Cryptogram - 27JAN2023

Bitcoin rally may not last, here’s why

The newsletter is put together by Giottus Crypto Platform and The News Minute’s Brand Studio. You can read all the previous issues of Cryptogram

.

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Hello!

Howard Morgan, co-founder of quant giant Renaissance Technologies and now chair of venture firm B Capital, had a few interesting things to say about crypto in an interview to Semafor business newsletter. What he thinks about crypto, we thought, was a good read on what traditional money thinks about crypto.

While he lamented the “complete lack of oversight and the complete lack of diligence” by the likes of Sequoia while investing in crypto, he says that what’s happening now is “not going to take the industry all the way down. And I’m still a believer in the blockchain. I think people will be surprised over the next 18 months at how the crypto industry comes back. You pick over what’s there and rebuild stronger.

That’s the thing about investment bubbles. It has happened with the railroad industry, the railroads all went bankrupt, but the track that was laid powered the industrial age. Same with fiber-optic cable in the dot-com era.”

Are people still willing to fund crypto companies?

“At much lower prices, and more cautiously, but yes. What will help is the growth of the metaverse if Apple makes the announcements they’re supposed to make in [augmented reality] and [virtual reality], and Meta does what it has been promising.”

And there are signs of this, with Big Tech continuing to enter Web3. On that note, our top-5 stories for this issue: 

1

“China’s Instagram”, called Little Red Book, now allows users to showcase NFTs on the platform.

.

2

What do Netflix, Apple, Binance, Fox News, Wall Street Journal, Stanford University, American Airlines, and about 10 million other people have in common?

. Here’s the

, which was released this week. 

3

Amazon is

, and an NFT initiative is expected in the spring.

4

Binance has acknowledged that it failed to keep backing for dozens of tokens issued on Binance Smart Chain separately, and instead commingled it with customer funds.

5

Are we at the “phoenix phase” of the crypto winter? After talks of FTX trying to reboot itself, now

.

 WEEKLY PRICE TRACKER

Price movements from last Friday

BTC Watch

 10% as markets are de-leveraged from all the short positions and Fed’s next interest rate hike is being priced into the market. BTC will continue to swing to US Fed decisions and might pull back if recession hits hard.

ETH Watch

 3% with Ethereum breaching the strong resistance level at $1600 again ahead of March's Shanghai upgrade. ETH will likely rally heading into March.

Altcoins Watch

MATIC

:

 15% as many projects have migrated to Polygon network citing low transaction fees and better scalability.

APT

:

 133% with new announcements from the project CEO and additional buzz created from NFT sales on the network.

APE

: 

 27% as the initial momentum of the asset could have been gained due to the recovery of the market in general and the further acceleration is tied to the NFT industry.

 WHAT'S HOT

Coins to watch out for

Cardano (ADA)

- Frequently termed as Ethereum’s competitor, ADA has grown by more than 60% from the December 2022 lows. One of the main reasons for that is due to the upcoming stablecoin launch of DJED which is expected to expand the DeFi ecosystem rapidly. 

Ethereum (ETH)

- Despite being well known among the crypto community for being the largest altcoin, ETH is poised to appreciate in price ahead of its much anticipated Shanghai upgrade in March. If BTC were to hold strong heading into March, ETH will likely outperform most of the crypto.

Project to watch out for

Render (RNDR)

- Render is a platform that lets users contribute unused GPU power from their home devices to help projects render motion graphics and visual effects. In exchange, they earn Render token (RNDR), the native utility token of the Render Network. 

Despite being in great demand, GPUs are often idle when they are not being used by developers to render their own work. By tapping into these unused resources, the Render Network suggests it can greatly improve inefficiencies in the current system.

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 THE HOT TAKE

Bitcoin rally is strong and tempting, but maybe short-lived

Bitcoin (BTC) is up 40+% since the start of the new year. This is bringing some cheers to long-term hopefuls who believe the bear market is behind us and now is the time for growth.

But will this rally be sustained, or is it a bull trap? We think the case is stronger for it to be the latter, and here are 4 reasons why:

1. Traders are waiting for $25K to take profits

Traders, including key influencers, are all calling for a $25K BTC price (see below). This is usually a market manipulation strategy as some of them will take profits on their sub-$20K buys along the way. BTC may hit $25K, but may face huge selling pressure at that price. Given that $25K is just an 8% increase from today (not huge given the context), wait for the eventual drop before you make your investment. If you haven’t already got your investments in BTC by now (DCA or otherwise), it is better to hold off on taking a ‘long’ position for now.

2. US Fed will increase interest rates on Feb. 1

The US Federal Reserve has been increasing interest rates with the hope of reducing inflation in the market. Any announcement regarding this has always been met with volatility in financial and crypto markets. It is on track to announce an increase in rates on Feb 1. 

A hawkish stance (continued stance towards higher interest rates) will likely spook the markets next week and it could coincide with BTC’s rally towards $25K. 

3. DXY – the US dollar index – is at an 8-month low

DXY, which attained a high of 114 last year, is now at an 8-month low near 102. Usually, BTC is inversely correlated with DXY and has been rallying in the last month as DXY has declined. Signs of a weak economy are beginning to show in the US. As global conglomerates announce job cuts, there is a fear that earnings of these companies will not be in line with expectations. When this happens, stock markets tank and DXY zooms. Earning calls are expected in the month of February.

Source: TradingView

4. The year after the bear market is usually mixed

Source: Into the Cryptoverse

We have shown this chart before. 2015 and 2019, the year after a bear market, usually had 5-6 red months. Given a strong positive start to 2023, we have to anticipate a red month soon. If February continues to be kind by any chance, March will likely be a brutal month. The best way to navigate the next quarter is 1) hold on to FOMO investments in Bitcoin and deploy them post April; 2) continue to employ DCA as a strategy to gain exposure into the asset; and 3) stay away from investing in altcoins as Bitcoin dominance continues to be lower than 45% (likely will reach 50% in the upcoming months).

That’s it in this issue, see you next week.

If you have any questions or feedback for us, write to us at [email protected]. You can check out the previous issues here.

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