🗓💊 High on Hopium or Turning of the Tide?

Weekly Alpha - March 11-17, 2023

Theo Delarosa
March 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.

Exchange Reserves

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

📰 News

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?
0/10
— 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