The Weekly #183
Markets continue to be soft with BTC facing a tall order for momentum reversal. NFT and Metaverse assets outperform in the week.
Bearish Bias Remains
Another week, another 7 days of muted interest. Global crypto markets are up slightly (1%) on the week but still down 18% on the 14D and down 22% for the month.
Total market cap which includes ETH and BTC plotted against total market cap excluding ETH and BTC (orange line) shows a tightly coupled trend - The wider market does what BTC and ETH does, as BTC and ETH does what the wider market does.
We are also seeing assets in oversold territory. The last time RSIs were at these lows was in May 2021 nearly 3 months of continued bearish price action while a slight bullish RSI divergence was in play.
Therefore, bulls beware - oversold price levels in one thing but identifying momentum change is another thing entirely.
Simple spot volumes are still trending lower. Despite increasing to ~$40 last week due to sharp drawdowns, volumes are still 50% lower than levels seen in Q3/4 2021. Demand for trading cryptoassets remains very muted.
On a pure technical perspective, we have cause for concern. BTC briefly rallied closer to 38.7k before returning to the bearish camp once again.
This confirms a descending channel with the orange coin needing the following playbook for conviction in momentum change:
Break above the formed channel
Break above 50d EMA potential resistance
Break above long term momentum indicator (200d) with evidence of new support
Macro Still Weighs In
As we highlighted in previous editions for The Weekly, the drivers in muted interest in crypto and wider risk assets more generally is the geopolitical and macroeconomic ‘cocktail of worries’.
Updating the status of these ‘worries’ can therefore be helpful in gauging any potential ‘relief’ for crypto.
Geopolitical
Ukraine-Russia
Ukraine-Russia tension is now having direct impact on wheat prices with some analysts not ruling out war for Russia in achieving its objectives in Ukraine.
Whether this actually happens is another thing but that would be largely missing the point. It does little to ease the concerns for investors.
China-Taiwan
The Chinese Ambassador gave a hawkish warning to the US warning of military action over Taiwan intervention.
Macroeconomics
Hawkish Fed
Banks have revised their rate hikes forecast this week. And they are all increasingly hawkish. Highlights include JPM increasing their 2022 forecast to 5, BoA increasing to 7 (most hawkish), and Nomura predicting a 0.5 pt increase in Q1.
With the market predicting a more hawkish stance, it is clear investors believe the Fed is behind the curb on its inflation battle. At the very least, volatility will stay high with risk assets remaining vulnerable.
Companies are also meeting or beating expectations but equities are still feeling the heat as investors brace for volatility and treasury yield continuing to rise.
Long-term holders
Long-term holders are also capitulating, slowly but surely. Indicators like LTH-SOPR (7d MA) highlight this with the metric pressured downwards closer to 1.
Every time the LTH-SOPR crosses past current levels, we see a prolonged bearish period like in mid 2014, June 2018, and August 2019.
Exploring The Market Dispersion
While the market has moved largely in line with high cap names like BTC and ETH, this overlooks some dispersion that we see in sector performance for the week.
Layer 1s have underperformed the most (-28%) while the NFT/Metaverse sector has outperformed the most (16%). Assets driving this performance include NFTX, MAGIC, and MANA.
This outperformance comes at a time when market leading NFT exchange, OpenSea, had a week from hell.
Top performing assets are centred more around Ethereum DeFi. Note - DeFi top performers have been the global top performers.
Global (7d%):
JOE (+41%)
SNX (39%)
FLOW (+27%)
TFUEL (+25%)
MANA (+22%)
DeFi (7d%):
JOE (+41%)
SNX (+39%)
FIDA (+34%)
KNCL (+27%)
LDO (+24%)
JOE
JOE has been a top DeFi performers over the past week (+41%). Performance has not been driven by exchange volume or TVL growth per se.
On the 28th, a staking V2 overhaul was announced where the platform will share revenue, offer xJOE (a la Sushiswap), and veJOE.
NFTX
NFTX is moving full steam ahead with the launch of several products:
Loot Integration - new vaults that offer 20% APR
Inventory staking - turning naked floor NFTs into yield-generating assets without needing to provide liquidity
External usage/availability - NFT aggregator Gem using NFTX as venue as part of floor sweeps
Active users are ticking back up closer to ATHs while active vaults have remained at the 1.2k mark since December 2021.
Curve Finance launches YFI / ETH pool, APY and CRV rewards TBA.
Aave launched v3 across 7 testnets. New version of the protocol is expected to be more efficient, offer isolation mode, bridging capabilities and other features, learn more here. Mainnet launch TBA.
Synthetix announced SNX rewards for Sorbet's WETH/SNX LPs on Optimism, 50,000 SNX will be distributed for one month.
Dani Sesta's Wonderland (TIME, Ohm fork) is likely to be closed following recent 0xSifu drama, with treasury paid back to token holders. Proposal has mixed results (55% for No), but Dani is saying that the project is coming to an end.
Biden’s war drum beats as he leverages the ‘national security’ narrative to wage all out war on crypto, with an executive order expected in February, and several coordinated proposals across agencies.‘Snow Job’: The plot to hand the crypto industry to the big banks (Decrypt)
SEC continues to stonewall a spot ETF application and focus on blue chip platforms as it forces primary onramps into a box. SEC dashes spot bitcoin ETF hopes with Fidelity rejection (Bloomberg).
‘Travel Rule’ continues to be a tool for forced transparency and reporting, and will accelerate as a forced requirement across sectors. Few crypto firms even trying to comply with FATF’s ‘Travel Rule’ (CoinDesk).
Global market cap: $1.7T; Global market cap has increased slightly by 1% but still down 22% over the past 30 days.
DeFi: $152B; DeFi market cap has fallen 5%, slightly more than global MCAP. DeFi dominance has fallen 11%.
Market shares; Bitcoin dominance has increased to 47% as L1s and mid-cap names underperform relative to the orange coin.
BTC/USD
ETH/BTC
Price action; BTC/USD failing to break above $40k and remain in descending channel below 50 EMA and 200d MA. Similar trend in ETH/USD with both RSIs showing small bounce from oversold levels. Slight outperformance of ETH/BTC ratio (6%) in the last 5 days.
Volatility (BTC & ETH); BTC 30D vol has kept flat while ETH has spiked upwards in recent days.
Combined order books; Order books heavier on the ask side. Heavier resistance up to $40k (Source: Bitcoinity).
Crypto vs. SPX; Correlations between crypto and equities spiking to 1. Cause for concern for crypto investors in terms of risk asset appetite given ‘cocktail of worries’.
GBTC premium; Slight recovery in discount over the past few days although premium remains near ATL levels. Continued weak spot action likely to dampen discount further.
ETHE premium; Similar dynamic with ETHE with the discount at 19%. Overall descending trend with limited evidence of buyers stepping in.
Bitcoin Mempool activity (Size in MB); The mempool size for the Bitcoin network remains relatively low despite turbulent price action. Congruent to other on-chain metrics that point to weak network activity (e.g. active entities).
On-chain real (BTC) & off-chain volume; BTC on-chain volume has increased 10% over the past week. BTC and ETH spot volumes have fallen 26% and 28% respectively over the past week (7d MA).
Hashrate & Difficulty; Bitcoin hashrate cools from all-time-highs. Lawmakers probe into crypto mining companies’ energy use.
Active addresses (BTC); Active addresses (30d MA) has fallen 3% over the past week and is approaching lows since September 2021.
Trader positioning; Aggregate perpetual funding rates remains slightly positive for BTC markets while OI kept relatively high ( 360k). Put/call ratio for BTC increasing while for ETH this has also increased but to a lesser degree.
Omenics Sentscore (BTC); Sentiment score around BTC is kept near extreme lows. Hitting extreme negative sentiment levels (e.g. March 2020) will be at the whim of wider price action.
Exchange inflow/outflow (BTC, ETH); Exchange flows have moved from net positive to slightly net negative which may indicate a growing set of buyers stepping in and withdrawing assets from exchanges.
📚 Oracle Network Valuations: The VSPT Ratio [@Decentral Park Capital]
📚 On Olympus DAO [@CarlKVogel]
📚 Our Network #106 [@Our Network]
📚 Web3 Innovation [@CoinTelegraph]
📚 This Week In Digital Assets [@Arca]
🎙️ Future of Digital Asset Securities [Between2Chains]
🎙️ JHL Project Serum Core Dev Contributor [FTX Podcast]
🎙️ Charting Zodiac & DAOs [Zero Knowledge]
🎙️ Paul Sztorc on Bitcoin Security [On The Brink]
🎙️ What It Takes To Scale an Ethereum DeFi Protocol [The Defiant]
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