Friday, 10 December 2021

Market Summary

Market Summary 10 December 2021

Bitcoin Price: U$47.545.59 (-5.80%)
Ethereum Price: U$4,105.65  (-7.47%)

 

NFT Blue Chip Flippening, Anchor Grows Reserves, & Crypto Fund Flows

  • Bored Ape Yacht Club (BAYC) has been outperforming CryptoPunks since the middle of November. Floor prices of CryptoPunks have remained stagnant while the BAYC floor rose by over 50%.
  • BAYC’s sudden uptick was likely catalyzed by recent partnerships and endorsements. Over the last couple of months, BAYC has partnered with multiple celebrities such as Diplo, DJ Khaled, Martin Garrix, and Jimmy Fallon to name a few. Not to mention Adidas Originals, who officially partnered with BAYC, Punks Comic, and GMoney (who we’ve recently interviewed on the podcast for a second time).
  • The floor price of a BAYC is currently 52 ETH while a Punk is 77 ETH. (Both projects have a supply of 10,000.) With BAYC catching up to CryptoPunks, is a flippening upon us?
  • FTX burns roughly a third of its revenue periodically. Weekly FTT burns, and thus revenue, have steadily increased since Q3 2021 but the price of FTT has failed to keep up with that pace.
  • In October, the exchange concluded a $420M funding round valuing the company at $25B. Just last week, FTX announced that they are seeking a new round of funding at a valuation of $32 billion, with the intent to raise a total of $1.5B.
  • Since bETH was added as collateral on Terra’s Anchor Protocol, the yield reserve has consistently grown.
  • Recently, the growth in LUNA’s staking yield has also resulted in significant growth in Anchor’s yield reserves. When users deposit bAssets as collateral, leftover yield after paying depositors accrues to the yield reserve, which acts as an insurance fund to guarantee Anchor can continue paying depositors as deposits rise. The growth of the yield reserve is a healthy sign, as it ensures Anchor can operate sustainably.
  • VC activity has surged as crypto went mainstream this year. Crypto project investments saw a major uptick in March 2021, dipped in summer months, and rebounded up to about 140 deals per month, according to Footprint Analytics.
  • Over the course of 2021, the makeup of projects getting funding has also transformed. In Q1’21, DeFi was the largest category for investment. More recently, NFT-related projects are the largest slice of deals. (Note: NFTs and Web3 have similar sub-categories like Gaming and Music).
  • This comes as the dawn of the Metaverse takes the world by storm. Axie Infinity also made strides in 2021, acting as a pioneer for play-to-earn gaming. It comes as no surprise that others are trying to replicate its success and that investors are hungry to capitalize on these opportunities.

 

When There’s Blood In The Streets (Nov. ’21 Chartbook)

  • BTC open interest is down 50% from its peak a month ago, as a barrage of over-leveraged longs got wiped out. Deleveraging events are significant in crypto given market participants’ propensity for leverage and the volatility of the asset class. Typically, a deep deleveraging has given way to further upside in crypto, and while a short-term rebound is far from guaranteed, it’s quite possible this time will follow a similar playbook as prior occasions.
  • More interestingly is the pace at which OI has been wiped out; the 30-day % decline in OI for BTC has reached levels that previously signaled a bottom was forming (or wasn’t too far out).
  • ETH open interest is down 30% in a month, which is surprising given the drawdown in BTC open interest. However, as we’ve noted several times, ETH has held up remarkably well in the past month compared to most large cap crypto assets.
  • As a result, implied volatility (IV) for BTC jumped, albeit for a very short period of time, before reverting back to similar levels we saw ahead of the short-term liquidity crisis. As uncertainty continues to loom over BTC and the wider crypto market, it looks like IV is inching up again, implying a period of elevated volatility lies ahead.
  • AVAX is a prime example and had quite the run up, both on an absolute and relative basis, since we started highlighting it in some of our market notes. Like most crypto assets, it’s suffered a significant pullback over the last couple weeks, but is one of the best positioned L1s if and when we see market sentiment recover.
  • Amidst the panic of the last few days, LUNA has completely ignored the broader market and only gone and set a new all-time high just under $80. The catalyst for this seems to be a proposal to burn 80M LUNA and mint 3-4B UST in its place. The UST would be used to fund incentives on Osmosis, a Cosmos Zone that acts as the core liquidity layer for the (Cosmos) ecosystem. The process of doing this was hinted to entail large swap fees accruing to stakers of LUNA.
  • LUNA’s strength throughout this latest market rout serves as a strong testament for the value proposition of Terra and the excitement surrounding all the projects currently being developed on its network. This is certainly one to keep a close eye on, especially if we see another downside move that opens up more attractive entry points for those interested.
  • BSC has been lackluster in H2 despite a great start to the year. Many see BSC as a short-term solution, as certain engineering flaws limit the network’s ability to be long-term sustainable. Terra, Solana, and Avalanche, which are touted as more legitimate competitors to Ethereum, have capitalized on this to establish their own growth curves.

 

Bitcoin hash rate returns to all-time high levels

  • The global hash rate of the Bitcoin network tanked to as low as 84 exahashes per second (EH/s) at the start of June following the Chinese government’s crackdown on the crypto mining sector.
  • According to Blockchain.com, the global hash rate has increased by 108% since June, with the Bitcoin network performing at a rolling seven-day average of 175 EH/s as of Wednesday.
  • The figure is roughly 3% shy of peak levels of 180 EH/s seen at the height of the previous bull cycle in May. It is a commonly held belief that the trends in hash rate correspond with the price of Bitcoin (BTC), suggesting that there may be some positive price action on the horizon despite the overall gloomy sentiments in the market at the moment.

 

Bitcoin dips below $50K as Evergrande defaults on US dollar debt

  • Bitcoin (BTC) kept $50,000 as a focus on Dec. 9 as consolidation on BTC/USD continued to avoid last week’s lows.
  • A crucial area to hold is that region we’ve touched already at $42K. The close was above $46-47K and I’d prefer not to lose that at all.
  • Amid broadly calmer conditions despite macro markets dealing with an unprecedented debt default from China’s Evergrande property giant, analysts thus focused increasingly on longer-term phenomena to gauge Bitcoin price action’s overall health.

 

Ledger unveils crypto debit card, partners with FTX, Coinbase, Rarible

  • Hardware wallet maker Ledger made a slew of announcements at its inaugural — and now bi-annual — conference Ledger Op3n in Paris today.
  • Key among them was the reveal of its new crypto debit card, released on the basis that, as Ledger VP of payments Iqbal Gandham put it, “we need to start focusing on spending.” According to the presentation, it’s a Visa card that’s issued by Baanx, an affiliate of Contis Financial Services. 
  • Called the Crypto Life card, it supports a range of cryptocurrencies and can be tracked through Ledger Live, the software companion to Ledger’s range of hardware wallets. Ledger has started a waitlist ahead of its launch.

 

Meta’s crypto wallet Novi launches on WhatsApp

  • Novi, the crypto wallet owned by social media giant Meta, has launched the ability to send and receive money via WhatsApp, according to a tweet from the company’s VP of product Stephane Kasriel. 
  • This integration with WhatsApp comes six weeks after the company launched a pilot for the crypto wallet and will not interfere with the messaging app’s privacy features, according to Kasriel. The service is initially only available to a limited number of users in the United States. 

 

Polygon acquires ZK-rollups startup Mir Protocol for $400 million

  • Polygon (formerly Matic Network) has made yet another acquisition in the ZK-rollups space, buying Mir Protocol for $400 million.
  • Mir is an Ethereum scaling startup that utilizes zero-knowledge proof (ZK-proof) technology. A ZK-proof is a cryptographic tool that can be used to create ZK-rollups. ZK-rollups enable transactions to be processed but don’t require all transaction data to be posted on Ethereum. This helps to reduce the block space used on Ethereum — enabling it to scale — and reduces gas fees.
  • The deal follows Polygon’s acquiring of Hermez Network for $250 million in August.

 

US lawmaker purchases exposure to Bitcoin through Grayscale shares

  • Illinois Representative Marie Newman has disclosed she purchased up to $50,000 in exposure to crypto through shares of Grayscale Bitcoin Trust.
  • According to a financial disclosure report filed with the U.S. House of Representatives on Wednesday, Congressperson Newman bought between $15,001 and $50,000 of GBTC between Nov. 9 and last Saturday. In addition, she conducted four separate purchases of shares of Coinbase Global’s Class A stock between November and December, up to $215,000.

 

MicroStrategy purchases $82M in Bitcoin, now holds 122,478 coins

  • Business intelligence firm MicroStrategy has added 1,434 Bitcoin to its coffers after purchasing the crypto asset at an average price of $57,477.
  • According to a Thursday filing with the Securities and Exchange Commission, MicroStrategy purchased 1,434 Bitcoin (BTC) between Nov. 29 and Dec. 8 for roughly $82.4 million, making its total holdings 122,478 BTC. With the recent buy, MicroStrategy’s holdings are valued at more than $5.9 billion, representing more than $2.2 billion in gains.

 

A rare CryptoPunk has sold at a record $10.2 million

  • Someone purchased a rare CryptoPunk for 2,500 ETH — worth more than $10.2 million as of publication — on the Larva Lab’s native CryptoPunk marketplace. 
  • The Punk sold was #4156. It’s a rare Ape Punk in which there are only 24 in a collection of 10,000 items.

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