Značka: manipulation

Analyst says 40% of users in most Web3 games are bots — Here’s how to avoid being fooled

The decentralized application industry pushed above $40 billion in smart contract deposits in February 2021, and currently the figure stands at $59 billion. To date, “real money” continues to flow into the sector, and on Aug. 29, gaming startup Limit Break raised $200 million. The project gained popularity after the successful launch of its DigiDaigaku free-mint NFT collection.According to a report by Dove Metrics and Messari, the crypto industry saw $30.3 billion in funds raised in H1 2022. This amount surpassed the $30.2 billion seen in 2021. Excluding the $10.2 billion in funding raised for the centralized finance sector leaves a whopping $20 billion that was invested in DApps, nonfungible tokens (NFTs) and Web 3 infrastructure.One might question how much of that money has effectively been deployed or reinvested in ventures owned by the same investment groups. Of course, there are a handful of clever ways to overextend those announcement numbers without breaking any regulation, but there’s undoubtedly a great deal of money flowing toward decentralized applications.There’s always been a healthy amount of distrust in the actual number of active users on DApps, but so far, no hard evidence of cheating has been presented. So what tools can retail users employ to detect inflated activity? Well, it turns out there are at least three: active users, community engagement and liquidity.Comparing registered users to active usersMost proof of stake (PoS) networks charge minimal registration fees and many are free to use. This leads to troves of “fake” active addresses that interact with the DApp and it creates incentives for developers and investors to boost their numbers.Filtering the DApps rankings by the number of users brings some staggering data, especially in the Tron, WAX, Flow, EOS and Thundercore networks. Some of the DApps claim to have more active users than industry leaders like OpenSea, Uniswap and Axie Infinity.Levan Kvirkvelia, the co-founder of Jugger, a Web3 bot prevention service, analyzed over 60 games and DApps and found that 40% of the active users are actually automated bots or a single entity controlling multiple accounts.after analyzing 60+ games and services, we found 200 000 bots. on average, every web3 game has 40% bots. link to the database with the results at the end of a thread pic.twitter.com/vvvuhgeRLV— Levan (@LevanKvirkvelia) August 29, 2022In some cases, such as the AnRKey X game on the Polygon network, the ratio of bots to holders reached 84%. Even though there could be a plausible explanation for distancing the project developers from the bot deployment, Kvirkvelia’s research shows that analysts should not use the number of token holders as a proxy for active users.Faking community engagement is incredibly hardA sign to look out for is inconsistent community engagement on the project’s social networks even if the DAU metric is high. Well funded projects aim to “buy” real users whereas bots are not skilled enough to contribute to discussions in a meaningful and consistent way.This analysis doesn’t take longer than 10 minutes because it only requires one to log in to the official group and scroll through the last 40 or 60 messages. Are there real questions and constructive debates by the community or merely activity from group admins and shilling from bot accounts?Moving on to the project’s official Twitter, Twitch, YouTube or Instagram page, follow the same process of reviewing posts and comments from the community. This qualitative data should yield a far more accurate analysis versus the number of shares, likes or active blockchain addresses.Detecting fake token liquidityBelieve it or not, market makers offer liquidity services for tokens. For a certain fee, they can keep bids and offers at reputable exchanges at all times, moving the price using algorithms based on the orderflow.An experienced investor will note nuances that distinguish fake volumes and order book depth from actual trading activity. For starters, analyzing the 2% depth on bids and offers provides an easy way to avoid illiquid tokens.UFO Gaming (UFO) top markets by volume. Source: CoinmarketcapNotice how the UFO Gaming token holds an unreasonably low amount of bids compared to its daily trading volume. The aggregate demand from buyers is 2% below the last trade and is less than 0.6% of the reported trading volume.While having a market maker is usually a good thing since it encourages users to trade the token actively, it does not necessarily translate to trading volume. Dissipating interest from the community eventually causes the token liquidity to plunge.Related: Singapore state investor leads $100M round for crypto firm Animoca, ReportOrchid Protocol (OXT) top markets by volume. Source: CoinmarketcapThe example above shows Orchid Protocol token, which despite being listed on Binance, Coinbase, Kraken and Kucoin, amasses $675,000 in daily volume. This effect causes the 2% order book depth to range between 9% to 47% of the daily trading activity, which sounds quite off.Investors should be aware that venture capitalists and market makers are becoming even more skilled at hiding their manipulation. For instance, finding a top-200 coin at Binance with distorted ratios on daily volume and order book depth is almost impossible. Traders, gamers and investors should take care to not be misled by high DAU metrics for popular DApps. Doing qualitative analysis of the platform’s social media accounts and GitHub is a great way to cross-reference on-chain and trading data.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.

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Markets rally after FOMC meeting, but Bitcoin bears still have a short-term advantage

Bitcoin’s (BTC) price has been in a down-trend since the $69,000 all-time high on Nov. 10, when the the Labor report showed inflation pushing above 6.2% in the United States. While this news could be beneficial for non-inflationary assets, the VanEck physical Bitcoin exchange-traded fund (ETF) denial by the U.S. Securities and Exchange Commission (SEC) on Nov. 12 threw some investors off-guard.Bitcoin/USD price on Coinbase. Source: TradingViewWhile the ETF request denial was generally expected, the reasons given by the regulator may be worrisome for some investors. The U.S. SEC cited the inability to avoid market manipulation on the broader Bitcoin market due to unregulated exchanges and heavy trading volume based on Tether’s (USDT) stablecoin.Analyzing the broader market structure is extremely relevant, especially considering that investors closely monitor meetings held by the U.S. Federal Reserve. Regardless of the magnitude of the upcoming tapering in the Fed’s bond and assets repurchase program, Bitcoin’s movements have been tracking the U.S. Treasury yields over the past 12 months.Bitcoin/USD at FTX (orange, left) vs. U.S. 10-year Treasury Yields (blue, right). Source: TradingViewThis tight correlation shows how decisive the Federal Reserve’s monetary policy has been with riskier assets, including Bitcoin. Moreover, the yield decline over the past three weeks from 1.64 to 1.43 partially explains the weakness seen in the crypto market.Obviously, there are cother factors in play, for example, the market pullback on Nov. 26 was primarily based on concerns over the new COVID-19 variant. Regarding derivatives markets, a Bitcoin price below $48,000 gives bears complete control over Friday’s $755 million BTC options expiry.Bitcoin options aggregate open interest for Dec. 17. Source: Coinglass.comAt first sight, the $470 million call (buy) options overshadow the $285 million put (sell) instruments, but the 1.64 call-to-put ratio is deceptive because the 14% price drop since Nov. 30 will likely wipe out most of the bullish bets.If Bitcoin’s price remains below $49,000 at 8:00 am UTC on Dec. 17, only $28 million worth of those call (buy) options will be available at the expiry. In short, there is no value in the right to buy Bitcoin at $49,000 if it is trading below that price.Bears are comfortable with Bitcoin below $57,000Here are the three most likely scenarios for the $755 million Friday’s options expiry. The imbalance favoring each side represents the theoretical profit. In other words, depending on the expiry price, the quantity of call (buy) and put (sell) contracts becoming active varies:Between $45,000 and $47,000: 110 calls vs. 2,400 puts. The net result is $105 million favoring the put (bear) options.Between $47,000 and $48,000: 280 calls vs. 1,900 puts. The net result is $75 million favoring the put (bear) instruments.Between $48,000 and $50,000: 1,190 calls vs. 1,130 puts. The net result is balanced between call and put options.This crude estimate considers call options being used in bullish bets and put options exclusively in neutral-to-bearish trades. However, this oversimplification disregards more complex investment strategies.For instance, a trader could have sold a put option, effectively gaining a positive exposure to Bitcoin (BTC) above a specific price. But, unfortunately, there’s no easy way to estimate this effect.Bulls need $48,000 or higher to balance the scalesThe only way for bulls to avoid a significant loss in the Dec. 17 expiry is by sustaining Bitcoin’s price above $48,000. However, if the current short-term negative sentiment prevails, bears could easily pressure the price down 4% from the current $48,500 and profit up to $105 million if Bitcoin price stays below $47,000.Currently, options markets data slightly favor the put (sell) options, thus creating opportunities for additional negative pressure.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.

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