October 26, 2021
A BTC Dip for Ants and More Bullish L1 Action
With a lot of anticipatory excitement and confidence on Crypto Twitter in the last 48 hours, it’s no surprise that we are seeing some mild dip action today. As Will Clemente points out, greed and overconfidence are still prevailing, making it more unlikely that prices will rise sustainably in the short term. Maybe we do need some more consolidation to make people nervous…
The L1 Games Continue
What we are witnessing today in the markets is a trend that has been raging for several months now: Emerging L1s stealing Ethereum’s thunder by rolling out massive liquidity incentive programs which subsequently lead to adoption and massive pumps of the respective ecosystem projects.
After SOL and AVAX, it seems like this week it’s the turn of FTM, NEAR, (Harmony) ONE, MATIC, and COSMOS to catch the attention.
Two projects have recently announced massive ecosystem funds: Tron (yes, the once super-hyped L1 still exists), and NEAR Protocol. NEAR in fact more than doubled its previously announced $350 Mio fund.
With massive incentive programs announced seemingly on a weekly basis, there is no doubt that L1 season will continue. The challenge for everyone who wants to bet on this trend is to identify the next likely mover in time and get out of the way of the unavoidable crashes which will follow the awe-inspiring L1 pumps.
As a general rule of thumb: When everyone on Crypto Twitter is talking about a specific project (in today’s case FTM), then it is likely not a favorable time to enter in the short term.
By the way, degen yield farmers on Avalanche, don’t miss out on the fresh pastures on Trader Joe. (No additional stablecoin farm incentives yet though 😏)
Be Ready for the Next Wave of FUD
When things are looking rosy, the markets have been green for many weeks in a row and everyone is feeling safe with their bull market predictions and altcoin picks, it is generally not the time to get carried away by the positive “vibes” in the crypto community.
In fact, these are the times when the market becomes more and more vulnerable to “disruptions” caused by unforeseen FUD storms – which always hit the crypto markets when everyone least expects it. Be mentally prepared for it and make a plan for how you will react.
Citing sources familiar with the matter, Bloomberg reports that developments surrounding SEC’s authority over stablecoin legislation will be announced formally this week by the Treasury Department.
Identifying Macro Tops and Bottoms
With daily price action absorbing a lot of the attention of crypto traders and investors, it is critical to zoom out from time to time and look at where we find ourselves in the macro picture.
Most will already be familiar with Plan B’s Stock-to-Flow model (see below), which estimates the current fair value of BTC to be at around $110k.
There are other great data science models that can help create a mental framework for what is to come. It’s very important to never rely on one single model but instead to have different scenarios in the back of your head. Below are two models that are particularly impressive when it comes to predicting market tops and bottoms.
1. Bitcoin Price Temperature
This model developed by on-chain analyst @dilutionproof apparently has a great track record in predicting Bitcoin’s market tops and bottoms. If Bitcoin were to reach its hypothetical all-time high right now, the model estimates it to be somewhere between $111,000 and $143,000 – in the ballpark of Plan B’s Stock-to-Flow model. Feel free to study the model closer since it provides some striking insights.
The Bitcoin Price Temperature (BPT) is an oscillator that models the number of standard deviations that price has moved away from the 4-yr moving average. This seeks to establish a mean reversion model based on the cyclical nature of Bitcoin halving, and investment cycles. The BPT bands then establish price levels that coincide with specific standard deviation multiples to identify fair, and extreme valuations.
2. Top Cap Model
Developed by the arguably most famous on-chain analyst Willy Woo, the Top Cap Model appears to be super accurate when it comes to predicting macro market tops. Just look how nicely Bitcoin’s price has touched the red line during previous market tops…
The Bitcoin Top Cap model was developed by Willy Woo to identify market cycle tops. It is calculated by multiplying the Average Cap by a factor of 35. The Average Cap is calculated as the cumulative sum of daily Market Cap values divided by the age of the market in days.
All three models indicate that there is still ways to go until Bitcoin reaches its next macro top. At the same time, we are nowhere near the lower (aka “undervalued”) regions of the data science models, putting the current risk for new buyers into perspective…
Banks Entering Crypto #∞
One bank after the other is announcing plans to offer crypto services – probably nothing.
Also, we see the trend of institutions and pension funds investing in crypto continue.
Chainlink Coming to the Terra Ecosystem
The Terra ecosystem has been on a tear lately, shipping one crucial update after the other. Now, oracle heavyweight Chainlink is dipping its toes into the Terra ecosystem, bringing its invaluable oracle services to the fast-growing L1 .
GameStop Is Not Repeating Steam’s “Nokia Moment”
Was it the last months’ fast rise of NFTs and gaming projects (such as trailblazer Axie Infinity) or the obvious blunder of Steam – which “banned itself” from crypto and NFTs – that made GameStop jump onto the Web3 bandwagon? Maybe both, since GameStop must have realized that this is its chance to “rise from the ashes”.
Sushiswap’s Highly-Anticipated NFT Marketplace Is Launching Next Week
We have talked several times about the need for a more decentralized NFT marketplace (ecosystem). Finally, Sushiswap’s Shoyu will take a chance at seizing the NFT marketplace crown from OpenSea starting with its launch next week. While a huge challenge, it’s going to be exciting to watch how the roll-out plays out.
Another positive catalyst for SUSHI (and MOVR) will likely be the imminent deployment of Sushiswap on Moonriver.
The NFT Bear Market Is on Fire
While we have certainly seen quite some corrective price action in NFT land as of late, there seems to be no lack of interest in “blue-chip” NFT projects.