news as the stock (GME) for the popular video game retailer rallied 860% from $17.40 on Jan. 4 to a high of $159.18 on Jan. 25. 

On Jan. 25 GME pulled back 51.70% from its high to close the day at $76.79 but what lies behind the massive upsurge warrants closer inspection.

While solid fundamentals often lead to price breakouts in both stocks and cryptocurrencies, the recent interest in GameStop appears to have more to do with the ‘Reddit army’ phenomenon which has seen internet groups go head to head with some of the largest firms on Wall Street.

GameStop (GME) 1-day chart. Source: TradingView

The most well-known instance of this trend in the cryptocurrency sector occurred when a group of dedicated Chainlink (LINK) investors affectionately referred to by many as ‘LINK Marines’ joined forces to spread positive news about the altcoin and also pledged to keep buying it when larger investors devised a plan to short LINK.

In early 2020 the LINK Marines responded to Zeus Capital’s attempt to short the altcoin. When the word got out that Zeus Capital had referred to Chainlink as ‘crypto’s wirecard’ and opened a short position, LINK marines went to work, refusing to sell and pushing the altcoin’s price to a new all-time high by triggering successive short squeezes.

Fallout from the short call also shifted to Nexo Finance as members of the LINK marines discovered a clue allegedly connecting Zeus Capital with Nexo.

Gemini exchange co-founder, Tyler Winklevoss, previously acknowledged the contribution that the LINK marines add to the cryptocurrency community with the following tweet:

“I really appreciate the passion of the $LINK Marines. Their fervor and dedication reminds me of the early Bitcoin and Ethereum communities. Unlike many other crypto armies, they are dedicated to a project that has real promise and technical merit.”

A similar situation occurred with GameStop on Jan.21 after Citron Research announced plans to open a short position as they believed GME price would fall back to $20. The reaction to this announcement was so swift that Citron Research was unable to finish its Twitter live stream due to an overwhelming amount of responses.

Social investing groups are having an outsized impact on stocks

This isn’t the first time a group of investors on a social platform have joined together to pump the price of an asset as a similar phenomenon occurred with Tesla and Netflix stock in 2020.

Analysts had been calling for a drop in the price of Tesla (TSLA) stock since early 2019 and a number of institutional investors opened large short positions only to see its value increase by more than 1000% since that time and help Elon Musk briefly become the richest person in the world. Short sellers who piled in on the advice of the trusted wall street analysts have been crushed by the non-stop move higher.

These moves higher have been powered in part by the Robinhood effect, a term coined to define irrational stock price movements caused by retail buyers on mobile investing apps like Robinhood. Millennial traders high on easy options trading made it possible to pump TSLA and NFLX, triggering a massive short squeeze again and again.

TSLA/USD 1-day chart. Source: TradingView

Netflix (NFLX) has also been plagued with calls of an impending price drop for years as analysis showed that the company was burning through cash, losing subscribers to competitors yet still raises prices. Some of the top investment brokerages rated the stock as a ‘sell’ and chat forums were rife with discussions of why Netflix stock should be shorted.

NFLX/USD 1-day chart. Source: TradingView

During the time that analysts were writing NFLX off, its price increased from $253 to an all-time high of $586 on Jan. 20.

Unconventional practices compete with conventional investing

From Tesla to GameStop, it’s clear that there has been a shift in how investors interact with financial markets and the factors that catalyze price discovery have also changed as retail traders have easier access to market information and analysis.

Threats against short-sellers are nothing new, but what is different in this situation is that it has become “internet vigilantes, and not corporate agents, who targeted the shorts,” as noted by Christopher Smith in a recent thread posted on TradingView.

Smith said:

“The GameStop and Tesla stories prove that retail traders, if they band together, have the power to be market makers and to take on institutions. It also proves that markets aren’t necessarily efficient or rational.”

The cryptocurrency sector appears to be on the precipice of becoming a mainstream investment and as mobile investing platforms gain more market share and the popularity of social investing grows, it’s possible that the same phenomenon seen with GameStop and Tesla will become commonplace with the low market cap, illiquid tokens that populate the crypto market.

Millennials are also becoming increasingly interested in investing and as more of them engage with mobile investment platforms, these social investing phenomena could become more prevalent.

A clear example that the two worlds are beginning to merge can be found on the Twitter feed of Tesla CEO Elon Musk, MicroStrategy CEO Micheal Saylor, and Twitter CEO Jack Dorsey. Each frequently references Bitcoin or other cryptocurrencies like Dogecoin in their tweets and a number of times this has resulted in a temporary price pump of the discussed asset.

As 2021 progresses, it will be interesting to see how mainstream financial markets adapt and change to the growing influence of decentralized groups of united retail investors.

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.