Every week, IntoTheBlock brings you on-chain analysis of top news stories in the crypto space. Leveraging blockchain’s public nature, IntoTheBlock’s machine learning algorithms extract key data that provide a deeper dive into the major developments in the industry.
This week, we cover large bets on Bitcoin from corporations and miners. As well, we go over on-chain data behind the SushiSwap saga and into details behind the most recent DeFi hack.
MicroStrategy & Miners Double Down on Bitcoin
Business intelligence firm MicroStrategy has bought over 16,000 Bitcoin for the second time in the last two months. This brings the total acquired by the publicly traded company to 38,250 Bitcoin. At an aggregate cost of $425 million, this would bring their average Bitcoin price to $11,111.
According to a Coindesk article, MicroStrategy is looking to hold Bitcoin for 100 years. Michael Saylor, MicroStrategy’s CEO, stated that macro conditions played a large role in his conviction:
“Forget about parking the balance sheet surplus in inflation-prone cash or low-yield bonds or overextended tech stocks. In a market like this there are only two good places to put excess cash to work: stock buybacks and bitcoin.” – Michael Saylor
Since MicroStrategy first started buying Bitcoin, its stock MSTR has surged over 30%. There are likely to be other institutional investors looking into Bitcoin as well. IntoTheBlock’s Large Transactions Volume, which aggregates the total amount transferred in transactions of over $100,000, provides a glimpse into whales and institutional buying/selling activity.
Total large transactions volume hit a yearly high of over 3.33 million Bitcoin on September 10. This number has been increasing significantly since mid-August, potentially indicating institutional demand for Bitcoin.
On the supply side, miners also appear to be getting confident about Bitcoin. The hash rate, which measures the aggregate computational power provided by miners, reached a new weekly average all-time high of 151.49 terahashes.
While the hash rate did drop shortly after the Bitcoin halving, it has managed to continue climbing to new highs. Despite block rewards being reduced to 6.25 Bitcoin from 12.5, miners continue to invest resources even at lower margins. Overall, this is positive news for Bitcoin holders, since a higher hash rate makes the blockchain more secure as it becomes more expensive to attempt a 51% attack on the network.
With Bitcoin’s price holding above $10,000, institutional players and miners show signs of confidence in its long-term prospects. To top it off, Jim Cramer, renown TV host and stock picker, has appeared to turn into a Bitcoin bull following a podcast with Anthony “Pomp” Pompliano.
On-Chain Insights Behind the SushiSwap Saga
One of the largest stories in recent weeks in crypto has been SushiSwap’s short, yet eventful history. To recap, SushiSwap is a fork of most of Uniswap’s code and was announced on August 27. The key difference is that SushiSwap provides liquidity providers with an additional liquidity mining reward in the form of its governance token, SUSHI, while Uniswap provides 0.3% of trading fees (which SushiSwap does too). This scheme has been called by many vampire mining, as SushiSwap “sucked out” Uniswap’s liquidity.
Being crypto, users naturally rushed to supply liquidity to earn SUSHI in return. Before even launching the decentralized exchange (DEX), liquidity providers were “farming” SUSHI and centralized exchanges were listing the token. Uniswap’s liquidity increased sharply as users providing tokens to selected pools were receiving SUSHI even before the DEX launched. This led to Uniswap’s total liquidity shortly reaching $2 billion.
Uniswap’s liquidity dropped over 70% the day SushiSwap launched, before recovering a substantial amount. At the time of writing, Uniswap’ liquidity is over $950 million, representing a 3x increase since SushiSwap was announced.
The already controversial story took a turn when its anonymous founder Chef Nomi sold 10% of SUSHI tokens (worth $14 million) which were intended for a development fund, in what many labeled an exit scam. The SUSHI token, which had already been declining, lost over 50% of its value on September 5 following Chef Nomi’s actions.
Sam Bankman-Fried, CEO of FTX Exchange and Alameda Research, was then selected by the community to lead SushiSwap, with Chef Nomi transferring the keys to the treasury to him. On September 11, Chef Nomi publicly apologized in a Twitter thread and returned the $14 million worth of ETH to SushiSwap’s treasury.
By analyzing on-chain activity, we can take a closer look at what was happening behind the scenes of the SushiSwap saga. For instance, we can observe that SUSHI large transactions spiked the day it was listed on Binance:
Over $280 million was transferred in SUSHI transactions of over $100,000 each on September 1st. That day, SUSHI also dropped from its all-time high price, suggesting that big farmers were likely dumping their SUSHI on retail investors.
In spite of the controversy caused when Chef Nomi briefly got away with $14 million in tokens, the total number of addresses holding SUSHI continued to rise.
Within less than a month, SushiSwap has been able to capture a significant community with approximately 20,000 SUSHI holders. SUSHI’s price is still down 80% from its high, but SushiSwap has managed to retain most liquidity, with $770 million still being supplied to the exchange.
Overall, SushiSwap’s vampire mining ended up surprisingly being positive for Uniswap, which ended up tripling their liquidity likely due to increased awareness. However, this story serves as a cautionary tale, highlighting how easy it can be to replicate code and profit from others’ work. Unfortunately, it also shows how large players sold their tokens as retail traders rushed to buy.
Finally, despite all the controversy, SushiSwap has still been able to capture a community with a decent amount of holders. In the end, it will be up to them if this is the end or just the beginning of SushiSwap.
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