Seeds of Wisdom RV and Economic Updates Wednesday Afternoon 11-20-24
Good Afternoon Dinar Recaps,
BIS RESEARCH FINDS PROS DOMINATE CRYPTO DEX DEFI EXCHANGES
In traditional finance (TradFi), market makers and high frequency traders act as intermediaries on exchanges. Decentralized Finance (DeFi) was meant to provide an alternative, with retail investors providing liquidity in a crowdsourcing manner.
The Bank for International Settlements (BIS) was curious about the extent of disintermediation, so it crunched the data on decentralized exchange (DEX) transactions. It found that sophisticated players dominate and are equivalent to professional intermediaries in TradFi.
That said, a sophisticated player in the crypto world could still be a spotty teenager working in their parent’s basement, albeit a wealthy one. So from that perspective, DeFi is democratized.
Despite retail investors making up 93% of DEX liquidity providers (LPs), a few larger actors provide 65-85% of the liquidity on DEXs. They also dominate profits, making an average net return of 3 basis points more daily. That’s equivalent to 11.65% more annually compared to retail LPs. While the average position of a retail investor is $29,000, for the professionals, the figure is $3.7 million.
The BIS found that retail investors earn about 10-25% of fees and are generally less skilled.
More sophisticated AMMs favor the pros
The study focused on Uniswap V3. In the early days of DeFi, the algorithmic model used by most automated market makers (AMMs) was a crude straight line formula. That meant that a crypto holder could provide liquidity in a relatively passive manner.
That changed with Uniswap V3, which encourages liquidity providers to target narrow price ranges close to the market price, helping to provide deeper liquidity around the price action.
Given prices are dynamic, that requires more monitoring. If an LP provides a broad price range, something retail LPs are more prone to do, their position will be inactive some of the time, earning less fees. The research showed that sophisticated LPs provided significantly narrower tick range spreads, less than half of retail LPs’ range.
The introduction of V3 has accelerated the shift to sophisticated players. At launch, sophisticated LPs accounted for 40-50% of transactions, rising to 70-80% by the end of 2023.
Sophisticated LPs show distinct patterns. They target high volume pools where daily trading volume exceeds $10m, and they completely dominate those pools.
Retail LPs provide liquidity to pools where volumes are less than $100,000 a day. Sophisticated LPs also target less volatile trading pairs, which are lower risk.
However, when the markets are in a temporary volatile period, the pros really stand out. During those times, rather than earning 3 basis points more than retail daily, the figure is 2.5 times higher at 7.6 basis points.
@ Newshounds News™
Source: Ledger Insights
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RUSSIA CRACKS DOWN ON CRYPTO MINING AMID WINTER ENERGY CRISIS
▪️Russia plans to ban crypto mining in specific regions to address energy shortages during winter.
▪️The ban will affect Siberia and certain Ukrainian territories under Russian control, with varying degrees of restriction.
▪️The move comes alongside new crypto regulations aimed at overseeing mining activities.
As winter approaches, Russia, one of the world’s top cryptocurrency mining hubs, is gearing up to impose targeted bans on mining to address looming energy shortages. Alongside the U.S., China, Kazakhstan, and Canada, Russia has become a key player in the global mining scene.
However, with winter temperatures plunging and energy demands rising, the country is forced to make tough choices.
The Moscow Times reports that these restrictions will mainly affect Siberia and Ukrainian territories currently under Russian control.
Crypto Mining Restrictions During Winter Months
A government commission, led by Deputy Prime Minister Alexander Novak, has outlined the plan to ensure stable energy supplies during the heating season. Starting December 1, 2024, mining in Siberia will be suspended until March 15, 2025, with similar bans scheduled annually through 2031.
In addition, the North Caucasus and occupied Ukrainian regions will face a total mining ban from December 2024 to March 2031, with no seasonal exemptions, as reported by Kommersant.
New Regulations in Effect
These mining bans are part of a broader set of crypto regulations signed into law by President Vladimir Putin on November 1, 2024. The new rules aim to regulate mining activities and establish infrastructure for experimental cross-border cryptocurrency transactions.
While domestic crypto payments remain illegal, Russian lawmakers view these measures as a possible way to bypass international sanctions by using digital currencies.
The Energy Cost of Crypto Mining
As the world’s second-largest cryptocurrency mining country after the U.S., Russia uses about 16 billion kilowatt-hours annually for mining—roughly 1.5% of its total electricity consumption, according to the Energy Ministry. In addition to the mining bans, the new laws introduce taxes on mining activities, which could generate up to 200 billion roubles ($2 billion) annually for the Russian economy.
Bitcoin Mining Difficulty Soars
Bitcoin’s mining difficulty has recently hit a record 102.29 trillion, reflecting the increasing computational power needed to secure the network.
This key metric adjusts every two weeks to maintain steady block production despite fluctuations in miner activity. Since mid-2024, Bitcoin’s mining difficulty has increased by nearly 20%, driven by intense global competition.
At the same time, Bitcoin’s hash rate peaked at over 900 EH/s before stabilizing around 730 EH/s.
Russia’s decision to implement these mining bans highlights the country’s challenge of supporting the expanding crypto sector while ensuring enough energy is available during peak demand periods.
@ Newshounds News™
Source: Coinpedia
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JUST IN: 🇷🇺🇨🇳 China and Russia officially complete East-Route Natural Gas Pipeline, directly connecting both countries.
The pipeline is expected to deliver 38 billion cubic metres of natural gas annually.
@ Newshounds News™
Source: BRICSNews
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🌱THE "BRUNSON CASE" AND WHY IT IS IMPORTANT | Youtube
@ Newshounds News™
Source: Seeds of Wisdom Team RV Currency Facts
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