Algorithma Crypto Brief # 6 - Breathing Room for FED Please
Crypto market structure, capital flows, market movers & narrative
Crypto Macro
Algorithma key Crypto Indicators
Macro Today - While BTC tried to break 40K over the week, weak On-Chain activity pulled it down and along with the entire crypto complex. We are not our of the woods yet, although I believe that 35K is the new level to watch on the downside. While signals are bearish, we must wait till weekend (You all know I am a fan of weekend crypto :)) to get some clarity and see if we get some direction. On-Chian weakness is getting even worse and bears and bulls don’t look like budging:
BTC Price that is dancing between 39-40K levels
Network velocity that stands at 260% - lowest since 2014
Network Fees that are down to $9mn/week - from already decreased levels of $10mn/week. They were about 40mn/ week in early May
Even the daily miner revenue continues to decline and miners are started to hard some inventory now but the China situation is not helping
Open Interest is almost flat as well and volumes are still not picking up
Funding rates are starting to go up for some alts but that is a non event IMO. BTC has to lead the way
It amazes me how powerful one person like J Pow can be. Everyone seems to be glued to their screens to listen and direct his each word. And when he moves, markets move. However, he (and by him we mean the FED) is stuck between a rock & a hard place. They need room to breathe. And that is exactly what they sought this week.
What did they do - they massaged the numbers to manage markets expectations while trying to get some breathing room by indicating two rate increases by 2023 end. That is about 0.5% in about 2 years.
What does that mean - Jack All. Two years from now 0.5%? Seriously? That means nothing and there are thousands of events and probabilities that could happen from now till then. If you see any signs of markets detracting , they will jump back in and throw more money - that is the only solution they know, they have.
How will markets behave - like markets do, Knee jerk at first, go down because some thing significant (0.5%) is going to happen in some light years (2 years), and then back to drinking games and party till 5 AM.
What does that mean for Crypto - generally bullish. Crypto is looking for a direction at the moment and at the same time whales, aka smart money is accumulating . Once BTC gets some legs ( and it will in a month or so), we will see another ATH. This is not financial advise and there are multiple factors at play. We are just talking about FED and What IF scenarios.
What do Investors do - Play long term and HODL. As simple as that. Did some analysis and realised that ETH has done better than most over the years and YTD. Best strategy was just to hold ETH on a risk-return basis. More on that in below sections
Crypto News
Article That Sought Our Eye
A great comparison in DeFi, exploring the difference in returns between holding spot ETH, a basket of DeFi governance tokens, and active participation in yield farming.
Managing returns, risk, and exposure,
Measure difference in returns between passive and active strategies,
Costs to participate in active strategies.
Glassnode compares four strategies over a six month period in our analysis:
A.) Buy and hold ETH,
B.) Buy and hold DeFi Pulse Index (DPI), basket of blue chip DeFi tokens,
C.) Yield farming a popular Sushiswap farm (SUSHI-WETH),
D.) Yield farming with stables on Yearn Finance.