First Mover: SushiSwap’s Billion-Dollar ‘Rug Pull’ Is Thriller to Crypto Geeks

First Mover: SushiSwap’s Billion-Dollar ‘Rug Pull’ Is Thriller to Crypto Geeks

The SushiSwap saga appears to have more plot twists ahead. (George M. Groutas/Creative Commons, modified by CoinDesk)

You’re reading First Mover, CoinDesk’s daily markets newsletter. Assembled by the CoinDesk Markets Team and edited by Bradley Keoun, First Mover starts your day with the most up-to-date sentiment around crypto markets, which of course never close, putting in context every wild swing in bitcoin and more. We follow the money so you don’t have to.

was down early Tuesday, barely holding above the important psychological threshold of $10,000. 

Prices for the cryptocurrency, up 40% year to date, have held above $10,000 for more than six weeks. The digital-asset firm Diginex wrote in a newsletter post that “prices will need to regain $10,550 to settle the nerves of traders.” 

On Wall Street, U.S. stock futures were . The dollar strengthened in foreign-exchange markets and Treasury bond yields fell, indicating a reduced risk appetite, though gold was off. The British pound slipped on speculation that a “no-deal” Brexit looms.  

In a 2020 during which the fast-growing arena of decentralized finance, or DeFi, has produced a seemingly unending series of jaw-dropping,  twists, the past few days’ saga of the market-making protocol SushiSwap is drawing comparisons to a thrilling caper flick.

The Bankless newsletter called it “the SushiSwap rug pull.” It was “one of “the most dramatic moments in DeFi this year,” according to The Defiant newsletter. Jay Hao, CEO of the cryptocurrency exchange OKEx, called it “one of those  the likes of which crypto hasn’t witnessed in recent times.” 

Of course, all this is from the perspective of crypto geekdom, and it’s really just the latest tech-gone-wild iteration of the reliable human themes of invention, fear, greed, mania and panic. 

As , a pseudonymous developer who goes by “Chef Nomi” launched the SushiSwap protocol in late August, and it was quickly cast as a “” because its inherent design intended to siphon away liquidity from a competing trading platform, Uniswap.   

The project quickly attracted more than $1 billion of collateral with a technique known as “zombie mining,” The market value of the associated SUSHI tokens surged roughly 500-fold in a matter of days to .

And then on Saturday, SUSHI investors learned that Chef Nomi had unexpectedly cashed out of tokens in exchange for 37,400 (ETH) worth about $13 million. SUSHI prices crashed before recovering somewhat after Sam Bankman-Fried, CEO of the cryptocurrency exchange FTX, reportedly took control of the project. 

Bankman-Fried tweeted early Monday that “” of migrating markets over from Uniswap will take place “one at a time, starting in 48 hours,” potentially setting up something of a .

“If you’re in it for the wild gains, if you’re chasing clearly unsustainable percentage leaps, you have to be able to stomach the losses as well,” Hao wrote.

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The episode is one of several prompting comparisons of DeFi to the 2017-18 initial coin offering (ICO) bubble, when little-known and barely-tested developers took advantage of surging prices for bitcoin and other cryptocurrencies to raise the equivalent of at least .    

According to the website , decentralized-finance applications, mainly focused on lending and trading businesses, now have a combined market value of about $14 billion.  

One key difference so far is DeFi does not appear to have penetrated the consciousness of individual investors, as happened during ICO boom. Amateur traders also have flocked recently in the stock market, embodied in the success of .  

CoinDesk’s Omkar Godbole  that Google searches on the keyword “DeFi” register nowhere near the scale of “ICO” searches a couple years ago. 

“DeFi is an incrementally accretive and sustainable trend while ICOs were not,” according to , CEO of the Singapore-based fund management firm Three Arrows Capital. 

The SUSHI saga? Sustainable? Just don’t tell the Robinhood crowd about it.

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Bitcoin’s recent drop from $12,400 to $10,000 has revived interest in short-term put options or bearish bets. 

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– Omkar Godbole

Ether (): Until next phase of Ethereum 2.0 development, “” means traders can transfer ether onto the new network but can’t transfer it back out. 

Bitcoin (): LedgerX announces launch of  representing 1/100th bitcoin, listing two months and two quarters, fully collateralized with cash or bitcoin and physically settled. 

Chainlink (): At least nine node operators suffered attack Sunday, , The Block reports. 

Wrapped Bitcoin (): One trading firm, Alameda Research, associated with the FTX cryptocurrency exchange, has accumulated more than 14,000 of wrapped bitcoin, roughly . 

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