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 the field. This letter is not investment advice, but merely the sharing of my personal point of view.
News
Meta (formerly Facebook) is recruiting employees from Microsoft and Apple to build its metaverse! The American giant does not hesitate to offer very attractive salaries to poach talent from the competition. Meta did not hesitate to double the salary of certain employees strategic to the development of their new project. «Meta has hired around 100 Apple engineers over the past few months», Bloomberg reports. These American giants are fighting for IT engineering skills. The value of skills in this field will likely increase significantly in the coming years.
A hydroelectric power plant in Costa Rica is turning to Bitcoin (BTC) to keep operating. There has been an overproduction in recent months, which led the hydroelectric plant in question to close due to a lack of demand from the state. Eduardo Kooper, the company's president, explains that he was « very skeptical »at first, but the company becomes profitable again thanks to this solution. As he points out, Bitcoin miners are looking to obtain electricity« clean and inexpensive, with a stable internet connection »This type of agreement with power plants should therefore tend to become more widespread.
Generally speaking, Bitcoin network miners tend to use more and more renewable energy simply because they need the cheapest electricity possible, and the cheapest electricity on the market necessarily comes from areas where it is in abundance and therefore close to hydroelectric dams like the one in Costa Rica.
The city of Rio de Janeiro in Brazil is going to invest % of the public treasury budget in cryptocurrencies. The city could also grant tax discounts for taxes paid in Bitcoin. Pedro Paulo, Secretary of Finance, explained during the event that Rio de Janeiro was studying the possibility to accept BTC payments for property tax. Residents choosing this payment method will receive a discount. We are seeing more and more countries, cities, and private companies turning to this new asset class, which is good news for the adoption of crypto-assets.
US banks are teaming up to create a stablecoin! What is a stablecoin? Click here). At the center of all regulatory attention, this specific class of cryptocurrencies could be the sesame for mass adoption. Our money is already fully digitized in centralized files in our banks. In the context of the growing digitization of the economy and the adoption of cryptocurrencies, the stablecoin is an opportunity for major banks. Some have understood this well: the New York Community Bank (NYCB), the NBH Bank, the FirstBank, the Sterling National Bank and the Synovus Bank work together on the development of USDF a new US dollar-backed stablecoin.
The American retail giant Walmart is diving into the metaverse too! At least that is what seems to emerge from trademarks that were quietly registered last month. Walmart is not the only one. Ever since Facebook announced it was renaming itself Meta last October, Major brands have rushed into this new sector. In December, Adidas thus sold 30,000 NFTs from his collection « Into the Metaverse ». And its competitor Nike had also shown interest in the subject that same month. Disney also announced that he was working on his own virtual universe, accessible within its parks
Technical & Fundamental Analysis
To give you a better overview, here is the price of Bitcoin over the past two years in dollars.
At the time of writing, the price of Bitcoin is 42,800 $ (on 01/17/22).
The price correction continued at the start of this year. This does not call into question the fundamental growth of the stock price and the long-term bull market.
The BTC price has returned to test the support zone around 39 - 41k $, and for now, it seems to be holding. This is an important zone and is strongly defended by buyers. A bounce off this area would be a good thing, and for now, the price does not want to drop any lower.
For on-chain data (data captured by analyzing BTC holders on the Bitcoin blockchain), not much is happening. The market is currently in limbo.
- Long-term cycle: Long-term holders continue to hold most of the coins, they are at maximum accumulation levels, and they have also stopped taking profits because the price must seem too low to them. Since the majority of circulating bitcoin is in the hands of long-term investors who only sell if the price rises sharply but do not sell if the price drops, this still points to a bullish year for 2022.
- Medium-term cycle (3 months): In terms of token movements, the image is very calm and neutral. Whales (large investors, institutions, private companies) sold in October with a peak in December; this has now eased off and we are slowly heading toward a buying zone. The redeployment of capital planned for January by large institutions has not yet taken place.
- Short-term cycle (1 month): The selling trend is not over yet. Trading data indicates that both short- and long-term speculators have been selling. We are waiting for demand to arrive. Short-term on-chain signals show that the market is oversold relative to fundamental valuation.
NVT Signal compares Bitcoin's market capitalization to the 90-day moving average of on-chain volume moved (effectively investor activity). NVT is the closest equivalent to the PE ratio as seen in equities.
The NVT Signal, which compares on-chain investment activity and Bitcoin valuation, continues to register the market as being in an oversold «buy zone». Structurally, we are in a zone similar to the 30,000 $ band observed between May and July 2021. It is truly a waiting game before price discovery reacts.
A commentary on Ethereum (ETH) (the second largest crypto-asset) and Altcoins (all crypto-assets other than Bitcoin): ETH is showing the first signs of increasing on-chain demand. While BTC is trapped in a prolonged sideways regime, this is typically a zone where altcoins perform, and indeed, they are starting to show strength. A mini altcoin season is forming.
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— Warning —
This is not investment advice, no one can predict the future.
You are solely responsible for your own investment decisions.
We are not responsible for any losses resulting from a decision made based on the information in this letter.
