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DeFi protocol Aave encounters major capital flight

otal value locked on the decentralized borrowing and lending platform fell 16% in the past 24 hours.

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NEWS

Annual percentage yields, or APY, on crypto borrowing and lending platform Aave have surged to record levels after capital withdrawals sent the decentralized finance, or DeFi, protocol into a liquidity crunch. At the time of writing, variable APY on borrowing stablecoin Dai via Aave has surged to 24.88%, compared to approximately 6.50% the day prior.

According to cryptocurrency researcher Igor Igamberdiev, blockchain personality Justin Sun was responsible for at least billions of dollars in withdrawals in the past few hours. Aave's total value locked, or TVL, fell to $14.7 billion from $17.89 billion the day prior, based on data from DeFi Pulse.

In a series of tweets, Aave developers revealed that financial modeling platform Gauntlet Network submitted an Aave Improvement Protocol, or AIP, to disable the borrowing function for xSUSHI and DeFi Pulse Index (DPI) tokens as a precautionary measure. In addition, the AIP also called for disabling Automated Market Maker, or AMM, liquidity provider tokens on the Aave AMM Market as an extra safeguard.

Earlier in the week, members of the Aave community voiced concerns regarding vulnerabilities with using xSUSHI tokens as collateral for borrowing on the platform. Aave developers alleged that the Gauntlet Network team ran simulations showing that it would not be economically feasible to exploit xSUSHI tokens on Aave. However, Aave developers claim that the Gauntlet Network still put forth the AIP despite these results. The AIP is currently in the voting phase, with "Yes" votes heavily favored.

Prior to today's flight, Aave was the most popular DeFi protocol as ranked by Defi Llama. The platform has a lot of traction among cryptocurrency enthusiasts looking to yield farm or take out a stablecoin loan by pledging their digital currencies as collateral.

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Gauging Polkadot’s near-term price action, as new ATH draws closer

Polkadot looked solid since commencing an uptrend during end-September. With a percentage rise of 80% over the last 30 days, DOT just needed to record an additional 17% increase to tag its May ATH.

However, a broader market correction combined with red flags on the MACD and RSI suggested some sideways action before DOT breaks above its immediate price ceiling at $46.3. At the time of writing, DOT traded at $42.3, up by a marginal 0.2% over the last 24 hours.

Polkadot Daily Chart

Source: DOT/USD, TradingView

A quick glance at DOT’s daily chart suggested that the alt just needed to overturn its immediate resistance at $46.3 to bag a fresh ATH above the $50-mark. Considering the fact that healthy buy volumes have constantly pushed DOT by nearly 80% during September, such a feat would not be difficult to achieve.

However, near-term jitters caused by a bearish crossover along the MACD could delay the eventual breakout for a few more days. An established support at $40 would look to deny any extended drawdowns and allow DOT to maintain its bullish-bias.

Now a closer inspection of the daily RSI revealed that a downwards sloping trendline was now overturned, marking a possible shift in momentum towards the sellers. Should the RSI weaken further below 45, DOT would keep to immediate support, with $38.7 and $36.8 as additional defenses.

Meanwhile, the Directional Movement Index would keep sellers in check. The +DI line still traded above the -DI line- a reading which could dissuade some sellers from betting against DOT.

Once DOT breaks above its previous ATH, the 138.2% Fibonacci Extension ($64.7) can be challenged immediately. The 161.8% ($74) and 200% ($89) Fibonacci Extension levels can be tested following a correctional period.

Conclusion

Over the near-term, DOT could remain fixed within the channel $46.3 and $40 due to bearish developments on the MACD and RSI. Once downwards pressure fizzles out, expect DOT to make way towards the 138.2% Fibonacci extension once the price breaks above $46.3 on strong volumes.

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US Senator Hagerty to CFPB Director: Don’t stifle crypto innovation

United States Senator Bill Hagerty, who was elected in 2020 to represent Tennessee after a stint as Ambassador to Japan, spoke to newly appointed Consumer Financial Protection Bureau Director Rohit Chopra regarding cryptocurrencies in a banking committee hearing, saying, “I just want to make certain as you exercise those oversight responsibilities that we don’t stifle innovation in this arena.”

“Digital ledger technology offers a tremendous amount of promise in terms of financial innovation and inclusion. It’s an industry where I think the United States is leading, has led, and I’d like to see us continue to lead there. Especially when we look at other countries like China and the Chinese Communist Party that has moved to ban private sector activity in that arena.”

Hagerty introduced legislation with Senator Mark Warner in July to study China’s adoption of a digital currency. Chopra and Hagerty have notably clashed previously during the former’s confirmation hearings, with Hagerty even introducing a bill to require congressional approval for the bureau’s funding.

In a late July Senate floor speech, Hagerty opined, “We’re using the cryptocurrency market as a pay-for. Have we fully vetted how this new regulation and taxation will affect this rapidly developing industry? Will leadership in this industry flee the United States as a result?”

Chopra criticized Facebook’s adoption of Libra during his time on the Federal Trade Commission and advocated for the Federal Reserve to adopt an instant payments service called FedNow. The CFPB warned consumers against Bitcoin (BTC) as early as 2014, saying at the time that they should “be aware of potential issues with virtual currencies such as unclear costs, volatile exchange rates, the threat of hacking and scams, and that companies may not offer help or refunds for lost or stolen funds.”