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The Hard Fork – Weekly Market Commentary

This Week’s Topics:
1) SushiSwap liquidity falls after rewards are reduced
2) Bitcoin hash rate pushes to new high
3) Binance to invest $100m to move DeFi projects to its own blockchain


Indices Round-up


TradeBlock Index Asset1 Price ($) 7d∆2
ECX Ethereum Classic 5.86 15.77%
ZCX Zcash 61.95 8.24%
XMRX XMR 85.39 8.14%
ETX Ethereum 366.78 8.00%
XLMX Stellar Lumens 0.08 5.83%
XRX XRP 0.24 3.77%
XBX Bitcoin 10416.87 3.32%
LTX Litecoin 47.84 1.99%
BCX Bitcoin Cash 223.20 0.05%
EOSX EOS 2.72 -2.70%
1. Underlying asset sorted in descending order by 7 day price movers.
2. 7 day price movers monitored from 09/07/2020 06:00 ET thru 09/14/2020 06:00 ET.


7 day price movers
Digital currencies broadly traded higher over the week. Among our indexed currencies, ECX traded up the most, gaining nearly 16%. Conversely, EOSX was our only asset that traded down, losing 2.70%. Digital currencies have had a turbulent few weeks, with most assets posting a broad rally this week recovering some of the sudden losses incurred last week.

In traditional markets, US equities declined with the S&P 500 losing over 3% on the week. In the bond market, US high-yield corporate debt spreads widened on economic weakness. Nonetheless, HY spreads have come in considerably since the blow-out in March during the peak of COVID-19 uncertainty.

SushiSwap liquidity falls after rewards are reduced
Total liquidity on the SushiSwap platform declined after economic reward incentives saw a sharp scheduled reduction over the weekend. SushiSwap is one of the latest DeFi liquidity pool and exchange platforms. Since launching just a few weeks ago, SushiSwap has become one of the most talked about platforms in the space given its controversial nature.

On the SushiSwap platform, market participants can add digital currencies into liquidity pools and earn rewards. SushiSwap, as well as other platforms, offer rewards to early liquidity providers in order to boot strap liquidity to the up-start exchange. Earlier this week, liquidity on SushiSwap overtook its decentralized exchange rival, Uniswap, with nearly $1.5 billion in notional value locked in liquidity pools on the platform.

However, after a recent change went into effect which reduced the amount of rewards distributed to liquidity providers by 90%, total liquidity pooled on SushiSwap declined by 35% to just over $900 million. In the figure below, we compare total pooled liquidity between Uniswap and SushiSwap.

Figure 1: Pooled liquidity comparison between Uniswap and SushiSwap


Bitcoin hash rate pushes to new high
The Bitcoin network hash rate has proved resilient, despite limited price increases since the halving in May of this year. After the halving, bitcoin miners receive reduced rewards for mining activities. The hash rate, however, has reached a new all-time high meaning miners are taking on increased costs in computing activities, or new efficiency gains have made mining more cost effective.

In the figure below, we diagram the Bitcoin network hash rate over time. As shown, around the COVID-19 sell-off, the bitcoin network hash rate declined as mining revenues fell on market price reductions in bitcoin. However, since this time the hash rate has continued a steady increase to reach a new all-time high this past week.

Figure 2: Bitcoin network hash rate and difficulty over time


Binance to invest $100m to move DeFi projects to its own blockchain
One of the largest digital currency exchanges in the world by trading volume, Binance, has announced a new initiative to commit $100 million in funding to attract DeFi developers and projects to the firm’s recently unveiled Binance Smart Chain.

Binance is attempting to attract more DeFi platforms to the firm’s own blockchain in a bid to capitalize on the recent excitement within decentralized finance. Developers and project participants can receive as much as $100,000 each in funding from the program.

Binance’s Smart Chain is designed to run parallel to Binance Chain, and enables the creation of smart contracts for tokens on Binance’s blockchain. Additionally it allows for a new staking mechanism for Binance’s exchange token, BNB. Staking allows users to receive additional yield on top of their invested capital.

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