Doc's Daily Commentary

Mind Of Mav

What’s Moving Markets Today; Everyone Is “Fed” Up

 

A week of crypto technology failure, which highlights that we are still not ready for massive adoption.

Yuga Labs, the creators of the Bored Apes Yacht Club (BAYC) NFT collection, held a land sale for their new metaverse, Otherside. It generated over $285 million of sales, with the currency as choice ApeCoin ($APE) which is used to buy Otherdeeds. However, the highly anticipated sale caused a stir, as it congested the Ethereum network and caused massive gas spikes. More than $172 million was spent on gas, with much of that figure consisting of failed transactions. Once again it highlighted the need for scalability, and exposed Ethereum’s flaws. Yuga Labs hinted at creating its own chain, stating that it was “abundantly clear that ApeCoin will need to migrate to its own chain”

Solana experienced a 7-hour outage after the network was overwhelmed by a barrage of NFT minting bots. This is the network’s second complete outage in 9 months (after the 17 hour downtime in Sep 2021), and 7th recorded form of outage event so far.

Where the Ethereum issue highlighted above was one of too high fees, this incident gives a stark reminder on the other hand of the importance of transaction fee markets for blockchains to prevent spam attacks. Seems like a right balance is needed. These repeated incidents also highlighted the flaws of a monolithic blockchain design like Solana, as opposed to a modular one like NEAR, Cosmos etc. which scales through sharding.

Ethereum DeFi protocols Fuse and Saddle experienced tens of millions of hacks over the weekend. These hacks lost $91 million, contributing to now the worst year on record for DeFi exploits (although only 4 months have passed) as per PeckShield.

Anchor on the Terra ecosystem officially launched floating interest rates yesterday, and the interest rate this week was 18%, down 1.5% from last week. Yield reserves are depleting, with $196 million as of time of writing, a net outflow of about $30 million w-o-w.

On the positive side, this week however also indicated signs on increasing future flow into cryptocurrency and in particular Bitcoin.

Central African Republic adopts Bitcoin as legal tender, becoming the first country in Africa to do so and follows El Savador less than a year ago. However, it is not very impressive news as CAR is a very small economy (most probably has not heard of), and only 14% of the population have access to the internet (Source). There is a need for a significant economy to make this step, which I believe will happen in a few years, as countries with balance account surplus start to diversify away from the USD as a reserve currency.

Fidelity Investments is launching a product that will allow plan sponsors to offer Bitcoin in 401(k) plans, making it the first provider to offer crypto in a retirement savings medium. MicroStrategy will be one of the companies piloting the Bitcoin 401(k) allocation in their retirement accounts.

Market Update

Macro

FOMC Meeting

Attention this week turns to the May FOMC meeting, with a 50bps hike fully priced in. Key to watch are the Fed’s indications for future rate hikes, with the market now seemingly expecting a 75bps hike in Jun as well.

Source: CME Group

Inflation Cycle Forecast

Below is an Inflation Cycle Forecast chart, which I took from a presentation from Larry Williams. His data is indicating that we are close to the peak of the inflation cycle, and perhaps this may indicate the end of rate hikes, possibly at the end of 2022.

Technical Analysis on Charts

Not much to report on the Crypto charts. Since last week, high correlations with equities persist and a downward sloping 200D MA acting as major resistance for BTC and ETH. However, that might change as there’s significant movements coming out of the FOMC meeting today.

USD Chart

One thing to highlight however is the USD, which historically has been an important factor for crypto prices. In April, we saw the largest monthly gain for USD since Jan 2015 (the Euro debt crisis).

Chart: DXY (Blue) and inverse ETHUSD (Orange)

In the chart above we see visually a similar movement between the DXY and inverse ETHUSD, meaning a high negative correlation.

$DXY weekly chart

The $DXY looks like it has ran up a lot into a key resistance. It will be one to watch if USD starts to cool down at this point, which may be a tailwind for crypto prices.

On-chain data

Bitcoin Hash rate still high

Despite the huge volatility that crypto and Bitcoin has experienced, Bitcoin’s hash rate has recently hit a new record high of 258 EH/s, signifying the growing number of miners on the blockchain. It has recovered about 400% since the trough in 2021 when China banned crypto mining.

Source: Glassnode

Key events this week

As mentioned above, the FOMC meeting has huge implications for the markets ahead.

Another point is that on 9-May, there is the annual Soviet WWII victory parade. Something to watch if Putin does indicate some easing down in the situation and claim “victory” in some parts of Ukraine, although probably unlikely.

The ReadySetCrypto "Three Token Pillars" Community Portfolio (V3)

Add your vote to the V3 Portfolio (Phase 3) by clicking here.

View V3 Portfolio (Phase 2) by clicking here.

View V3 Portfolio (Phase 1) by clicking here.

Read the V3 Portfolio guide by clicking here.

What is the goal of this portfolio?

The “Three Token Pillars” portfolio is democratically proportioned between the Three Pillars of the Token Economy & Interchain:

CryptoCurreny – Security Tokens (STO) – Decentralized Finance (DeFi)

With this portfolio, we will identify and take advantage of the opportunities within the Three
Pillars of ReadySetCrypto. We aim to Capitalise on the collective knowledge and experience of the RSC
community & build model portfolios containing the premier companies and projects
in the industry and manage risk allocation suitable for as many people as
possible.

The Second Phase of the RSC Community Portfolio V3 was to give us a general idea of the weightings people desire in each of the three pillars and also member’s risk tolerance. The Third Phase of the RSC Community Portfolio V3 has us closing in on a finalized portfolio allocation before we consolidated onto the highest quality projects.

Our Current Allocation As Of Phase Three:

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The ReadySetCrypto "Top Ten Crypto" Community Portfolio (V4)

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Read about building Crypto Portfolio Diversity by clicking here.

What is the goal of this portfolio? 

The “Top Ten Crypto” portfolio is a democratically proportioned portfolio balanced based on votes from members of the RSC community as to what they believe are the top 10 projects by potential.
This portfolio should be much more useful given the ever-changing market dynamics. In short, you rank the projects you believe deserve a spot in the top 10. It should represent a portfolio and rank that you believe will stand the test of time. Once we have a good cross-section, we can study and make an assessment as to where we see value and perhaps where some diamonds in the rough opportunities exist. In a perfect world, we will end up with a Pareto-style distribution that describes the largest value capture in the market.
To give an update on the position, each one listed in low to high relative risk:
SoV/money == BTC, DCR
Platforms == ETH, XTZ
Private Money == XMR / ZEC / ZEN
DeFi == MKR / SNX and stablecoins
It is the most realistic way for us to distill the entirety of what we have learned (and that includes the RSC community opinion). We have an array of articles that have gradually picked off one by one different projects, some of which end up being many thousands of words to come to this conclusion. It is not capitulation because we all remain in the market. It is simply a consolidation of quality. We seek the cream of the crop as the milk turns sour on aggregate.

Current Top 10 Rankings:

 

 

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