Hello everyone,
The purpose of this letter is to inform you about the current situation of the crypto-asset market as well as recent news in this field. This letter is not investment advice, but merely a sharing of my personal point of view.
News
Banking crisis: half of US banks are potentially insolvent. The banking crisis continues in the United States, with half of American banks having depleted their capital reserves, according to a report by The Telegraph. Consequently, thousands of banks are potentially insolvent, including one global systemically important bank. Have we reached the point of no return?
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1 million addresses now hold more than 1 Bitcoin (BTC). Bitcoin (BTC) continues to convince investors, who are giving it an increasingly large place in their portfolios. In this month of May 2023, a new record has been broken: one million addresses now hold more than 1 full BTC. Let's look at together what this means.
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OP-ED – Web3: let us penalize neither the growth of our companies nor France's attractiveness. While France and Paris are rising to the top of the rankings of the most sought-after locations for the Web3 ecosystem around the globe, the bill passed by the National Assembly at the end of March could penalize our ambitions in this sector full of opportunities. What is at stake for the industry when 10% of French people hold digital assets in their investment portfolios?
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PayPal customers invested $943 million in cryptocurrencies. According to a document filed with the SEC, we learn that PayPal holds nearly one billion dollars invested in cryptocurrencies by its customers. How is the payment giant evolving regarding this aspect of its business?
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Payment giant Stripe expands its fiat-to-crypto offering to conquer Web3. Stripe, the US payment solutions giant, has launched its fiat-to-crypto on-ramp solution to enable Web3 companies to provide an easy option for their customers to buy cryptocurrencies. This solution aims to accelerate the adoption of Web3 and has already been adopted by companies such as the social network Lens, the DeFi protocol 1inch, and the Brave browser.
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Tether, a «giant house of cards»? Its latest report divides opinion. Tether, the issuer of USDT, has released its first-quarter report for 2023, revealing a record excess reserve of $2.44 billion. The company also shared the breakdown of its reserves in cash, short-term deposits, Bitcoin (BTC), and gold. Tether maintains its dominant position in the stablecoin market, with a market capitalization of $82.87 billion, but some remain doubtful about its transparency.
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Blockchain: BNP Paribas, Goldman Sachs and Microsoft participate in the launch of the Canton network. Lately, several major tech and financial groups participated in the launch of the Canton blockchain. Designed to make financial systems interoperable with one another, this network demonstrates the interest of institutional players at a time when few of them anticipate a bull market recovery for cryptocurrencies.
Fundamental Analysis
Source : https://www.coingecko.com/fr
At the time of writing, the price of Bitcoin is 26,780$ (05/17/23).
The rush for Ethereum staking continues:
The latest Ethereum update that enabled the double upgrade, named «Shapella and Shanghai,» was successfully completed in April. In our last letter, we presented the increase in the number of Ethers deposited in staking.
To recall what staking is: it is the act of depositing tokens (Ethers for the Ethereum blockchain) as collateral in order to secure the blockchain (Ethereum) and receive in return a fraction of the fees generated by the network (fees that are paid by Ethereum network users). This applies only to blockchains that have a consensus mechanism based on Proof of Stake.
The amount of Ether staked since the end of 2020 has been growing, but since the update in mid-April 2023, this figure has increased very sharply. This is a real success for the network. This success could lead, in the medium to long term, to a staked Ether volume of between 50 and 70 %, as we can see on other PoS networks.
Below is the clear increase in staked Ethers, especially since the mid-April 2023 update.
Glassnode
Ethereum's tokenomics changed in 2022/23. We do not believe that market participants have truly integrated this modification. We are very bullish on the Ether token for the years to come.
The Bitcoin adoption cycles:
During our research, we analyzed the frequency of Bitcoin cycles. We isolated only 3 points per cycle: the Halving day, the cycle low, and the cycle high. As we can see in the chart below, there is a regularity in the frequency of each of these points that is almost perfect. Regarding the Halving dates, this is normal, but what is interesting is that the cycle lows and highs have perfectly adapted to the Halving frequency.
- The blue dots are the dates of the halvings, set at an average frequency of 4 years by the Bitcoin protocol.
- The orange dots are the dates of the market high points for each of the cycles.
- The gray dots are the dates of the market lows for each of the cycles.
Internal
There is one common point to note, many know it but it is important to repeat it: each of the orange points, and therefore the market highs, are higher cycle after cycle:
- December 2013: $1,237
- December 2017: $20,089
- May 2021: $68 789
Same for the blue points, so the market lows, they are higher cycle after cycle:
- December 2014: $171
- December 2018: $3 191
- November 2022: $15,599
We can see these same cycles more visually in the graph below. Only the highs and lows of the cycles are represented in this graph by the horizontal line with a value of 1 (highs) on the y-axis and by the horizontal line with a value of 0 (lows).
Internal
It is ultimately quite easy to predict the period during which the lows and highs of future cycles will occur. Obviously, it is more difficult to exit or enter a position at those times because the psychology of our human brains disrupts our decision-making. It is for this reason that we try to automate our decision-making based on non-psychological and/or non-sentimental elements.
Balance sheet of the United States Central Bank and the Eurozone Central Bank :
We can see in the graph below the increase in the balance sheet of the United States central bank since 2004. It is quite simple to understand why the value of the dollar has depreciated sharply over these last two decades.
Source : tradingeconomics
It is the same observation for the balance sheet of the euro area central bank:
Source : tradingeconomics
Readers might tell us that inflation is only very recent, that we haven't had any for a very long time even though our central banks have been «printing» for a long time, why?
Yes indeed, but the answer is that the way we measure inflation is simply wrong. We measure inflation only according to very selective criteria that in no way represent reality.
We calculate the inflation rate in our economies in the same way as this metaphor:
«It is a bit like trying to measure the amount of water falling into our garden when it rains with a bucket of water, and then multiplying the surface area of the bucket until we reach the total surface area of the garden. The calculation works mathematically and it seems logical, but this does not work if you stand under your porch roof with your bucket to try to catch the rainwater.»
Indeed, inflation, as calculated by INSEE for example, has not been very high over the past two decades. On the other hand, all assets that are «not printable at will» have seen their prices increase:
Gold, real estate, stocks, commodities, etc., have risen sharply. It is in these assets that all the money printing, and therefore inflation, has been stored for years. This causes huge wealth gaps between the richest who own assets that inflate and the poorest who remain stuck in a state of poverty. Inflation is unfair.
Our service
We offer a portfolio management service under mandate specializing in digital assets. We provide comprehensive, personalized support in this space by tailoring your portfolio allocation to your risk profile and situation.
Our turnkey management allows you to take advantage of this sector's growth without worrying about choosing the digital assets to put in your portfolio, conducting in-depth token research, dealing with volatility, or handling rebalancing, etc. All you have to do is read your monthly reports and invest regularly with a long-term horizon (4 years and more).
We do not engage in algorithmic trading or day trading; we invest for the long term in projects that we know and understand. We make monthly rebalancing adjustments in the portfolios and conduct in-depth research on the assets (especially their tokenomics) that we include in our portfolios.
Check out our website: https://www.mereau-finance.com/
If you have any questions, comments, or would like to know more about our service, please feel free to contact us at this email address: tristan.g@crypto-assets-management.com or to schedule a phone appointment with us via this link.
— Warning —
This is not investment advice, no one can predict the future.
You are solely responsible for your investment decisions.
We are not responsible for losses following a decision made on the basis of the information in this letter.
