First Mover: Binance’s New DeFi Futures Let Crypto Traders Bet on Decentralization

First Mover: Binance’s New DeFi Futures Let Crypto Traders Bet on Decentralization

The fast-growing realm of decentralized finance – semi-autonomous exchanges and lenders erected from interconnected systems of digital tokens and coding atop the Ethereum blockchain – is one of the hottest corners of the crypto industry this year, with $7 billion of value locked, a 10-fold increase over the start of 2020.  

Now, the big centralized crypto exchanges are finding a way to cash in on the mania, introducing indexes tied to the fate of “DeFi” tokens and new futures contracts and other types of derivatives. For traders, these indexes provide a way to speculate on decentralized finance without going all in on any single project.

Related: Blockchain Bites: Major Acquisitions, Bitcoin Futures Liquidations and the SEC’s New Rules

The latest announcement comes from Binance, the world’s largest cryptocurrency exchange. 

The company plans to offer “DeFi Index Perpetual Contracts,” listed on Binance Futures, according to a press release Wednesday. The contracts will be denominated in the dollar-linked stablecoin tether and offer traders leverage up to 50 times their money down.    

The “fully synthetic derivative product enables greater access to decentralized finance,” Binance said in the release. 

Ahem. Never underestimate crypto exchanges’ creativity when it comes to adapting Wall Street-style financial engineering for use on the so-called digital rails. 

Related: Bitcoin Drop Squeezes Out Weak Derivatives Positions – And That May Be a Good Thing

Binance’s new contracts might be an early entrant in what could potentially become a crowded field.

Earlier this week, the exchange FTX announced a futures index tracking the top 100 liquidity pools on the decentralized exchange Uniswap. FTX had already launched its own DeFi Index in June. 

Binance’s DeFi index consists of 10 tokens associated with DeFi, several of which rank among the year’s best performers. They include Chainlink’s LINK, Compound’s COMP, Kyber’s KNC, Aave’s LEND, ZRX’s 0x and MakerDAO’s MKR. 

In an example of the speculative fervor, tokens associated with the phenomenon now have a combined market value of $12.7 billion, more than the amount of money locked into the underlying platforms, according to the website DeFi Market Cap.

“DeFi is still the big hype, with many coins still flying high,” the Norwegian cryptocurrency analysis firm Arcane Research wrote Tuesday in a weekly report.

Messari, a crypto-markets research firm, has compiled its own list of 30 tokens associated with DeFi. On average, they’re up 13-fold in 2020.

It almost makes bitcoin’s 56% year-to-date gain look like dead money.  

Bitcoin’s latest price drop has a silver lining: It has forced out weak hands in the derivatives market and potentially opened the doors for a more sustainable rally to recent highs. 

  • Bitcoin is currently trading near $11,400.
  • Tuesday’s 3.7% price drop triggered sell liquidations – the forced unwinding of long trades – worth nearly $50 million in perpetuals (futures with no expiry) listed on cryptocurrency exchange BitMEX, according to data source Skew.
  • “The positives of last night’s move was that it cleared out a lot of the weak leverage longs,” Singapore-based QCP Capital said in a Telegram post, in reference to the perpetuals liquidations. 
  • Following Tuesday’s price drop, the cost of holding long positions in BitMEX perpetuals, known as the “funding rate,” has normalized.
  • A high funding rate discourages new investors from entering the market and existing holders from boosting their long positions.
  • “The unsustainably high funding rate has been pushed back to its typical baseline levels of 11% annualized,” QCP Capital said. 
  • The funding rate had jumped to highs above 60% in annualized terms on Aug. 18, when bitcoin broke above $12,000.
  • As a result, stronger buying pressure may emerge, leading to a re-test of recent highs above $12,000. 

– Omkar Godbole

Aave (LEND): Decentralized lender passes MakerDAO to become No. 1 in DeFi rankings (CoinDesk)

Wrapped bitcoin (WBTC): Fees on Ethereum blockchain are so elevated that BitGo is scouting for partners for new sidechain. (CoinDesk) 

Ether (ETH): More than $1 billion of ERC-20 tokens vulnerable to “fake deposit exploit.” (CoinDesk)  

PAX Gold (PAXG): Crypto exchange Binance lists the gold-linked digital token as precious metal trades around $1,900 an ounce. (Paxos)

Big companies load up on debt as borrowing costs fall, even amid recession (Bloomberg)

U.S. consumer confidence unexpectedly falls to 6-year low as stimulus checks expire (Reuters)


Author: Bradley Keoun, Omkar Godbole and Sebastian Sinclair

Crypto Users Are Receiving IRS Tax Warning Letters, Again

Crypto Users Are Receiving IRS Tax Warning Letters, Again

The IRS has begun sending out another round of crypto tax warning letters (dated August 14, 2020) to US taxpayers according to several posts on Reddit and other social media. These letters along with the new placement of the crypto question on Form 1040 show IRS’s continuous effort in regulating the crypto tax space. At the time of this posting, the IRS has not released any communication pertaining to this new wave of crypto tax warning letters.

2020 Crypto 6174-A letter originally posted on blog on August 25, 2020

The IRS first started sending out these warning letters in July 2019 to 10,000 US crypto users. In 2019, these notices came out in 3 variations: IRS Letter 6173, IRS Letter 6174, IRS Letter 6174-A. 

Letter 6173 is the most serious letter among the three. It requires your response by the date mentioned in the letter. If you do not respond, your tax profile will be examined.

You can respond to this letter in following ways;

  • File the missing tax return with your virtual currency transactions
  • If you filed a tax return but you mistakenly did not report cryptocurrency gains and/or incorrectly reported them, you can amend  that return
  • If you think you filed your crypto taxes correctly, you should respond to the letter by attaching a detailed explanation of how you arrived at the income reported
  • It is always a good idea to respond to the letter 6173 correctly on time to avoid getting into a tax examination. If you need additional time to respond to the letter, you can request more time from the IRS.

    Letter 6174 and 6174-A are no action letters. These are meant to educate the recipient. These letters alert you about crypto tax filing obligations and show relevant tax forms, schedules and additional IRS resources. After reviewing this information, if you think you misreported, under reported or completely omitted crypto transactions from your previous tax returns, you are supposed to file an amended (or delinquent) tax return and write “Letter-6174” or “Letter- 6174-A” on the top of it. If you believe you filed everything correctly, no action is needed from your end. 

    At the time of this post, it is unknown how many taxpayers received these letters in 2020 or how the IRS got information about those taxpayers. It is logical to think that the data might have gone to the IRS thru any US based cryptocurrency exchange that collects user information as a part of Know your customer (KYC) procedures. 

    Disclaimer: this post is informational only and is not intended as tax advice. For tax advice, please consult a tax professional.

    Follow me on Twitter or LinkedIn. Check out my website or some of my other work here. 


    Author: Shehan Chandrasekera

    New SEC-Backed Crypto Exchange Launches $130MN 'Security Token' Offering

    New SEC-Backed Crypto Exchange Launches $130MN ‘Security Token’ Offering

    New SEC-Backed Crypto Exchange Launches $130MN ‘Security Token’ Offering

    Tyler Durden

    Wed, 08/26/2020 – 04:15

    INX Trading Solutions, a new crypto exchange that’s hoping to displace its competition via close relationships with regulators and more ‘robust’ technology offerings (“we built our own technology; we don’t license it,” the company boasted in a release), has just launched one of the first SEC-approved “security token” offerings in the US.

    The company has attracted the attention of the financial press thanks to a hilarious “chart” that we suspect was intended as a light-hearted joke.

    But that didn’t stop Bloomberg editor Joe Weisenthal from apparently reached out for comment about the meaning of the “y axis” in the chart above, and the company brushed him off with a “whatever you want it to be.”

    When asked by @TheStalwart what the y axis is for this graph from their marketing materials, they said ‘whatever you want it to be’

    — Austerity Sucks (@austerity_sucks) August 25, 2020

    What future awaits cryptocurrencies?

    Some crypto afficionados, however, believe the project – which is coming to market just as bitcoin and top alt-coin prices have been moving higher – has some built-in advantages that differentiate INX from the ill-fated, scam-level ICOs of yesteryear.

    INX has built its own exchange platform, and forged a working relationship with the SEC that could give it an advantage, since American regulators hold the keys to the crypto-asset kingdom, so to speak.

    Traditionally, exchanges have been among “the most profitable businesses in the crypto ecosystem”.

    Don’t conflate permissionless altcoins that try to compete with bitcoin to this, a regulated security token for a specific company.

    This is a very different beast; I find it interesting because historically the most profitable businesses in the crypto ecosystem are exchanges.

    — Jameson Lopp (@lopp) August 25, 2020

    The company is offering up to 130 million INX Security Tokens in the offering on Tuesday.

    * * *

    Read the press release below:

    INX Limited today announced that the Securities and Exchange Commission (SEC) has declared as effective its registration statement on Form F-1 filed in connection with the initial public offering (the “Offering”) of up to 130 million INX Security Tokens (the “INX Tokens” or “Tokens”).  INX has set the offering price at $0.90 per Token with a minimum investment of $1,000.  It is anticipated that the Offering will begin on August 25, 2020 at 10am Eastern Daylight Time at

    INX intends to use a portion of the net proceeds raised from the sale of INX Tokens in the Offering for the continued development and operation of INX Trading Solutions, a regulated solution for the trading of blockchain assets, including cryptocurrencies, security tokens, and their derivatives, and for the establishment of a cash reserve fund.

    A registration statement relating to these securities was declared effective by the Securities and Exchange Commission (SEC) on August 20, 2020.  Copies of the registration statement can be accessed by visiting the SEC website at The offering is being made only by means of a prospectus. A final prospectus describing the terms of the offering has been filed with the SEC and forms a part of the effective registration statement. Copies of the final prospectus relating to the Offering may be obtained for free by visiting EDGAR on the Securities and Exchange Commission’s website at (click here). Alternatively, copies of the final prospectus may be obtained for free by sending an email to INX at [email protected].

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    Author: Tyler Durden

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    Author: Constitutional Nobody

    First Mover: Binance’s New DeFi Futures Let Crypto Traders Bet on Decentralization

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