The MegaBrainX Crypto Investment Newsletter

Issue #08 - 28 November 2023

MegaBrainX
November 28, 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 $293 million in inflows last week, extending the recent rally to 7 weeks and bringing total 2023 inflows past $1 billion to $1.14 billion, the third highest ever, as assets under management rose 9.6% week-over-week to $44.3 billion.

Thirteen projects secured a combined $133.35 million in funding during the past week, with Blur leading the way with $40 million in investments.

Four ICO launches this week, with 21 projects launching in December.

There are 13 projects with token unlocks scheduled for this week, with the most notable ones being $42.04M (2.74% of circulating supply) for OP coin of Optimism project, $34.12M (9.48% of circulating supply) for INCH token of 1INCH project, and $6.97M (1.2% of circulating supply) for DYDX token.

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.
Kyberswap was able to secure the first spot as the top revenue-generating blockchain protocol with $20.1M avg daily fees, followed by Ethereum at $8.1M. Bitcoin took the 3rd place at $5.2M while DeFi leaders Uniswap, & Aave round out the top 5

World Events Highlights

This Week’s Major US Economic reports

November 27: New home sales

November 28: Consumer confidence

November 29: GDP

November 30: Initial Jobless claims | Personal Income | Personal spending | PCE index | Core PCE index

December 1: S&P Global manufacturing PMI | ISM manufacturing | Fed Chair Jerome Powell speaks

Treasury yields nudge higher after the Thanksgiving holiday as investors assess the economic outlook with no Fed rate cuts on the horizon amid upcoming data still showing restrictive policy. Learn more

Fed minutes show no discussion of rate cuts despite market expectations, as officials see policy still restrictive, economic growth slowing markedly, and inflation risks still tilted to the upside. Learn more

Soaring mortgage rates have severely reduced housing affordability to lowest levels in decades, freezing markets and impacting mobility and generational turnover. Learn more

Major banks announce layoffs amidst rising rates causing unrealized losses, utilizing emergency Fed liquidity programs to manage stress signals a brewing global banking crisis. Learn more

Financials sector leads increase in S&P 500 earnings to a 4.3% gain with revenue up 2.4%, while forward estimates see just 0.6% profit growth in 2023 and an 18.6 P/E above 10-year average. Learn more

Reshoring of manufacturing to the U.S. is accelerating due to proximity to markets, government incentives, skilled workforce, synergies, and brand image, providing economic diversification and a multiplier effect for job creation and growth. Learn more

The U.S. fears Iran may provide ballistic missiles to Russia for Ukraine while the Wagner Group plans to give air defense to Iran-backed Hezbollah in Lebanon at Russia's direction. Learn more

North Korea claims successful satellite launch to boost military capabilities, vowing further missions, though details remain unverified, while South Korea calls it a missile test violating UN resolutions and partially suspends border surveillance deal. Learn more

Putin told G20 leaders ending the "tragedy" of war in Ukraine must be considered while claiming Russia never refused peace talks, his most dovish remarks yet though he still asserts Russian control of occupied territory. Learn more

Dutch Donald Trump Geert Wilders records a massive election victory with his anti-Islam populist party, overcoming mainstream shunning and death threats from extremists to potentially become the next PM. Learn more

Chinese authorities opened criminal probes into shadow banking giant Zhongzhi after a $36.4 billion hole was revealed, taking coercive action against suspects including the founder's relatives. Learn more
Israel received the list of the final 11 hostages released yesterday after 52 days held by Hamas in Gaza as part of a temporary ceasefire deal that has seen 39 freed so far, with sides negotiating a potential extension. Learn more

Investors need-to-know | Macro

The implications for investors across these developments are mixed but generally point to ongoing volatility and cross-currents across markets. Persistently high inflation tilting Fed policy hawkish will continue weighing on growth assets in the near term. Meanwhile, geopolitical tensions from Iran, North Korea and the Ukraine war represent incremental risks that could sporadically spark market instability.

The brewing crisis in China’s property sector also threatens global growth while it could benefit some commodities in the case of fiscal stimulus. The resilience of the US jobs market offers some counterweight but manufacturing’s competitiveness challenges may mute upside for now. Lastly, the housing downturn will be a headwind for sectors like materials and furniture and the overall economy.

There is uncertainty on the horizon across both macro and geopolitics, requiring vigilance and prudent asset allocation. Investors should take protective measures accumulating cash(dry powder) and parking 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 Treads Water

Bitcoin closed last week around $37.4k, continuing to move sideways as excitement cools from the recent rally. It remains unclear if Bitcoin heads lower or regains upward momentum in the weeks ahead.

This week brings several key events that could impact crypto markets:

On Thursday, OPEC meets to determine oil production levels. This directly influences global inflation.
Also on Thursday, the Core PCE inflation index comes out - the Fed's preferred inflation gauge.
On Friday, Fed Chair Jerome Powell gives a speech. His commentary often moves markets.

With Bitcoin appearing to stall out, macro factors like inflation data and central bank policy messaging return as prime catalysts to monitor. Key events later this week could spark the next meaningful move in crypto.

You can also check crypto project-specific upcoming events Here

Key Charts

Altcoin Season Index

This index tracks what percentage of the top 50 altcoins have outperformed Bitcoin over the last 90 days.

Below 25% signals "Bitcoin season" - Bitcoin is outperforming most altcoins.
Over 75% signals "altcoin season" - altcoins as a group are beating Bitcoin.
Stablecoins and asset-backed tokens are excluded.

Current Market Conditions

In bear markets and early bull runs, Bitcoin tends to beat altcoin returns. We remain in a bear, favoring Bitcoin over altcoins.

Most alts bleed against Bitcoin in these environments. The chart shows we are in between seasons presently.

Altcoins have pumped a bit recently, taking us out of firm Bitcoin season. But given bearish overall conditions, Bitcoin outperformance likely resumes before long.

BTC Puell Multiple

The Puell Multiple tracks Bitcoin mining profitability and selling pressure. It's calculated by dividing daily BTC issuance value in USD by the 365-day average.

When issuance value is high compared to the past year average, miner selling pressure rises as profitability spikes.

Analyzing Market Cycles

The Puell Multiple shows consistent long-term downtrends from each Bitcoin peak to the next. If the trend holds, expect it to hit 2-3 at the next bull run top.

Historically, market bottoms happen when the Puell Multiple falls below 0.5. These are good accumulation zones before the next bull.

Lately, the Puell has trended higher, signaling we may be past the depths of this bear market.

Investors need-to-know | Crypto

What's Bitcoin Up To?

Bitcoin has traded sideways this past week as Bitcoin ETF excitement fades. It remains unclear if BTC will keep creeping up or correct from here.

How's Ethereum Doing Against Bitcoin?

Ethereum looks weak against Bitcoin and could continue lower versus BTC if momentum stalls.

What About Altcoins Overall?

Most altcoins are losing ground against Bitcoin. However, some renewed excitement is brewing in altcoins recently.

What's the Best Move? (NFA)

Dollar cost averaging into Bitcoin on dips remains wise. But with altcoins showing some signs of life, it may soon be time to start evaluating select altcoins for modest capital allocation. Keeping some dry powder in USD provides flexibility to take advantage of potential opportunities arising.

Market Moves

The NFT market saw a surge in trading volume and floor prices over the long holiday weekend. Leading profile picture (PFP) projects saw floor prices increase 5-10% on the week, driven by increased attention and volume from Blur incentives and farmers.

However, top tier art projects largely saw floors decrease, with Fidenza down 7% to 65.3 ETH, Ringers down 17% to 35 ETH, and Gazers down 8% to 11.85 ETH.

Some notable gainers in the PFP category included Azuki up 10% to 6.05 ETH, Bored Ape Yacht Club up 9% to 29.64 ETH, MAYC up 13% to 5.69 ETH, Pudgy Penguins up 14% to a new all-time high of 6.21 ETH, and DeGods up 16% to 3.48 ETH ahead of a new roadmap release.

The big outlier winner was Jack Butcher’s new Trademark collection, which spiked from 0.069 ETH on mint to 0.33 ETH and currently at 0.256 ETH, driving renewed interest across Butcher’s eco-system of NFT collections.

With increased attention and volume flows into NFTs, along with a stronger crypto market, there is optimism that the NFT market could continue its up trend through the end of the year. However, some remain cautious whether the pump is purely driven by Blur farming incentives.

Source: NFT GO

New Highlights

Magic Eden introduced a new wallet designed specifically for its platform users and cross-chain collectors, now in beta. Know more

LooksRare updated its reward system with a new contract and $200,000 in ETH seeding for early adopters. Know more

Frank goes on announcement “spree” for DeGods, including, but not limited to: - New art iterations - End of Points - DeGods and Y00ts presidents & community leaders - IP licensing system - de[ID] iterations - And more Know more
Pudgy Penguins partnered with Walmart for a Cyber Monday deal, selling a "Celebrity Box" for $25 Know more

This week’s spotlight

Crypto Gaming Tokens Surge as Axie Infinity, Ronin, and ApeCoin Rally

Blockchain gaming tokens posted strong gains this past week, indicating a potential resurgence of interest in metaverse and gaming projects.

Axie Infinity saw its token AXS jump 12% to $6.88 after developer Sky Mavis brought back the classic Axie battling format and announced the first official Axie merchandise line. Sky Mavis also opened up commercialization rights for rare Axies, letting owners profit from their NFTs.

The Ronin sidechain token (RON) gained 27% to $1.06 thanks to growing adoption from the launch of the Pixels game.

ApeCoin similarly rallied 7% to a 3-month high over $1.63, which is tied to the Bored Ape Yacht Club NFT ecosystem and will power the upcoming Otherside metaverse game.

Stepn's token (GMT) went up 11% while Illuvium (ILV) climbed 9%. And Treasure's token (MAGIC) jumped nearly 24% after announcing plans for its own blockchain.

With new game launches, crypto gaming may be making its way back onto traders' radars.

Investors need-to-know | NFT

Market observations

Blur's new incentives are driving major spikes in volume and market share, now capturing over 75% of NFT trade volume over the past week.

Attention and trading activity around the new Blur Layer 2 Blast protocol is also benefiting the broader NFT market, with leading PFPs up 5-10% this week.

Sentiment feels stronger with crypto markets and tokens near highs, and traders seem to be re-entering the NFT market.

Flooring Protocol is promising to buy 10-30% of PFP collections, most leading sets have 60-70% of their NFTs which haven't sold in the past year. So Flooring buying 10-30% is huge for the available supply.

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.

Given the Blur airdrop and increased liquidity in the market, there's a possibility of certain NFT projects experiencing increases in their floor price.

Take advantage by securing whitelists for the upcoming NFT Gaming projects.

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

A couple of weeks back we began by outlining a framework to analyze narratives that will shape the next crypto cycle. Rather than chasing hype, we want to map secular trends.

So far we’ve explored major sectors like:

Smart contracts - Scaling and interoperability improvements underway
NFT gaming - Long-term potential if sustainability issues are addressed
DeFi - Innovating quickly but facing regulatory uncertainty
Real world assets - Tokenization set to unlock trillions in value
Decentralized identity - Empowering but early stage overall

Since we may be past the depths of this bear market, it’s a good time to dive into the research.

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

Check out our website if you haven’t already

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