The weekly market outlook

A difficult week

The world of cryptocurrency was shocked by a bankruptcy filing and a new court case this week, which could lead to several crypto projects facing legal challenges in the future. This week was marked by a flurry of legal activity that highlighted the challenges and risks inherent in the fast-paced world of crypto.

Silvergate Capital, a central lender in the crypto industry, has announced that it is shutting down. The decision to wind down operations and liquidate its bank was made in response to recent industry and regulatory developments, according to a statement released by the company. The news caused the stock to plummet by over 40% in after-hours trading.

In other news, New York State Attorney General Letitia James took legal action against KuCoin. The lawsuit alleges that KuCoin violated securities laws by offering tokens, including Ethereum, that meet the definition of a security without registering with the attorney general's office. This lawsuit is significant because it is the first time a regulator has claimed in court that Ethereum is a security.

While the Chairman of the Securities and Exchange Commission (SEC), Gary Gensler, has hinted that his agency might consider Ethereum to be a security, the Commodity Futures Trading Commission (CFTC) has long maintained that both bitcoin and Ethereum are commodity assets.

This lawsuit could have far-reaching implications for the cryptocurrency market. If ether is deemed a security, it could open the door for other regulatory agencies to take action against exchanges and other entities that deal in the digital currency. The SEC has already taken action against several companies that offered initial coin offerings (ICOs) that the agency deemed to be securities, and this lawsuit could signal a broader crackdown on the cryptocurrency industry. We will need to see how the market reacts to this piece of information.

Market data

Over the past few days, the crypto market has experienced a significant decline in its total market capitalization. The market cap went down by 10%, which is the first time such a hit has been taken since the FTX collapse.

The week started off with the market cap at a whopping 998 billion dollars, but it has now dropped below 900 billion dollars. While 10% of the total market cap seems like a lot, I believe that more is to come. The reason for this is the size of liquidations, which can have cascading effects. Most of the move happened in the last 24 hours.

In the last 24 hours, there have been only about 123 million in bitcoin liquidations. When you get these types of weeks where the price of bitcoin declines by 5% you want to see a higher amount of liquidations, closer to 250 million. Also, when looking to buy a pullback you want to see a lot of degenerates and apes rinsed out of the market because they are way too leveraged. Furthermore, you don't want to see that most of the market is long.

At this point, most of the market still seems long, based on the Coinglass data shown above. 78% of the market is still long, which means degenerates still have not been rinsed. Based on this data I would wait for some more pain, to then potentially take a position in the market.

If in the coming days the market does recover, the Kava ecosystem seems ripe for a bounce. With the total ecosystem growing over 35% in the last 7 days, Kava is positioned to potentially be a winner if we do bounce. Kava started to outperform the market because a new hype was surrounded by their $750 million ecosystem fund, and this hype has now spread to their ecosystem.

When it comes to the other big ecosystems, there is not much change. Most ecosystems seem to be very stagnant apart from Kava. The most notable change is that close to 2 billion dollars was moved from Binance chain to Ethereum, which could be due to the BUSD case.

In reality the market won't recover till Bitcoin finds footing - as long as the price of Bitcoin is free falling and bad news gets released it's not worth risking a piece of your portfolio just for a 2% bounce.

“Never try to catch a falling knife”

Best and worst performers

When looking at the best performing ecosystem in the past 7 days, it seems to be Canto. What's odd is that while it’s the best performing one in the past 7 days, not much capital was bridged there. That just shows that it has become a pvp chain, meaning that if you can't spend your whole day searching for the new coin to buy you shouldn't waste your time trying to beat the full time traders.

The top gainers are showing the same story, there isn't a specific narrative that is driving the price. The only token with a potential narrative is Rollbit. Rollbit has the gambling narrative driving it. On top of the narrative, the platform has a very easy user experience plus the ability to use 1000x leverage.

The top gainer of the week has been Access Protocol. Access Protocol offers a new way for digital media publications and content creators to monetize their work. Access Protocol currently doesn't have a narrative backing it but its core business of monetizing digital media could be a potential new narrative.

Huobi BTC is the biggest loser this week, as the Huobi platform had a huge liquidation causing everything to depeg. Currently, the team is trying to repeg HBTC. In response to this issue, Huobi will create a $100 million fund to improve multi-currency liquidity.

Apart from the Huobi issue, we are finally seeing a pullback on some AI coins. AGIX and WEMIX were previously some of the top gainers in the space, but are now seeing some strong pullbacks as the AI narrative seems to be cooling off. Lastly, Stacks seems to be cooling off. Stacks was also previously one of the strongest narratives, as they are creating a use case for the Bitcoin ecosystem.

The week ahead

The week ahead is likely going to be very difficult. With the liquidation of Silvergate, and now a new case against Kucoin who is accused of selling securities like Ethereum, we might see some lower prices to come in the week ahead.

On a brighter note, it is reported that Chat-GPT4 will be released next week. Chat-GPT3’s release back in November caused a huge price growth and AI narrative. With a big pullback and cool off with current AI tokens, this release probably won’t cause the same price growth, but it could offer a short term bounce.