The MegaBrainX Crypto Investment Newsletter

Issue #06 - 15 November 2023

MegaBrainX
November 14, 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 investment products saw continued inflows last week totaling $293m, bringing the 7-week run past $1bn. This suggests increased institutional participation in the crypto market recovery.
Sixteen projects secured a combined $108.65 million in funding during the past week, with Ritual leading the way with $25 million in investments.
Zero ICO launches this week, with 23 projects launching in November.
There are 6 projects with token unlocks scheduled for this week, with the most notable ones being $22.47M (4.23% of circulating supply) for APE coin, $13.97M (3.9% of circulating supply) for ROSE token of Oasis Network, and $9.46M (11.43% of circulating supply) for Cyber token of CyberConnect 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 $8.4M avg daily fees a 58% increase W/W, followed by Bitcoin at $4.8M. DeFi leaders Uniswap, BNB &, Aave round out the top 5

World Events Highlights

This Week’s Major US Economic reports

November 14:

CPI & Core CPI

November 15:

PPI & Core PPI
U.S retail sales

November 16:

Initial jobless claims
Industrial production

November 17:

Building permits

US debt interest bill rockets past $1 trillion, doubling in 19 months, signaling greater bond issuance ahead. Learn more

US yields surged after a weak 30-year bond auction and hawkish Powell comments left investors doubting the Fed is done with rate hikes, despite recent inflation moderation. Learn more

Fed Chair Powell said the central bank is unsure it has done enough to lower inflation sustainably to 2% and may need to tighten policy further, signaling rate hikes could continue despite recent moderation. Learn more

Moody's cut its US credit outlook to negative from stable due to rising interest rates and doubts about fiscal policy effectiveness to address growing debt affordability concerns. Learn more

Speaker Johnson floats options to avert shutdown, including two-step funding and getting "jammed" by Senate, but risks conservative ire over holiday deadlines and lack of deep cuts. Learn more

Citadel's Ken Griffin warns higher inflation, rates, and unrest are pushing toward de-globalization as US faces deficit unsustainability and Europe struggles economically without cheap Russian energy. Learn more

China has shifted its overseas lending from infrastructure loans to financial rescues for debt-burdened borrowers, providing emergency funds to prop up previous Belt and Road recipients as US ramps up development finance to counter China's influence. Learn more

China's strategic port investments along key shipping routes under Maritime Silk Road initiative raise concerns about potential military uses despite stated commercial aims. Learn more

Chinese authorities ask Ping An to take control of Country Garden, the nation's largest private developer, to mitigate liquidity crisis risks spilling over into the economy. Learn more

Biden and Xi plan bilateral talks in San Francisco on November 15 during APEC summit, their first in-person meeting in over a year as US and China aim to stabilize intense rivalry. Learn more

Investors need-to-know | Macro

Recent developments point to heightened uncertainty on the horizon amid complex interplays of risk. Hawkish signals from Powell cast doubt on rate cut expectations, coinciding with a weak 30-year Treasury auction that sent yields surging.

This comes as Moody's cut its US credit outlook to negative, citing swelling debt burdens and lack of fiscal solutions. Estimated interest costs on US debt have rocketed past $1 trillion annually, fueling fiscal sustainability worries. Citadel's Griffin warned higher baseline inflation may persist for decades given de-globalization and Europe's loss of cheap Russian energy.

China is shifting overseas lending from infrastructure to financial rescues as the US counters its influence. Despite stated commercial aims, China's strategic port investments globally raise military concerns. Geopolitical tensions remain high on various fronts, including potential Biden-Xi talks and Israel-Hamas clashes.

These developments underscore heightened uncertainty and complex risks related to monetary policy, fiscal deficits, global trade and politics, and geopolitical flashpoints that investors must monitor closely.

Our investment strategy recommends accumulating cash and investing it in money market funds to benefit from any potential panic selling or black swan events. At the same time, dollar cost average into preferred assets like Bitcoin and gold with a 2+ year time horizon.

Overview

Crypto Market Update

Bitcoin closed last week around $37k, taking a breather after the recent rally.

The excitement has now shifted a bit towards the news that BlackRock filed for a spot Ethereum ETF.

Macro Focus This Week

Tuesday brings the big monthly CPI inflation report.

If inflation comes in hotter than expected, brace for stocks and crypto to sell-off as interest rates spike further.

But a cooler than forecast read could spark a rally.

Either way, expect major volatility with this and other macro events - Xi's US visit, the government shutdown threat, and ongoing Middle East tensions.

This week will likely see crypto prices swinging as the markets digest the latest economic and geopolitical developments. Strap in!

You can also check crypto project-specific upcoming events Here

Key Charts

Bitcoin Dominance

In bear markets, Bitcoin often outperforms altcoins. So its dominance rises as its share of the total market cap increases.

BTC dominance has trended higher overall since May 2021. This suggests Bitcoin will continue taking a bigger slice of the crypto pie.

The latest reading is 55.9%, down from late October due to the recent altcoin pump. But Bitcoin dominance should correct back up to resume its uptrend.

Bitcoin Price versus DXY

The DXY Index tracks the dollar versus a basket of currencies - euro, yen, pound, Canadian dollar, Swedish krona, and Swiss franc.

If DXY rises, the dollar is gaining value against those currencies.

DXY and Bitcoin Correlation

The DXY vs Bitcoin chart shows a clear negative correlation:

When DXY rises, Bitcoin tends to be in a bear market.

When DXY falls, Bitcoin bull markets occur.

When DXY trends up, markets stay risk-off as a stronger dollar reduces the urge to invest.

The opposite happens when DXY drops - people tend to invest more in risky assets like crypto.

Lately the dollar has been in an uptrend, which could put pressure on crypto prices if it continues, however a change in trend would be beneficial for BTC.

Investors need-to-know | Crypto

What's Bitcoin Up To?

Bitcoin has started correcting over the past few days, dropping about 6% from its recent highs. This pullback was expected after its rapid ascent.

How's Ethereum Doing Against Bitcoin?

Ethereum had stopped bleeding against Bitcoin for a bit thanks to hype around a potential ETH ETF. But once that news buzz fades, ETH will likely resume its downward trend versus BTC.

What About Altcoins Overall?

We've seen a few altcoins like SOL pump hard recently. But these bursts seem unsustainable. Overall, altcoins are still looking weak compared to Bitcoin, making them very risky bets right now.

What's the Best Move? (NFA)

Given all this uncertainty, having some dry powder in USD makes sense. Dollar cost averaging small amounts into Bitcoin on dips and corrections seems the prudent strategy.

Market Moves

Last week saw an explosion in NFT trading volume, catalyzed by increasing optimism in the wider crypto market, however, in the last few days we have seen last week's volume pump has faded.

Ethereum NFT volume surpassed $20M for four straight days, a significant uptick from previous weeks. CryptoPunks drove a large portion of this volume, with over $20M spent on the project in the past week alone. This was sparked by notable collector Gordon's purchase of a Zombie Punk for $1.3M last Monday, which seems to have shifted market sentiment.

Other blue chip NFTs like Bored Ape Yacht Club also saw spikes in volume, averaging over 2,000 ETH daily as prices bounced back above 30 ETH. And newer projects like Springfield Punks entered the top 10 in volume following The Simpsons' recent NFT-focused episode.

The surge in Solana token prices similarly buoyed NFT projects on that chain, with increased interest in Bodoggos after the Breakpoint event.

However, wallet activity has remained relatively flat despite the price and volume jumps. This suggests established collectors are driving the increased spending, while many remain sidelined waiting for a broader market bottom.

Overall, the surge in NFT volume observed last week was temporary. Is it likely that the momentum will surge again?

Source: NFT GO

New Highlights

Chiliz partners with Animoca Brands, bringing the industry giant into its SportFi ecosystem. Know more

The Sandbox announced a Cinerama LAND Sale, offering Sandbox Metaverse LAND owners a unique cinematic creation opportunity in partnership with top film brands. Know more

Cool Cats is receiving a strategic investment from Animoca Brands Japan and San FranTokyo to spread its brand in Japan. Know more
Illuvium Beta 3 going live on November 28th on EpicGames. Know more

This week’s spotlight

$MEME Mania

Memecoins captured attention this week, with $MEME from Memeland leading the charge.

$MEME exploded over 60% in a single day, rallying as high as $0.037 with over $1.1B in volume. From its low on November 9th, $MEME has surged a whopping 100% this past week to sit around $0.033.

The spike reignited interest in Memeland's goals and vision as a "Community Company", though specifics remain vague. More products, events, NFTs, integrations, and swag are coming.

However, Memeland's Floor Captainz NFTs have not kept pace with $MEME's meteoric rise. Floor prices are up just 10% this week, while $MEME gained 77%.

This means the NFTs are trading at a massive 50-68% discount to the value of $MEME locked inside them. For example, the Alien Captainz with 119 ETH worth of $MEME is selling for just 39 ETH.

The reason seems to be uncertainty around the unlock schedule for the $MEME tokens. Rumors point to a 2 year vesting schedule with unlocks every 6 months, but details are sparse.

Given the unknowns, the market is pricing the NFTs at an expanding discount to account for the locked $MEME. This arb opportunity will be one to watch in coming weeks as more details emerge.

Investors need-to-know | NFT

Market observations

Weekly trading volume has declined after last week's spike, with volumes reverting back towards lower levels seen earlier this year.

The number of unique buy wallets active in the market has also declined, currently sitting near the lowest levels. This suggests lower overall retail participation.

However, the number of higher-value buys (wallets spending 0.3+ ETH) directly purchasing NFTs rather than via bids has held up better, remaining in an uptrend. This segment is important for market health.

NFT prices have retained recent gains and held steady over the past week, despite the volume and wallet count pullback. Price resilience is a positive sign.

Recommended Strategy

Several NFT collections have experienced significant surges, prompting investors to contemplate chasing the upward momentum. However, it's crucial to recognize that, at this stage, the risks are beginning to outweigh the potential rewards.

As the Blur airdrop approaches in just three weeks, cautious airdrop enthusiasts may consider strategically divesting their NFT holdings leading up to the event. While speculative short-term trading might offer profitable opportunities in the coming days, it undeniably carries high risks. It is advisable to adhere to conviction plays and remain vigilant for emerging opportunities, particularly within the gaming sphere.

Amidst the market dynamics, there may be potential chances to acquire assets at lower prices, presenting an opportunity for those seeking strategic entry points.

Last week we explored the potential for real-world asset tokenization to expand decentralized finance. Check it out in case you missed it.

This week we dive into decentralized identity (DID) - a key infrastructure layer for user control and security.

In our latest article, we analyze the evolution and current state of DIDs:

The limitations of traditional centralized digital IDs like fragmentation and lack of user control
The emergence of DIDs using blockchain to return identity ownership to users
DID wallets for managing identity credentials vs centralized databases
Benefits like enhanced security, privacy, portability and interoperability
Challenges inhibiting mainstream adoption like scalability, regulation, and usability
Immense potential impact across healthcare, finance, refugees, voting, and more

Though early stage, DIDs can profoundly reshape digital identity. 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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