The MegaBrainX Crypto Investment Newsletter

Issue #04 - 31 October 2023

MegaBrainX
October 31, 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

Optimism over a potential US spot Bitcoin ETF drove the largest weekly inflows into digital asset funds since July 2022, dominated by Bitcoin but with substantial inflows also into Solana, indicating growing investor interest in crypto if regulatory clarity improves.

21 projects received funding last week with a total of $141.25M.

Two ICO launches this week, with 23 projects launching in November.

There are 14 projects with token unlocks scheduled for this week, with the most notable ones being $10.51 million (16.36% of circulating supply) for GAL token of Galxe project, $12.75 million (1.55% of circulating supply) for IMX token of Immutable X project, & $5.37 million (1.21% of circulating supply) for DYDX token.

Developer activity has been relatively steady in October, with Internet computer (ICP) in the lead in number of hours and commits in Github, followed by Cosmos & Then Chainlink. 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 $4.8M avg daily fees, followed by Uniswap at $1.3M and then Bitcoin AT $895K. DeFi leaders Aave and BNB Chain round out the top 5

World Events Highlights

This Week’s Major US Economic reports

October 31:

Consumer Confidence

November 1:

Manufacturing PMI
Job openings
Federal Reserve decision on interest rates
Fed Chairman Powell press conference

November 2:

Initial jobless claims

November 3:

U.S. nonfarm payrolls
U.S. unemployment rate

The US economy continues growing steadily despite higher interest rates, though the housing market suffers from reduced demand and turnover due to rising mortgage rates. Learn more

Subprime auto loan delinquencies have hit record highs, indicating lower-income borrowers are struggling with inflation, interest rates, and a weak job market. Learn more

US stocks posted their longest losing streak of 2023 as surging bond yields spooked investors, erasing early-year gains. Learn more

While global consumption has largely recovered, real consumer spending remains below pre-pandemic trends, with an uneven rebound across sectors and continued demand shifts from goods to services, indicating the pandemic has durably transformed consumption patterns and behaviors. Learn more

The US economy grew at a robust 4.9% annualized pace in the third quarter, exceeding expectations and showing resilience despite high interest rates, but the strong performance may complicate the Federal Reserve's efforts to tame inflation. Learn more

Xi Jinping made a rare visit to China's central bank and foreign exchange regulator, underscoring the government's heightened focus on shoring up the economy and markets amid a battery of support measures, though sizable stimulus remains off the table. Learn more

Chinese property developer Country Garden was deemed in default on a dollar bond for the first time, underscoring its fall into distress amid China's broader real estate crisis and likely heading for one of the country's biggest-ever restructurings despite recent government efforts to revive the sector. Learn more

National security advisor Jake Sullivan warned the risk of the Israel-Hamas conflict escalating into a wider regional war is real given ongoing attacks on US forces by Iran-backed groups, vowing the US will continue responding militarily to deter further escalation while taking steps to prevent the fighting from spinning out. Learn more
The Bank of Japan's meeting could signal an end to yield curve control, reducing money printing but forcing the BOJ to sell foreign assets like US bonds to defend the weakening yen. This would push up US yields, impacting crypto via less liquidity but also impacting broader markets by tightening financial conditions. Learn more

Investors need-to-know | Macro

With global growth slowing, recession risks rising, and geopolitical tensions escalating, investors face an increasingly uncertain macro environment.

Key developments to watch include central bank policies, inflation & economic trends, consumer resilience, supply chain stresses, the Strong dollar tightening financial conditions, and potential escalation of conflicts in the Middle East and Eastern Europe.

While markets have endured recent volatility, more challenges likely lie ahead. Investors should prepare portfolios to weather further turbulence, rotating into quality & low risk assets.

Our Investment strategy still remains on money market funds and dollar cost averaging into your hard or your preferred assets such as Bitcoin and Gold with 2+ years time horizon

Overview

Last week, the crypto market saw a pump and Bitcoin closed its weekly candle at $34,526.
Bitcoin has been riding high the past couple weeks on the excitement around a spot Bitcoin ETF.
However, there are some concerning macro factors on the horizon that could weigh down the crypto market and drag prices lower.
It is unclear if the recent pump in crypto prices is sustainable long-term.

Key Event This Week

On Wednesday November 1st, we have the FOMC statement and press conference.
Watch Fed Chair Jerome Powell's conference closely as it will likely contain market moving information.

You can also check crypto project-specific upcoming events Here

Key Charts

Altcoin Season Index

How Are Altcoins Stacking Up to Bitcoin Lately?

The "Altcoin Season Index" is a simple way to see if altcoins are outperforming Bitcoin over the last 90 days.

When less than 25% of the top 50 altcoins do better than Bitcoin, we call it "Bitcoin season" - Bitcoin is king.

If over 75% outperform Bitcoin, it's "Altcoin season" - the tide is lifting most altcoins higher.

(Stablecoins and asset-backed tokens don't count.)

Lately, Bitcoin is Leading the Pack

In bear markets and early bull runs, Bitcoin tends to beat out altcoins.

With crypto still in a bear market, it's the safer play to stick with BTC.

Most altcoins underperform compared to Bitcoin in this environment.

The index shows we're clearly still in a Bitcoin season.

Plus, with all the buzz around a Bitcoin ETF lately, money has been flowing from altcoins into BTC.

Bitcoin Puell Multiple

What is the Puell Multiple?

The Puell Multiple tracks mining profitability and selling pressure from miners.

It's calculated by dividing the value of daily bitcoin issuance in USD by the 365-day moving average of daily issuance.

When the Puell Multiple is high, it means daily issuance is high compared to the past year average. This suggests miners are highly profitable and selling pressure will be strong.

Tracking Market Cycles=

The Puell Multiple shows broad downtrends from each market peak to the next.

If the trend continues, we could see the Puell around 2-3 at the next Bitcoin bull run peak.

Market bottoms have historically happened when the Puell Multiple drops below 0.5.

These periods present good opportunities to accumulate before the next bull run.

Investors need-to-know | Crypto

BTC Outlook:

BTC has been riding the wave of the spot Bitcoin ETF approval for a couple of weeks. It looks like it will be cooling off a bit in the coming days.

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 losing ground to 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

The NFT market saw a surge in momentum and buying activity over the past week. Several factors contributed to the increased interest and demand:

Memecoin's upcoming drop from Captainz generated hype and buyer interest. The $MEME token launch on Binance also boosted Captainz' floor price.
Real-world events like ApeFest Hong Kong brought new attention and visibility to top NFT collections like BAYC and MAYC.
Flooring Protocol adding new NFT projects to its protocol and Mocaverse's Realm Points program incentivized buying.
Large purchases from prominent NFT whales drove up select collection floors, like Vombatus sweeping Terraforms.
New collabs like Snowfro x Opepen generated buzz and higher demand for the Opepen collection.

Key Market Moves

Captainz saw its floor price surge over 37% to 5.7 ETH on the heels of its $MEME token drop news.
BAYC climbed 15% on the week to 30.28 ETH as ApeFest approaches.
MAYC also rose 12% this week to 5.71 ETH.
Mocaverse spiked 70% to 1.13 ETH as its new Realm Points program went live.
Vombatus' Terraform purchase sent its floor up to 1.66 ETH.
The Opepen x Snowfro collab boosted Opepen's unrevealed floor to 0.42 ETH.
ETH and crypto broadly rallied this week, providing tailwinds for NFTs rather than diverting interest.

The market saw a healthy mix of gains across blue chips, profile pics, and newer projects. Momentum and hype have clearly returned, with 5 days of $10M+ volume last week. Excitement is high heading into further token drops and developments.

New Highlights

Mocaverse introduced Realm Points (RP), a new system to gauge user activity and influence within its on-chain identity ecosystem. Know more
Animoca Brands solidified its presence in the web3 gaming arena with the acquisition of blockchain game streaming platform, Azarus. Know more
Neon Machine, the gaming company behind the upcoming title "Shrapnel," secured $20 million in funding, led by Polychain Capital. Know more
Phantom introduced Camera Mint, allowing users to transform photos and videos into Solana NFTs in seconds. Know more

This week’s spotlight

Gaming Tokens Rally

While the broader crypto market has seen continued volatility, gaming and metaverse-related tokens have shown impressive growth over the past week.

Leading the pack is GALA, the native token of Gala Games, which saw a meteoric 42% surge despite a slight pullback of 7% in the last 24 hours. Axie Infinity's governance token, AXS, also posted strong gains of 28%, hitting its highest price since August.

Other top performers included SAND, MANA, and APE - the native tokens of The Sandbox, Decentraland, and Bored Ape Yacht Club respectively. Each notched double-digit growth over the week, recovering from recent lows.

The rally demonstrates the continued strength and momentum in blockchain gaming and metaverse projects. As major launches and integrations continue on platforms like The Sandbox and Decentraland, the value being accrued in their ecosystems is being reflected in their native assets.

Investors need-to-know | NFT

The NFT market saw a welcome resurgence last week, with trading volume and prices bouncing back across blue chips, profile pic projects, and newer collections.

Market observations:

Memecoin is set to list on Binance this Friday, November 3rd. Some analysts predict it could see a 100x return on pre-sale prices. If it does well, profits flowing from altcoins into higher-risk NFTs could positively impact the NFT market, similar to what we saw with the Pepe coin returns earlier this year.
Increased involvement from prominent NFT whales drove up select collection floors. Activity from large holders provides validation and can influence further buying.
Flooring Protocol adding new NFT projects to its lending platform incentivized buying as well. We are seeing a new trend with assets being fractionalized and vaulted on Flooring Protocol, then arbitrage traders acquiring NFTs on Blur.
Gaming and metaverse tokens rallied despite crypto market turbulence, underscoring the momentum in blockchain gaming/metaverse adoption.

Recommended Strategy

All eyes on Memecoin right now. If the token shoots up in price in a short period of time, we’ll likely see a good amount of profits trickle down to the NFT space.

Nothing guarantees this happens, however it’s good to be prepared to buy your favorite NFTs if they show strong signs. And like everything else in this market, this could be a very short-lived hype cycle.

Last week we explored the landscape and future potential of NFT gaming. Check it out in case you missed it.

This week, we dive into decentralized finance (DeFi) - one of the most transformative applications of blockchain.

In our latest article, we break down the key aspects of this new financial paradigm:

The origins of DeFi in early crypto protocols like Bitcoin and Ethereum
How core DeFi building blocks like DEXs, lending, and yield farming work
The explosive growth in 2020 but limitations today around UX and exploits
Recent innovations like layer 2 scaling, algorithmic stablecoins, and NFT lending
The regulatory landscape and challenges to mainstream adoption
What the future may hold for DeFi composability and disruption

DeFi aims to build an open financial system, but it still has a long road ahead. Read our full analysis here. Read our full analysis here.

As always, let us know your thoughts on the research. Where should we explore next on our journey towards the next cycle?

Knowledge BEFORE the hype - Let's continue learning together.

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.

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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