First Mover Americas: Crypto Market Trades in the Green Despite Hacks

By August 3, 2022DeFi
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Even with multiple hacks this week, the crypto market traded mostly in the green on Wednesday morning. (Nicholas Stanley/Unsplash)
  • Market Moves: Some analysts are taking the possibility of an Ethereum fork seriously as BitMEX issued a blog post arguing that a new chain might generate interest from market participants.

The crypto market was mostly trading in the green on Wednesday despite news that popular layer 1 blockchain Solana was exploited Tuesday night.

“The hack will definitely cast a shadow over Solana’s credibility as a better alternative to Ethereum, especially when it comes to security,” Mikkel Morch, executive director of ARK36, a digital asset fund, wrote in an email. “It may even give Ethereum some additional boost from the narrative perspective as the safest and most reliable DeFi (decentralized finance) ecosystem.”

Earlier in the week, the cryptocurrency bridge Nomad suffered a $200 million exploit. Since that breach, blockchain security company PeckShield said $9 million has been returned, equating to around 4.75% of the total loss.

In other news, Ethereum developers addressed a potential glitch ahead of the Merge in the 92nd Consensus Layer Call. One researcher said that the chance of such a glitch (an MEV-boost failure) is slim, but contingencies should ensure that the Merge still goes smoothly.

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It’s little more than speculation now that some Ethereum miners might break away when the world’s second-biggest blockchain shifts as soon as September to a new “proof-of-stake” system that’s supposed to be better for the environment.

But with the Ethereum Merge still at least a month away, some analysts are already sharpening their pencils on various strategies to profit from any revolt in the ranks.

"Although there are many technical challenges that ETHPoW faces, as long as the chain survives, it looks likely that there could be positive narratives around the coin and leading centralized exchanges are likely to list it," the analysts wrote.

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“Doing the above trade, you have potentially got more USD for free with almost zero risk! Well, zero risk when only considering certain types of risk, such as price movements,” the BitMEX post states.

“ETHPoW may generate a lot of excitement, and we predict that ETH vs ETHPoW will be a popular trading pair post-split, at least until another interesting dynamic comes along," BitMEX analysts said.

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  • Solana's put-call volume ratio, a gauge measuring the number of put options traded relative to calls, surged above 3 early Wednesday, pointing to bearish market sentiment.
  • The surge implies that more than three put options were traded for every call option.
  • Perhaps investors sought protection against a price drop following reports of a multimillion-dollar hack from Solana's digital wallets Phantom and Slope.
  • A put option offers insurance against price drops while a call option offers protection against price rallies.
  • Sol's Deribit-based options market is quite small relative to ether and bitcoin. As of this writing, the notional open interest in the SOL options market was $19.2 million – a meager 0.42% of bitcoin's $4.5 billion.
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SOL options chart: top volume by instrument. The chart shows increased volumes in SOL put options at $30 and $38 strikes. (Deribit)

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