Two Ethereum DeFi traders made $120m today using a strategy called ‘looping’
Two Ethereum traders made $120 million in the last 24 hours.
The traders employ a 'looping' strategy in DeFi, enabling leveraged positions on Ether to amplify their investments.
Upcoming Ethereum upgrades and the potential approval of an Ether ETF are key market catalysts, potentially driving Ether's price even higher.
A pair of high-value Ethereum traders are up nearly $120 million today as crypto prices continue to jump.
According to DL News’ analysis, two wallet addresses, 0x28 and 0x74, have used various lending protocols to increase their exposure to Ether.
Combined, these wallets hold over 1.1 million in Ether and staked Ether derivatives — worth $3 billion. Both wallets are deposited in a handful of lending protocols like MakerDAO, Spark, Morpho and Compound.
The identities of wallet owners aren’t publicly known, but these wallets caught attention in 2022 for nearly being liquidated for $600 million worth of Ether. Now, that risky bet has paid off.
Looping on DeFi
The strategy these whales employ is commonly referred to in DeFi as looping.
A trader deposits an asset, such as Ether, into a lending protocol and then borrows a different asset, like dollar-pegged stablecoin DAI, against their deposit. They then swap that DAI for Ether, the original asset.
After swapping cryptocurrencies, the trader re-deposits the newly-acquired Ether back into the lending protocol. This action allows them to borrow additional funds, establishing what’s called a ‘leveraged long position’ on their original Ether deposit.
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The looping strategy enables traders to achieve a leverage of 3-5x — multiplying capital by a factor of 3 to 5 times — on their initial investment.
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But in this case, these whales have opted for a more conservative leverage range of 1-2x. Despite its potential for higher returns, this strategy carries a multitude of risks. A significant drop in the Ether price could lead to liquidation, resulting in the loss of the initial deposit.
The pair of whales deployed these strategies years ago when Ether was worth around $1,000. Ether is currently trading around $2,700. The price of Ether would have to drop over 60% for them to be liquidated.
Ethereum catalysts
Traders who utilise the looping strategy inherently hold a bullish sentiment — conviction that the prices will go up — on the market.
For Ether, there are a couple of significant catalysts on the horizon.
The first is the upcoming Dencun upgrade, which will reduce the cost of transactions on Ethereum’s layer 2 networks like Arbitrum and Optimism. After successful tests on two of Ethereum’s test networks, the upgrade is slated to come to Ethereum mainnet around March 13.
The weeks leading up to major Ethereum upgrades generally coincide with increased interest in the Ethereum network, and some researchers even find that it causes Ether’s price to increase.
Since the approval of the Bitcoin spot ETF, the market has turned its sights to an Ether spot ETF.
Heavyweights like Blackrock, Fidelity, Invesco and others have all already applied for an Ether spot ETF, with a decision to be made by May 23.
Given the Bitcoin ETFs hold 692,000 Bitcoin, or 3.53% of the total supply, traders are hoping an Ether ETF would see a similar success.
Ryan Celaj is DL News’ New York-based Data Correspondent. Reach out with tips at ryan@dlnews.com.
Newsletters
Uniswap v2 inches nearer to expanding beyond Ethereum in aim to starve copycats
Uniswap v2 inches nearer to expanding beyond Ethereum in aim to starve copycats
DeFi
By
Osato Avan-Nomayo
February 14, 2024 at 1:07 AM
Uniswap delegates are voting to deploy Uniswap on multiple blockchains.
Launching v2 is expected to starve any copycats currently deployed on these chains.
The vote is a final onchain execution poll after months of delay.
After almost three years since its launch, Uniswap is going multichain – again.
That’s according to an ongoing onchain vote among community members to deploy Uniswap v2 on every blockchain that already hosts its more recent v3 protocol, including Optimism, Arbitrum, and Base.
Participants have already shown unanimous support, with 10 million UNI tokens cast in favour of the proposal.
The proposal has yet to satisfy Uniswap DAO’s 40 million UNI tokens quorum requirement — the minimum number of DAO votes necessary for a vote to be viable. Failure to meet the quorum means the vote wouldn’t pass regardless of results and be restarted.
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The polls shut on Saturday.
Erin Koen, governance lead at Uniswap Foundation and the proposal’s author, said the absence of Uniswap v2 on some blockchains allowed unsafe copycats to thrive. Deployment would instead help to divert liquidity back to Uniswap.
He added that having both Uniswap versions on these blockchains would help provide better execution for small token swaps.
While Uniswap v3 has been deployed on multiple chains, Uniswap v2 has exclusively been on Ethereum since its launch in May 2021, amassing a market size of $1.9 billion. It has also processed $465 billion in token swaps to date.
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As a standalone version, Uniswap v2 is only behind Curve and Uniswap v3 in terms of market size for decentralised exchanges.
Delegates voted in August to approve the plan, but that was an offchain temperature check — a preliminary vote among DAO delegates to gauge whether they agree with a proposal.
The current onchain vote, if passed, would execute the plan.
Across the Uniswap aisle
Some Uniswap community members have previously been critical of the plan.
One DAO member with the pseudonym kfx previously said the move was coming too late and should have happened in 2021 to preempt the emergence of harmful copycats.
Kfx also previously warned that deploying Uniswap v2 to blockchains that already have the protocol’s latest upgrade could cause liquidity fragmentation. Crypto liquidity for trading is spread too thinly across different protocols, they argued.
However, supporters like GFX Labs, a crypto research firm, say the move could help the protocol acquire even more market share. Their response to delegates critical of the plan has been “better late than never.”
Despite enthusiasm for the plan, the process hasn’t been hitch-free. The onchain vote, slated for October after the successful temperature check, was postponed.
Koen noted on the community forum at that time that the process ran into a “nit picky issue.”
This “issue” involved a lack of uniformity in the smart contract codes being used by the deploying teams to launch Uniswap v2 on the various blockchains.
This has now been resolved, Koen said.
Osato Avan-Nomayo is our Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.
Related Topics
UNISWAP LABS
UNISWAP
ETHEREUM
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