The decentralized finance ecosystem has been plagued by a variety of known scams and exploits for some time, with yet another coming in the form of what is known as a “soft rug”.
Those that have been dabbling in DeFi for some time will be familiar with the term “rug pull”. This generally refers to the abandoning of a project by insiders or developers who remove liquidity from pools or vaults on decentralized exchanges and disappear with the funds.
A related malfeasance to plague the emerging financial landscape is the “soft rug” which is where a project’s founders simply dump their own tokens and exit the venture instead of taking control of users’ assets.
In some cases, a soft rug is more insidious with developers going out of their way to build trust and a false sense of security at the same time as attempting to disguise the dumping of tokens. If done cleverly enough, users may not even know they’ve drawn the short straw.
There have been a couple of incidents in the DeFi scene over the past week where soft rug exit scams have been alleged.
The team from Polywhale, a Polygon-based yield farming project, announced that it would be ceasing work on the platform in a Reddit post on June 20. Two days later, it was discovered by token holders that the project’s treasury wallet had been emptied.
As reported by Cointelegraph, Polywhale Finance’s founders were accused of pulling a soft rug by selling their tokens during the latest crypto market price collapse. The project’s native token, KRILL, has collapsed to $0.17 from a high of $7 at the beginning of this month.
Related:Pulling the rug: DeFi investment hype fuels rise in crypto exit scams
The Defiant reported on another claimed soft rug involving Swipe, which developed Binance Smart Chain’s third-largest protocol, Venus.
On June 22, the founding team behind the BSC-based money market and stablecoin protocol announced that they were bailing from the project. Uniswap community member @MonetSupply accused the team of a soft rug on Tuesday.
looks like flagship @binance project @VenusProtocol’s core team (@Swipe) pulled a soft rug
for lending protocols, sound governance isn’t everything, it’s the only thing https://t.co/MDVMrw7I4y
— monetsupply.eth (@MonetSupply) June 22, 2021
However, members of the new Venus community denied the allegations, claiming that it was just a rumor and the Swipe team had handed in all of their tokens.
The incident has not prevented the Venus native XVS token from slumping 40% since the same time last week when it traded close to $34. According to CoinGecko, XVS is down 87% from its all-time high of $147 on May 10, changing hands for $19.28 at the time of writing.
A new report by CoinShares suggests Bitcoin (BTC) has garnered 97% of the total crypto inflows in 2021.
The recent correction in Bitcoin price does not seem to have deterred crypto investors as CoinShares data shows a record $1.3 billion in crypto product inflows over the past week. This suggests that investors are accumulating on the dips rather than attempting to chase higher prices.
Another space that has taken giant strides in the past few months has been the decentralized finance sector. While bond yields across the world are reeling near-zero levels, the attractive yield farming opportunities in DeFi and flash loans have attracted investors, boosting the total value locked to $26.1 billion on Jan. 25.
Unless the markets are gripped in panic, there are always certain sections that are in a bull phase. The tokens selected today have also outperformed the broader market in the short term.
Let’s investigate some of the fundamental reasons behind their bullish moves and pinpoint the critical levels to watch out for.
Transferring money seamlessly across borders without having to pay high fees is a necessity in today’s world and Celo (CELO) aims to ease this process. The project is gradually gaining adoption as there is now $30 million worth of cUSD in circulation.
After the success of cUSD, the platform plans to launch a new stablecoin that is pegged to the euro in the next two months. Similar to its cUSD, the euro stablecoin will use a basket of crypto assets to keep the price closely pegged to the underlying asset.
Celo’s partnership with KardiaChain, Kadena, and Paychant opens several new opportunities for its users. The community also cheered Celo’s listing on Binance exchange on Jan. 5 and the altcoin broke out strongly after listing.
Celo recently announced a rewards program and starting Jan. 25 users who maintain a certain minimum average monthly balance of cUSD will earn rewards in CELO on a first-come, first-serve basis.
Along with the products, the credibility of the project is also important for its success. On that front, Celo’s inclusion in the World Economic Forum’s Global Future Council on Cryptocurrencies may have worked as a big positive.
CELO price surged from $1.752 on Jan. 12 to an intraday high at $3.922 on Jan. 22, a gain of 123% within ten days. The token is currently forming a rounding bottom pattern that will complete on a breakout and close above $4.50.
The CELO/USD pair has started a new uptrend and has been making a series of higher highs and higher lows. This suggests a bullish sentiment and traders are buying on dips. The moving averages are sloping upward and the relative strength index (RSI) is in the overbought zone, indicating an advantage to the bulls.
The pair does not have any major resistance until it reaches $4.30 but the bears are unlikely to give up easily. They will try to stall the current up-move in the $3.60 to $3.922 zone. If they succeed, the pair could drop to the 20-day exponential moving average ($2.528) where buyers are likely to step in.
A strong rebound off the 20-day EMA will keep the uptrend intact and the bulls will then again try to push the price to $4.30. A breakout and close above the $4.30 to $4.50 resistance zone could start the next leg of the uptrend.
This bullish view will invalidate if the pair breaks below the 20-day EMA. In such a case, the pair could drop to the 50-day simple moving average ($1.95).
The DeFi space continues to hold strong even as major cryptocurrencies are witnessing a sharp correction. This shows users’ confidence in DeFi and the ability of the sectors’ projects to offer much better returns compared to altcoins.
Venus Protocol (XVS) is exclusively on Binance Smart Chain, therefore it did not suffer from the detrimental effects of high gas fees that negatively impacted DeFi projects in early January. This could have attracted some traders to jump over to Venus.
Decentralization is one of the key factors in crypto and Venus completed the transition on Jan. 15. The protocol will now be governed by the community, which is a welcome step in the right direction. The positives of the past few days may have resulted in its total value locked to jumping to $400 million.
XVS has risen from an intraday low at $3.945 on Jan. 18 to an intraday high at $12.90 today, a 227% rally within a short span. The momentum picked up after the bulls pushed the price above the stiff $5 to $6 overhead resistance zone on Jan. 23.
Some profit-booking was seen on Jan. 25 but the bulls purchased the dip and pushed the price above $9.89 today to resume the uptrend. Crossing into double digits seems to have ignited the bulls who have continued to buy at higher levels.
The XVS/USD pair could now rally to $15 and then to $20. However, the recent rally has pushed the RSI deep into the overbought territory, which increases the risk of a correction or consolidation.
If the price turns down from the current levels, it is likely to find support at $10. A strong rebound off this level will suggest the previous resistance has flipped to support and the bulls will then try to resume the uptrend. On the contrary, if the price breaks below $10, the correction could deepen to $8.
FantomFinance (FTM) is another DeFi project that is acting as a bright spot that is leading the market higher.
Fantom recently entered into a partnership with Injective Protocol that is expected to increase adoption as users can access assets on both chains. Together both teams plan to bring new and innovative synthetic products to the market, tapping the ever-growing popularity of synthetics and decentralized derivatives trading.
This offers an opportunity for the traders to benefit from trading markets that are in a trend rather than getting stuck to a specific asset class. FTM’s recent listing on SushiSwap also seems to have been cheered by the community.
FTM has soared from an intraday low at $0.0241 on Jan. 22 to an intraday high at $0.0678 today, a 181% rally within five days. The bulls had pushed the price above the $0.05665 resistance on Jan. 24 and 25 but could not sustain the higher levels.
The bears attempted to start a correction on Jan. 25 but the bulls were in no mood to relent. They have aggressively propelled the price to a new all-time high today. However, the sharp rally of the past few days has pushed the RSI deep into the overbought territory, which could start a correction or consolidation.
If the price turns down from the current levels but rebounds off the $0.05665 support, it will suggest the previous resistance has flipped to support. The FTM/USD pair may then start the next leg of the uptrend that could reach $0.0850.
Conversely, if the bears sink the price below $0.05665, the pair could drop to $0.05 and then to $0.045. A break below this support could signal a change in trend.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision.