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
FTX is currently going through an unprecedented crisis. The funds of Sam Bankman-Fried's platform users are still blocked. Follow the evolution of the FTX situation in real time.
To summarize in a few lines: Fraud was committed by Sam Bankman-Fried, the founder and CEO of the FTX exchange and the trading firm Alameda Research.
The FTX platform allegedly used funds deposited by its clients to cover Alameda Research's losses and to conduct its trading activity. Furthermore, most of the company's assets and loan collateral were FTT, the platform's native token.
When rumors of insolvency circulated, FTX customers began withdrawing their funds in large quantities. This was followed by a freeze on withdrawals: FTX could not honor them because it did not hold its customers' assets at a 1-to-1 ratio.
Once panic gripped the market, the FTT token collapsed, drastically reducing all assets on the FTX and Alameda Research platform. The crypto-asset market then fell sharply, followed by a significant wave of withdrawals of assets from exchange platforms. This period is a stress test for all trading platforms, especially the financially weaker ones.
The crypto-asset market is currently undergoing a «purge» of weak and/or over-leveraged players, following this event of fraud of a centralized actor. Despite the difficulties for participants and investors, «purges» are healthy and necessary for the continued development of this recent asset class.
Key takeaways:
–> The value propositions of blockchains (Bitcoin, Ethereum, and others) remain just as solid and have by no means failed.
–> The DeFi (decentralized finance) sector continues to operate perfectly.
-> The cause of this event is fraud, which, to my knowledge, remains a human trait.
–> Crypto exchanges should not hold a fractional reserve. Customer deposit reserves should be 1 to 1.
–> Exchanges should not use their own tokens as assets within their companies.
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Additional note: none of our clients suffered losses on the FTT token or the FTX exchange. We only work with the strongest platform on the market: Binance.
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71 billion dollars in cryptocurrencies – The crazy reserves of Binance. Following this event, a wave of transparency was launched by the founder of the Binance platform. The platform published its wallet addresses, revealing that it holds substantial reserves amounting to $71 billion. Subsequently, numerous platforms published their reserves. Binance is by far the player with the largest reserves.
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Shell and Bitcoin: the oil giant enters mining. Oil company Shell is gradually plunging into Bitcoin (BTC) mining. The company offers products that allow businesses in the sector to improve their profitability and environmental balance sheet.
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DeFi: JP Morgan executed its first transaction on Aave. As part of experimental projects with the central bank of Singapore, JP Morgan executed transactions on the decentralized finance (DeFi) protocol Aave Arc for the first time. For the central bank of Singapore, the outlook is therefore firmly focused on blockchain experiments. And for good reason, MAS (Monetary Authority of Singapore) conducted this operation with JP Morgan as part of the «Project Guardian» program. This vast plan consists of a set of projects aimed at test the value propositions brought by DeFi innovations, in order to consider their longer-term use.
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Google launches a cloud service dedicated to Ethereum nodes. We learn this week that the tech giant is now offering a «Blockchain Node Engine,» which makes it possible to host Ethereum nodes. Concretely, this means that the synchronization process will be greatly accelerated by Google's service. A new node can be deployed in a single operation. For now, the service focuses on the Ethereum blockchain, but it will be open to other networks in the future. Little by little and discreetly, Web 2 giants are making their transition to Web 3, which is a good sign of the adoption that is taking place.
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Mastercard welcomes 7 blockchain and Web3 companies to its startup incubator. Payment giant Mastercard is increasingly getting involved in the blockchain ecosystem by supporting seven Web3 startups in a new batch of its incubator. The interest of Mastercard for blockchain no longer needs to be proven and the new beneficiaries of its Start Path incubation program are further proof of this.
Fundamental Analysis
Source : https://www.coingecko.com/fr
At the time of writing, the price of Bitcoin is 17,000 $ (on 11/15/22).
The bankruptcy of the FTX exchange strongly recalls the failure of Mt Gox in 2013. This platform held 80 % of the centralized exchange market, and it was a difficult period for the market and for the left-behind investors.
However, FTX held 8 % of the centralized exchange market in terms of volume (see below), which is less serious than Mt Gox. On the other hand, there will be fallout in the coming weeks: other companies will likely go bankrupt and a chain reaction may occur. This is a severe blow to the ecosystem, which will lose its good reputation, temporarily slowing down the speed of adoption. There will also likely be fallout in terms of stricter regulation.
This event is regrettable and has broken the momentum that the crypto market was building. US inflation dropped and the dollar stopped its rise dead in its tracks: it was a perfect cocktail to break out of the top of this long plateau that the market has been building in recent months. Following the market panic, it was a breakout to the downside of the plateau, and the potential rally is postponed for later while waiting for the consequences of FTX's bankruptcy to be fully known and absorbed by the market, which will take time, probably a few months.
As we can see below, most end-of-cycles bring out «skeletons in the closet»: Mt. Gox, Bitfinex, FTX. When the market is under stress and lacks liquidity: history repeats itself.
On the bright side, all categories of investors have accumulated Bitcoins following the FTX bankruptcy. Below is a chart that breaks down investors by category (those holding 10k). We can easily notice (in blue) on the far right, the positive accumulation score for each investor cohort.
The variable that is important and represents network adoption is the cohort of small entities holding less than 1 bitcoin. This cohort, called shrimp (<1BTC), added 33.7k BTC this week, resulting in a 30-day increase of +51.4k BTC. This level of balance influx is the second highest in history. As we can see below, in the green circle, small investors bought heavily during this drop. This is a sign of the network's good health and continued adoption, as well as growing confidence, even as prices fall.
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US inflation is down this month, from 8.2 % to 7.7 %. Core inflation (excluding food and energy) is also down, from 6.6% to 6.3%. This is good news for risk markets (stocks, crypto), as the Fed is likely to slow down its rate hikes, which at the same time signaled the end (for now) of the dollar's meteoric rise against other currency baskets. This was foreseeable given the unsustainable pace of the dollar's rise. On the other hand, the FTX bankruptcy made the crypto market the laughingstock, and it was unable to benefit from a rally following the dollar's weakening.
In Europe, it is quite a different story, since we are not energy-independent and we have made major strategic mistakes. Inflation, which we were already talking about almost more than a year ago, is driven by 4 major factors that are all intertwined:
- Foreign energy dependency, particularly Russian gas, which we suddenly decided to deprive ourselves of without a «spare tire».
- The rate hike by the ECB, which is grossly inadequate and much too late.
- The decline against the dollar, and therefore an increase in all products coming from abroad paid in dollars.
- To finish, the large amount of money «printed» over the last 2 years to make up for strategic errors (handling of Covid and handling of the Russia/Ukraine conflict).
These different factors give us a result that sends a chill down the spine for the inhabitants of Europe:
Unfortunately, the peak has not been reached yet. Inflation in Europe will be persistent.
If you have any questions, comments, or would like to know more about our service, please feel free to contact us: crypto.assets.manage@gmail.com
— 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 any losses resulting from a decision made based on the information in this letter.
