The MegaBrainX Crypto Investment Newsletter

Issue #03 - 25 October 2023

MegaBrainX
October 24, 2023

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

Key Metrics

Anticipation of a spot Bitcoin ETF saw modest inflows totaling US$66m into digital asset investment products for the 4th straight week, indicating investor caution despite positive news.

10 projects received funding last week with a total of $77.3M.

Three ICO launches this week, with 24 projects launching in October.

There are 11 projects with token unlocks scheduled for this week, with the most notable ones being $31.89 million (2.74% of circulating supply) for OP token of Optimism, $2.98 million (6.8% of circulating supply) for YGG token, & $1.72 million (0.77% of circulating supply) for AGIX token.

Developer activity is on a slight decline in the past month, 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 38% decrease year on year in August 2023.

Ethereum remains the top revenue-generating blockchain protocol with $2.3M avg daily fees, followed by Uniswap and then Bitcoin. DeFi leaders Aave and BNB Chain round out the top 5 with GMX coming in fast to replace BNB on the 7 day average.

World Events Highlights

This Week’s Major US Economic reports

October 25:

New home sales

October 26:

GDP
Initial Jobless claims

October 27:

Nomina personal spending
PCE index
Core PCE index
Consumer sentiment

Leaders from Africa, Asia, and the Middle East are gathering in Beijing for China's Belt and Road forum, seeking infrastructure loans despite debt concerns. Notable attendees include Putin and Hungary's Orbán, while China downplays competition with Russia in Central Asia. Learn more

The relationship between oil prices and the dollar has evolved due to US energy production, making the dollar a "commodity currency" that rises with oil prices. This adds pressure on emerging market energy importers facing higher costs and weaker currencies. Learn more

The traditional 60/40 portfolio allocation between stocks and bonds has become highly correlated recently, reducing diversification benefits. Strategists say higher bond yields now make fixed income more attractive again for balancing equity risk, though alternatives may be needed too. Learn more

Jerome Powell said bringing inflation down will likely require slower economic growth, even as the economy has been more resilient than expected. While cooling inflation reduces pressure to hike rates further, rates may still need to stay high to ensure inflation falls to the 2% target. He said it's unclear if inflation is on a steady downward path yet. Learn more

The biggest US banks have cut tens of thousands of jobs this year as higher rates weaken key businesses. Wells Fargo, Goldman, and Citi made the deepest reductions of around 5% each so far, while outlier JPMorgan continues hiring amid outperformance. Deeper cuts are likely in 2023 despite economic resilience. Learn more

Chinese fighter jets have dangerously intercepted US surveillance planes over 180 times in the Pacific in the past two years, far exceeding the previous decade's total, in an escalating pattern of harassment the Pentagon calls unacceptable. Learn more

China injected a record $100 billion into its financial system through short-term loans, signaling intent to keep interest rates low and support economic recovery. The liquidity boost will offset upcoming tax payments and bond issuance, while providing stimulus through low rates. Learn more

10-year Treasury rate hits 5%, first time since 2007

Investors need-to-know | Macro

Investors should note several key developments affecting markets: Tensions persist as China provokes the US & hosts the Belt and Road forum amid regional cooperation with Russia. Meanwhile, the evolving oil-dollar relationship weighs on emerging markets as rate hikes strengthen the dollar.

Stocks and bonds remain correlated, but higher yields now revive fixed income's appeal. Despite economic resilience, slower growth may be needed to tame inflation per the Fed. Cautious optimism is warranted as banks cut jobs, while stimulus in China offers some stability. Overall, risks remain elevated amid global uncertainty, warranting prudent portfolio positioning. However, opportunities can emerge for selective investors able to navigate increasingly complex dynamics.

Our Investment strategy still remains on money market funds and dollar cost averaging into your preferred assets with 2+ years time horizon

Overview

Last week marked a notable upswing in the crypto market with BTC sealing the week at a promising $29,992, largely propelled by the brewing optimism around a possible SEC endorsement of a spot Bitcoin ETF. However, the unfolding geopolitical scenario in Israel and key economic events on the horizon could potentially sway crypto market dynamics.

Potential ETF Approval

Anticipation of SEC's acceptance of a spot Bitcoin ETF fuels market rally.

Israel Conflict Concerns

Escalation could cast a shadow on crypto prices at a macroeconomic level.

Key Dates Ahead

October 25: FED Chair Powell's discourse, poised to influence market trends.
October 27: Release of US Core PCE Price Index data, a crucial inflation measure for the FED, merits close monitoring.

You can also check crypto project-specific upcoming events Here

Key Charts

Valuation vs. Trendline

The chart provided shows how the total value of the cryptocurrency market compares to a set "fair value" line. This comparison serves as a snapshot of the market's macro-state.

Chart Usage

Bullish Phase: When valuation (yellow line) is above the fair value (red line), indicating positive market sentiment.
Bearish Phase: When valuation is below the fair value, indicating negative market sentiment.

Market Analysis

Current undervaluation presents an opportune landscape for Dollar-Cost Averaging (DCA), appealing for long-term value investors.

Recent Trend

A slight reversal is noted due to the recent market upswing, hinting at a change in market sentiment.

Bitcoin Price Color-Coded By Risk Levels

This chart employs a color-coded Risk metric to exhibit price variations, where dark red indicates values near 1, and dark blue represents values near 0. The Risk metrics aim to spotlight appealing long-term buying or selling zones rather than forecasting price extremes.

Risk Metrics Purpose

Identify long-term attractive buying or selling points.
Low Risk (dark blue regions) signifies potential buying areas.
High Risk (dark red regions) denotes potential selling areas.

Usage & Quick Analysis

SA swift market sentiment gauge; red zones indicate significant overvaluation while dark blue zones indicate significant undervaluation based on historical metric performance.

Recent Measurement

Current value stands at 0.521.
Historically, a risk level below 0.3 has been a safe and profitable juncture for buying BTC.

Investors need-to-know | Crypto

BTC Outlook:

BTC has been pumping due to the imminent spot Bitcoin ETF approval. It is not known how sustainable the pump will be. It seems that liquidity is rolling over from alts to BTC with no new money coming into the market yet.

ETH Outlook:

Ethereum is still bleeding against its Bitcoin pair and thus buying ETH is not justifiable at the moment.

Altcoins Outlook:

The total altcoin market is bleeding against Bitcoin due to its recent pump. It doesn’t make sense to buy altcoins in this market because it is very risky with no potential reward as BTC’s dominance keeps gaining power. (no gains to be made against BTC)

Recommended Course (Not Financial Advice):

In these market conditions the best thing to do is to accumulate USD on the side in order to deploy the liquidity later on, when BTC cools off a bit.

Market Moves

Volatility in the market for fungible tokens correlates with lower NFT trading volume. However, this week appears to be an exception, with daily NFT trading volume maintaining an elevated level around 5,000 ETH despite market fluctuations.

Several signs of a healthier market this week, some of the key highlights included:

A mega-whale making sweeping buys across bluechip NFTs like Azuki and Otherdeed, sending their floors up 25% and 12% respectively.

New mints also showed strength, with the AI art project Nami doing a 10x right out the gate going from a 0.05 ETH mint to 0.5 ETH secondary floor this weekend.

Even XCOPY returned from his hiatus to announce a new drop called ALGO BRO with his signature quip "New contract, new format. Same vibes. FRESH HELL."

The trading volume tells the story, with the highest single day volume ($10.3M) this past Friday since late August. For the week, volume trended up and total traders increased 15% - a modest but meaningful uptick in activity.

Most collections were trending up this week, with a few exceptions:

Bluechip NFTs were mostly flat or pulled back slightly this week. CryptoPunks (-4%) and Fidenzas (even) held strong at the top, but newer entrants like Ringers (-6%) and Pudgy Penguins (-4%) cooled off.

However, Azuki (+30%) powered forward on the whale buys to reclaim the #3 spot over Penguin Paradise. MAYC (+6%) continues its slow ascent back up the ranks as well.

In the middle tier, Captainz (+17%), DeGods (+5%), and Grifters (+14%) were standouts - with Grifters flipping both Chromie Squiggles and Winds of Yawanawa in the art rankings.

So in summary, this week felt like the first spark back to life for the NFT market after the long crypto winter. Trading activity increased, mint prices spiked, and bluechips found bids again. Too early to call it a bull market, but certainly a week to take notice.

New Highlights

NFT Games Are Not To Be Considered Gambling, Votes French National Assembly. Know More

Decentraland Personalizes Metaverse Identities with NAME. Individuals can now embrace more unique and personal identities online through Decentraland NAME. Know More

This play-to-earn game offers NFTs linked to physical items like gold. The FRUITS Eco-Blockchain Project is building on this momentum by allowing NFTs to be redeemed for a coveted, real-world object: a physical golden egg. Know More

'We're the Rebels!': NFT Artists Invade London's Saatchi Gallery. A selection of works from NFT artists forms part of this year’s Focus Art Fair at the iconic Saatchi Gallery in London. Know More

This week’s spotlight

The Metaverse: Healthcare's Exciting New Frontier

This week's spotlight shines on the immense potential of the metaverse to transform healthcare. As per a new report by The Brainy Insights, the global metaverse in healthcare market could reach a staggering $48.67 billion by 2030.

What's driving this projected growth? The metaverse promises more immersive training for medical professionals, superior patient care through precise diagnostics and planning, and enhanced doctor-patient interactions. Technologies like augmented reality (AR), virtual reality (VR), and AI are making it possible to deliver quality healthcare in innovative new ways.

The COVID-19 pandemic has also accelerated telemedicine adoption, creating fertile ground for metaverse health solutions. Imagine virtual 3D doctor consultations and remote surgeries leveraging these emerging technologies. The possibilities are endless.

However, challenges remain, including the high costs of implementation and valid privacy and security concerns. But technological advances and stricter regulations are expected to address these issues over time.

Overall, the metaverse represents an exciting new frontier for healthcare. It could dramatically improve training, treatment, and delivery of care. Companies worldwide are already strategizing how best to capitalize on this $48 billion opportunity. The future looks bright for health in the metaverse!

Investors need-to-know | NFT

The wider crypto market saw a bounce over the past 2 days, with Bitcoin topping ~$35,000. This liquidity influx often draws money out of NFTs as traders sell NFTs to ride the crypto wave.

Though we’ve seen an exception at the beginning of the crypto pump, the momentum is slowly fading and we could see prices suffer as the market adjusts into its common pattern.

Once the crypto market stabilizes, profits usually rotate back into NFTs. This phenomenon could spark another NFT relief rally in the coming weeks.

Recommended Strategy

Monitor crypto trends to prepare for a potential run up when crypto prices stabilize
The market showed signs of renewed interest in quality projects. It would be wise to pay attention to upcoming projects and the existing “market leaders”.
Prioritize liquidity on the side-line and identify your picks.

For now, caution is advised as the NFT-crypto dynamic unfolds. But the foundations exist for prices to regain momentum.

Last week we explored the evolution of smart contracts and their role as the backbone of Web3 apps. Check it out in case you missed it.

This week, we're diving into NFT gaming - one of the most hyped sectors aiming to merge blockchain with mainstream experiences.

In our latest article, we analyze the landscape of NFT gaming from its pioneering early days to the current state:

The rise and fall of "play-to-earn" and virtual world hype cycles
Steady niche growth, but retention and sustainability remain unclear
Flagship games driving renewed interest with updated features
Virtual worlds slowed, but see long-term potential
Investments evolving from short-term hype toward infrastructure

For NFT gaming to reach its potential, priorities like sustainable tokenomics, appealing gameplay and accessibility need focus. The path ahead has obstacles, but the long-term promise remains substantial. Read our full analysis here.

As we continue researching narratives that will shape Web3's future, let us know what topics you want to see covered. The goal is to learn together!

Knowledge BEFORE the hype - that's how we'll prepare for what's next.

Subscribe to this Newsletter, this is where we’ll be tracking the research process and following the narratives from the thesis.

If you missed the first piece explaining our thesis framework, check it out to understand our goal with this series.

Coming up next:

Crypto Payments Integrations for Traditional Businesses - an Overview
Blockchain Interoperability Overview
Tokenization of Real-World Assets (RWAs)

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.

Check out our website if you haven’t already

MegaBrainX provides web3 insights enabling strategic growth for businesses and investors.