Ethereum (ETH) is peaking and traders, it seems are quickly taking their profits.
For perspective, and to quantify how fast longs are scrambling for the exits, the second most valuable asset is down 5% in the last trading day.
Ethereum (ETH) bulls Falling Short
Peaking over the weekend, $20 just shy of the important $300 level, the exhaustion of bulls is clear. Given, the coin’s rally has been spectacular.
In just under two months, the asset’s price rallied from Dec 2019 lows more than doubling to $280. In that impressive rally, ETH gained 140% against the greenback.
While prices soared, the burgeoning DeFi ecosystem, a sub-sector that has seen over $1 billion of ETH locked up, continues to grow.
The idea of open finance, of lending and borrowing funds without intermediation is an attractive proposition it seems.
More users are flocking to the industry. Meanwhile, the concept of flash loans is attracting diverging opinion following the loss of $350k by BzX, a DeFi protocol from where Fulcrum is built.
The BzX exploit and the $350,000 Arbitrage Money
Over the weekend, a skilled coder took advantage of the flash loan feature, borrowing 10,000 ETHs and through arbitrage, earned a cool $350k in a matter of seconds.
This DeFi issue is another great example of info assyemtries in crypto.
? Everyone outside of #Ethereum refers to it as a "hack"
? Anyone inside knows it was an exploit
The use of the term "hack", as with The DAO, will make sure $ETH gets oversold. Great for shrewd investors.
— 0xNick.eth (@0xEther) February 16, 2020
A flash loan is only valid within 15 seconds. That is the time it takes for an Ethereum block to be confirmed.
By coding different actions in a smart contract, the “heist” took BzX by surprise, forcing the firm to issue a statement and pause Fulcrum. The exploited contract was also paused.
The DeFi community should nonetheless be concerned. It could spur more of this of attack more so if the number of oracles is limited and decentralized.
~353k net profit using 'Sophisticated' arb on Fulcrum @bzxHQ
1.he took $2.7M Flash loan.@dydxprotocol 10kETH
2.put 5.5k ETH @compoundfinance, borrowed 112 WBTC
3.short WBTC on bzx #sETHwBTC5x
4.dumped 112 wBTC on #KyberUniswap to trigger short(oasis?)
5.Paid back loan
6.profit https://t.co/NRHM7NnAGK pic.twitter.com/11YWpUZe0o
— Julien Bouteloup | LA (@bneiluj) February 15, 2020
It should be a learning curve for BzX and others. For now, the focus is on mitigation and whether prices will slump after such a near perpendicular rally.
ETH back to $200?
From the daily chart, sellers are in charge. As bears press lower, there are pockets of support.
However, that may be quashed if prices fall below the middle BB. That would trigger a wave of dumping that could force ETH back to $200, a round number.