Research Lead at Iterative Capital touches on why crypto miners are coming to Texas

Within the past few months, one company opened a bitcoin mining facility in Texas and another announced they were building one. People are confused because one of the biggest cost factors in mining is heat, which Texas has an excess of. Leo Zhang, Research Lead at Iterative Capital, an investment managing and cryptocurrency mining company shared some insight as to why mining is coming to Texas.

“There’s alot of cheap elecricty, the United States has alot of power,” Zhang told Frank Chaparro in The Scoop’s interview. “People are beginning to realize that we can use this otherwise wasted electricity for bitcoin mining.”

Zhang went on to say that finding dirt cheap electricity is becoming more important in the process of mining, especially in China. Texas is deep into the business of producing electricity and some companies likely have an abundance because of the competition which results in lower electric prices for mining facilities.

“Mining for North America is still relatively new, especially mining at scale. Most people who are building these facilities  are not miners themselves as opposed to people in China, they were miners first and then realized to fully capture this economy, I have to own my facility as well,” Zhang clarified.

While there isn’t a great reason to doubt the insight of someone who has been a profitable large scale miner for some time, Zhang only briefly touched on why he has negative opinions about the Texan miners in question. He said that he had phone calls with people who own remote locations in Texas and while they were confident about the power capabilities, they had yet to factor in other important costs. Zhang feels like facility owners in the US see miners as “suckers” who they can pawn off their excess electricity to.

DeFi inspired me, a poor millennial, to start thinking about personal finance

I am in my early 20s, bad at saving, have an average credit score and am about to begin paying off my debt from college. For a while, I didn’t really know what was in store for the future, so I didn’t care much about planning on it. Suddenly, I heard about DeFi and became a bit more interested in my personal finance.

Not to say that I’m a crypto maximalist now, or that I’m even confident of Bitcoin lasting long into the future, but the tech behind it inspired me to learn more about money. There are two main things that appealed to me and likely appeal to others in my situation: Being your own bank, and earning real interest.

Take control of your personal finance

Like many others, I’m not a big fan of banks. I don’t care about the corruption, or whatever they’re doing with money behind the scenes. I simply don’t like them because they’re slow, hard to access and I don’t feel like even a small monthly fee is worth paying for their services.

My credit union doesn’t have many locations, so it’s always hard to deposit cash. When I return something at Best Buy, it doesn’t process on the weekend and takes 24 hours at the minimum. I get paid on the first and fifteenth, and it won’t process on Sundays. My savings account is essentially useless, with interest ranging from 0.05% to 0.15% APR.

Basically, ever since I opened a checking account at 16, I’ve experienced inefficiencies and a lack of incentives that have never changed. This effected my optimism on managing money effectively.

If I am receiving no returns from storing money, I might as well take complete ownership of it. Blockchain tech allows me to do just that. It’s pretty simple for me to get paid, convert cash to Dai, then lock a portion of it in a lending protocol to hedge against any small amount of volatility. Dai ranges +-5% of the USD, so through dollar cost averaging and earning interest through protocols, I now have a real incentive to save money.

I may not have ownership of the Dai while it is earning interest, but I have the ability to choose where it goes or to leave it in cold storage.

Earn actual interest in DeFi

Because of Maker splitting into Sai and Dai, this isn’t a great time to brag about how high potential interest is, but I can still earn about 80x more than my savings account. The APR for MakerDAO’s Dai Savings Rate is 4% right now, and by taking on more risk through other platforms, you can get up to 7.5%. Also, if you are more comfortable using a stablecoin backed by fiat dollars, loaning USDC can return around 3.6% of your cash.

Some money management protocols lock your coins into a contract that expires after a certain amount of time, and others allow you to pull out coins whenever you’d like. Similarly, some protocols have higher risk than others. For instance, protocols that let users take money out as they please are pooled, and pay higher interest depending on how full that pool is. If the protocol is paying 7.5% and is loaning 75 million out of 80 million, then 25 people with 100k decide to pull out, your money will be stuck until more people put their money in. At the same time, this will likely increase the interest paid.

So as long as you know what you’re getting into, these managing money through decentralized applications can be relatively safe. You may need to monitor lending pool usages and be wary of the amount you put into one protocol. For people like me who are saving a couple thousand dollars, I don’t worry about anything besides hackers.

DeFi isn’t perfect for everyone yet

Decentralized Finance is supremely illiquid, so people with real money to manage don’t like it. What it is able to do is trigger the interest of people like me who just haven’t been impressed by the traditional financial system. I’ve introduced DeFi lending protocols to a friend who cares about personal finance and is almost completely uninterested in crypto, and he couldn’t help but gravitate towards it.

I’m sure there are ways to earn similar interest rates through the traditional means but there’s a very small learning curve to get into crypto. You literally start a Coinbase account, send Dai to Maker and start earning 4% APR.

 

Mudrex, make trading bots for BitMEX and Binance without knowing how to code

Creating a trading bot in Crypto is particularly difficult because most exchanges have proprietary API, meaning the programming is different for each. Mudrex created possibly the only product enabling non-programmers to into backtest and automating trades on exchanges like Coinbase, BitMEX, Binance and Deribit. With this app, no coding experience is needed.

How does a Mudrex bot work? 

Like Mudrex itself, the application is better described with pictures than with language. Mudrex example AlgoThey simplified algo-trading to the point where a child could probably figure it out. Ofcourse, it’s unlikely that you can take their application as far as someone who can code bots raw, but it’s the only option for those who don’t have time to learn a language.

As you can see, there are blocks resembling conditional circumstances like patterns, trends, indicators, volume, price and time. The rectangular boxes in the middle are calls to trigger buys, sells, stop losses or take profits. These blocks can simply be connected to each other to trigger orders at certain conditions.

Double clicking on the boxes will let you get a bit deeper into how much you would like to buy, what percentage your trailing stop loss follows at, etc. The picture below is what the interface looks like when clarifying the conditions of the exponential moving average that you want price to trigger at. EMA vs EMA would signify one EMA crossing another. Further down you can see the this one is set to trigger with the 9 period EMA crosses the 26 period EMA.

Mudrex boxes

There are also circles on the side that add extra conditionals like “or,” “and,” “exact,” “not,” and “any” to add further complexity to the bot.

Once your algorithm is created, you can either run it as a backtest, or live trading via paper trades or real capital. Activate trades

How much does Mudrex cost? 

There are a few options for newcomers and experienced traders who trust the application. Thankfully, inexperienced are able to run 1 live bot, 2 paper trading bots and 100 backtests/month for free. This allows everyone to try make sure that the program works without becoming invested.

In total, there are four tiers to pricing:

  • Free – $0
  • Researcher – $16/m
  • Trader – $42/m
  • Pro Trader – $84/m

To summarize, Researcher pricing allows more access to backtesting, but no additional features to running bots. Trader gives even more backtesting ability and increases bots users can run up to 10. Pro Trader allows for unlimited access to all features. There is support for Free users and Researchers via e-mail and Discord while Traders and Pro traders get live support.

Disclaimer: Few high frequency traders are profitable and we don’t consider trading to be a smart way to invest your money.

 

21% of Binance Futures users are trading with 125x leverage

In a tweet today, Binance announced some user base statistics including that a whopping 21% of exchange participants use 125x leverage on average. Using leverage is essentially taking out a loan for a trade, meaning that users have 125 times their buying power. $100 in this case could scale to $12,500. The catch is that you can lose your money 125x more quickly.

Crypto assets are volatile, trading is risky and combining the two with 125x leverage results with a small chance of profiting. Just today, there was a 5% wick in a low volume range that rose and depleted within five minutes. Market reactions that nobody expects can easily liquidate a 125x position.

Binance’s statement did not clarify whether or not 125x leverage was considered to be the same as cross leverage. Cross leverage takes funds from your wallet as your position falls, putting liquidation further away as long as you didn’t go all in. Usually, cross leverage takes the minimum amount necessary to enter the trade, in this case, 1/125th of the position size, allowing users access to leftover funds unless the position starts losing money.

Traders pay a percentage fee based on the position size, so the more amount of money exchanges can offer traders, the more they will profit. Using this type of leverage wouldn’t fly past US regulators, which is likely why Binance and Poloniex abandoned US citizens. Regardless of how dangerous trading with leverage is, the fact that US traders don’t have legal access makes them feel left out.

 

Why am I kind of surprised that Coinbase is promoting DeFi?

The theme of Coinbase’s Winter 2019 Hackathon was “Bring DeFi to the World” which is kind of crazy considering they are one of the most centralized entities in crypto. Coinbase is a centralized exchange that abides by tight regulation and operates a centrally backed stablecoin, USDC, with Circle.

DeFi vs. Coinbase

DeFi, or decentralized finance, aims to compete with Coinbase in all aspects other than onboarding. Ironically, Coinbase likely sells many Ether tokens that are part of the relatively large locked value of the DeFi ecosystem.

The most obvious sector where Coinbase and DeFi compete is in personal finance. They both allow users to earn interest on tokens, and DeFi gives much higher APR. In 2019, Coinbase started allowing USDC holders to earn interest on any tokens lying in their portfolio with an APR of 1.25%.

Dharma, an app that requires users to sign up with their Coinbase account, offers 3.6% APR on USDC with little difficulty. They are able to offer higher interest by using Compound, a decentralized lending pool. All it takes to earn more interest in this situation is to take the USDC you have on Coinbase and send it to your Dharma address.

Another way that Coinbase competes/cooperates with DeFi is that they, along with Circle, created a stablecoin. At the same time, they sell the Dai stablecoin on their platform. Dai uses an algorithm and incentives to keep the token pegged to the dollar while USDC is backed 1:1 by USD. USDC cremes Dai in total market cap, but Dai has been gaining notoriety in recent months. On top of that, DeFi lending pools often offer more interest for Dai holdings than USDC.

And finally, they compete because Coinbase is a centralized way to exchange tokens, where as DeFi offers a way to do that straight from one wallet to the other. Exchanges like Uniswap or even aggregated exchanges like DEX.AG act as a forum for users to match orders with each other. Coinbase and other centralized exchanges always win in terms of slippage, but someone who values privacy and decentralization will likely opt for a decentralized exchange.

Is Coinbase promoting DeFi for the culture?

“DeFi, or decentralized finance, is an essential part of an open financial system. DeFi tools are censorship-resistant, unbiased, programmable, and available to anyone with a smartphone. For this hackathon, we’re focusing on bringing DeFi to the world. (Costumes not required.)” – Coinbase

This quote from Coinbase is advertising the opposite of what Coinbase is. Maybe they have accepted the role they play in the space, but as enthusiasts of decentralization, they appreciate breaking boundaries in finance.

One thing that is forsure, is Coinbase has been keen on decentralized projects. ChainLink is a decentralized oracle service, 0x is a decentralized liquidity tool, Dai is a decentralized stablecoin, and ofcourse, Ethereum is the platform to build dApps. Also, the aforementioned projects are on the bottom half of the ranks on Coinbase in terms of market cap, which could imply that Coinbase is sort of sticking their neck out for the ideas.

My theory is that like many others, Coinbase finds DeFi to be one of the more interesting and tangible things coming out of Blockchain tech. I am a bit biased, but listing 0x and Dai doesn’t seem like a decision that was made to rake tons of money and new users in. It seems more like a long-term bet.