Welcome to this week’s edition of the Myth of Money, a weekly newsletter on all things money, economics and technology read by 10,000+ investors, curated by Tatiana Koffman.
Disclaimer: The following is not intended as investment advice. Do your own research.
This week in Forbes I wrote about the role of decentralized exchanges (DEX) in the crypto ecosystem.
In 2020, we saw the rise of decentralized exchanges, or “DEXs,” from UniSwap and SushiSwap on Ethereum, to more niche products like Project Serum for Solana users and PancakeSwap on Binance Smart Chain. A DEX allows users to not only trade, but to also earn a portion of the platform transaction fees, by users staking or lending digital currencies to the exchange. Crowd-sourced liquidity is at the heart of so-called ‘decentralized finance’ (“DeFi”), but presents a double-edged sword, as decentralized exchanges are only as useful as the willingness of their users to stake assets.
DEXs utilize a bonding curve to calculate the price of an asset:
Commonly used by economists, a bonding curve is a mathematical concept that describes the relationship between price and supply of an asset, such as a currency or a token. For example, when a person purchases an asset that is available in a limited quantity, such as Bitcoin, each subsequent buyer’s cost will be slightly higher, as the number of available coins decreases. Consequently, the earliest investors generate the greatest amount of profit.
In developing decentralized exchanges, the cryptocurrency industry implemented bonding curves into smart contracts, to create a fair exchange of assets. Bonding curve contracts sell tokens to users by calculating the token price in an underlying asset, such as Ethereum, and quoting prices in the same underlying asset. In both cases, the smart contract calculates the average price and provides a transparent rate to its user.
Why are DEXs important?
Not only are decentralized exchanges a more secure and trustless way to exchange assets, they also provide an opportunity for retail investors to earn extra-ordinary yields by providing liquidity, particularly at the beginning of the liquidity cycle.
I am currently playing around with two platforms Popsicle.Finance and SpiritSwap. The yields range from 50% to 700% APY and decrease over time. Additionally, a new platform, Waka Swap will IDO on Wednesday with a similar model.
This is a stark contrast to the current interest climate in the traditional financial world.
If there is enough demand, I will host a free zoom tutorial for anyone who wants to learn more about using these platforms. 🤓🤓🤓
This Week By the Numbers 📈
Crypto markets saw an amazing rebound this week, after fears over last week’s sharp drop evaporated, and the bull market was back on.
Recent pullback was largely caused by regional blackouts in China, which affected several Bitcoin mining pools. Antpools fell by 24.5%, BTC.com fell by 18.9%, Poolin fell by 33%, Binance pools fell by 20%.
Bitcoin’s pullback, however, was short-lived as the crypto bull market is firmly back in swing. Ethereum was one of the biggest gainers reaching an all time high of $3000 last night.
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Who is the opportunity for?
Funds and ‘fund of funds’ investing in Bitcoin and/or Ethereum
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Top Stories 🗞
European Investment Bank Issues $121M Digital Notes Using Ethereum
The European Investment Bank (EIB), the lending arm of the European Union, used Ethereum technology to issue €100 million ($121 million) in two-year digital notes for the first time. Goldman Sachs, Banco Santander SA and Societe Generale AG served as joint managers for the notes, issued on April 28. The EIB said the transaction is a series of bond tokens on a blockchain, where investors purchase and pay for the security tokens using traditional fiat. The notes have a zero percent coupon and will be registered on the blockchain. Read Full Story.
Inflation Worry Spreads Beyond Bitcoiners to Wall Street Stock Analysts
The inflation scare looks to be spreading to stock markets from the bond and bitcoin markets. Suddenly, it’s a top-of-the-mind concern for Wall Street analysts peppering CEOs with questions during quarterly earnings conference calls. According to a new report from Bank of America, the second-biggest U.S. bank, the number of mentions of “inflation” in earnings calls of Standard & Poor’s 500 companies has more than tripled year on year, the most significant jump in 17 years. Strategists cited raw materials, transportation and labor as major potential drivers of inflation, adding that the number of mentions of inflation has historically led the consumer price index (CPI) by a quarter, with a 52% correlation. Several companies have begun passing on higher costs to consumers. Read Full Story.
SEC Delays VanEck Bitcoin ETF Decision to June at Earliest
The U.S. Securities and Exchange Commission (SEC) pushed back making a decision on VanEck’s proposed bitcoin exchange-traded fund (ETF) to at least June. The securities regulator announced Wednesday it was designating a longer deliberative period for the bitcoin ETF application, saying it needed to ensure it has “sufficient time” to evaluate the proposal. There are 10 active bitcoin ETF applications, including VanEck’s, and the agency is currently looking at three of them. A bitcoin ETF could be key for mainstream adoption because it would be a regulated product allowing financial institutions and retail traders to gain exposure to the cryptocurrency without having to invest in it directly. Read Full Story.
Product of the Week: GDA Lending
This week I’m giving a shout out to my friends at GDA Lending. Having recently worked on a loan with them, I can say that they offer the best rates for collateralized crypto loans at 4.5%, with the lowest counter-party risk. If you are looking to borrow against your BTC or ETH, ping me for an intro here.
Thank you for reading this week’s edition of the Myth of Money.🚀
Until next week,
By Tatiana Koffman
Hi there and thanks for reading. If you stumble upon my newsletter, you will notice that I write about money, economics and technology. I hold a JD/MBA and spent my career in Capital Markets working across Mergers & Acquisitions, Derivatives, Venture Capital and Cryptocurrencies. I believe in empowerment through closing the financial education gap and creating equality of opportunity for the next generation. Check out my articles in Forbes here.
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