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Crypto Industry Divided Over Introducing Circuit Breakers on Exchanges

Crypto Industry Divided Over Introducing Circuit Breakers on Exchanges



Recent turbulence has brought traditional tools such as circuit breakers to the forefront of crypto community discussions.

Since the inception of Bitcoin, volatility has been a part of the cryptocurrency narrative even before exchanges and the current mainstream mentions. Now that traditional markets are showing volatility further exacerbated than anti-fragile cryptocurrency during the coronavirus pandemic, the community is seeing how traditional marketplaces like the New York Stock Exchange handle equity and commodity volatility through circuit breaker implementation. 

In cryptocurrency and decentralized finance, liquidation auctions have been the answer for periods of market turbulence. The prominence of the traditional marketplaces triggering the circuit breakers has led some cryptocurrency exchanges to implement similar measures. So as the community debates the needs for mechanisms to protect investors versus decentralization, there are a few options and scenarios to consider.

When speaking on circuit markets and market volatility in a conversation with Cointelegraph, Vadym Kurylovych, the founder of STEX — a regulated cryptocurrency exchange based in Estonia — said:

“Trading derivatives on the offshore exchanges looks similar to playing roulette in Madagascar casino. You knew you'd get busted the minute you joined but the potential payout entices you to take the risk.”

While the popularity of derivatives and financial products continues to grow within the cryptocurrency ecosystem, educating investors is an important step that exchanges are now beginning to take. While this does not fully prepare non-sophisticated investors in advance for when strong solutions are developed, crypto is left borrowing protection mechanisms from the traditional space. For clarity, protection mechanisms in cryptocurrency will be broken down into circuit breakers at the exchange level as well as the token level. 

Overarching exchange circuit breakers

Mimicking the traditional market, some cryptocurrency exchanges have implemented protection mechanisms in the form of circuit breakers to safeguard their users, while others are resistant to this level of control citing decentralization or other measures to meet demand during periods of high liquidation. So, should exchanges implement circuit breakers to protect users from plummeting prices?

The New York Stock Exchange implements “three circuit breaker thresholds that measure a decrease against the prior day’s closing price of the S&P 500 Index -- 7% (Level 1), 13% (Level 2), and 20% (Level 3).” When the first two levels are reached, a 15-minute suspension of trading occurs. At the level 3 threshold, daily trading ceases. In a conversation with Cointelegraph, Ryan Salame, head of OTC for Alameda Research — which manages over $100 million in digital assets and trades $600 million to $1.5 billion per day — stated:

“[It] seems to me more like a philosophical debate than anything else, but I imagine you get a more stable market with circuit breakers thus a larger audience would be in favor of them. I personally love a 24/7 market with no circuit breakers and 100x leverage with high volatility, but can certainly see the argument against it.”

The difference may be in the type of product being offered to the financial community. While Bitcoin is decentralized, other financial products in the cryptocurrency space may need circuit breakers to protect against black swan events just like the traditional market has experienced.

The cryptocurrency market has many large liquidation events to point to, but recently, the now-infamous Black Thursday on BitMex is a great example. The massive sell-off was reportedly triggered by two DDoS attacks causing a flash crash in the Bitcoin (BTC) price. This attack did major damage to investors, and it is being reported that Binance now tops BitMex for Bitcoin Futures. BitMex lacks circuit breakers and therefore benefits financially in times of market volatility. While the financial benefit may have been large for BitMex, the fallout from not protecting users may cost the platform in the long run.

Currently, Binance has not implemented any form of circuit breakers in their exchanges. In a recent interview with Cointelegraph, the exchange’s CEO Changpeng Zhao touched upon circuit breakers, but did not give out any indication of future Binance plans for them. He did, however, remark that “blockchain is much fairer in solving the fundamental problems of the old system, which means the fiat-based system.” This lends credence to Binance upholding its decentralized philosophy and resisting the development and implementation of circuit breakers. 

Jake Stott, the founder of blockchain think tank dGen, lent his insight in a conversation with Cointelegraph, saying, ”With circuit breakers, we start to see a cryptocurrency market that betrays some of the fundamental reasons for it to exist.” He went on to add:

“Without circuit breakers, we may never see products such as a Bitcoin ETF, due to the huge price variations that could occur between the 24 hour and traditional exchange-traded product. I’m personally in favour of the circuit breakers because it appears much of the recent problems were caused by margin traders uncovered shorts and subsequent clogs in the Bitcoin and Ethereum networks. Price crashes were much more extreme for those reasons.”

So what will cryptocurrency exchange circuit breakers look like? A circuit breaker introduced by the Huobi exchange may give some insight into how the industry’s trends could traverse. The liquidation circuit breakers only allow partial liquidation of orders rather than full liquidation, which previously was the case. The circuit breaker acts differently than traditional market circuit breakers, which are used to curb panic-selling. The Huobi circuit breaker will terminate liquidation orders on positions where the margin ratio is ≤0% when abnormal price deviation between the market price and liquidation price is identified. 

Related: What Is a ‘Circuit Breaker’ and Why Do Exchanges Need Them?

While there have been calls to ban shorting, such a move could disrupt liquidity, while an approach like the one Huobi developed protects users’ funds first. While Huobi may be on the right path, Jens Willemen, a partner at Kairon Labs Market Making — which provides liquidity to exchanges — outlined implementation struggles for circuit breakers, saying that “for the smaller tokens, the ones that are just getting listed a circuit breaker would be a good thing,” adding that overall:

“Circuit breakers do make sense for the larger, more liquid tokens to add in a bit more stability to the markets. In practice we believe this will be very hard to implement in the crypto space. Most tokens are listed on a number of different (unregulated) exchanges, getting all these exchanges to agree on when and how to implement these circuit breakers will be very difficult to say the least.”

A similar sentiment was shared by Michael Creadon, a board advisor at Inveniam Capital Advisors — a digital financial instruments tool for private capital markets — told Cointelegraph that traders would be caught out either with or without circuit breakers in place:

“Circuit breakers won’t work because there are too many exchanges and no centralized rule-making body. If Coinbase freezes up but the market moves another 50% on Binance, you won't be able to get out. So you’re damned if you do, damned if you don’t. For long term hodlers, I think this is less important. For day traders, this is very important. Circuit breakers are a good thing, but hard to deploy when there are hundreds, if not thousands, of trading venues.”

Understandably, competition and high trade volume is beneficial to exchanges, which lends itself to a future where not all will implement circuit breakers. Exchanges will continue to ensure they make money even if practices may harm investors and prevent wipeouts due to system overloading and attacks. 

Governance circuit breakers at the token level

While exchange circuit breakers take the first step in protecting investors, the shortcomings appear to stem from the difficulty of widespread implementation and consensus on best practice. Additionally, individual tokens have the ability to implement governance circuit breakers and reserves in an effort to protect users.

While discussing the potential of seeing token-level circuit breakers in any upcoming projects and launches with Cointelegraph, Leslie Lei, listing director for Cointiger — the first cryptocurrency exchange to introduce an equity mechanism through their native token — remarked:

“The decentralized goal of the cryptocurrency industry will not be left up to the exchanges alone and a project we are aware of is already implementing circuit breakers like investment downside protection. We see innovative projects developing and launching daily that strive to meet the needs for the whole ecosystem in a decentralized fashion. Most options exchanges implement present major centralization issues with everyone running on different APIs, so the token-level approach may be a preferred solution while keeping users’ interests first.”

While DeFi companies seek an alternative to overarching exchange circuit breakers, the potential solution could also lie in non-correlating reserves. While this is possible and currently being implemented with DAI, Dmitri Laush, CEO of GetID — an omnichannel Know Your Customer solution — noted to Cointelegraph:

“The Crypto industry is still in the Wild West zone in survival mode, with monopoly or duopoly on this market finally we can see those rules, but it will not in the near future. And as altcoins usually reflect BTC and ETH in their drops and raises, the circuit breakers can help traders dealing with altcoins and tokens as well.”

The dependence on volatile assets such as Bitcoin and Ether (ETH) places strain on reserves and values of tokens. A recent example is Ethereum’s crash creating issues for DAI during Black Thursday. MakerDAO remedied the dependence on a volatile Ethereum and implemented another reserve that utilizes USD Coin (USDC), a fiat-pegged stablecoin. Liquidity through demand or reserves is necessary, yet only reserves can be legally controlled.

Eventually, cryptocurrencies may need to add their own circuit breakers to protect the baseline value of assets. For example, during the DAI Auction, a number of users won liquidation auctions for 0 DAI because of a bug. While the Ethereum used to create the DAI was not worth 0, the drop in price caused mass auctions to occur. These failures triggered a $28 million lawsuit against the Maker Foundation.

For this reason, reserves themselves may need to act as a circuit breaker. For example, Gemini Dollar does not see major exchange fluctuations because it is minted and burned at a 1:1 ratio to the fiat currency it tokenizes. Likewise, Bancor-based reserves produce slippage on available funds in a transparent way to disperse liquidations.

The community appears split on whether cryptocurrency and exchanges should implement circuit breakers and is even more divided on whether those circuit breakers should be at the exchange level or token level. However, one piece seemed clear throughout all the opinions and developmental research: Projects that focus on the success of investors and users will come out of this as winners.

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The Coming Of The Police State In America

The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now…



The Coming Of The Police State In America

Authored by Jeffrey Tucker via The Epoch Times,

The National Guard and the State Police are now patrolling the New York City subway system in an attempt to do something about the explosion of crime. As part of this, there are bag checks and new surveillance of all passengers. No legislation, no debate, just an edict from the mayor.

Many citizens who rely on this system for transportation might welcome this. It’s a city of strict gun control, and no one knows for sure if they have the right to defend themselves. Merchants have been harassed and even arrested for trying to stop looting and pillaging in their own shops.

The message has been sent: Only the police can do this job. Whether they do it or not is another matter.

Things on the subway system have gotten crazy. If you know it well, you can manage to travel safely, but visitors to the city who take the wrong train at the wrong time are taking grave risks.

In actual fact, it’s guaranteed that this will only end in confiscating knives and other things that people carry in order to protect themselves while leaving the actual criminals even more free to prey on citizens.

The law-abiding will suffer and the criminals will grow more numerous. It will not end well.

When you step back from the details, what we have is the dawning of a genuine police state in the United States. It only starts in New York City. Where is the Guard going to be deployed next? Anywhere is possible.

If the crime is bad enough, citizens will welcome it. It must have been this way in most times and places that when the police state arrives, the people cheer.

We will all have our own stories of how this came to be. Some might begin with the passage of the Patriot Act and the establishment of the Department of Homeland Security in 2001. Some will focus on gun control and the taking away of citizens’ rights to defend themselves.

My own version of events is closer in time. It began four years ago this month with lockdowns. That’s what shattered the capacity of civil society to function in the United States. Everything that has happened since follows like one domino tumbling after another.

It goes like this:

1) lockdown,

2) loss of moral compass and spreading of loneliness and nihilism,

3) rioting resulting from citizen frustration, 4) police absent because of ideological hectoring,

5) a rise in uncontrolled immigration/refugees,

6) an epidemic of ill health from substance abuse and otherwise,

7) businesses flee the city

8) cities fall into decay, and that results in

9) more surveillance and police state.

The 10th stage is the sacking of liberty and civilization itself.

It doesn’t fall out this way at every point in history, but this seems like a solid outline of what happened in this case. Four years is a very short period of time to see all of this unfold. But it is a fact that New York City was more-or-less civilized only four years ago. No one could have predicted that it would come to this so quickly.

But once the lockdowns happened, all bets were off. Here we had a policy that most directly trampled on all freedoms that we had taken for granted. Schools, businesses, and churches were slammed shut, with various levels of enforcement. The entire workforce was divided between essential and nonessential, and there was widespread confusion about who precisely was in charge of designating and enforcing this.

It felt like martial law at the time, as if all normal civilian law had been displaced by something else. That something had to do with public health, but there was clearly more going on, because suddenly our social media posts were censored and we were being asked to do things that made no sense, such as mask up for a virus that evaded mask protection and walk in only one direction in grocery aisles.

Vast amounts of the white-collar workforce stayed home—and their kids, too—until it became too much to bear. The city became a ghost town. Most U.S. cities were the same.

As the months of disaster rolled on, the captives were let out of their houses for the summer in order to protest racism but no other reason. As a way of excusing this, the same public health authorities said that racism was a virus as bad as COVID-19, so therefore it was permitted.

The protests had turned to riots in many cities, and the police were being defunded and discouraged to do anything about the problem. Citizens watched in horror as downtowns burned and drug-crazed freaks took over whole sections of cities. It was like every standard of decency had been zapped out of an entire swath of the population.

Meanwhile, large checks were arriving in people’s bank accounts, defying every normal economic expectation. How could people not be working and get their bank accounts more flush with cash than ever? There was a new law that didn’t even require that people pay rent. How weird was that? Even student loans didn’t need to be paid.

By the fall, recess from lockdown was over and everyone was told to go home again. But this time they had a job to do: They were supposed to vote. Not at the polling places, because going there would only spread germs, or so the media said. When the voting results finally came in, it was the absentee ballots that swung the election in favor of the opposition party that actually wanted more lockdowns and eventually pushed vaccine mandates on the whole population.

The new party in control took note of the large population movements out of cities and states that they controlled. This would have a large effect on voting patterns in the future. But they had a plan. They would open the borders to millions of people in the guise of caring for refugees. These new warm bodies would become voters in time and certainly count on the census when it came time to reapportion political power.

Meanwhile, the native population had begun to swim in ill health from substance abuse, widespread depression, and demoralization, plus vaccine injury. This increased dependency on the very institutions that had caused the problem in the first place: the medical/scientific establishment.

The rise of crime drove the small businesses out of the city. They had barely survived the lockdowns, but they certainly could not survive the crime epidemic. This undermined the tax base of the city and allowed the criminals to take further control.

The same cities became sanctuaries for the waves of migrants sacking the country, and partisan mayors actually used tax dollars to house these invaders in high-end hotels in the name of having compassion for the stranger. Citizens were pushed out to make way for rampaging migrant hordes, as incredible as this seems.

But with that, of course, crime rose ever further, inciting citizen anger and providing a pretext to bring in the police state in the form of the National Guard, now tasked with cracking down on crime in the transportation system.

What’s the next step? It’s probably already here: mass surveillance and censorship, plus ever-expanding police power. This will be accompanied by further population movements, as those with the means to do so flee the city and even the country and leave it for everyone else to suffer.

As I tell the story, all of this seems inevitable. It is not. It could have been stopped at any point. A wise and prudent political leadership could have admitted the error from the beginning and called on the country to rediscover freedom, decency, and the difference between right and wrong. But ego and pride stopped that from happening, and we are left with the consequences.

The government grows ever bigger and civil society ever less capable of managing itself in large urban centers. Disaster is unfolding in real time, mitigated only by a rising stock market and a financial system that has yet to fall apart completely.

Are we at the middle stages of total collapse, or at the point where the population and people in leadership positions wise up and decide to put an end to the downward slide? It’s hard to know. But this much we do know: There is a growing pocket of resistance out there that is fed up and refuses to sit by and watch this great country be sacked and taken over by everything it was set up to prevent.

Tyler Durden Sat, 03/09/2024 - 16:20

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Low Iron Levels In Blood Could Trigger Long COVID: Study

Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate…



Low Iron Levels In Blood Could Trigger Long COVID: Study

Authored by Amie Dahnke via The Epoch Times (emphasis ours),

People with inadequate iron levels in their blood due to a COVID-19 infection could be at greater risk of long COVID.


A new study indicates that problems with iron levels in the bloodstream likely trigger chronic inflammation and other conditions associated with the post-COVID phenomenon. The findings, published on March 1 in Nature Immunology, could offer new ways to treat or prevent the condition.

Long COVID Patients Have Low Iron Levels

Researchers at the University of Cambridge pinpointed low iron as a potential link to long-COVID symptoms thanks to a study they initiated shortly after the start of the pandemic. They recruited people who tested positive for the virus to provide blood samples for analysis over a year, which allowed the researchers to look for post-infection changes in the blood. The researchers looked at 214 samples and found that 45 percent of patients reported symptoms of long COVID that lasted between three and 10 months.

In analyzing the blood samples, the research team noticed that people experiencing long COVID had low iron levels, contributing to anemia and low red blood cell production, just two weeks after they were diagnosed with COVID-19. This was true for patients regardless of age, sex, or the initial severity of their infection.

According to one of the study co-authors, the removal of iron from the bloodstream is a natural process and defense mechanism of the body.

But it can jeopardize a person’s recovery.

When the body has an infection, it responds by removing iron from the bloodstream. This protects us from potentially lethal bacteria that capture the iron in the bloodstream and grow rapidly. It’s an evolutionary response that redistributes iron in the body, and the blood plasma becomes an iron desert,” University of Oxford professor Hal Drakesmith said in a press release. “However, if this goes on for a long time, there is less iron for red blood cells, so oxygen is transported less efficiently affecting metabolism and energy production, and for white blood cells, which need iron to work properly. The protective mechanism ends up becoming a problem.”

The research team believes that consistently low iron levels could explain why individuals with long COVID continue to experience fatigue and difficulty exercising. As such, the researchers suggested iron supplementation to help regulate and prevent the often debilitating symptoms associated with long COVID.

It isn’t necessarily the case that individuals don’t have enough iron in their body, it’s just that it’s trapped in the wrong place,” Aimee Hanson, a postdoctoral researcher at the University of Cambridge who worked on the study, said in the press release. “What we need is a way to remobilize the iron and pull it back into the bloodstream, where it becomes more useful to the red blood cells.”

The research team pointed out that iron supplementation isn’t always straightforward. Achieving the right level of iron varies from person to person. Too much iron can cause stomach issues, ranging from constipation, nausea, and abdominal pain to gastritis and gastric lesions.

1 in 5 Still Affected by Long COVID

COVID-19 has affected nearly 40 percent of Americans, with one in five of those still suffering from symptoms of long COVID, according to the U.S. Centers for Disease Control and Prevention (CDC). Long COVID is marked by health issues that continue at least four weeks after an individual was initially diagnosed with COVID-19. Symptoms can last for days, weeks, months, or years and may include fatigue, cough or chest pain, headache, brain fog, depression or anxiety, digestive issues, and joint or muscle pain.

Tyler Durden Sat, 03/09/2024 - 12:50

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…



By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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