It seems like the crypto community has already checked out for the year because there is absolutely nothing going on – no hot news, no debates, no controversy…

Before we jump into today’s content, I wanted to wish everyone a very happy new year – may it be as exciting and profitable as 2021!

Market Watch

• At least price-wise, it seems like the bears are showing some mercy on the last day of the year, with the crypto market bouncing moderately from yesterday’s lows. Especially DeFi is finally getting some love after being beaten down for months and almost entirely skipping the altcoin bull market in the second half of 2021.

• It seems like options expiring today was the primary catalyst for this week’s price action. Only up from here?

• The last weeks’ sentiment on Crypto Twitter could make one believe that we have entered a brutal bear market with prices crashing to new lows on a daily basis. If you zoom out and look at the charts, however, you can see that after the initial liquidation dump, prices have just consolidated in a large sideways channel…

• We have outlined several times recently that the crypto market will likely look quite different in 2022, with less overall money printing by central banks driving up asset prices, a new crypto cycle framework (lengthening cycles?), many projects and important updates finally shipping (think the Merge, innovations in the NFT space or hotly anticipated crypto games) and an overall structural shift of the crypto market. To end the last post of the year, let’s conclude with some more fresh outlooks for 2022:

With crypto prices still in limbo and susceptible to erratic price swings due to the super-low volume on exchanges, at this point, most crypto holders are probably longing for the beginning of the new year. Not just can we then put all tax harvesting FUD to rest, but we can focus on the likeliest short-term hopium for crypto: Institutional reaccumulation.

Market Watch

• It’s clear, looking at prices hasn’t been particularly pleasurable as of late. While the weakness in crypto prices is pronounced, so far, we haven’t broken the “flush lows” of the last major liquidation event. Thus, patience is key to assessing where we go next.

• The current “sketchy” outlook is reinforced by the fact that BTC exchange deposits have been increasing significantly in the last hours. Is that a precursor to more pain or a sign that capitulation is near?

• On the bright side, we can still observe rather strong hodling behavior by long-term holders, likely putting a floor under Bitcoin’s price. That doesn’t mean that we have to shoot straight back up (since for that, you also need buying pressure), but at least it should limit downside risk to a degree.

• As we mentioned yesterday, our biggest short-term bull case right now is that institutional investors who have been aggressively rebalancing their portfolios in the last few weeks will start reaccumulating crypto with fresh books in the new year.🤞🏻

• One way or another, at this point of the cycle, some real talk for anyone who missed out on the gains in 2021 and wants to “make it” next year is appropriate…

• At the same time, crypto rewards the brave more often than not. So with seemingly maximum fear in the markets right now, it’s likely a more opportune time to DCA into the market compared to the euphoric bull run phases in spring and autumn.

Is it tax-loss harvesting that caused the crypto market sell-off at the beginning of the last week of 2021? Or is it just whales playing with super-thin order books in a week where institutional investors are mostly absent? We can’t tell for sure, but one thing is clear: Last week’s price gains and the euphoria on Crypto Twitter have evaporated faster than they came.

Market Watch

• After a few rather brutal weeks in the markets, the eagerly awaited Santa rally came after all last week. However, the fun didn’t last long, and Bitcoin’s short-term ascent got stopped precisely at the critical resistance level everyone was watching: $53k.

• What does that mean for the markets? Well, most likely more of what we have seen in November and December: consolidation. Crypto prices showing this much weakness and panic at first sight of overhead resistance is certainly not a good sign in the short term… However, we should also not overinterpret today’s dump, given the low volume in this holiday week.

• A bit concerning is that crypto, while correlating strongly with equity markets, underperformed them massively in recent weeks. While only benefitting mildly on moves to the upside, any shakiness in stocks has led to an abrupt sell-off in the crypto markets.

• On a more positive note, even though crypto has underperformed equity markets recently, the signs for a continued overall risk asset rally in January are mounting.

• What do we need to change the current negative trend in crypto markets? Well, either crypto fundamentals improve strongly for price action to follow – however, we don’t have as many catalysts lined up right now. (“Maybe” the Merge in a couple of weeks?). From an on-chain and structural perspective, it’s indeed not a very bright outlook at the moment.

• Another possible driver to change the trend back in favor of the bulls could be a structural change in buying and selling activity. While it’s unlikely that retail investors will flood into crypto out of nowhere any time soon, institutional investors may start redeploying capital in January. That’s the biggest hopium we have right now.

• With macro conditions likely going to deteriorate and not improve over the course of 2022, it’s likely that January (maybe also February) is the month that determines if we can get another rally in this bull market cycle. Later in the year, the signs point to a storm with a choppy grind up in the best and further drawdowns in the worst case. (This refers to the general market, but of course, there can always be exceptions of fundamentally strong projects with fast-growing adoption.)

• Some fractal hopium is never wrong, though:

It’s Airdrop Season Again

• In 2020 Uniswap introduced an entirely new form of token distribution at scale: the retrospective airdrop. Soon after that, many existing and new DeFi protocols executed their own airdrops – some more, some less successful. Once it became harder and harder for projects to perform a “good airdrop,” the trend slowed down somewhat.

• Recently, however, airdrops have made a comeback. Especially the ENS airdrop went to become one of the most successful token distributions ever.

• This week the crypto community was treated to two more airdrops: SOS and GAS (go claim them if you haven’t already).

• However, it would be unfair towards ENS to throw SOS and GAS into the same category since both of them don’t have a working product (yet), and there are several red flags…

• While getting rewarded with free money for using crypto protocols is nice, it’s important to differentiate between the different airdrops. I’m not saying SOS and GAS are scams (even though we haven’t gotten many details about the two projects yet). But this new wave of airdrops of new projects opens the door for shady actors…

Real Worlds Assets Coming to Aave

• When you asked crypto people a few years ago about upcoming use cases, tokenizing real world assets was one of the most mentioned. However, due to a lot of friction and legal complexities inherent at the intersection of the digital and physical world, it has taken much longer for RWA tokenization to take hold.

• While we have already seen isolated projects of real world asset tokenization, these were mostly executed in a permissioned manner (e.g., the tokenization of real estate or wine by a few companies). Bringing real world assets into the global world of DeFi would undoubtedly be a milestone for the crypto space – and that’s exactly what Aave is shooting for!

• At this point, it’s hard to tell if this specific product by Aave will catch on in the short term. But there is no doubt that in a couple of years, real world assets will be a central part of DeFi, just as altcoins and stablecoins are today. The projects that can capitalize on this massive trend will likely experience tremendous growth.

The RWA Market is a much-needed building block not only for protocols such as Aave, but across DeFi as a whole," said Stani Kulechov, found and CEO of Aave. "Knocking down barriers of entry and making DeFi accessible to all is part of the Aave Companies' vision, and we are excited to be fulfilling this through the collateralization of real-world assets, made possible by Centrifuge.

• On top of Aave’s real world asset integration, there has been another announcement hot off the press which will excite L2 fans!

Another day full of volatility and fear lies soon behind us, and again, stock and crypto markets have tumbled hand in hand, followed by a relatively strong bounce from the lows. It’s clear: Nervousness in the investor community is still sky-high – but “buy the dip” mentality as well.

At this point in time, the fate of crypto prices is – unfortunately – strongly linked to the health of equity markets. As you can see in the charts below, today’s price action of BTC and the S&P 500 has been almost identical.

One small comfort we find amid the strong correlation between crypto and stock markets is that Ethereum has been bleeding less than tech stocks…

If you have been reading this newsletter for some time now, you have surely not been surprised by the increased volatility of the last weeks, as we indicated that the Fed’s hawkish pivot, combined with a slowing economy, could lead to a very shaky market.

Does that mean that everything will only go down from here? No, because despite the immense uncertainty all around, the chance of dip buyers stepping in and supporting the markets is still fairly high. We would likely need more cataclysmic events to send the stock markets down to tremendous new lows – which is, of course, always a possibility.

All in all, the current investing climate is certainly not for the faint-hearted, and you should be prepared for more rollercoaster rides in the weeks ahead!

Market Outlook

• The last weeks’ market downturn has undoubtedly left some scars on crypto bulls. However, technically, the weekly uptrend and the hope for renewed bullish price action are not lost…

• We continue to see a “battle” between – likely institutional – crypto sellers on Coinbase and accumulating crypto whales on Bitfinex.

• Will institutional selling be exhausted soon, with today marking the last trading day for many funds?

Wild Stories Only Crypto Can Produce

• What a crazy day it has been – not just price-wise but also when it comes to other emerging stories. First, Justin Sun resigned as the CEO of the Tron foundation in order to become an ambassador to the Caribbean island nation Grenada... Then notorious crypto-hater Brad Sherman lauded the Mongoose community for donating to tornado victims… 🤯

TRVL Airdrop

• If you are currently holding Travala’s AVA token, you are eligible for a TRVL airdrop. Don’t forget to submit your wallet today!

A Gaming Project to Have on Your Radar

• Yes, gaming tokens have cooled down quite significantly after their huge run in autumn. While we don’t know if prices will come roaring back soon, it’s surely more interesting to look at new gaming projects when the overall hype has calmed down.

• An interesting, brand-new project to look out for is Fancy Games DAO. Check out the thread below to learn more!

Disclaimer: With the $FNC token launching today and the overall market environment being rather uncertain, be aware of the risks involved with investing in new projects like these.

Well, yesterday was an interesting day in the markets, to say the least: After lots of fear and price declines in stocks and crypto leading up to it, yesterday’s FOMC meeting turned out to be what many expected: A “buy the news” event, where we saw both stocks and crypto popping up from their lows.

Is This the End of “Fed Fear” Dominating the Crypto Market?

• Can we finally put the fear of the Fed crashing the markets to rest? Well, yes and no. While the Fed signaled a hawkish posture yesterday by accelerating its tapering and rate hike plans, the markets had already expected this. As Darius Dale puts it, this might open up another window for risk assets to do well for a while.

• Let’s hope Zhu Su is correct (this time):

• Chart-wise, there are undoubtedly bullish outcomes in the cards:

• But there are, of course, different possible outcomes:

• If you’re unsure what to do right now, here is a possible strategy outlined by Will Clemente (as he points out, this strategy only affects his short-term trading stack and not his long-term “HODL-portfolio”).

• When looking through the initial “buy the news” euphoria, however, the reality is that monetary and fiscal conditions will become tighter in the weeks and months ahead. Combined with signs of a slowing economy, this should, in theory, not bode well for risk assets.

• Even though the equity and crypto markets might have been given another pass for now, it's clear that we can't take our eyes off the macro environment for the foreseeable future. While everyone in the crypto community would love to see a decoupling from traditional markets, the fact is that Bitcoin and co. traded in lockstep with equity markets yesterday – down to the minute candle…

• It’s just a reality the crypto community has to face: the more institutional money flows into the crypto space, the more correlated crypto becomes with traditional markets overall.

• There is a likely scenario, however, where subsectors within the crypto space that are highly demand-driven (like gaming and NFTs, for example) can decouple at least to an extent from the movements of the overall markets. Spotting such opportunities will be a central focus of us since the macro investing climate going forward will not be what it was in 2020!

• Meanwhile, some of the best “advertisement” for Bitcoin and crypto is coming out of Turkey, where the Turkish central bank cut interest rates today to fight inflation (yes, you heard right: “cut”). It’s no surprise that the Turkish Lira is and has been in free-fall for months, fueling one of the highest crypto adoption rates in the world!

• To wrap it up, below is some advice for people who try to navigate these crazy markets. The critical thing to know is when to step on the gas and when to step on the brake. Let the macro environment and your conviction be your guides. And most importantly: follow a plan!

If you checked your portfolio yesterday, you must have been quite shocked…

Did you manage to nail the top?

Jokes aside, obviously, the major data glitch CoinMarketCap, Coinbase, Binance, and Co. experienced yesterday prompted a wave of memes on Crypto Twitter. While no major damage was caused, it was indeed a good reminder that the crypto space and its infrastructure are still nascent and full of bugs and risks...

What are we looking at today? Of course, all eyes are on Jerome Powell and the FOMC meeting, which has kept the markets in suspense for many days now... While the consensus expectation seems to be a “buy the news” event, be prepared for some rollercoaster price action.

As macro expert Darius Dale puts it: “Investors are ill-positioned for a probable US Dollar short squeeze amid growing talk of a Santa Claus rally in/across risk assets.” 💥

Here are some more takes on this pivotal day for all asset markets:

Continued Mainstream Crypto Adoption…

• In the end, what crypto needs to grow sustainably, both prize-wise and fundamentally, is continued adoption. That’s the reason why we keep highlighting major crypto adoption stories – even if they don’t have a short-term impact on prices.

… While the Legacy System Feels Increasingly Threatened

• At the same time, the famous saying “First they ignore you, then they laugh at you, then they fight you, then you win” is playing out before our eyes. We’re likely somewhere in the later stages…

Juicy New Yield Farming Pastures

• Are you sitting on stablecoins after heavily taking profits (hopefully) and don’t want to throw it all back into the market? Then, you should consider deploying a portion of your stablecoins into different DeFi opportunities to earn yield.

• Today, cross-chain bridging protocol Celer Network has launched an attractive liquidity farming program. If you want to provide some of your coins as bridging liquidity and get rewarded handsomely for the risk, you should check out this DeFi opportunity.

• While rewards are currently the highest on Ethereum L1, there is also the option to provide liquidity on a cheaper L1 or L2. However, Ethereum fees are much lower today than they were recently.

Composable Finance Crowdloan

• A project we have had our eyes on for quite a while is cross-chain DeFi protocol Composable Finance, which already has a great working product, the Mosaic bridge. Composable Finance is perfectly positioned among several narratives, which we believe will remain hot in the future: Polkadot, cross-chain DeFi, and L2s.

• Today, Composable Finance entered the race for the next Polkadot parachain slot (after Acala, Moonbeam, Astar, and Parallel won the first four slots). If you still believe in the Polkadot ecosystem long-term (as we do), contributing to this fundamentally solid project could be a worthwhile moonshot.

• A big positive is that the hype surrounding Composable Finance isn’t nearly as large as when Moonbeam and Acala had their crowdloans, which means you will likely get a “fairer” allocation now...

There have been quite a few “bottom callers” on Crypto Twitter today anticipating an imminent reversal of the crypto markets. Will they be right, or will the macro-induced downtrend continue? Let’s look at some promising and some potential warning signs.

Market Outlook

• Should you have been buying the dip yesterday and today in anticipation of a bullish reversal, or is it still time to be cautious? Well, that depends a lot on your risk appetite and whether you have been taking profits when the market was still hot. To be clear, the risk of making big moves now is still considerably high.

• There are several indicators and theories, however, that suggest that some short-term relief could be around the corner for Bitcoin and Co.

• However, given the current rather hostile climate for risk assets, jumping headfirst into altcoins could be a risky undertaking, given that smart money seems to be sitting on the sidelines waiting out this uncertain period.

Nike Acquiring RTFKT

• Yesterday, the news of Nike not just buying a single NFT (like Adidas did recently) but instead a whole NFT project, RTFKT, has caused quite a stir in the crypto community.

• While the initial reactions to Nike’s NFT acquisition have been mostly positive and interpreted as a major step forward for the overall NFT movement, the news also provoked some critical voices:

• In other bullish Web 3 news, Shopify hinted at an upcoming MetaMask integration – probably nothing…

• To sum it up: The trend of mainstream corporations jumping onto the metaverse and NFT bandwagon has clearly accelerated lately. 2022 is undoubtedly going to be exciting!

Yes, we all would like to see the crypto markets turn bullish again and continue their moon mission… But is it likely that crypto prizes will blast off today or tomorrow? Most likely not.

The fact is that all eyes are on the Fed this week and how the stock markets will react to its decisions… Will we see a fear-induced sell-off leading into the FOMC meeting on Wednesday (where we expect the announcement of accelerated tapering), or a nuke afterward? Hard to tell since it depends on how much of the Fed hawkishness is already “priced in” and how the markets will interpret the Fed’s words… However, with a high likelihood, we can expect nervousness and choppiness until at least the middle of this week!

Market Outlook

• It’s a big week for global asset markets: After years of seemingly unlimited money printing, which fueled a massive “everything bubble” and led to “up only” market sentiment, we are now in for a possible major policy shift that will alter the macro investment climate.

• Since the investment climate for risk assets is more than uncertain in the short- and possibly mid-term, we advise you to have your risk management in check, which involves proper position sizing and a low-time preference.

• Don’t forget: Crypto and Web 3 are the future, even if markets are shaky for a while. It’s all about managing risk and seizing opportunities when they arise!

• What is a good example of how not to approach this market? Well, how about aping into meme coins like DOGE or SHIB when everyone and their friends are talking about them? As you can see in the chart below, DOGE is a picture-perfect example of how bearish distribution to “the herd” looks like…

• Here is a message that, unfortunately, many people have and will not take seriously until it’s too late: If crypto gains have the potential to change your life, take them – even if only a portion!

• If the recent market downturn made you doubt your involvement in crypto, here are some wise words from Santiago Santos:

• And here is some more (not serious) advice for how you can protect yourself from inflation instead of investing…

• If you need signs that crypto is fundamentally still moving along despite stalling prices, here are a couple of news items from today:

• Even without hot crypto prices, Web 3 is still undoubtedly the future!

As inflation and tapering fears keep the equity markets from coming to rest, we see the expected choppy and negative price action in the crypto markets as bear market vibes spread like wildfire. Are things really looking that bad?

While the risk of a prolonged bearish period is undoubtedly rising given that we have experienced a 2+ bull market, we – and other reputable market analysts – are still of the belief that this bull cycle is not over... Of course, we could be wrong, and it’s certainly wise to hedge your bets.

While crypto prices are dropping, it’s essential not to let short-term uncertainty affect the conviction in your long-term investment thesis. It’s advisable for most people to mentally separate long-term holds from short- to mid-term “swing positions.” This way, you can sleep well regardless of where the markets are heading in the short term.

Inflation… Again

• As we prepared you yesterday, a highly anticipated CPI date release came out today… and it’s not looking good.

• While intuitively, one could believe that such high inflation numbers are good for stocks and crypto, but in reality this is not the case:

• What makes things a bit more complicated is the fact that stock markets often “price in” news before the fact. In this case, we already saw a stock market pullback last week and yesterday. The question is now: Will the stock markets “look through” this already expected, nevertheless still massive inflation number? Or will panic spread and the sell-off continue?

• We’re certainly not out of the woods yet: Next Wednesday’s FOMC meeting will mark another critical test for the markets.

• With Crypto Twitter realizing how material the impact of inflation and the stock markets are on crypto prices, it’s no surprise that more and more self-proclaimed “macro experts” appear on the interweb. It’s best to take everything you read with a grain of salt.

• With all this (tiring) talk about inflation and the stock markets, it’s essential not to neglect how strongly the crypto space is fundamentally moving ahead… Thus, at some point, prices should – in theory – catch up again.

The L2 Ecosystem Is On a Roll

• While crypto prices have not been particularly interesting recently (unless you like choppy price action), there is no lack of exciting developments in the L2 ecosystem:

• Starting with Polygon doubling down on its ZK-Rollup strategy and incorporating yet another project, the popular Ethereum scaling project is definitely well-positioned to expand its strong position in the L2 ecosystem.

• In contrast to most other L2 networks (e.g., Arbitrum, Optimism, zk-Sync, StarkNet), Polygon already has its MATIC token. While MATIC has already performed very well this year and is not immune to a possible market downturn, MATIC’s fundamentals are certainly among the best in the crypto space.

• However, MATIC has yet to break its old all-time high at $2.62 to enter price discovery mode… So there is certainly some risk in the short to mid term.

• A critical aspect for L2 adoption are on-ramps. So far, there have only been two options to get tokens to an L2: 1. Bridge tokens from Ethereum (or another L1), which often includes high gas fees, or 2. Send Tokens directly from a CEX like Binance or Coinbase. Unfortunately, CEXes have been relatively slow to adopt L2 transfers so far, but things are improving on that front.

• Thanks to Ramp Network, there is now a third option: A direct fiat on-ramp to L2s. Starting with Loopring and soon expanding to other networks, this marks a significant step to fostering L2 adoption.

• Another favorite project of ours at the L2 front, StarkNet, is making great progress after its recent launch. Keep your eyes peeled for more news on the evolution of this promising ZK-Rollup solution.

• Another Ethereum L2 solution gaining traction is Aztec, a ZK-Rollup-powered protocol focused on private token transfers. Since the project doesn’t have a token (yet) – just like many other L2s – it might be worth opening and funding an Aztec account (which you can do here). The brief time investment might be rewarded with a juicy airdrop…

The Next Airdrop For L2 Early Birds!

• If you have been reading this newsletter for a couple of weeks and you share our excitement for L2s, then you will most likely have tried out Hop Protocol – an excellent bridging protocol that allows for quick token transfers between various L1s and L2s. If you did give it a shot, guess what? You’re eligible for another airdrop! 🎉 (thanks to @darshanbaba for giving a hint!)

• While it’s not Hop Protocol itself launching a token, cross-chain DeFi protocol Instrumental Finance is distributing a percentage of its token supply to users of various bridging protocols. Besides Hop Protocol, this includes Composable’s Mosaic (which we repeatedly covered!), Celer’s cBridge, and Connext’s bridge!

• Here you can check if you’re eligible for the airdrop. All relevant information on the token distribution is shared in this article.

• By the way: History has shown that dumping airdrops in s often a viable short-term but a terrible long-term strategy. Just look at Uniswap’s UNI token: After the initial airdrop dump, UNI became one of the largest DeFi tokens, yielding insane gains for people who held the token long enough.

• When it comes to Instrumental Finance, I could definitely see the project do very well in the mid- to long-term as it’s perfectly positioned in the L2 narrative:

Leveraging several key features of the Composable technology stack, Instrumental aims to enable seamless chain- and layer-agnostic transfer, swapping, and liquidity provider APY maximization capabilities in order to provide novel yield generating opportunities on various L2s and L1s for its users.

Yesterday’s surprisingly bullish congressional hearing (more on this in Elliot’s last video) didn’t have much impact on the crypto market. After the strong bounce earlier this week, the market is now consolidating and looking for direction.

With the stock markets shaky ahead of tomorrow’s inflation data release and – even more importantly – the FOMC (Fed) meeting coming up next week, the current choppy price action will likely continue for the time being.

Side note: We know we have been talking a lot about the stock markets recently, while we would prefer to just focus on crypto. However, the impact of the macro climate on crypto has been super strong as of late and the current environment just doesn’t provide fertile ground for risk-on assets (like altcoins). This will change again at some point, of course.

Market Outlook

• As outlined yesterday, Bitcoin dominance is currently retesting critical support levels. The outcome will determine whether we get an alt season of epic proportions (rather unlikely the way most charts look right now) or a strong Bitcoin move (to either the down- or upside) that mutes altcoins for a while.

• In the current uncertain climate, the likelier scenario is that altcoins will take the backseat for a while until we reenter a risk-on environment (likely after a Bitcoin breakout and/or when the macro headwinds ease).

• Something to keep in the back of your head is the fact that stock (and crypto) markets are hovering below all-time highs after a years-long bull market. While the base case is that this asset party continues for the time being, the risk of a downturn is there – especially given the fact that stock investors seem to overlook slowing economic growth while inflation is still sky-high… Entering a potentially stagflationary environment wouldn’t mean good things for stocks in the months ahead.

• This doesn’t mean that crypto always has to be correlated with stocks, but generally, we should be aware of the potential headwinds.

• Early signs of the headwinds the global asset rally is facing are well outlined by macro analyst Mohammed El-Erian:

• One of the charts you should observe closely to spot a potential storm in the stock markets as early as possible is… Apple stock, with the ticker $AAPL. You can see in the chart below that Apple’s stock price has gone absolutely parabolic in the last years.

• In fact, Apple (and a couple of other tech stocks like Facebook and Google) supported the US indices strongly in the last few years and made them appear “healthy” – while the majority of stocks actually didn’t do so well... Some of the most intelligent macro investors argue that you should better prepare for the worst once these tech names turn around.

• One could argue that the stock markets would have already been in a bear market for quite some time if it weren’t for the easy “Fed money” flowing into a few “mega-caps”…

• Another good friend of the markets has again reared his ugly head today: Evergrande. With the official announcement of Evergrande’s default, this is the beginning of the end of this saga... While we still have to wait and see if there will be ripple effects emerging from Evergrande’s downfall, for now, the markets seem to care more about the billions of liquidity the Chinese government has injected into the markets… Definitely, a story to watch in the near term though.

WhatsApp Integrating Crypto Payments!

• While we already knew that Facebook has been working on crypto projects for quite some time, it’s nevertheless huge news that Facebook (I just can’t say Meta yet…) is trialing crypto payments through WhatsApp, one of the world’s largest messaging apps with over 2 billion active users worldwide!

• For now, the feature will be trialed with a limited number of US users but imagine how huge it would be for adoption if 2 billion people get easy access to crypto… 🤯

• Let’s see if regulators in the US and internationally push back on Facebook’s crypto plans – again.

• If you think about it: One of the largest tech giants in the world rolling out crypto features, while being a massive step for adoption, inherently also raises critical questions: How strong will Facebook’s grip on crypto become, how about the lingering privacy concerns and is this step really good overall for the decentralized ethos of crypto? Time will tell.

After the last days’ strong bounce action, the time for a bit of cooling of the volatility has come – both in stocks and crypto (what a surprise). As we have repeatedly stated, after the massive capitulation last week, the most likely scenario was a bounce followed by consolidation. That’s exactly what we got.

It will take some time to work through the selling pressure from people who want to take risk off on the bounce and to find a new equilibrium of supply and demand. While on-chain and exchange metrics inspire optimism for the long-term outlook, we should expect more uncertainty and volatility in the short term.

Market Watch

• While crypto prices have calmed down somewhat today, there are still intriguing observations to be made. A striking one is how weak Bitcoin’s chart looks compared to Ethereum.

• Will this trend continue like the charts insinuate? If yes, the big question becomes: Will BTC’s weakness drag Ethereum’s performance (and the rest of the market), or will Ethereum become the new leader, propping up Bitcoin? It’s truly a pivotal moment in crypto history.

• In the coming weeks, you should watch the following three charts like a hawk: BTC/USD, ETH/USD, and ETH/BTC. They will give the biggest clues on how the overall crypto market will evolve from here. (You should look at DXY and SPX as well to monitor the development of the macro environment…)

The Madness of Financial Markets

• While the risk of macro tailwinds derailing the stock market (and with it crypto) is rising with every fresh record-high inflation reading and the looming slow-down of the economy, a total market meltdown is NOT the base case – at least not as long as the likes of Jerome Powell are in office.

• We surely have to expect a more significant “macro event” that could drastically shake up the markets at some point in the future, but for now, “dips” will likely get bought up... (until they don’t)

• It can certainly be maddening to observe this game of greed and “up only” stock markets, which are totally detached from the real economy. The fact is, it’s the reality the powers of be (governments and central banks alike) have created for us… The better we understand this game and learn to protect us from different averse scenarios, the likelier we will make it to the finish line.

A New Financial Paradigm Is Rising

• While we often get distracted by daily price swings, we shouldn’t forget how far crypto has come in a very short period of time. After years of building “in the shadows”, the signs are mounting that crypto is increasingly penetrating the legacy financial world. It happens faster than anyone could have imagined just a year ago but too slow for the dopamine-addict crypto markets to notice…

NFT Bridging Is Finally Here

• The NFT space has been facing a dilemma lately: Despite the high gas fees and inaccessibility for newcomers, most valuable NFT collections are still home on Ethereum. At the same time, new “siloed” NFT ecosystems have emerged on other chains…

• With DeFi having already started its expansion to L2s and alternative L1s (aka, become “multi-chain”), it was only a question of time until NFTs would do the same. A crucial element for this are bridges which allow for seamless transfers between chains. With the emergence of multi-chain DeFi (on ETH L2s, Solana, Avalanche, etc.), we have witnessed bridging protocols like Anyswap flourish in the last few months. ANY has performed impressively despite the recent market correction…

• Today we have seen Composable Finance, an established bridging protocol for fungible tokens as of yet, come out with one of the first NFT bridges – truly a remarkable accomplishment!

• It will be exciting to see how fast the multi-chain NFT movement will gain traction and what new use cases can emerge thanks to the access to lower gas fee environments. It might be the necessary boost the NFT space desperately needed!

With both the stock and crypto markets massively oversold after last week’s liquidation event, the strong bounce we’re seeing now is the unsurprising consequence – the question is, what’s next. Follow-through on this bounce in the days and weeks to come will determine if we are only experiencing a “dead-cat bounce” or the return to full-on bull mode.

While it’s likely smart to take some profits on positions you bought during the flash-crash (if you managed to), the last days’ price action is a good reminder that buying at maximum fear levels gets rewarded more often than not. While easier said than done, “buying low and selling high” and staying true to your investment strategy and risk management will guide you through even the wildest storms.

Whales Bought the Dip

• We already pointed out yesterday but have gotten more data today that while leverage traders and “weak-hands” were shaken out during last Saturday’s massive dump…

• … long-term holders and whales slurped up the dip. Despite technical structures and the macro picture still looking somewhat shaky, this exchange and on-chain data instill confidence in the intactness of this crypto bull market from an intrinsic perspective.

Will the Cardano Ecosystem Rise From the Ashes?

• We haven’t talked about Cardano for quite a while – and for a good reason. After the massively anticipated “smart contract launch” this summer, it quickly became clear that the Cardano ecosystem was not ready for prime time…

• Apart from the hot NFT activity on Cardano supported by one of the most faithful communities in the crypto space, there has just not been much to write home about. Hence, we have seen ADA underperform massively in the last six months, especially when compared to hot L1s like Solana and Avalanche, which gained significant traction.

• Is there still hope for Cardano to turn around? The answer is yes. While the ADA chart certainly looks rather unpleasant and suggests that with broader market weakness, ADA could easily slump down to $1 and below, there is hope for Cardano believers.

• FINALLY, the first DApps on Cardano are rolling out – at least on testnet. SundaeSwap, one of the most anticipated Cardano DEXes (aka, the “Uniswap on Cardano”), had its initial launch yesterday. While there are still bugs to be ironed out, it looks like in the comings months, we could, at last, get to see and experience working smart contracts and DApps on Cardano.

• In addition, we see progress being made with the “ERC-20 Converter”, a tool that will enable seamless bridging of ERC-20 tokens from Ethereum to Cardano.

• As with every hot trend, it’s always better to position BEFORE it starts heating up and everyone becomes aware of it. Thus, now might be the right time to pay attention to the Cardano ecosystem: Check out which projects might have potential (e.g., have strong backers, team, community, and narrative) and might be close to launching a product soon.

• Hint: Most of the hotly anticipated DEXes on Cardano (e.g., SundaeSwap and OccamX) don’t have their native token out yet. However, there are ways to earn these through staking, liquidity providing, or a process called ISO (Initial Stake Pool Offering). You can find out more here for SundaeSwap and here OccamX.

• To round it off, here is a little strategy tip: Instead of taking on additional risk and jumping into ADA on today’s strong market bounce, try to make a watchlist of coins you want to pick up on another potential discount day. Because chart-wise, we’re not in rocket mode yet, and you don’t want to be the one to panic-sell on the next possible dip…

The Current Web 2 Landscape Is Broken

• As a crypto enthusiast, you probably don’t need many arguments to be convinced that many legacy systems and corporations will be disrupted by the “Web 3 wave”. In case you do, here are a few illustrations:

• In case you need a reminder of what the vision of the Web 3 movement is:

Fed tapering, Evergrande default, Omicron… For weeks, we have been warning that significant macroeconomic headwinds were starting to blow, threatening to crash the stock and crypto party (at least temporarily).

With the amount of leverage and froth across all asset markets, the threat of a significant liquidation-induced sell-off was rising by the day – and that’s precisely what we got last Friday in both the stock and crypto markets.

Is the worst over for now, or should we expect more downside? That, of course, is the big question hanging in the air.

By the way: If you wish you could have gotten updates on the unfolding market meltdown this weekend, go ahead and follow Elliot, Daton or me to get news and real-time perspectives from the team.

Market Watch

• It’s clear that opening up Blockfolio to check one’s portfolio hasn’t been pleasant for crypto investors in the last few days – unless you were prepared for the crash and are now looking forward to new opportunities.

• In the last days and weeks, crypto prices have been rising and falling in lock-step with the stock markets: Sharp declines, bounces, and further downside – almost everything happened in tandem.

• We can in fact go back and compare the price action of Bitcoin and the S&P 500: They have been strongly correlated for months now… Hence, even though we don’t like it, crypto investors are HIGHLY dependant on what is going on in the macro world.

• As you can see in the chart above, the S&P 500 (and Bitcoin) is sitting on top of important support levels on the daily time frame right now. So, the chance for a bounce this week is relatively high – the question is: What comes after?

• With the lingering fear catalysts in macro land, especially surrounding the Fed’s next decisions, it’s certainly advisable to keep your risk management in check. If the Fed really sticks to its faster tapering pace, then yes, we could be in for a bloody end of the year.

• At the same time, extreme fear like we see currently often marks the best buying opportunities in hindsight. Since we can’t perfectly predict price action going forward, a “DCA approach” seems appropriate, especially given the uncertain climate. That means: Buying slowly on dips and accelerating buys with increased panic in the market – precisely the opposite of the profit-taking we did on the way up…

Have We Entered a Bear Market?

• Of course, the question on everybody’s minds is: Are we only experiencing another bull market correction, or is this the start of the decline into a brutal bear market? What helps to answer this question (apart from technical analysis, which at this point indicates that we still could be in a bullish macro structure), is a look at both macro and crypto-internal metrics:

• When it comes to the macro picture, we have already outlined that uncertainty is high, and what we see in the stock markets at the moment could mark the beginning of a multi-month bearish trend – with a strong spillover effect into crypto.

• However, when we look at on-chain metrics, we haven’t yet seen the typical signs that mark the beginning of a full-fledged bear market – specifically, whales and long-term holders starting to sell en masse, which would mean game over for the crypto bull cycle.

• However, looking at on-chain metrics after last Saturday’s crash, we can see that long-term holders haven’t been fazed much, and almost exclusively short-term holders have panic-sold. This is generally behavior we would expect in a bull market correction and not a bear market.

• To sum it up: At this point, not much indicates that we have entered a crypto bear market. The fact that certain subsectors within crypto are showing strength vs. Bitcoin could be a sign that the market is not ready for full-on bear mode yet.

• However, the risk of a dark winter is certainly there, given the uncertainty in the macro environment. We have to keep our eyes peeled, especially on the Fed’s actions!

Getting Your Hands Dirty With ZK-Rollups

• While we know that ZK-Rollups will likely be the future of Ethereum (and the overall crypto space), there are not many ways to bet on this emerging trend yet. Yes, you can invest in DYDX or IMX, both ZK-Rollup-powered projects built on StarkEx.

• But what we are really looking for is a chance to invest in the first fully-fledged EVM-compatible ZK-Rollups, on which the next generation of DeFi and NFT protocols will be built. Since these aren’t live yet / have a token, we must be attentive to spot potential airdrops or projects launching on StarkNet & ZkSync early (e.g., the “Uniswap on StarkNet”).

• Odin-free.eth has done a great job summarizing everything currently going in the ZK-Rollup space and how you can “farm” potential airdrops (these are just a few Tweets of his thread, feel free to check the whole thread here):

Will NFTs Have a Comeback Soon?

• With crypto prices likely to consolidate in the weeks to come, the question arises: Will NFTs start to blossom again, just like they did this summer when ETH and Co. entered a “mini bear market”? The possibility is certainly there, and Google search volume suggests that the mainstream interest in NFTs is still growing…

• Does that mean that all the PFPs we have seen shooting up like mushrooms this summer will come roaring back? Absolutely not since there is clearly a massive oversupply of low-quality NFT collections and "cash grabs" out there that, in all likelihood, will trend towards 0. But NFT projects with strong utility and communities might get a chance to shine again.

The crypto markets haven’t been particularly interesting in the last couple of days… So, if you’re still here and educating yourself, you are one of the few who do the extra work when most people turn away. If you play your cards right, you will likely get rewarded sooner or later!

With the lack of direction of crypto prices and no clear catalysts in sight, crypto is currently following the stock markets’ lead – which are clearly in a quite nervous and volatile state right now… 📈📉

Market Outlook

• With the macro outlook looking somewhat uncertain, it’s currently hard to have strong conviction in any short-term price scenarios. Will Clemente did an excellent job laying out both his bull and bear case for the weeks and months to come:

Crypto and Web 3 Are the Future…

• While crypto prices have been in limbo recently, the signs that crypto and Web 3 are the future are clear as day.

• Meanwhile, a small cohort of people and companies has yet to get the memo that the Web 3 revolution is just around the corner!

… But Probably Also In a Bubble

• Here comes the cautionary part: As with every emerging technology, speculation and hype will override fundamentals from time to time. That’s why the Dot-com bubble, after creating and destroying incredible amounts of capital around the millennium, nonetheless laid the foundation for one of the pillar technologies of the modern age.

• Coupled with the fact that not just crypto but ALL asset markets are in bubble territory (especially stocks and real estate), the risk for a systemic “deleveraging” at some point in the not-so-distant future surely exists.

• It’s important to put things into perspective, though…

• The big question is, what happens IF the “everything bubble” bursts? Our base case is that after a possible “deleveraging” of global asset markets, hard assets will capture the bulk of the rebound (as happened after the crash in March 2020). How low crypto prices will go in case of a massive macro liquidity event is anyone’s best guess…

• While the scenario of one giant crypto bubble is undoubtedly imaginable, another scenario (which we already see today) is the emergence of several sector-specific “mini bubbles” within the broader crypto market.

• Given that the late stages of a bubble are the most profitable, the key question becomes: How should we invest in this environment, and how do we spot the bubble top? The reality is that once a bubble pops, most people will not recognize it until it’s too late.

• Since spotting the very top is nearly impossible even for seasoned investors, risk and portfolio management are vital for navigating a bubble. Here are some tips and ideas to think about:

Do you like rollercoaster rides? If yes, you are probably enjoying the current market environment... In the last two weeks, a day of euphoria has usually been followed by a day of fear – and it’s likely going to continue like this for the time being with macro consolidation being the likeliest scenario.

With lingering uncertainty in stock markets and US indices likely testing critical support levels soon, it’s no wonder that crypto isn’t able to fly currently. On the bright side, the crypto markets have shown more relative strength compared to the stock markets.

However, there is no way around the fact that crypto – with the number of institutional investors in the space now – has become increasingly correlated with other risk assets. Thus, understanding the moves of the stock markets is key to predicting where crypto could be headed next.

Market Outlook

• With Bitcoin still in a mid-term downtrend, the burden of proof currently lies on BTC bulls. Until BTC is able to breach the critical resistance levels at approximately $61k, we have to remain cautious for the time being.

• One thing is clear: There is a lot at stake in the crypto markets right now and the price moves in the weeks to come could be rather dramatic – especially with the historically high levels of leverage across the board.

• A notable exception in today’s mostly red crypto market has been LUNA which, after a period of consolidation, is catching up to its continuously improving fundamentals (aka, LUNA burns due to increased UST demand).

The Long-Term Prospects for Crypto Look Bright

• Despite the short- to mid-term macro uncertainty and headwinds for the crypto markets, the long-term outlook couldn’t be brighter (for the space overall, not necessarily each and every altcoin, of course…) The amount of capital – both intellectual and monetary – that has been pouring into the crypto industry is simply stunning.

• With tech giants such as Facebook (or Meta…) increasingly opening up to the crypto industry, the path to mainstream adoption is paved.

• When it comes to timeframes, however, we have to be realistic: Despite the massive improvements and innovations we have seen in the crypto space this year alone (just think DeFi and NFTs), we are far from reaching a state where crypto as a technology is suitable for the average joe. It will take years and the rollout of new killer applications (will it be blockchain gaming?) in order to reach a tipping point.

The Next Airdrop for Early DeFi Adopters

• If you have been reading this newsletter for a while and followed our call to try out the Lyra protocol on Optimism, then you’re lucky: As predicted, Lyra is rewarding early users and protocol testers with a retrospective airdrop!

Fresh Yield Farming Pastures

• In times of market uncertainty – and in general, for more risk-averse crypto investors – stablecoin yield-farming is an attractive endeavor. While there are barely any triple-digit yield opportunities anymore like we saw in the early DeFi days, double-digit yields are not to be despised…

• Today, we have gotten two new yield farming opportunities, one on Avalanche and one on Polygon – so, no expensive gas fees for both of them... The yields on stablecoins are currently around 30 - 40 % but will likely come down a bit in the days to come.

A Reminder of the Risks in DeFi

• With DeFi protocols having become the go-to financial applications for many crypto users, it is easy to forget that the risks in this nascent ecosystem are still fairly high. Even reputable and time-tested protocols can fall victim to hacks and sophisticated exploits. So, be careful when playing around, especially with new DeF protocols, and spread your bets to not risk all your money in one place.

While Ethereum is on the cusp of breaking to new highs and MATIC starts benefitting from the hot L2 narrative, Bitcoin is still in “meat grinder mode.” Will Ethereum keep its momentum going and pull the altcoin market with it? Or will Bitcoin return to the spotlight again, now that everyone has shifted their attention to Ethereum?

Market Outlook

• When it comes to “legacy markets,” we got the green light today, meaning that stock markets are bouncing after the severe sell-offs of the last few days.

• In the bigger scheme of things, however, the insane volatility we are witnessing across markets at the moment is a clear signal of increased frothiness and “bubble behavior.” Does that mean that everything will come crashing down soon? Not necessarily, since there are simply no better alternatives than investing right now to protect oneself from inflation, and central banks try all they can to prevent assets from imploding. However, be prepared for even wilder volatility in the coming months and that at some point, the music could stop – at least temporarily.

Bitcoin Maximalists Showing Their Ugly Side

• Most of you have probably heard of Ross Ulbricht, the infamous founder of darknet marketplace Silk Road, which got taken down by American authorities in 2013. For his crimes, Ulbricht now serves a double life sentence plus forty years without the possibility of parole – really an astonishing punishment for a young tech nerd who made some missteps...

• Today, Ross Ulbricht announced auctioning off an NFT to help children who are unable to visit their parents in prison. The shocking part of the story is how several proponents of the Bitcoin movement have reacted – truly shameful for a community that is supposed to promote freedom and inclusion.

• At this point, it really feels like Bitcoin has become more an implacable religion than anything else. Fortunately, there are also numerous voices that stand up against toxic maximalism.

• Meanwhile, the world doesn’t care about Bitcoin maximalists’ opinions and continues to focus its attention on NFTs and the metaverse…

Set Protocol – A DApp Worth Trying Out

• A big trend this year has been DeFi protocols rewarding early adopters with retrospective airdrops. Starting with the infamous Uniswap airdrop more than a year ago, we have seen dozens of airdrops in the last months.

• A project worth checking out – since it doesn’t have a token (yet) – is Set Protocol. The protocol has created tools for everyone to create baskets of tokens (aka, indices), a use case that will only grow in importance. With Set Protocol expanding to L2s, its tools will get accessible to many new users and lay the foundation for continued protocol adoption.

• It might well be well worth playing around with some Tokens Sets now – who knows if a token will be airdropped sometime in the not so distant future…

• Projects like Set Protocol play a central role in bringing DeFi and Web 3 to millions of new users by creating products and tools with real utility.

Is Ethereum “saving the bull market”? We don’t need to get into that discussion, but either way, Ethereum’s outperformance today has been impressive.

We witnessed more than once in the past that Ethereum has the ability to lead the markets and lift Bitcoin and the rest of the market with it. Also, ETH pumps often precede major altcoin seasons…

However, with altcoins already in the spotlight for weeks now, most alt/ETH charts are not looking too hot. And, of course, the risk of a continued stock market meltdown has not disappeared just yet, so be careful with the bets you place right now.

While the green in the market is certainly a pleasant way to start the week, there is no reason to become euphoric or careless now. Even after today’s price action, Bitcoin is still firmly in a mid-term downtrend. So, put on your war helmet and get ready for a roller coaster ride with different potential outcomes!

ETH 🔥🚀

• We have been beating the drum for days that Ethereum’s chart presented an excellent technical set-up – especially when compared to the rest of the market. We have seen repeatedly that once the crowd is leaning on one side (hot L1s), “ignored” assets – in this case, Ethereum – can start to shine. Especially the ETH/BTC pair is looking very strong right now!

• Coupled with the growing excitement for ETH scaling and particularly ZK-Rollups (+ the fact that most metaverse and gaming projects are in the Ethereum ecosystem), there were enough catalysts to catapult ETH higher.

• Let's not forget whom we have to thank for the current Ethereum pump, Zhu Su 😉 (For those uninitiated: Three Arrows Capital CEO and crypto investing legend Zhu Su hit Ethereum's bottom to a tee when he announced to “abandon” Ethereum last week, causing quite an outcry...)

• Of course, when ETH is outperforming Bitcoin in such a notable way, the Ethereum community is quick to come out and call for the “flippening” (meaning, Ethereum overtaking Bitcoin in market cap).

• In my opinion, while the flippening is a possibility, Bitcoin and Ethereum fulfill utterly different use cases at this point in time – "store of value” vs. “programmable money.” However, once Ethereum successfully completes its transition to Proof-of-Stake, there is a realistic chance that Ethereum could go for Bitcoin’s “digital gold” position… So far, Ethereum has the burden of proof on its shoulders to achieve what Bitcoin has achieved: maximum trust.

• On another note, yesterday’s stepping down of Jack Dorsey as Twitter CEO seemed to “magically” accelerate Ethereum’s bullish move. And indeed, shortly after Dorsey’s resignation, Twitter added ETH to its tipping feature yesterday – “probably nothing,” as they say.

• In addition, Ethereum secured the support from another unexpected party 🍻😄

Inflation, Inflation, Inflation…

• I know most of us have heard about inflation in recent weeks... But the unfortunate reality is that inflation is not something to just brush off and ignore. No, inflation affects everyone, whether your salary and savings are no longer enough to cover the rising cost of living or because you benefit directly from asset inflation as an investor.

• If you know how inflation works and how it affects literally everything, you can take decisions that have the potential to transform your life! That’s why we’ll keep covering this critical topic for the time being.

• What “positive” effect could the new Covid-variant have for the markets? No matter how absurd it may sound, but bad news is often good news for the markets – especially in an “up-only” bubble phase. Although objectively bad for many people and companies, renewed Corona restrictions will likely cool inflation and could serve as an excuse for the Fed not to intervene until later next year. Thus, the stock (and crypto) market party can continue for the time being unless another negative catalyst comes up…

More Positive Crypto Regulation News

• After the massive positive EU regulation news we covered a couple of days ago, we got some more good regulation news today:

Well, the past few days have been quite the rollercoaster ride… Up, down (a lot), up, down, and up again – that’s the fastest way to describe the last days’ crypto price action.

What was eye-catching this weekend is the sheer amount of bearishness the recent correction has provoked in the crypto community. This time, however, we didn’t just see the usual trend followers and noobs come out of the woodwork to call for caution but also seasoned crypto “big brains”. Of course, optimistic voices are still prevalent as well. So, who is right?

Bear Market Fears Are Reaching Peak Levels

• It hasn’t been all sunshine and roses on Crypto Twitter in the last few days. In fact, fear and toxicity have reached levels not seen in months.

• The main point of contention was: Is the current correction only a precursor for the continuation of the bull market or do we find ourselves at the beginning of a prolonged bearish period? The opinions on that are split.

• One thing is clear: If you’re not having a close eye on both fundamentals and technicals in this market, and you’re not able to adapt quickly to new market conditions, there is quite a bit of pain in store...

• When reading through the opinions of others, it’s important to always keep the following in mind:

Market Watch

• While last Friday’s drop-off certainly has been intense, it’s important to put things into perspective and recognize that most projects are still just a few percent below their highs. Judge for yourself if this means increased risk for further downside or a downplaying of the current correction.

• The bounce today had to be expected since nothing moves in a straight line. The big question, however, is, what comes next? Have we seen the bottom and can go back to full-on bull mode or are we only seeing a “relief rally" today? Well, as seen above, opinions and data are divided on that. Your own risk tolerance and conviction will have to determine how you want to be positioned in this market going forward.

• While MicroStrategy buying Bitcoin certainly creates welcome buy-pressure, at this point, it’s certainly not big news anymore.

• Apart from the prevalent risk for more downside, there are, of course, reasons to be optimistic. Many on-chain metrics and data science models are still looking fairly promising. It’s important though to take such models and fractals with a grain of salt.

StarkNet Alpha Has Launched

• In the wake of the growing excitement for Rollup-scaling solutions in general and ZK-Rollups in particular, StarkWare has launched its highly anticipated StarkNet Alpha today! This release marks a critical step towards fully-fledged ZK-Rollups which pave the way for a highly scalable Ethereum ecosystem. Let’s see how the rollout is being received and especially which projects decide to deploy on StarkNet in the weeks to come.

Uniswap (Probably) Coming to Polygon

• With its fast and cheap sidechain implementation, Polygon is not just a leading Ethereum scaling solution but also a hot contender in the ZK-Rollup race. It’s exciting to see the “DEX king” Uniswap (likely) expand to Polygon soon. For yield farmers, this means safe and potentially attractive pastures coming up soon. However first, some governance hurdles need to be overcome.

Is Crypto Just a Big Scam?

• It’s clear that despite the tireless innovation and building by thousands of talented developers and teams, there are still many misconceptions and prejudices about crypto in the mainstream. While it’s certainly true that crypto hasn’t proven its full potential so far and many “killer applications” are yet to reach a critical adoption threshold, there are countless use cases which – already today – change the lives of hundreds of thousands if not millions of people.

Jack Dorsey Stepping Down as CEO of Twitter

• There have been rumors for quite some time and today we got the news that Jack Dorsey is stepping down from his post as Twitter CEO. What impact will this have on Twitter’s Web 3 ambitions now that “Bitcoin-maximalist” Jack Dorsey is not in charge anymore? We’ll have to wait and see.

What a nice way to wake up today and see the stock and crypto markets crumbling – seemingly out of nowhere. Is it time to panic?

Market Watch

• After seeing almost only green yesterday, today we have the opposite picture: red across the board.

• According to CNBC (or their new intern?) Bitcoin has officially entered a bear market. The writer must be new to crypto…

• So, what has caused today’s crash? Well, it’s Covid fears again. How much we missed them…

• What did we say yesterday?

In recent years we have seen more than once that retail investors who jump into the market on a holiday get punished soon thereafter...

• Well, it seems like the punishment for Thanksgiving FOMO buyers came quickly this time. We told you to be careful, especially with retail-driven rallies on public holidays.

• Should you jump in and buy the dip today? Although laddering in buys on days like today is certainly better than on a green day like yesterday, there are still reasons to be concerned about more downside price action in the short term. Particularly when the consensus in the crypto crowd is to buy the dip and traders jump in with leverage, it’s reasonable to stay cautious.

• Should you sell parts of your positions now to derisk? Well, technically, it’s not an ideal moment, and it’s always better to take profits on the way up. But if you feel like you seriously overexposed yourself to the markets, it’s always wise to monitor your risk profile.

• Will the Fed come to the rescue again, this time if the stock market crash intensifies? While that’s undoubtedly the consensus expectation and also our base case, there is a chance that “this time is different.”

What Does Today’s Sell-off Mean for the Market Cycle?

• While the short-term outlook seems uncertain, it’s essential to zoom out and continue to build your overall investing framework.

• A significant difference between 2018 (the first year of the last bear market) and 2022 is that this time around, massive fundamental catalysts are coming up, such as ZK-Rollups and “the Merge” for Ethereum as well as the emergence of highly anticipated ecosystems (e.g., Polkdaot, Cardano).

First of all, to all American readers: Happy Thanksgiving! Since our team is international, you will still be treated to a daily update today 🙂 And good luck to those who get involved in the usual family crypto discussions…

In case you wonder who is behind the massive inflation we’re currently experiencing, look no further than what you have on your Thanksgiving table 😇

Market Outlook

• What a sea of green today in the markets! On days like these, the hardest thing is not to get carried away by FOMO and be tempted to buy massive green candles… In recent years we have seen more than once that retail investors who jump into the market on a holiday get punished soon thereafter... Of course, this only applies to the short term outlook.

• On the brighter note, two things stand out: ETH gas fees, while certainly too high for the average person, are in more reasonable territory right now, potentially paving the way for ETH to continue its ascend. 2. We haven’t seen the whole altcoin market explode yet. Instead, certain narratives and projects with fundamental catalysts (mostly at least) are doing well. This creates a relatively “sustainable” market feeling. Take these two arguments with a grain of salt though.

• As we stated yesterday, BTC and ETH are at a pivotal moment right now, testing upside resistance. The outcome will determine whether we should expect more downside in the weeks to come (or at least consolidation), or whether BTC and ETH will be able to make major bullish moves leading into the end of the year.

Is Plan B Wrong?

• After being spot-on with his latest predictions – nailing BTC’s monthly closes to a tee in September and October – it appears like in November, Plan B’s floor model might be deviating somewhat from reality. It seems rather unlikely that BTC will shoot up from around $69k to $98k in the next few days…

• It was already impressive enough how accurate Plan B’s short-term predictions were until now. While it has yet to be seen if Bitcoin can reach the sought-after Stock-to-Flow target of $100k and beyond, we can all agree that Plan B’s models are meant to be long-term approximations and not short-term trading signals.

A Storm Is Brewing in the “Sushi-Verse”

• If books and movies were to be produced about the early days of the DeFi ecosystem, Sushiswap would definitely play a major role in them. In its mere 14 months of existence, the project has gone through turbulent times: Created out of a highly contested Uniswap fork and equipped with a meme name, Sushiswap quickly rose to become a trusted DeFi “blue-chip” protocol (if that term is even applicable in the highly dynamic crypto space).

• Now, unfortunately, the signs are mounting that not all is well within Sushiswap’s ecosystem. After Sushiswap’s founder and core developer, 0xMaki left the project under dubious pretext a few weeks ago, we are hearing more voices sounding the alarm bells. We can only hope that the project – which has brought so many innovations to the DeFi and multi-chain space – manages to turn things around!

• If you have been a supporter of Sushiswap like us, I encourage you to read the whole thread here and to do additional research to form your own opinion.

• This Sushiswap “incident” is a good reminder that all that glitters is not gold in crypto and that even if the markets are currently in a bullish posture, you always have to do your own research and stay on top of project developments!

Aavegotchi Is on a Roll

• We have praised NFT and metaverse project Aavegotchi several times for their meticulous building and continuous delivery of innovations – and currently, the project even exceed its own tempo. With Rarity Farming Season 2.0 just concluding, the next land auction coming up next week, and the continuous release of new features, Aavegotchi is certainly attracting a lot of attention from the NFT and gaming community.

• GHST’s price, despite being dampened by a bonding curve, is not surprisingly benefitting a lot from the current metaverse trend.