Exchange Coins - Crypto Academy S5W1 - Homework Post for @imagen
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1.) Perform a complete analysis of the currency of some exchange. Not allowed: BNB, KuCoin, Cake and Uniswap.
There are a lot of exchanges through which we can trade or exchange crypto assets globally without any hindrance. Gate.io is one of the numerous crypto exchange platforms that offer a lot of trading instruments for crypto investors and traders. It is one of the oldest crypto exchanges as it has been operating since its launch in 2013. Its original name was Bter.com but was later rebranded to gate.io in 2017. They have listed over 800 coins and have promised to handle their users' assets under high security with the KYC verification and other security measures. Gate.io offers a variety of trading services, including cryptocurrency trading, crypto currency exchange traded funds (ETF), liquidity services, and other useful services. Customers of Gate.io can leverage their trades with up to 100x leverage, trade in a variety of cryptocurrencies in the crypto currency markets, and access advanced services such as margin lending and margin borrowing, though users cannot deposit fiat on the platform. They have included the gate.io startup platform, which is specialized for start-up projects through the IOE services. It has been doing great since its launch. The gate.io exchange has a good user interface similar to Binance and Kucoin, although the design platform may look complex to some beginners due to the way it is clustred.
Some of the Trading Instruments available in Gate.io
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Image from gate.io
The native token for GateChain is called GateToken (GT). The token formally became the native token of the platform in March 2020, and it has been gaining momentum in conjunction with the gate.io platform. It is a utility token built on the ERC-20 Token Standard.
Basic token information from gate.io
Screenshot from gate.io
The token is currently being used for multiple purposes, including, payment of transaction fees through the Gate.io exchange, earning trading fee discounts for trading in gate.io ,providing liquidity for swap protocol services that run on the exchange. The GateToken can also be used by customers to invest in various cryptocurrencies listed on the platform, Listing Voting. The mainnet Gate chain, which is a blockchain for gate.io, was launched in Q2 of 2020 and the GateToken is being used for its tokenomics as it will use the Gatetoken as gas to power its network, the Gatechain. They have also started a buyback program where the Gatetoken is to be used for this program in Gate.io. You can buy Gatetoken through the gate.io site or any exchange where it is listed.
Key Information of GateToken from coinmarketcap.com
Screenshot from coinmarketcap.com
| Price | $6.35 |
| Rank in CMC | #152 |
| Circulating Supply | 77,756,079.40 GT |
| Total Supply | 300,000,000 |
| MarketCap | $495,413,486 |
| Trading Volume | |
| Market Dominance | 0.02% |
| 24hr Trading Volume | $17,436,339.51 |
GateToken 3Months chart from CoinMarketCap
2.) Make a purchase equal to at least US $ 10 of the currency you explained above. You must make some movement with that currency within the exchange that created that currency. Show screenshots and explain in detail the steps to follow. Example: transfer of funds, Staking, participation in a Launchpad, trading in futures, etc. Indicate the reasons why you chose that option (operation) on that platform.
I made a purchase of the GateToken worth 10 USD through the gate.io exchange and the following are the steps I took
I made the purchase with the Spot market so first of all visited the spot market and the searched for GT/USDT pair to make the purchase of the GateToken
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I then clicked on the pair to open the the Trade terminal. I used the limit order to purchase the coin at a price of GT at $6.3748. I purchased 1.60 GT awith $10.1996
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The order was filled at exactly 23:57 on 17/11/2021
Screenshot from gate.io mobile app
Performing an operation on the platform
There are so many operation on the platform, but the one that cought my attention was the Swapp of small balance to GT, this service gives users the chance to convert small token balance to GT with ease. This is refered to us Dust Swap in the platform.
I first of all opened my Gate.io spot account. I then clicked on Swap Small Balance to GT.
My spot account in Gate.io
When you click on that, a window will appear with all the tokens or coins with small balances in your spot wallet. In my case, I have 0.000185 TRX and I will swap it for 0.000018GT. I then clicked on TRX to mark it then confirm by clicking on Swap to GT under the far bottom left of the screen.
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There are alot of operations in the exchange but this Dust swap has cought my attention, I realized how useful it is. I have been using other exchanges and due to slippage and other transaction problems I have some small balances in my wallet which I wish i could make a use of it. And more to the point, I am a beginner and this operation seems to be easy and risk free for me as compared to other operations like futures trading, lending and borrowing.
3) Show the return on investment in time frames of 0, 24 and 48 hours from the moment you bought. Take screenshots where you can see the price of the asset and the date of capture.
As I indicated earlier on, I purchased 1.60GT at $10.1920 as the open price of GT was $6.37. This means that, the return of investment should be greater than $10.192 for me to be in profit.
0th hour
Initial investment
| GT price | USDT equivalence | Profit/Loss |
|---|---|---|
| $6.37 | $10.1920 | ---- |
24 hours Return of Investment
I was not online to track the change in price of GT in 24hours time but through the GT/USDT 30mins chart, I was able to get the open price of GT 24hours of my investment to be 5.9223. That means the USDT price will be equal to 1.6 x 5.9223, so my investment equivalent to $8.23 after 24 hours. that means that I am in loss. It it was due to the strong pull back in the BTC price.
GT/USDT 30mins price chart
| GT price | USDT equivalence | Profit/Loss |
|---|---|---|
| $5.9 | $8.23 | Loss |
48 hours return of investment
My GT return of investment after 48hours
| GT price | USDT equivalence | Profit/Loss |
|---|---|---|
| $6.404 | $10.22 | Profit |
3.1) Has the asset's price acted independently or does its price strictly follow the correlation with Bitcoin? You can add the information you want, creativity will be taken into account.
It is obvious that the majority of altcoins have their prices in correlation with those of BTC, as it is the mother of all crypto assets. Looking at the movement of GT with that of BTC, I can conclude that the price of GT follows the movement of BTC, but not completely; it is moving slowly behind BTC when compared to the chart.Let’s do some comparison with the GT and GT chart from Coingecko, as seen in the pictures below.
GateToken vs. Bitcoin 1 year chart
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Source
This chart is used to demonstrate the macro view of the movement of BTC with respect to BTC. As seen in the picture above, the blue line is GT. It is moving slowly with the movement of BTC. In mid April 2021, GT reached its current ATH in response to BTC’s upsurge, There was a pullback in GT after BTC’s pullback. This chart proves that the movement of GT is in corelation with BTC in the long run.
GateToken vs. BTC 7-day chart
Source
This chart is used to demonstrate the relationship between the two based on the current state of the crypto market. It has clearly shown that GT is moving slowly in correlation with BTC.
It should be noted that, even though the price of GT follows that of BTC, more development of the coin could make it an independent one, but the current state of the token is currently impacted by the gate.io or gatechain development and the development of the crypto market as a whole. The usability of Gatecoin increases as the platform keeps growing. The GateToken is just like any other exchange token like BNB, HT, KCS, and many others. Their developments are highly impacted by the exchange's development.
4.) What are futures trading?
The crypto market is volatile in nature. Many traders usually buy the asset in hand when the price is low and sell it when the price is high to make profits. Using this strategy leaves the users' holdings with the exchange even after they leave the market. A continuous rise in the price of the asset will not benefit the user after they sell out the asset, as they could have made some profit from the market if the asset was left open in the market. This is where the idea of futures trading comes in. Futures trading is a derivative financial contract and gives traders and investors the chance to benefit from any situation in the market by insuring positions in the market without necessarily holding any crypto asset. In futures trading, traders usually sign a contract and that contract will have an expiration date in the future. They can either buy the asset or sell it depending on their plan and expect the price to go up or down by the end of the contract. They don't have to wait for the contract date to end, as they can close their positions even before the contract date. Gate.io also employs futures trading for BTC and other altcoins. Users can sign the contracts, which are standardized financial agreements with an expiration date. Traders have the chance to renew their contacts with a new ticker name any time it expires. futures trading have leverages, they are employed to maximise profitability, investores and traders can apply it meaning, they can apply 5x, ten times, 20 x, even 100 x, for instance in [gate.io], users can leverage up to 100x . The futures on gate.io are settled in USDT.
Futures contracts are mainly used to lock in profits, or better yet, to secure investments, especially in volatile markets. If a trader expects the price of the coin to move up, he can either purchase the futures contracts to go long or sell the contracts to go short if a downward movement is expected. The future outcome will determine whether they are in profit or loss with regard to their projection of the market. The contracts in futures trading are regulated by a centralized commission depending on the jurisdiction. For example, in the US, BTC futures are regulated by the Commodity Futures Trading Commission (CFTC) and it is applicable to all US based exchanges.
Although futures trading also includes different order types as in spot trading, like limit orders, market orders, and take profit and stop loss orders, it is not an easy tactic for beginners to venture into. You need to have some technical knowledge as far as trading futures is concerned. Venturing into futures trading without a proper understanding of how it works will result in losses.
5.) What is the margin market?
A margin market is one of the techniques offered by brokers in the crypto markets. In margin markets, investors and traders trade with more funds than they actually have. In order to achieve this, they have to have funds or collateral that the exchange platform will hold in place. By putting those funds in the exchange, they usually put them in at 100%, 10%, or any percentage you decide as collateral to borrow more than they actually have. Margin trading is all about leveraging. As a trader, you can leverage multiples like 1x, 2x, 10x, or any leverage multiple you wish. Some exchanges offer as much as 125x leverage. The returns are proportional to the number of leverage multiples used. Thus, higher multiples have higher returns and vice versa. This is applied to the risk too; the higher the leverage, the higher the risk. For example, if the price of Bitcoin is $10,000 and I use 10x leverage, my margin will be $1000. If the price of Bitcoin rises by 5%, my profit will rise by 50%.As it can be seen, the profit increased by 5% because I am using 10x leverage, so 5x10 is 50. That is why my profit maximized to 50%. As the price continues to move up, my profit will grow exponentially. However, there is a reverse effect if the price falls 5%. That means that I have lost 50% of our margin and run the risk of being liquidated if the price falls further. This makes trading with leverage a riskier venture than spot trading, as investors may lose their position in a further fall in price. Traders can also buy long and sell short in margin trading to gain a profit.
Just like futures trading, margin trading requires technical knowledge and proper understanding, so it is advisable to have some knowledge about how margin trading works before venturing into it as there is high risk involved. It is also good for beginners to start with low leverage multiples like 2x to reduce the risk of losing their positions.
6.) What happens to the cryptocurrencies of an exchange when they suffer from a hack or it turns out to be a fraud? Present at least 2 real life examples.
There have been numerous exchange hacks that have occurred in history. Some of them were intentionally created to defraud investors' funds, while others were hacked as a result of some data breaches that have given fraudsters the chance to hack within the exchange, as most of the crypto exchanges are prime targets of hackers. Investors have lost millions of dollars as a result of those hacks. Exchange hacks are just like bank robberies. They will definitely have an impact on the assets in the bank, especially the native currency of the bank. Through history, there have been numerous crypto exchange hacks and almost all of them have led to the degradation of the reputation of those exchanges, which, in turn, will have led to the loss in value of their native tokens or coins. Crypto hacks have contributed to tight regulations and high security measures in most exchanges to ensure that users' funds are safe.Two scenarios of exchange hacks are discussed below.
The KuCoin Hack
Kukoin is a very popular centralized crypto exchange and its HQ is based in Asia. The hack incident on this exchange occurred in September 2020, which led to the loss of approximately $280 million from its hot wallets. The hack was as a result of a data breach in some of the private keys of the Kucoin hot wallets. In a public statement by the Kucoin team, larger quantities of BTC and ETH withdrawals were detected to be moving from the exchange to an unknown wallet. The rest of the hot wallets that remained unaffected were transferred to new hot wallets by abandoning the old ones. They further froze deposits and withrawals within the exchange. The team was able to recover about $204 million of the stolen funds, which is about 80% of the stolen funds. A few minutes after the incident was broadcast across various social media platforms, the price of KuCoin’s native token, KSC, declined by approximately 14%. The picture below is the chart of KCS from coinmarketcap. It indicates that, the price fell to as low as $0.83 that day.
Source
The MT.Gox attack
MtGox was one of the biggest crypto exchanges in the early years of crypto. It was launched in 2010 and its head quarters were based in Tokyo, Japan. It rose to become the most popular Bitcoin exchange platform as about 70% of BTC transactions used to take place on this exchange. It was running smoothly until it was declared bankrupt as a result of a heist that occurred during the exchange.Before the scandal, users were complaining of having some issues with withdrawing their funds and the company could not track the transactions due to a bug that made it possible for hackers to tamper with their BTC addresses. The exchange spotted this activity in January 2014; by then, over 800BTC in circulation, representing 6% of BTC in circulation, were being lost . Although they were able to retrieve just a small portion of the lost funds, This scandal caused a huge decline in the price of BTC, as BTC was the most popular crypto currency being traded on the MT Gox exchange by then. The company signed a bankrupsy agreement and the case has been under investigation up to date. This scandal caused the fall in the price of BTC to about 20 from nearly $600 to nearly $200.
Conclusion
The development of the exchange coins can be obsered to be developing with respect to the accessibility of the exchange on which they are built. Most popualar of them are Binance Coin BNB, Houbi Token HT, GateToken, CAKE, UNI all of them are peforming well in the crypto market. This asigment though, very stressful, has assisted me to explore more into exchane tokens especially the Gate.io and the GateToken, I have seen a future development in this paticular token. I was able to purchase funds from gate.io and also performed some operations. I will finally like to than professor @imagen for this wondeful lecture
Thank you for reading