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DeFi proved resilient during the March 2020 and May 2021 market crises

While centralized protocols struggled with the two major market crises of March 2020 and May 2021, DeFi remained resilient.
As if 2020 didn’t provide enough nail-biting moments, 2021 is shaping up to be quite an interesting year…

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While centralized protocols struggled with the two major market crises of March 2020 and May 2021, DeFi remained resilient.

As if 2020 didn’t provide enough nail-biting moments, 2021 is shaping up to be quite an interesting year for cryptocurrency. With the price of Bitcoin (BTC) floating around the $35,000 mark, skeptics and pundits are flocking to the streets of social media to celebrate the long-awaited demise of the decentralized economy. Of course, they quite conveniently forgot that the price of Bitcoin has experienced a 533% increase since the third halving happened in May 2020

Given the number of people claiming the crypto bubble has burst — including former U.S. President Donald Trump — it is almost hard to remember that the price of Bitcoin was hovering between $9,000 and $10,000 a mere 12 months ago.

Since the halving, in fact, decentralized finance (DeFi) has emerged as the most promising sector of the cryptocurrency economy, fueling the adoption of the crypto space. A quick glance at the growth statistics clearly indicates just how much momentum DeFi has generated over the past year. In June 2020, the total value locked (TVL) in DeFi was around $1.05 billion. Today, DeFi boasts more than $104 billion locked-in protocols.

Related: Was 2020 a ‘DeFi year,’ and what is expected from the sector in 2021? Experts answer

Although DeFi is set to lead the crypto space into the mainstream, DeFi has been challenged to its core over the past two years. While some onlookers may point to the hurdles in March 2020 and May 2021, the fact remains that DeFi is quite resilient and is poised for further growth moving ahead.

Calm in the storm

Despite the frenetic growth of DeFi, the space has experienced two substantial stress tests over the past two years: March 2020 and May 2021. To be clear, these instances challenged the DeFi space in ways it had not previously been challenged. The spread of the global COVID-19 pandemic and the Elon Musk-provoked panic selloff, coupled with the crackdown on China’s Bitcoin miners, culminated in the loss of $1 trillion across the entire crypto market.

If the Twitter account of Musk is partially responsible for summoning the storm, DeFi provided a calming presence within the storm.

Following the massive panic selloff ignited by Musk, a far more telling and impressive thing occurred: nothing. DeFi protocols continued to operate exactly as designed: no crashes, no glitches. In fact, the DeFi sector would grow to surpass $100 billion in value — passing its stress test with flying colors.

This feat is especially impressive when juxtaposed against the stress test administered in March 2020. The combined capitalization of the DeFi sector took a hard nosedive — crashing below $1 billion. Worse, the frenzy culminated in a crisis within MakerDAO’s liquidations system, where the protocol became under-capitalized, and roughly $8 million worth of Ether (ETH) was bid on and purchased for free over a 40-minute time period.

Like the rest of the DeFi space, however, MakerDAO survived. Although its survival required it to auction off native MKR tokens to fill the bad debt, it was also able to weather the storm of March 2020’s “Black Thursday.”

Just 12 months later, DeFi would once again carry the mantle for the acceleration of the crypto space. Even famed mainstream investor Mark Cuban would go on to claim that with DeFi, cryptocurrency’s “utility has changed. There are so many things that you can do now. If I've got my Bitcoin, whether it goes up or down in value, I can take a percentage of that and borrow and lend and earn income, and be my own personal banker.”

CEX and DEX performance

The impact of the two aforementioned crises was vastly different across centralized and decentralized exchanges (DEXs), as well. While DEXs navigated the situations relatively effectively, their centralized counterparts experienced outages and significant liquidation chaos.

The May 2021 crisis was extremely difficult for centralized exchanges (CEXs), with more than $7 billion in futures positions being liquidated in a single day, marking the second-highest single-day liquidation ever. Additionally, CEX users experienced functionality issues, including prevention from adding collateral, closing loans or completing trades.

Related: Decentralization vs. centralization: Where does the future lie? Experts answer

Decentralized exchanges, on the other hand, were not only able to avoid outages or downtime, but DEXs also experienced unprecedented trade volume, according to Dune Analytics. Though, that is not to say there were no hiccups along the way. A record $700 million was liquidated in DeFi protocols over a two-day span, and users suffered from egregious gas prices. However, the protocols operated as designed, and did not present compounding issues to users at any point.

This alone highlighted the robustness of DeFi when compared with centralized platforms.

DeFi is the new secure asset fund for users

Perhaps the most important factor in the resilience of DeFi has been the ability of crypto traders to generate significant returns on tokens, regardless of the market volatility. DeFi protocols have become increasingly popular over the past year, as they reward traders with yield for their collateral and their farming. More broadly, yield farming helps traders generate maximum returns on their crypto assets by borrowing, lending and staking across different DeFi protocols. The trading technique is quite similar to dividend payments in the traditional banking system, where the yield paid out to traders helps them generate compounded returns.

Related: Yield farming is a fad, but DeFi promises to change the way we interact with money

This method was instrumental in helping DeFi weather the storms of 2020 and 2021, as traders continued to operate within DeFi protocols to earn annual percentage yield, or APY, while simultaneously circumventing the turbulence within the market.

The volatility we’ve witnessed over the past 18 months was largely unable to dissuade traders from investing in DeFi. In fact, the statistics argue the contrary. While some speculators were dusting off their snow coats in preparation for crypto winter, DeFi protocols experienced monthly all-time high revenues — pushing the TLV in DeFi protocols to nearly $8 billion.

The massive economic stress tests of 2020 and 2021 had the potential to dismantle previous iterations of the decentralized economy. This evolved, matured version of the cryptosphere, however, was much more prepared to weather the storm. Akin to influencer Logan Paul squaring off against lightweight champion Floyd Mayweather, simply surviving is a huge victory. And, similar to Paul, the DeFi space fared far better than most assumed.

Not only did DeFi protocols survive, they thrived. The volatility within the free market must not be the takeaway from the previous two years. The more telling occurrence is that DeFi passed these tests — tests that centralized protocols struggled with.

DeFi’s resilience alone speaks volumes about its potential and its staying power.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.

The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Doug Leonard is the CEO of Hifi, a fixed-rate, fixed-term lending protocol built on the Ethereum blockchain. Doug holds a BS in information systems from Brigham Young University and a master’s degree in management information systems from Brigham Young University. Before being named CEO of Hifi Finance, Doug spent a year as a senior software architect at Mainframe.

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Government

Survey Shows Declining Concerns Among Americans About COVID-19

Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat"…

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Survey Shows Declining Concerns Among Americans About COVID-19

A new survey reveals that only 20% of Americans view covid-19 as "a major threat" to the health of the US population - a sharp decline from a high of 67% in July 2020.

(SARMDY/Shutterstock)

What's more, the Pew Research Center survey conducted from Feb. 7 to Feb. 11 showed that just 10% of Americans are concerned that they will  catch the disease and require hospitalization.

"This data represents a low ebb of public concern about the virus that reached its height in the summer and fall of 2020, when as many as two-thirds of Americans viewed COVID-19 as a major threat to public health," reads the report, which was published March 7.

According to the survey, half of the participants understand the significance of researchers and healthcare providers in understanding and treating long COVID - however 27% of participants consider this issue less important, while 22% of Americans are unaware of long COVID.

What's more, while Democrats were far more worried than Republicans in the past, that gap has narrowed significantly.

"In the pandemic’s first year, Democrats were routinely about 40 points more likely than Republicans to view the coronavirus as a major threat to the health of the U.S. population. This gap has waned as overall levels of concern have fallen," reads the report.

More via the Epoch Times;

The survey found that three in ten Democrats under 50 have received an updated COVID-19 vaccine, compared with 66 percent of Democrats ages 65 and older.

Moreover, 66 percent of Democrats ages 65 and older have received the updated COVID-19 vaccine, while only 24 percent of Republicans ages 65 and older have done so.

“This 42-point partisan gap is much wider now than at other points since the start of the outbreak. For instance, in August 2021, 93 percent of older Democrats and 78 percent of older Republicans said they had received all the shots needed to be fully vaccinated (a 15-point gap),” it noted.

COVID-19 No Longer an Emergency

The U.S. Centers for Disease Control and Prevention (CDC) recently issued its updated recommendations for the virus, which no longer require people to stay home for five days after testing positive for COVID-19.

The updated guidance recommends that people who contracted a respiratory virus stay home, and they can resume normal activities when their symptoms improve overall and their fever subsides for 24 hours without medication.

“We still must use the commonsense solutions we know work to protect ourselves and others from serious illness from respiratory viruses, this includes vaccination, treatment, and staying home when we get sick,” CDC director Dr. Mandy Cohen said in a statement.

The CDC said that while the virus remains a threat, it is now less likely to cause severe illness because of widespread immunity and improved tools to prevent and treat the disease.

Importantly, states and countries that have already adjusted recommended isolation times have not seen increased hospitalizations or deaths related to COVID-19,” it stated.

The federal government suspended its free at-home COVID-19 test program on March 8, according to a website set up by the government, following a decrease in COVID-19-related hospitalizations.

According to the CDC, hospitalization rates for COVID-19 and influenza diseases remain “elevated” but are decreasing in some parts of the United States.

Tyler Durden Sun, 03/10/2024 - 22:45

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International

Rand Paul Teases Senate GOP Leader Run – Musk Says “I Would Support”

Rand Paul Teases Senate GOP Leader Run – Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump…

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Rand Paul Teases Senate GOP Leader Run - Musk Says "I Would Support"

Republican Kentucky Senator Rand Paul on Friday hinted that he may jump into the race to become the next Senate GOP leader, and Elon Musk was quick to support the idea. Republicans must find a successor for periodically malfunctioning Mitch McConnell, who recently announced he'll step down in November, though intending to keep his Senate seat until his term ends in January 2027, when he'd be within weeks of turning 86. 

So far, the announced field consists of two quintessential establishment types: John Cornyn of Texas and John Thune of South Dakota. While John Barrasso's name had been thrown around as one of "The Three Johns" considered top contenders, the Wyoming senator on Tuesday said he'll instead seek the number two slot as party whip. 

Paul used X to tease his potential bid for the position which -- if the GOP takes back the upper chamber in November -- could graduate from Minority Leader to Majority Leader. He started by telling his 5.1 million followers he'd had lots of people asking him about his interest in running...

...then followed up with a poll in which he predictably annihilated Cornyn and Thune, taking a 96% share as of Friday night, with the other two below 2% each. 

Elon Musk was quick to back the idea of Paul as GOP leader, while daring Cornyn and Thune to follow Paul's lead by throwing their names out for consideration by the Twitter-verse X-verse. 

Paul has been a stalwart opponent of security-state mass surveillance, foreign interventionism -- to include shoveling billions of dollars into the proxy war in Ukraine -- and out-of-control spending in general. He demonstrated the latter passion on the Senate floor this week as he ridiculed the latest kick-the-can spending package:   

In February, Paul used Senate rules to force his colleagues into a grueling Super Bowl weekend of votes, as he worked to derail a $95 billion foreign aid bill. "I think we should stay here as long as it takes,” said Paul. “If it takes a week or a month, I’ll force them to stay here to discuss why they think the border of Ukraine is more important than the US border.”

Don't expect a Majority Leader Paul to ditch the filibuster -- he's been a hardy user of the legislative delay tactic. In 2013, he spoke for 13 hours to fight the nomination of John Brennan as CIA director. In 2015, he orated for 10-and-a-half-hours to oppose extension of the Patriot Act

Rand Paul amid his 10 1/2 hour filibuster in 2015

Among the general public, Paul is probably best known as Capitol Hill's chief tormentor of Dr. Anthony Fauci, who was director of the National Institute of Allergy and Infectious Disease during the Covid-19 pandemic. Paul says the evidence indicates the virus emerged from China's Wuhan Institute of Virology. He's accused Fauci and other members of the US government public health apparatus of evading questions about their funding of the Chinese lab's "gain of function" research, which takes natural viruses and morphs them into something more dangerous. Paul has pointedly said that Fauci committed perjury in congressional hearings and that he belongs in jail "without question."   

Musk is neither the only nor the first noteworthy figure to back Paul for party leader. Just hours after McConnell announced his upcoming step-down from leadership, independent 2024 presidential candidate Robert F. Kennedy, Jr voiced his support: 

In a testament to the extent to which the establishment recoils at the libertarian-minded Paul, mainstream media outlets -- which have been quick to report on other developments in the majority leader race -- pretended not to notice that Paul had signaled his interest in the job. More than 24 hours after Paul's test-the-waters tweet-fest began, not a single major outlet had brought it to the attention of their audience. 

That may be his strongest endorsement yet. 

Tyler Durden Sun, 03/10/2024 - 20:25

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Government

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While “Waiting” For Deporation, Asylum

The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several…

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The Great Replacement Loophole: Illegal Immigrants Score 5-Year Work Benefit While "Waiting" For Deporation, Asylum

Over the past several months we've pointed out that there has  been zero job creation for native-born workers since the summer of 2018...

... and that since Joe Biden was sworn into office, most of the post-pandemic job gains the administration continuously brags about have gone foreign-born (read immigrants, mostly illegal ones) workers.

And while the left might find this data almost as verboten as FBI crime statistics - as it directly supports the so-called "great replacement theory" we're not supposed to discuss - it also coincides with record numbers of illegal crossings into the United States under Biden.

In short, the Biden administration opened the floodgates, 10 million illegal immigrants poured into the country, and most of the post-pandemic "jobs recovery" went to foreign-born workers, of which illegal immigrants represent the largest chunk.

Asylum seekers from Venezuela await work permits on June 28, 2023 (via the Chicago Tribune)

'But Tyler, illegal immigrants can't possibly work in the United States whilst awaiting their asylum hearings,' one might hear from the peanut gallery. On the contrary: ever since Biden reversed a key aspect of Trump's labor policies, all illegal immigrants - even those awaiting deportation proceedings - have been given carte blanche to work while awaiting said proceedings for up to five years...

... something which even Elon Musk was shocked to learn.

Which leads us to another question: recall that the primary concern for the Biden admin for much of 2022 and 2023 was soaring prices, i.e., relentless inflation in general, and rising wages in particular, which in turn prompted even Goldman to admit two years ago that the diabolical wage-price spiral had been unleashed in the US (diabolical, because nothing absent a major economic shock, read recession or depression, can short-circuit it once it is in place).

Well, there is one other thing that can break the wage-price spiral loop: a flood of ultra-cheap illegal immigrant workers. But don't take our word for it: here is Fed Chair Jerome Powell himself during his February 60 Minutes interview:

PELLEY: Why was immigration important?

POWELL: Because, you know, immigrants come in, and they tend to work at a rate that is at or above that for non-immigrants. Immigrants who come to the country tend to be in the workforce at a slightly higher level than native Americans do. But that's largely because of the age difference. They tend to skew younger.

PELLEY: Why is immigration so important to the economy?

POWELL: Well, first of all, immigration policy is not the Fed's job. The immigration policy of the United States is really important and really much under discussion right now, and that's none of our business. We don't set immigration policy. We don't comment on it.

I will say, over time, though, the U.S. economy has benefited from immigration. And, frankly, just in the last, year a big part of the story of the labor market coming back into better balance is immigration returning to levels that were more typical of the pre-pandemic era.

PELLEY: The country needed the workers.

POWELL: It did. And so, that's what's been happening.

Translation: Immigrants work hard, and Americans are lazy. But much more importantly, since illegal immigrants will work for any pay, and since Biden's Department of Homeland Security, via its Citizenship and Immigration Services Agency, has made it so illegal immigrants can work in the US perfectly legally for up to 5 years (if not more), one can argue that the flood of illegals through the southern border has been the primary reason why inflation - or rather mostly wage inflation, that all too critical component of the wage-price spiral  - has moderated in in the past year, when the US labor market suddenly found itself flooded with millions of perfectly eligible workers, who just also happen to be illegal immigrants and thus have zero wage bargaining options.

None of this is to suggest that the relentless flood of immigrants into the US is not also driven by voting and census concerns - something Elon Musk has been pounding the table on in recent weeks, and has gone so far to call it "the biggest corruption of American democracy in the 21st century", but in retrospect, one can also argue that the only modest success the Biden admin has had in the past year - namely bringing inflation down from a torrid 9% annual rate to "only" 3% - has also been due to the millions of illegals he's imported into the country.

We would be remiss if we didn't also note that this so often carries catastrophic short-term consequences for the social fabric of the country (the Laken Riley fiasco being only the latest example), not to mention the far more dire long-term consequences for the future of the US - chief among them the trillions of dollars in debt the US will need to incur to pay for all those new illegal immigrants Democrat voters and low-paid workers. This is on top of the labor revolution that will kick in once AI leads to mass layoffs among high-paying, white-collar jobs, after which all those newly laid off native-born workers hoping to trade down to lower paying (if available) jobs will discover that hardened criminals from Honduras or Guatemala have already taken them, all thanks to Joe Biden.

Tyler Durden Sun, 03/10/2024 - 19:15

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