The MegaBrainX Crypto Investment Newsletter

Issue #05 - 07 November 2023

MegaBrainX
November 07, 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

Digital asset funds saw a sixth straight week of inflows totaling $261 million, extending the recent run to $767 million, as bitcoin grabbed the lion's share on prospects for a US spot ETF while ethereum saw its largest inflow since August 2022.

Nine projects secured a combined $27.7 million in funding during the past week, with MODULUS LABS leading the way with $6.3 million in investments.

Two ICO launches this week, with 21 projects launching in November.

There are 7 projects with token unlocks scheduled for this week, with the most notable ones being $174.39M (10% of circulating supply) for APT token of Aptos project, $42.16M (73.82% of circulating supply) for HFT token of Hashflow project.

Developer activity has been relatively steady for the past year, 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 32% decrease year on year in September 2023.
Ethereum remains the top revenue-generating blockchain protocol with $5.3M avg daily fees a 10% increase WOW, followed by Uniswap at $1.3M. DeFi leaders BNB, Aave & GMX round out the top 5

World Events Highlights

This Week’s Major US Economic reports

November 7:

U.S Trade deficit

November 8:

Fed Chair Powell delivers opening remarks
Wholesale inventories

November 9:

Initial jobless claims
Fed Chair Jerome Powell on panel at IMF

Federal Reserve Chair Powell hinted the central bank may be finished with interest rate hikes after holding steady again, pivoting to a more dovish stance that cheered markets though officials said decisions will be made meeting-by-meeting. Learn more

US job growth slowed in October and unemployment ticked up as auto strikes weighed, but the labor market remains tight; softening may be required to lower inflation further per the Fed's latest signals. Learn more

As Treasury yields top 5%, consumer borrowing costs rise, hurting homebuyers, students, and car purchasers, while savers benefit from higher deposit rates. Learn more

Private equity deal making has dried up in 2022 as higher interest rates make cheap borrowing impossible, ending an era of easy money and posing an unfamiliar challenge to firms long accustomed to having the wind at their backs. Learn more

The US is investing in Africa's Copperbelt to challenge China's mineral dominance, but after Beijing's decade-long infrastructure push and control of Congo's copper, Washington has major catching up to do. Learn more

China's imploding real estate sector is rattling domestic growth and markets with unfinished projects eroding consumer confidence, and global spillovers could swell if the unfolding crisis remains unchecked. Learn more

China's Evergrande proposed swapping offshore debt into 30% equity in its Hong Kong units, potentially forcing huge losses on creditors as the distressed developer races to avert liquidation. Learn more

The UK hosted a landmark AI safety summit last week seeking global coordination on ethical development, but tensions loom as the US and China clash over tech and key leaders like Biden and Macron skip the event. Learn more

Russia revoked its ratification of the global nuclear test ban treaty, a condemned move showing the deep chill with the US though Moscow says it won't resume testing unless Washington does first. Learn more

As Israel intensifies strikes on Gaza, Iran threatens US retaliation if a ceasefire is not reached, raising regional tensions amid the ongoing war. Learn more
The US Treasury lowered its expected 4Q borrowing estimate to $776B from $1T, still a record high but below prior forecasts, briefly easing pressure on yields though debt issuance remains massive amid huge deficits. Learn more

Investors need-to-know | Macro

Geopolitical tensions remain elevated amid Israel's military strikes on Gaza and threats of retaliation from Iran if a ceasefire is not reached. Meanwhile, the US and allies are attempting to contain the conflict's spread, though spillover risks persist.

On the energy front, top producers Saudi Arabia and Russia extended voluntary output cuts to reinforce market stability as demand concerns weigh on crude prices. And though lower US Treasury borrowing estimates briefly buoyed markets, massive deficit financing needs continue, keeping pressure on yields absent major fiscal reforms.

Investors must watch escalating Middle East instability, evolving OPEC supply adjustments, and the interplay between still-massive borrowing requirements and volatile bond yields in the quarters ahead.

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

Overview

Crypto Market Treading Water

The crypto market was mostly flat last week, with Bitcoin closing out around $35k - taking a breather after the huge rally the week prior.

Given how fast Bitcoin shot up, some pullback or correction seems likely here.

Meanwhile, regulators keep piling on scrutiny, now expanding their focus beyond stablecoins to other areas of crypto.

And the situation in the Middle East remains volatile with no resolution in sight. Geopolitical tensions like this can definitely spill over to impact broader markets.

So uncertainty lingers from multiple fronts. The crypto rally may cool further before finding its next catalyst.

You can also check crypto project-specific upcoming events Here

Key Charts

Bitcoin Percentage of Supply in Profit and Loss

Tracking Bitcoin Prices Relative to Supply

This chart shows what percentage of all existing Bitcoin were last moved at a price lower vs. higher than the current price.

When coins last moved at a lower price, they're "in profit" today. When they were last moved at a higher price, they're currently "in loss."

After new all-time highs, nearly 100% of supply is in profit. This can persist for a while with multiple record highs.

One clear pattern is that cycle bottoms happen when supply in profit crosses below supply in loss.

In bear markets, the bottom often comes around 40-50% supply in profit.

Currently 82% of supply is in profit after the latest pump. Just 18% is in loss right now.

This suggests we're still far from the next market cycle bottom.

BTC Market Value to Realized Value Z-Score

Tracking Bitcoin's Market Value vs. Realized Value

The MVRV Z-Score compares Bitcoin's total market cap to its realized cap - the value of all BTC when they last moved on-chain.

It shows when market value deviates extremely high or low compared to realized value.

The Z-Score is calculated by taking the market cap minus the realized cap, divided by the standard deviation between the two caps.

This accounts for diminishing returns at extremes.

Historically, buying Bitcoin when the Z-Score is below 0 has been a good move.

Selling when the Z-Score is above 6 has also made sense.

The Z-Score sits at 0.995 currently - quite normal and not signaling any extremes.

Investors need-to-know | Crypto

What's Bitcoin Up To?

Bitcoin's been moving sideways the past week after the recent pump. A correction seems likely soon given how fast BTC shot up.

How's Ethereum Doing Against Bitcoin?

Ethereum keeps bleeding against its Bitcoin pair. Buying ETH isn't looking wise yet.

What About Altcoins Overall?

Altcoins pumped a bit but are still in a downtrend vs Bitcoin. It's very risky to buy alts right now.

What's the Best Move? (NFA)

With all this uncertainty, it's smart to accumulate some dry powder in USD.

That way you'll have funds ready to deploy if Bitcoin corrects lower.

Patience and disciplined buying seems the prudent way forward.

Market Moves

NFT trading volume rebounded after last week's declines. Daily volume has stayed above 10M and today volume came in at a 3-month high of $19.4M, driven by heavy trading of bluechip collections like Bored Ape Yacht Club and CryptoPunks. Over 8,000 ETH changed hands during Ape Fest and other BAYC events. The Captainz collection also saw a spike in volume following the launch of its associated Meme token.

On the art side, Fidenza fell 2% to 58.74 ETH. Chromie Squiggles was relatively flat and Winds of Yawanawa up 5% on the week.

PFPs saw ups and downs, likely tied to increased demand from Flooring Protocol and Blur farmers returning. BAYC fell 7% to 28 ETH, while CryptoPunks bucked the trend, rising 5% to 49.85 ETH and Azuki jumped 7% to 5.49 ETH. Pudgy Penguins dropped 2% to 4.96 ETH and Captainz plunged 30% to 3.93 ETH.

New mints saw strength, with Springfield Punks settling at 0.08 ETH floor and The Grapes and Mocaverse soaring 191% and 77% respectively on upcoming token news.

The $MEME token price fell significantly to 0.019, which could soon impact related NFTs. It's unclear that the $MEME liquidity has really hit the market yet - we'll see if it does this week.

New Highlights

Yuga Labs is partnering with Magic Eden to launch a creator-first Ethereum NFT marketplace by year's end. Know more

Yuga Labs and A BATHING APE unveiled their exclusive BAPE X BAYC collection, fusing early 2000s streetwear nostalgia with avant-garde fashion. Know more

Nike’s RTFKT NFT collections have generated nearly $1.4B in trading volume. It’s been 2 years since Nike acquired RTFKT and the sneaker giant has already made $170M in earnings. Know more
The Simpsons Showcase NFTs to its 6.7 Million Active Viewers. Know more

This week’s spotlight

Blur Steals the Spotlight

This week's spotlight is on Blur, which saw significant growth in market share and token price despite lackluster overall NFT market performance. Blur's volume rose to $132 million this month, excluding wash trading, capturing over 60% of Ethereum NFT exchange volume. This uptick comes ahead of Blur's season 2 farming rewards airdrop on November 20th, which will distribute over 300 million BLUR tokens to platform users.

The airdrop and subsequent token price rally of 31% were driven by a new governance proposal to implement a 0.5% fee on Blur exchange volume. If passed, the fee aims to provide utility and value accrual to the BLUR token. Supporters argue the fee could generate up to $2 million in monthly revenue for the DAO to utilize for buybacks and rewards, while critics caution it may erode Blur's dominant market share.

After strong community debate, it appears the vote will move forward, with a decision expected in the coming weeks. For now, the market appears bullish on the proposal, as evidenced by the double-digit BLUR price increase this month. As the largest NFT marketplace by volume and now governance activity, Blur is proving it aims to solidify its status as a leader in the NFT space.

Investors need-to-know | NFT

Market observations

The NFT market flashed signs of life this past week, with glimpses of the excitement and hype that defined past bull runs. Key takeaways:

Trading volumes ticked higher, fueled in part by anticipation around Blur and its upcoming November airdrop. This influx of liquidity from new token distributions is helping prop up the market. Active wallets interacting with Ethereum NFTs pumped to 19K yesterday, up 50%

Leading into Blur's airdrop, we can expect continued farming of its tokens, providing stability and incentives to hold through November. Speculation around what other plans Blur may unveil is further driving interest. ($Blur has pumped 38% ahead of Blur Season 2)

Viral influencers like Gordon Goner igniting rallies in select projects adds to the excitement. His impact shows the potential for key players to move markets.

Meme coin mania appears to be cycling back into NFTs. arbitrage trades between platforms like Flooring Protocol and Blur show profits flowing from fungible tokens back into NFTs.

Across the board, a renewed sense of optimism is palpable. But whether this blossoms into a sustained bull run still depends on attracting a wave of new capital and traders into the NFT space - a key ingredient still missing.

Recommended Strategy

Many NFT collections have seen major moves already. Investors should try and chase the pumps, at this stage the risk is starting to outweigh the potential reward.

With Blur airdrop just 3 weeks away, prudent airdrop farmers could start offloading their NFTs leading up to the date.

Speculative short-term trading could be profitable in the coming days. However it comes with high risk. Ideally, hold on to your conviction plays and keep an eye out for new comers especially in the gaming sphere.

Our DeFi deep dive last week explored the potential to reinvent finance on blockchain. Check it out in case you missed it.

This week we look at how that disruption could expand even further through tokenizing real-world assets.

In our latest article, we examine the emerging world of real-world asset (RWA) tokenization:

Early experiments tokenizing commodities, real estate and collectibles
Recent growth in platforms, regulations and institutional pilots
Improved liquidity and access, but still early stage overall
Future trends like expansion across asset classes, integration with DeFi, and infrastructure improvements
Massive total addressable market worth hundreds of trillions in global real-world asset value

RWA tokenization stands poised to unlock tremendous opportunities for innovation and inclusion in finance. Read our full analysis here.

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

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