The weight of Bitcoin in investments
The weight of Bitcoin in investments
Crypto's role enhanced by tense moments in financial markets
Lost coins only make everyone else’s coins worth slightly more. Think of it as a donation to everyone
Satoshi Nakamoto
Moments of tension from the Dragon's Country accompanied the weekly decline that only with a burst of pride on Sunday allowed limiting the damages of the second-worst week since last June.
With only a few days to go before the close, the month of September is about to close in the red, without compromising the quarter's performance, which shows another rise.
For Bitcoin, this is the positive fifth quarter out of seven since the beginning of 2020, while for Ethereum, it is the seventh consecutive quarter in the green, the best consecutive series ever for the queen of altcoins.
On Monday, September 20, China's Evergrande real estate giant warned that it would not be able to cover its debts, worth a total of $300 billion, due by the end of the month, triggering a sharp drop in the prices of all Chinese real estate companies. These losses also spread to American and European stock markets, raising fears of a possible "Lehman effect" that a Chinese real estate crisis could have had on global financial markets.
Concerns caused global stock markets to lose further ground, making the American S&P 500 index return to the levels of the beginning of July, with a loss of 5.5% from the absolute highs of the start of the month. That is the third time since the beginning of the year that the US stock index has slipped more than 5% from its previous absolute highs.
On Friday, the fire is again stoked by a new ban by the Chinese Central Bank, which bans all transactions on digital assets. A veto that reflects negatively on Bitcoin prices and the whole sector, which cancels the rebound that started from Tuesday's lows. Even the Chinese choices no longer seem to reflect as dramatically as they did in the past, highlighting how investors now seem to discount China's diminishing weight in adopting cryptocurrencies, supporting the official and increasingly imminent launch of its own State CBDC with the digital Yuan.
After more than a year of independence, the correlation index between Bitcoin and other major financial assets is back at highs. The metric that records the correlation realized in the daily trend between the price of Bitcoin and that of the S&P 500 is currently over 63%, the highest point since July 2020 and the second highest peak in the last four years.
The realized correlation between Bitcoin and physical gold also climbs back to its highest level in three months. The metrics indicate how investors demobilize positions held on crypto-assets at critical moments of liquidity, increasingly becoming part of investment choices worldwide.
That is also confirmed by the volumes of derivatives traded in the last week, which rose at the beginning of the week for both futures and options, coinciding with the decline in the Open Interest of positions held on both instruments. These data indicate how in times of portfolio repositioning, Bitcoin always becomes important as an investment asset. Within the next few months, SEC decisions are expected to approve prospective ETFs on Bitcoin and Ethereum. A choice that, when it becomes final, will make Bitcoin take on an increasingly relevant role in the global financial environment.
Decentralized Finance
The regulator's hand against decentralized finance is starting to get heavier. After the statements at the beginning of August, during the Aspen Security Forum event and the subsequent SEC investigation against decentralized finance platforms, Gary Gensler, chairman of the SEC, is back on the attack during the live streaming organized by the Washington Post. During the online event, he stated that digital tokens would be recognized on par with securities, urging entrepreneurs in the cryptocurrency sector - including those involved in DeFi - to collaborate with the authorities to facilitate the work, hinting that those who do not will suffer enforcement actions.
Clear and unequivocal words that have raised tensions and criticism, such as those of Ryan Selkis, the CEO of the platform Messari, who stated, "If today's SEC had been responsible for internet policy in the '90s, we'd still be communicating via fax".
The harsh attack does not seem to worry operators. DEX (Decentralized Exchange) trading volumes are up with over $18 billion traded in the last seven days, with an 18% increase on a weekly basis. As anticipated in the previous issues of the newsletter, with over $85 billion in total, the month of September is going to close with the second-best result for the number of trades and value calculated in dollars.
The leadership of Uniswap remains firm with over 115k traders and a volume of $12.5 billion changed hands in the last week, consolidating the first position by regaining over 70% of the market share.
Sushiswap follows at a distance with $2.2 billion or 12% and
Curve with $1.1 billion and 6% dominance.
Total Value Locked (TVL) rises to $84 billion with over 7.7 million ETH immobilized on the various DeFi projects, the highest number since last April.
Aave's multichain lending and financing protocol consolidates the top position with over $14 billion immobilized, followed by
Maker and Curve, both above $12 billion locked.
Non Fungible Token
Even though September was less eventful than the previous month, with general volumes cooling down, the investment activity on the part of Venture Capitals on several projects involved with Non-Fungible Tokens remains very lively.
In the last week, two important NFT startups have raised together 930 million USD. These are Sorare, a French fantasy soccer platform, which raised $680 million with Series B funding, led by Japan's SoftBank, boasting a $4.3 billion valuation. Upon completion of the raising, the Sorare team announced that the project would be expanded to other sports, involving hiring elements and new talent.
Another sports project, NBA Top Shot, which rose to fame earlier this year for being created by the team at Dapper Labs -the same as CryptoPunks-, closed the funding round with over $250 million, receiving a $7.6 billion valuation.
The Dapper Labs team confirmed that it has partnered with the Spanish La Liga, also involved in a deal with Sorare, confirming how the growth of partnerships between various projects is setting the stage for organic growth of the entire industry.
Trading Volumes for the last week remain in line with the average for the last month and far from those recorded for the entire month of August. The $109 million project, Axie Infinity, confirms its leadership, in line with previous weekly trades, while CryptoPunks' trades drop to $40 million (-22%) and Art Blocks' $32 million (-52% weekly). Art Blocks' generative art project places three of the top five weekly auctions. XCopy's "All-Time High in the City" auction on SuperRare with 1,000 ETH, or $2.9 million, posted the highest price of the past week. The work previously created in November 2018 had been awarded for 16.6 ETH, at the time, in December 2019, equal to $2,425.
Trading volumes also drop for Fan Tokens. Among the top five, only the FC Barcelona token registers a 120% increase since last week, rising to $158 million total. A growth that does not allow to climb to the first position is confirmed for the second consecutive week by AC Milan that since last Monday exchanged $189 million. Among these top five grows the token price for AC Milan with a +9.8%, regaining $ 10 per token for the second time since May, and Juventus, up +4% with a price that touches $ 12.
Dream Quest: decentralized play-to-earn RPG game
This week our attention is caught by a new project called Dream Quest.
Dream Quest is a decentralized fantasy-setting video game that offers users the chance to play cards with unique and collectible NFTs. Players can carry out different confrontations and create the best strategies to defeat their opponents in exciting quests, tournaments, events, and battles.
The video game offers the possibility for all players to perform numerous challenges and collect tokens, farm, and continue to level up in a game where the competition is very high.
Players have the opportunity to continue playing and discover new realities and virtual worlds, collect resources or tokens that they can exchange or use to upgrade their NFTs, sell them, and earn even more.
In each encounter, there are unknown factors such as weather, temperature, elements that affect the attributes of players and NFTs. There are magical and legendary items that can help some players get the better of the battle.
The fascinating thing is that all these changes and variations are written into the attributes of the NFTs and automatically recorded on the blockchain.
Dream Quest consists of several explorable parts of the world called Realms; each part has different factions that allow players to choose characteristics and ally with the chosen nation.
The Guardians are the ultimate protectors of the realms. Each side has an equal number of NFT Guardians. Guardians have unique powers and abilities that no one else can possess, and because of these powers, they can gain even more. They can strategically unite to attack other factions and lead players to victory in battle.
This video game is poised to be one of the most interesting cryptocurrency role-playing games of the moment that also uses unique NFTs allowing users to play, scale skills, and earn even more tokens.
The roadmap and development of the video game seem to be full of exciting points until 2022 when the Testnet game and the first beta access will be released.
Among the most famous allies and developers of the game are Polygon ChainLink and Polka Foundry, truly relevant names in the cryptocurrency world. A lot of important news awaits us in October, including the opening of initial sales of NFTs and the token launch.
So, for the time being, keep your eyes open, and let's see what will happen to Dream Quest, waiting for official news from the website and from the Discord community of the videogame.
*Please Read our Disclaimer
5 hottest DeFi news of the week
Twitter and Bitcoin Lightning Network: promises become reality
Uniswap (UNI) gains nearly 50% in 24 hours as China’s latest crypto purge boosts DEX tokens
Cardano to enable new DeFi stablecoin with Coti
Bitcoin Is the Most Illiquid It’s Ever Been: 12 Numbers That Tell the Current Story of Markets
Axie Infinity Has Sold $2 Billion Worth of Ethereum NFTs. Here's What’s Next
Technical Analysis
Bitcoin (BTC)
The declines of the last few days bring prices back to the levels of early August, flirting with the psychological threshold of 40,000 USD that corresponds to the 50% Fibonacci retracement calculated with the lows and highs of the current two-month cycle that began in mid-July.
After the decline that twice (Tuesday 21 and Sunday 26) has put a strain on the support of 40,500 USD, it is rebounding the prices that in these hours manage to tick above 44,000 USD. A reaction accompanied by good short-term volumes that must begin to consider the possibility of two-month cycle closure, with recent lows and the possibility of restarting a new cycle accompanied by new short-term highs.
BTC levels to monitor for the week:
° Upside: a return of the price above USD 45,000, with the recent relative highs touched between September 23 and 24, triggers the first signal of a possible reversal of the trend from bearish to bullish, in line with the hypothesis of the start of a new monthly cycle.
° Downside: a descent below the recent lows of 40,000 USD will bring back the tension and the possibility of revisiting 35,000 USD, the level that meets the bullish trendline that joins the last year's lows.
BTC Options
After the expiration of the monthly derivative contracts and the collapse of the Open Interest for both instruments, the new hedging strategies favor Call selling positions. Professional traders continue to identify the area of 50,000 USD, a level that in the last month has rejected both attempts to rise as resistance to overcome for a directional change. On the contrary, the support of 40,000 USD, in addition to the technical reasons mentioned above, is the only level to be monitored with attention to assessing the dangers of possible declines to obtain new short-term lows.
Ethereum (ETH)
The technical price structure is similar to that of Bitcoin. Between the two assets, the doubts that showed a misalignment until a few days ago between the 3 and 2-month cycles seem to start to clear up. With the double minimum of the last few days, the structure of the two-month cycle seems to have been explained, even if it is necessary to wait for confirmations that may arrive even in the short term.
For the quotations, it is necessary to rise above 3,200 USD to have a first bullish signal and drive away from the uncertainties that accompany the weakness from the beginning of the month.
ETH levels to monitor for the week:
° Upside: the ascent of prices above 3,200 USD could blow up the bearish stop-losses of the short term and trigger new purchases, opening spaces to go back up to the 3,700 USD area, the highs of mid-July.
° Downside: the recent double minimum in the 2,700 USD area has built a valid support base and became an operational reference. A consolidation above this level for the following days of the week will increase the probability in favor of the restart of the new monthly cycle. On the contrary, there are ample spaces to fall dangerously in the 2,400 USD area.
ETH Options
Even though the strategies remain in favor of hedging new rises, there has been a tripling of new openings to hedge the downside risk in the last few days. Analyzing the open positions on Puts, the area between 2,700 and 2,900 USD (a level that coincides with the TA references indicated above) is the range to protect in order not to risk painful slides. On the upside, above 3,500 USD, a rush of new purchases could be created.
Disclaimer
The analysis presented exclusively reflects the author's point of view and does not represent operational advice or a trading signal and should not be seen in any way as a service of financial advice or solicitation of public savings and should not be taken in any way as a service on which to base investment decisions.