| Your Weekly Update On All Things Crypto |
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| What the Heck is Happening to the Bitcoin Market? |
Usually, we save our Bitcoin analysis for later in the newsletter, but this week, the story needs to be front and center. What is happening to Bitcoin, and have we really reached the end of the bull market? In order to shed some light on the causes of this major selloff, we have listed a few major explanations for the crash:
China Cracks down on Bitcoin Mining and Crypto Banking: The National Internet Finance Association of China, the China Banking Association, and the Payment and Clearing Association of China published a notice saying member financial institutions should not provide services to crypto-related transactions or investment funds. While heavy crypto regulation is nothing new to the Chinese market, this message was much more explicit than the warnings issued in 2013, and 2017.Days later, news broke of a new crackdown on coal-powered Bitcoin mining in an effort to make good on the government’s commitment to meet its clean energy and emission goals. Currently, 65% of the mining power on the Bitcoin network comes from China, much of which is powered by dirty energy sources in Mongolia.If a full crack-down on banking services and mining does take effect in China, it could be a devastating blow to the hash power on the network, as well as access to the crypto market for their citizens. It should be noted that this ban does not prohibit citizens from owning Bitcoin, however, it does target banking institutions and private bitcoin miners with the hope of making it extremely difficult for Chinese citizens to get access to the crypto markets.
Energy Consumption FUD: The energy usage debate has long been an Achilles Heal for Bitcoiners. While this debate has been addressed time and time again, each bull market brings in many new-coiners and it can be difficult to distinguish between truth and fiction. The energy consumption narrative was exacerbated by Elon Musk when he made the announcement that Tesla would no longer accept Bitcoin as a form of payment citing ESG concerns. This caused a cascade of selling from ESG investors and institutions.
Excessive Leverage: While leverage did not cause the drop, it did do a lot to accelerate the speed and depth of the decline. Because traders were so leveraged long on the crypto market, a small pull-back was enough to liquidate highly levered positions. In fact, over 800,000 positions were liquidated (aka completely lost) in a 24-hour span from May 19th to 20th. Leverage is present in all markets, but perhaps most prevalent in crypto. You would be hard-pressed to find another market that offers such ridiculous amounts of leverage (up to 100x) as in crypto. In order for this market to take the next step as a global asset class, this leverage epidemic needs to be addressed.
Market Structure: It comes as no surprise to anyone that the crypto markets have been overheated. With the price of Bitcoin rising over 500% in a 6-month span, a pullback was almost inevitable. Moreover, given that the new Bitcoin highs were getting shorter and closer together, signaled that the parabolic move was losing steam. Once Bitcoin was unable to print a higher high on May 8th, the market lost faith in the upward momentum and the sell-off began.
So, is the bull market over? Although it is impossible to say with certainty, we are extremely confident that the bull run will continue this year. Similar to the 2013 rally, this bull run looks destine to have two major legs. We look at this dip as a golden buying opportunity before the next leg up. The general feeling of those in the industry is that these losses will be recovered in short order. |
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| DeFi Dashboard Zapper Raises $15M in Series A Lead by Framework Ventures |
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Zapper, the decentralized finance (DeFi) dashboard for over 150,000 monthly users, announced a $15M Series A round lead by Framework Ventures last week. Mark Cuban and Ashton Kutcher's Sound Ventures also participated in the round.
Born out of a hackathon in 2019, the crypto startup has seen significant growth since it's extended seed round in November of 2020. Acting as a hub for DeFi users to view, swap, stake and yield farm across multiple chains, Zapper supports 54 DeFi Protocols and recently surpassed $3 billion in total transacted volume. It's current web app plugs into users wallets but Zapper has plans to launch an on-platform app store for developers and is also working on creating a mobile app.
Zapper's CEO, Seb Audet, states "everything is fragmented, it's on a bunch of different apps living, different websites and web apps and our goal is really to reduce the friction and just have this one portal where you can track all your assets and manage and swap and farm." Audet also compared Zapper's coming app store to Shopify, which will enable community members to pitch in with new features.
Zapper will use the fresh capital to accelerate the growth of it's dashboard features with hopes to make DeFi easier through lessening the intricacies of crypto. As Zapper funds the development of it's new app store and mobile app, the team will also look to add Ethereum layer 2 roll-ups and other chain features for it's users. |
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| Bitcoin Falls Off a Cliff: Time for a Market Reset |
It's no secret that last week was one of Bitcoin's worst weeks since the COVID selloff in March of 2020. As we listed earlier in the newsletter, there were many factors that contributed to the pullback. With respect to market structure, as seen in the chart above, we can see that the bullish momentum was waning as it approached 60K. Once the following peak on May 8th was unable to chart a new all-time high, quickly market sentiment changed and the selloff began. At the time of writing, we have put in a bottom of roughly 30K, a support level that was formed in January of this year. Typically, pullbacks of this magnitude tend to recover quickly when they are in a bull run. Only time will tell if history will repeat this time. If the 30K support line is broken, our next support target is $25K.
View the chart here. |
| Altcoins Fair Well Amidst Bitcoin Pullback |
After 9 straight weeks of positive altcoin action, the long-awaited pullback came last week, and it came quick. As the price of Bitcoin plummeted, the altcoin market dropped even faster, retracing more almost 9% down from its local peak of 60%. Generally, when Bitcoin volatility increases, altcoins suffer. When Bitcoin stagnates, altcoins have their time to shine. A pullback to the ascending green line of support would represent an even 10% drop. If the bull market continues, we suspect the altcoin market to reverse the trend and test the 60% dominance line once again. With all the promising projects in the crypto space continuing to drive adoption, we suspect this bull market will see new all-time highs in altcoin dominance before the end of the year.
View the chart here. |
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| The Real Story of the Crypto Crash Isn't about Elon or China |
| | A High Yield Bond Trader Describes the Bull Case for Bitcoin - Greg Foss |
| | This Week in Crypto: Bitcoin FUD, ADA, MATIC & More! |
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| At a nearly 50% discount from all-time highs, Bitcoin is a deal for those trying to "buy the dip." Given that Alt-coin dominance has started to retrace, the best coins to be in at this time are the large-caps. As the market capitulates, Bitcoin will likely start to steal more market share from the smaller-cap coins.
View the chart here. |
| | | Another strong play to capitalize on the pull-back is Ethereum. After a quick 51% retracement from all-time highs, ETH stands to gain momentum once the market turns around. Also, with EIP1559, around the corner (slated for release in July) We suspect the new deflationary monetary policy to drive even more demand for the 2nd largest cryptocurrency.
View the chart here. |
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| We at CryptoWeekly are not Financial Advisors. None of the content or opinions expressed in this newsletter should be considered financial advice. We highly recommend that you do your own research before investing in any project within or outside the cryptocurrency space. |
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