The week ended at slightly lower levels of approximately 2.4% for BTC and S&P 500. NASDAQ showed weaker performance owing to the continued poor quarterly results from big tech companies. For the past few weeks, Bitcoin has been trading in a constrained range, with significant support at around $19,000 most of the time. ETH has spent the majority of that time trading around $1,300. Now that both have support levels above $20,000 and $1,500, respectively, they have advanced a price rise. The rises coincide with the Federal Open Market Committee (FOMC) raising interest rates by 75 basis points for the fourth time to combat inflation without sending the American economy into a deep recession. The rise was short-lived, with the week ending in negative.
A16z on the medium-term horizon, has lost 40 % of its latest Crypto fund value. In May this year, Chris Dixon, the visionary crypto investor from A16z, announced a $4.5 billion crypto fund. Dixon was one of the earliest VC movers who identified gems like Coinbase and invested in multiple extremely successful crypto projects. Assets like BTC and ETH shed over 70% of their value during the same duration. As these were long-only positions, the managing downside risk is extremely challenging in such constructs.Positions in liquid and improvised directional bets can be taken immediately. However, the velocity of money in cryptocurrency is extremely high; like all investment assets, long-term holding gives the most optimised results. The same was concurred by Dixon, when asked in an interview.
Continued Momentum in Private Funding and Restructuring
The total private funding scenario has slowed down but hasn’t stopped, as mentioned in previous outlooks. Former Uber employees have come together to back a new startup with $9 Million to decentralize ridesharing. This has been one of the most interesting use casesof the genere, the that haven’t been figured out in a decentralised fashion yet. While web2 and web3 players have made some attempts, this is the most extensive funding for a single project tackling the problem. Such solutions, if implemented correctly, can create massive inflows of users to web3 and subsequently open up opportunities for higher value accrual in a much shorter time frame.
This week, a proposal to divide MakerDAO into smaller clusters known as MetaDAOs to build a new governance architecture for the DAO was passed.
The proposal seemed to create a huge split within MakerDAO into two factions: MetaDAOists, who favored the Endgame plan, and the Constitutionalists opposed it. Worries regarding consolidation of power were raised because more than 70% of the aggreing party votes were cast by delegates came from voting blocs connected to the DAO’s one founder Rune Christensen. Decentralisation, a core tenant of crypto projects, is highly stress-tested in this downturn.
Apart from this, the technical developments have sustained a good pace across the crypto ecosystem. Crypto exchange giant Binance launched its new native data feed network, the ‘Binance Oracle’, offering for its in-house blockchain, ‘BNB Chain.’ However, the service is reportedly chain-agnostic, skepticism of centralisation has arisen from the community following the events around the chain from previous weeks. The firm has indicated support for more blockchains in the future. Oracles are sharp knives that make interesting crypto DAPPs possible but behave as honeypots of treasury for hackers. Giving competition to the oracle pioneer Chainlink (LINK) won’t be easy, but binance has gathered enough muscle to tackle any challenges it faces.
Elon musk’s Twitter deal saga and who benefited from it
The launch of its oracle offering was not the only win for Binance this week. The firm has now been confirmed as an equity investor in Elon Musk’s acquisition of Twitter, with a commitment of $500 million. Binance CEO Changpeng Zhao stated the collaboration is essential to bring a fresh version of Twitter which brings social media and web3 together to expand crypto and blockchain adoption. Musk has already started firing redundant teams, which has potentially accelerated the rift across broader tech companies laying off employees. Elon’s acquisition has prompted the emergence of another familiar token. As Musk finalised his Twitter takeover, Dogecoin’s value surged over 150% last week, and as of writing this, it is trading at $0.133. The surge can be attributed to Musk’s previous statements about allowing users to pay in dogecoin for premium Twitter features. However, the charts indicate that Dogecoin is currently at its most overbought level since April 2021, pointing to a correction ahead.
Another one to gain profit from the acquisition is none other than SBF (Sam Bankman Fried). The FTX CEO owned between 0.1% to 0.2% of the stake in Twitter stock before its acquisition, which is worth between $50 million and $100 million. Rumours of SBF’s intention to spend up to $15 billion in the Musk-Twitter deal before the acquisition were floating in the market, but were denied in short time.
Stablecoin environment, not so stable
Another big intention that SBF had shared recently was to launch a stablecoin under FTX’s banner. While issues surrounding CBDCs and stablecoins still haven’t slowed down, players from different parts of the ecosystem are working on different versions of the same.
Issues for tether don’t seem to stop either. Recently, the Department of Justice (DOJ) deep dives into Tether, and whether or not its executives committed bank fraud in the early days of its existence. According to Bloomberg’s confidential sources, after months of stagnation, the investigation will now be led by U.S. Attorney Damian Williams, who is well known for being an aggressive prosecutor of crypto crimes and has even recently secured a guilty plea from someone associated with Tether’s payment processor.
Huobi Global has announced that it will delist its native stablecoin HUSD, which is pegged to the US dollar, on October 28 and convert it to Tether (USDT) on November 4.
Tighter scrutiny can be observed around the stablecoin business, as in down markets, stablecoin issuing and onramps are one of the most profitable businesses. Hence accelerated changes in development and regulatory ends should be expected
India’s march toward faster financial growth
Despite all the volatility, India also steps into the digital world. As announced by the Reserve Bank of India (RBI), the country will introduce a pilot wholesale CBDC program on 1st Nov, along with a follow-up of the retail version of the wholesale CBDC program within a month. It is reported that the wholesale digital rupee will be used to settle secondary market government securities transactions to reduce transaction costs and mitigate settlement risk. Future pilots will test various wholesale transactions and cross-border payments using digital currency based on the results of this pilot. Currently M1 money supply has to reach the masses, and an operational cost of 15% is also scheduled to be applied on such huge sums of money. The same can be reduced to a lower single digit with the help of blockchains and thus create higher distribution to the economic benefits for the masses and increase the velocity of business and transactions across the board.
Nimble approach to crypto and retail protection by governments
Lately, the Indian Government isn’t the only one recognising the benefits of crypto in private and public financial ecosystems. Singapore government’s Open Government Products (OGP) and its financial services company, DBS, are catching up. The two will work together to create a pilot for tokenized Singapore dollars, which will enable the issuance of purpose-bound money-based vouchers. Aptly named Orchid, the project will be run by the Monetary Authority of Singapore, which aims to create a programmable digital Singapore dollar. The new currency will be issued by DBS through the use of smart contracts made possible by OGP. But they are not the only ones, though, which are simplifying the DeFi system for the masses. MAS (Monetary Authority of Singapore) has published two papers for regulating the activities of stablecoin issuers and digital payment token service providers under the Payment Services Act to safeguard consumers. Notably, the regulator has also suggested rules prohibiting cryptocurrency service providers from giving retail customers trading credits or tokens. The regulator also cited that trading with credit or leverage can lead to losses greater than the investment amount. This might include airdrops, as well.
Traders in the futures market wagered that the fed funds terminal rate, which was just over 5% prior to the meeting, would increase to 5.09% by May.Jerome Powell’s commentary on prolonging the rate increases and higher rates will ultimately cause sustained pain in the market. In the futures market, traders bet the terminal rate for fed funds would reach 5.09% by May from just over 5% before the meeting. The same will, in turn, trigger the final layoff season with markets reaching the previous recession drawdown averages. Any big restructuring or business changes could be the final trigger for Finding this cycle’s bottom.
Traders in the futures market wagered that the fed funds terminal rate, which was just over 5% prior to the meeting, would increase to 5.09% by May.Jerome Powell’s commentary on prolonging the rate increases and higher rates will ultimately cause sustained pain in the market. In the futures market, traders bet the terminal rate for fed funds would reach 5.09% by May from just over 5% before the meeting. The same will, in turn, trigger the final layoff season with markets reaching the previous recession drawdown averages. Any big restructuring or business changes could be the final trigger for Finding this cycle’s bottom.
With the US midterm elections next week, big volatility and possibly bullish scenarios should be expected for the short term owing to the high probability of gridlock. Any kind of pause or stop to regulatory or political changes is exceptionally favourable for the investment community and risk on assets like crypto tends to outperform the broad market indices in the same time period. Although the total reverse direction is possible, the probability of the same is very low.
Bitcoin returns were -1.79% for this week. The Alpha Blue Chip Focused Strategy
returns were 4.57% during the same period (27 OCT – 3 NOV). The Top Cap Digital Assets Strategy and Arbitrage and Balanced Opportunities Strategy returns were 1.48% and 1.18%, respectively.
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Kunji AMT