🗓💊 High on Hopium or Turning of the Tide?
Weekly Alpha - March 11-17, 2023
Today’s newsletter is a cool 7 minute read.
1 week in crypto = 6.9 weeks in the real world
In the past week:
- USDC depeg
- Silvergate, Silicon & Signature Bank fail
- Euler Finance exploit
- Fed $25B rescue
- A crazy rally?
- Arb airdrop March 23
Next week there's FOMC & who knows what else
Never a dull moment in crypto
This week we’re looking at:
- 📷 Macro & Market Synopsis
- 📊 Crypto Weekly Data Update
- 📈 Important Charts - Stablecoins, the Lifeblood of Crypto
- 🚨 Narratives Update: Anatomy of an Airdrop - Arbitrum Edition
- ✅ Top Crypto Highlights of the Week
- 📝 Good Tweets
Do you prefer the daily or weekly newsletter?
📷 Macro & Market Synopsis
What a week! Down, up and speedrunning “it’s so over”/“we’re so back” with so many things happening in between. We saw an early week bullish rally despite a USDC depeg event, wave of bank failures, and ongoing banking crisis at Credit Suisse that would seem to suggest a rocky road ahead for the economy.
Almost seems logical, right? Wrong!
This is due to this curious “bad news is good news” phenomenon we’ve got playing out. Basically, anything that makes Fed interest rate hike less likely (including negative news about the economy) is bullish for risk assets.
There’s a lot of speculation going around about whether or not the Fed will begin to pivot and cut interest rate hikes soon but the important takeaway for markets is that interest rate hikes are still entirely on the table.
Nothing is ever guaranteed and while a bull and bear case can be made for what the Fed will do next, the most reasonable action is continuing their course of interest rate hikes throughout this year, as they’ve repeatedly said they would.
The factors driving the current BTC and ETH rallies feel speculative and continued rate hikes would add more downward pressure and rain on everyone’s parade.
The next meeting of the Fed’s FOMC is scheduled for March 22-23 and we’ll want to pay especially close attention to the language used as well as the Fed’s dot plots for an idea of what will come next.
Lastly, let’s recap some of the bullish and bearish trains of thought people are throwing around out there.
Bullish thought process:
- Demise of banks could trigger a correction in the interest rate market
- News of the bailout led some to speculate the liquidity influx could potentially flow into crypto
- In the past, government stimulus packages and financial bailouts have led to crypto rallies
- Bitcoin could benefit as investors seek alternative assets to traditional banking
- Bond market is pricing in rate cuts this year as well as lowering expectations for future rate hikes
Bearish thought process:
- Recent banking crisis isn’t as bad as other crypto collapses and won’t cause the Fed to pivot yet
- Other banks have already stepped in to take over SVB’s assets and liabilities and the Swiss National Bank took steps to limit the Credit Suisse fallout
- Suggests the banking collapses will not cause significant disruptions to the wider market
- If Fed doesn’t change course, risk off sentiment will return
Final Expectation: interest rates are likely to remain elevated, as inflation pressures persist and central banks continue to be cautious about cutting rates too quickly - despite the hopeful wishes of the market. However be ready to revise this if the Fed signals they are indeed going down that path next week.
Expect disappointment and you won't be disappointed.
📊 Crypto Weekly Data Update
Crypto Market Cap: $1.119T, up from last week’s $933.85T 📈
Stablecoin Exchange Reserves: $22.293B, down from last week’s $23.504B 📉
Stablecoin Total Market Cap: $133.17B, down from last week’s $135.04B 📉
DeFi TVL: $47.36B, up from last week’s $44.04B 📈
Exchange Volume: $525.21B for the month of March vs $878.42B total in February
Dex Volume: $89.19B for the month of March vs $75.85B total in February
Ethereum NFT Volume: $768.88M for the month of March vs $1.61B total in February
📈 Important Charts - Stablecoins, the Lifeblood of Crypto
Why do we care so much about stablecoins? They are the lifeblood of crypto. Stables signify buying power and liquidity and we want to know what those stables are doing. So let’s peep.
Total Market Cap
This is not moving at all, in fact, it keeps sliding downward. We’ve got no new money entering the ecosystem. The market moves and rally we’ve seen is just the same old money sloshing around.
Once again, stables are flowing off exchanges. Buying power isn’t returning to support continued moves up. At least no new money.
Stablecoin USD Flows
Breakdown of important dates while USDC crashed and banks failed yet crypto rallied
- March 11: $2.84B outflow
- March 12: $3.56B inflow
- March 13: $1.34B outflow
- March 14: $1.13B outflow
- March 15: $344.09M inflow
Individual Market Caps
Also a very relevant question, which is the “safest” stablecoin?
Not sure if there is such a thing anymore however we can clearly see the strongest coming out of this ordeal is USDT, which has had its market cap increase while everything else has fallen.
Do you find monitoring stablecoins to be important?
🚨 Narratives Update: Anatomy of an Airdrop - Arbitrum Edition
Arbitrum airdrop has been confirmed! The ARB governance token will be airdropped on Thursday, March 23. You can check your eligibility here. Data on the airdrop can be found here.
Wen? Now. 🧑🚀💙🧡
— Arbitrum (💙,🧡) (@arbitrum)
Mar 16, 2023
Thoughts on how the ARB airdrop will play out:
Arbitrum has been one of the Most hyped and highly anticipated airdrops out there for quite a long time. Many people, including professional airdrop farmers and whales have done everything they can to amass as much of the supply as they can through multiple wallets. That’s just how it goes.
Now all these market participants are going to be airdropped free money out of the sky, during uncertain market conditions and it’s not free money though until you sell and lock in your profits.
Similar to Blur recently and other highly anticipated airdrops such as Optimism, Ape, etc - it can be expected that there will be an inevitable dump after some initial volatility while these market participants realize their profits and sell. Pull up any past chart of hyped airdrops and observe the playbook.
Example: Optimism, note what happened in the beginning:
Now let’s compare Optimism to Blur so far:
Predictable initial dumps. None of this has anything to do with the potential and future price of a project. It’s just very important to know who your counterparty is when buying, selling and holding an asset.
You must be aware that this token is bound to face a good amount of sell pressure upon launch. Don’t get caught up in the hype and mania. Arbitrum is poised to play an important role in the future of Ethereum scaling but right now we’re talking about financial participants doing financial participant things.
Be smart and practical if you’re looking at the price of the token.
The market is not yet in a place where fresh money or new buyers are here to buy our bags and push the price too high. All we have are people who are about to get a nice payday handed to them.
Are you optimistic about the Arbitrum airdrop?
✅ Top Crypto Highlights of the Week
- Coinbase paused USDC:USD conversions while banks were closed leading to depeg event
- Three banks fail in short succession: Silicon Valley Bank, Silvergate, Signature
- US Fed announces $25B in funding to backstop banks
- Circle had $3.3B of USDC reserves at Silicon Valley Bank. Partnering with Cross River Bank
- Signature Bank regulator says it was closed for not providing data
- Signature Bank’s prospective buyers must agree to give up all crypto business
- Prosecutors were investigating Signature’s association with crypto clients ahead of its collapse
- US Banking System’s credit rating gets downgraded from “stable” to “negative”
- Credit Suisse $4.7B loss from collapse of Archegos Capital and Greensill Capital
- A New York court denied the government’s request to halt the $1B Voyager-Binance.US deal
- Binance converting remaining $1B industry recovery funds from BUSD to BTC, ETH and BNB
- Binance GBP funding on/off-ramp to be suspended in May
- Meta plans to stop working on NFTs and fire 10,000 employees in a second round of job cuts
- Meta is working on a decentralized social app
- Justice Department investigating Do Kwon and Terra’s collapse
- Europol shuts down ChipMixer - seizes $46M in Bitcoin
- SBF paid $2.2B from Alameda. Ex-CEO Caroline Ellison only received $6M
- Digital asset investment products outflows for the 5th consecutive week totalling $255M
- US probing Jane Street, Jump, Alameda over Terra stablecoin bailout group chats
- $630M seized by U.S. government. Chinese businessman arrested for $1B fraud conspiracy
- YouTube influencers $1B lawsuit for promoting FTX: BitBoy Crypto & Graham Stephan
🆕 Project Updates
- Arbitrum to airdrop ARB governance tokens to users on March 23
- Ethereum developers set April 12 for launch of the Shanghai-Capella upgrade on the mainnet
- Euler Finance exploit - more than $185M suspected to have been stolen
- Euler Finance's offer to hacker: keep $20M and return 90% of the funds stolen or face the law
- Euler hacker sends funds to crypto mixer Tornado Cash
- Ethereum final dress rehearsal for Shapella upgrade
- AI tokens’ prices soar after ChatGPT-4 release
- Solana DEX Orca will restrict U.S. trading activity
- Doodles 'no longer an NFT project' and won’t cater to speculators
- Coinbase disabled trading for BUSD
- DAI depegged to lifetime lows of $0.88
- MakerDAO launched an emergency proposal to limit Maker’s exposure to USDC
- Coinbase to take unstaking requests a day after the Shanghai-Capella update
- Lido expects staked Ethereum withdrawals in May
- Uniswap v3 will become free to use after April 1 and launched on BNB Chain
- Sunset of Aztec Connect, privacy infrastructure that served as the encryption layer for Ethereum
- Shibarium early beta test is live
- Filecoin successfully implemented its own virtual machine, enabling smart contract support
- Radiant v2 launch
- Ribbon Finance’s launch of on-chain options exchange, Aevo
- Yuga Labs opened the minting of its newest NFT collection, HV-MTL
- Stargate Finance no longer reissuing STG tokens
- Avail, modular blockchain optimized for data availability related to Polygon
- Uniswap v3 proposal passed to deploy to Avalanche
📝 Good Tweets
Yours truly exploring the thought process behind why crypto pumped this week
Thoughts on recent events: Banks failing, The Fed, Pump
Crypto is pumping…. after we just had 3 major crypto banks fail within days of each other and fears of USDC imploding.
How could the sentiment change so quickly?
What does it mean?
— M6 Labs (@M6Labs)
Mar 14, 2023
Cope with everything you need to know about the upcoming Arbitrum airdrop
💥 BIG NEWS: The Arbitrum airdrop is finally here!
But no need to panic; there's no rush. You have a week before tokens can be claimed.
Here's a thread on everything you need to know 🧵 1/9
— Cope (@Timccopeland)
Mar 16, 2023
GCR reminding smaller accounts to stop getting cut up trading leverage and utilize airdrops
It's been repeated on CT for years, and is some of the most obvious advice
But for those of you who haven't digested it; if you don't have much cash and looking to get capitalized
There's no greater opportunity in this world than farming airdrops; can really change your life
— GCR (@GCRClassic)
Mar 16, 2023
Rekt Fencer with a reminder on how to stay safe online and protect your crypto
Crypto crime is on the rise- don't be the next victim.
Take control of your security to stay safe 🔐
An ex-KGB officer shares expert tips on protecting yourself and your assets. Check them out 🧵👇
— Rekt Fencer (@rektfencer)
Mar 15, 2023
Did you read to the end today?