- The MegaBrainX Crypto Investment Newsletter
- Posts
- The MegaBrainX Crypto Investment Newsletter
The newsletter is designed to be an Investor’s best-friend, each week we’ll cover:
Macro Overview
Crypto Overview
NFT Overview
Building an Investment Thesis
Together, we grow as Investors. Let’s dive into it
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Key Metrics
Digital asset investment products saw inflows for the second week totalling US$78m, while trading volumes for ETPs also rose by 37% to US$1.13bn for the week. We also saw a rise in Bitcoin volumes of 16% on trusted exchanges.
11 projects got funded last week with a total of $66.7M
Four ICO launches this week, with 26 projects launching later in October
There are 10 projects with token unlocks scheduled for the upcoming week, with the most notable ones being $16.87million (4.23% of circulating supply) for APE coin, $6.26 million (11.43% of circulating supply) for Cyber, $23.45 million (1.9% of circulating supply) for Aptos
Developer activity has remained somewhat stable for the past 3 months, with Solana in the lead in number of hours and commits in Github, followed by Internet computer (ICP) & Then Mina protocol. The total number of developers have been in a downward trend with a 45% decrease since early 2022
Ethereum remains the top revenue-generating blockchain protocol, followed by Bitcoin and Uniswap in daily transaction fees. DeFi leaders Aave and BNB Chain round out the top 5
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World Events Highlights
This Week’s Major US Economic reports
October 11:
Producer Price Index
Core PPI
Minutes of Fed’s September FOMC meeting
October 12:
Initial Jobless claims
CPI
Core CPI
October 13:
Import price index
Import price index minus fuel
Consumer sentiment
Public opinion and data point to a downturn in the $11 trillion commercial real estate market, especially office spaces, as rising interest rates increase financing expenses while regional bank troubles limit lending; yet the full impact may be delayed due to long-term leases. Learn More
Despite economic headwinds, Americans continue indulging in the "experience economy," traveling and spending on services more than goods, making the Fed's job of cooling inflation through blunt interest rate hikes harder, though high costs will likely curb splurging eventually. Learn More
Barclays analysts believe only a significant stock market crash can attract enough buyers to rescue the rout in the bond market, as the Fed's dual quantitative tightening and interest rate hikes have created a double whammy to bond prices. Learn more
The market for long-term US Treasuries has seen extreme volatility and a historic selloff, with yields on 30-year bonds spiking to 5% as Fed hikes and bond vigilantes punish prices, though investors will recoup principal if held to maturity. Learn more
The yield on the 10-year Treasury rose after a stronger-than-expected September jobs report pointed to a still-tight labor market, reinforcing expectations for the Fed to continue raising interest rates to combat inflation. Rising long-term rates means bond prices are falling, and that means banks have lots of unrealised losses
September payrolls increased by 336,000, exceeding expectations and signaling ongoing labor market strength that may keep Fed policy tight to combat inflation despite rising recession worries.
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Investors need-to-know | Macro
Crypto markets are currently on tenterhooks due to overarching macro factors like escalating rates impacting assets. However, potential relief could come from bond market dislocations or interventions. The macroeconomic backdrop, if orderly, may pave the way for more Federal Reserve rate hikes, given the robust September payrolls that surpassed anticipations, reflecting enduring labor market strength.
Macro Factors:
Rising rates burdening assets; bond dislocations or interventions could offer relief.
Strong September payrolls keep Fed on an assertive tightening trajectory despite recession concerns.
Market Implications:
Commercial real estate grappling with elevated financing costs, full impact yet to materialize.
Continued consumer expenditure on experiences poses challenges to Fed's inflation combat efforts.
Analysts suggest a stock market crash might be the only savior for beleaguered bond markets amidst Fed tightening.
Investor Concerns:
Yield surges on long Treasuries indicate market stress, despite principal recoupment by investors.
Banks threatened by plummeting bond prices and unrealized losses.
Upcoming Data Releases:
Key data releases like PPI, CPI, and mood readings this week could reaffirm or overturn market expectations.
Investment Strategy:
Advisable to allocate cash in money market funds for the time being, awaiting clearer market insights, and to practice dollar-cost averaging into chosen assets.
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Overview
Last week showcased BTC testing and being rebuffed by the upper echelon of its bull market support band, closing at $27,917, with a potential retraction to the $25,300 mark forecasted. Key economic events in the upcoming week could significantly influence investor sentiment and market dynamics.
BTC Movement
Encountered resistance at bull market support band's upper limit.
Likely reversion to around $25,300 anticipated.
Upcoming Economic Events
11th October: Release of FOMC Meeting Minutes, shedding light on the Federal Reserve's recent discussions and possibly hinting at future economic directions.
12th October: Unveiling of US CPI and Core CPI data, with potential impacts:
Higher-than-expected inflation: May drive long-term interest rates up, negatively affecting stocks and crypto.
Lower-than-expected inflation: Could lead to a decrease in long-term interest rates, propelling stocks and crypto upward.
You can also check crypto project-specific upcoming events Here
Key Charts
Bitcoin Percentage of Supply in Profit and Loss
Attaining a new all-time high indicates a scenario where the entire supply is held in profit. Repeated all-time highs can maintain this near 100% profitable supply status for some duration. Historical trends highlight a crucial market cycle pattern related to the crossover of supply in profit and loss.
All-time High Implication
100% of supply held in profit.
Repeated all-time highs can sustain near 100% profitable supply.
Historical Pattern
Crossing of supply in profit and loss is essential for market cycle bottom.
Bear markets usually bottom out with 40-50% of supply in profit.
Current Supply Distribution
68.74% in profit.
31.26% in loss.
BTC Market Value to Realized Value Z-Score
The MVRV Z-Score is derived from the formula (Market Cap − Realized Cap)/(Standard Deviation (Market cap)), serving as a tool to compare market value to realized value to gauge market overvaluation or undervaluation.
Usage & Analysis
Effective in pinpointing when market values significantly exceed or fall below realized values.
For Bitcoin
Historically, buying when Z-score < 0 and selling when Z-score > 6 has been advantageous.
Current Z-score: 0.505.
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Investors need-to-know | Crypto
The cryptocurrency market is exhibiting varying dynamics across different assets. Here's a summarized outlook and suggested course of action based on the current market conditions:
BTC Outlook:
Historical trends show pre-halving year marked by price volatility, challenging both bullish and bearish investors.
Given prevailing macro and crypto-specific factors, a lower BTC price than current is anticipated in Q4 2023.
ETH Outlook:
ETH portrays weakness against BTC, making purchases unjustifiable at present.
Altcoins Outlook:
Altcoin market, represented by DOT and AVAX, is declining against BTC, with new lows observed.
Given the high risk and lack of potential rewards, purchasing altcoins is deemed unfavorable.
Recommended Course (Not Financial Advice):
Consider Dollar-Cost Averaging (DCA) into BTC or saving USD for future liquidity deployment amidst these market conditions.
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Market Moves
The NFT market saw major developments across several top projects this past weekend, setting up volatility
Bored Ape Yacht Club creator Yuga Labs announced layoffs and restructuring to refocus efforts on The Otherside metaverse game. The news was mostly positively received, with Apes trading steady around a floor of 25.30 ETH, down just 1.5% for the week.
Allegations surfaced about Pudgy Penguins founder Luca Netz's involvement in past failed projects. This led to a sell-off, with Pudgies falling around 10% from their midweek high of 5.6 ETH to a current floor of 5 ETH. The project had become a market darling, but its future now depends on how the controversy around Luca is handled.
Sunday brought the biggest surprise, as DeGods announced a full reset to Season 1, along with opening up bridging of y00ts NFTs to Ethereum mainnet for free. This is an attempt to revive the project and answer past criticisms. DeGods are trading around 3.3 ETH, flat for the week.
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New Highlights
Stars Arena’s contract was exploited for nearly $3 million, and will re-deploy contract with funds recovered after a “security overhaul” Know more
DeGods announce Chapter One of “The Comeback”: All DeGods art will be reset to Season 1 and can be customized on-chain, y00ts will migrate to Ethereum for free this week, and a “Clarity” announcement teased Know more
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This week’s spotlight
The big news shaking up the NFT world this week - Blur has put an end date on Season 2.
Come November 20, the current phase of hype and heavy trading around Blur's model will cease. At least temporarily.
This revelation from Pacman and team has sent ripples across the market. Let's break down what it might mean for the road ahead.
First, the headline “Blur Season 2. November 20."
Blur Season 2 will officially conclude on November 20. And the image clearly hints that the airdrop is on the same date.
Since the news dropped, $BLUR price tanked further. Already far off its peak, but still down 6% on the announcement day alone. More vesting cliff unlocks are coming too. Expect selling pressure to persist.
On the flip side, OpenSea has been regaining market share as Blur declines. We could see a changing of the guard after November 20.
But will Blur roll over that easily? I'd expect some major incentives cooked up for Season 3. Gotta keep users engaged.
Most intriguing is how this might impact NFTs broadly. Especially the collections that have seen consistent trading volume mainly due to the farming activity.
Are going towards a rather illiquid NFT market? Hard to say for sure right now.
Either way - the end is in sight for Blur Season 2. Buckle up for more speculation and volatility before we reach the finish line. The market is poised to change dramatically.
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Investors need-to-know | NFT
The non-fungible token (NFT) market is currently facing a downturn in trading volumes, largely attributed to the volatile fungible token market, with daily trades ranging between 3,000-5,000 ETH. Several factors seem to be at play affecting the market dynamics.
Market Observations
Recent Middle East conflicts may have prompted NFT holders to offload, as evidenced by a surge in sales to 90% WETH bids.
The closure of blur (airdrop incentive) season 2 on November 20 threatens to further dampen the market due to:
Potential selloffs by airdrop farmers fearing post-season illiquidity.
The announcement, laden with uncertainties regarding future plans, could foster trader apprehension.
Recommended Strategy
It's prudent to de-risk NFT positions, retain long-term conviction plays, and observe market developments in this period.
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Crypto markets move in cycles. The next big bull run could ignite at any moment. Are you prepared?
When hype and hysteria take over, it's tough to keep a level head. Prices soar, FOMO sets in, and it's easy to throw money at 'hot' tokens without doing proper research.
We've been there before. Jumping in during the mania only to get burned when the bear market hits. Not this time.
We’re taking a different approach and starting our research now before the frenzy begins.
Here's our plan:
We’re identifying key sectors like DeFi, NFTs and gaming that show long-term promise. Analyzing projects within them based on real fundamentals, not hype. Evaluating teams, tokenomics, roadmaps, and more.
Curating watchlists of opportunities worth tracking. Following their progress through early stages.
The goal is to separate signals from noise. Spot quality projects poised for sustainable growth.
We'll be sharing our ongoing research through a blog series and investment newsletter. The aim is not to give directives, but to accelerate your own learning. Help you gain conviction through knowledge, not hype.
Want to come along for the ride? Now is the time to start mapping the road ahead together.
Subscribe to this Newsletter, this is where we’ll be tracking the research process and following the narratives from the thesis.
We've published the first piece explaining our thesis framework. Check it out and let us know your thoughts!
Coming up this week:
Web3 Gaming Overview
Smart Contract Protocols Overview
Crypto Payments Integrations for Traditional Businesses - an Overview
The early work you put in now will pay dividends during the next mania phase.
Don't wait - the time to start preparing is now.
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Check out our website if you haven’t already
MegaBrainX provides web3 insights enabling strategic growth for businesses and investors.