Week 27, 2023 - Weekly Market Outlook

TLDR

• Three senior officials from Binance have resigned
• Larry Fink, CEO of BlackRock, has changed his stance on cryptocurrencies,
• Multichain experienced significant outflows of popular tokens from its bridge contracts
• Bitcoin has made new Yearly highs
• Despite Ethereum's rally, Bitcoin remains a preferred investment until Ethereum breaks current structure.
• MakerDAO has performed well this week.
• Growth in Liquid Staking Derivatives (LSDfi) market highlighted.
• Analysis of Bitcoin and Ethereum
• DeFi sector overview
• Review of the week's top gainers and losers in crypto.

Introduction

As usual, the crypto industry has experienced an eventful week. We delve into a series of significant events that have shaped the crypto landscape. From the departure of senior executives at Binance amidst ongoing investigations, to BlackRock CEO Larry Fink's changing stance on cryptocurrencies, and the mysterious outflows from Multichain's bridge contracts, the crypto world continues to be a hotbed of activity. We also explore the potential of MakerDAO's Endgame Plan v3, the growth of the Liquid Staking Derivatives finance space, and the performance of Bitcoin and Ethereum. Finally, we take a look at the DeFi sector, focusing on the performance of Solana and the MarginFi project.

Binance Executives leave

This week has seen the departure of three senior officials from the troubled cryptocurrency exchange, Binance, according to a report by Fortune. This comes at a time when Binance is set to defend itself against multiple challenges. Those who have resigned include Binance General Counsel Han Ng, Chief Strategy Officer Patrick Hillmann, and Senior Vice President for Compliance Steven Christie. This follows on from Steve Milton, Binance’s Global Vice President of Marketing and Communications, leaving the company in June, as stated on his LinkedIn profile. Additionally, Senior Director of Investigations, Matthew Price, recently opted to part ways with the exchange.

According to sources quoted by Fortune, the decision for the three senior officials to leave was largely influenced by the ongoing U.S. Department of Justice investigation into Binance and its CEO, Changpeng "CZ" Zhao. The investigation is believed to center on attempts by Binance to deceive U.S. regulators and allegations of money laundering and sanctions violations. Nonetheless, Hillman stated via Twitter on Thursday that his departure was amicable, expressing continued respect and support for Zhao.

The departure of executives from Binance's legal and compliance divisions could potentially hinder its defense against current probes. Binance is already facing scrutiny from various regulators globally. Last June, the Securities Exchange Commission (SEC) filed a lawsuit against Binance accusing it of 13 counts of securities law violations. A couple of months prior, the exchange was sued by the Commodity Futures Trading Commission (CFTC). It's also the subject of several investigations by regulators in Europe and Australia.

Larry Fink on Fox News

Larry Fink, the CEO of BlackRock, has said in an interview with Fox Business that he believes cryptocurrencies, particularly bitcoin, could significantly transform the financial system. This perspective marks a significant change for Fink, who was previously known as a skeptic of cryptocurrencies and had suggested that they were largely used for illicit activities.

Fink stated that if the process of tokenization of assets and securities - essentially what bitcoin does - could be expanded, it would revolutionize the finance sector. He went on to argue that instead of investing in traditional hedges like gold to guard against inflation or the devaluation of a country's currency, one might consider investing in bitcoin. He emphasized that bitcoin is an international asset that isn't tied to any one currency, making it a viable alternative for investors.

In other developments, the iShares unit of BlackRock, on June 16, submitted paperwork to the U.S. Securities and Exchange Commission (SEC) to establish a spot bitcoin exchange-traded fund (ETF). Despite BlackRock's stellar record of gaining approval for ETFs, Fink couldn't predict when the SEC would make a decision about its bitcoin ETF proposal. He expressed hope that, as has happened in the past, they would be able to work with regulators to secure approval for the filing, but noted that the timeline for this was uncertain.

Multichain Outflows

Several bridge contracts operated by Multichain witnessed substantial outflows of numerous popular tokens on Thursday. The cause of these outflows remained unclear. This sudden activity depleted nearly all holdings of wBTC, USDC, USDT, and a few altcoins from Multichain’s Fantom bridge. The total value of the assets exceeded $130 million. Observers tracking the blockchain identified this activity as highly unusual, and Michael Kong, CEO of the Fantom Foundation, told CoinDesk he was investigating the matter.

Multichain has been dealing with numerous challenges for over a month, including technical issues and an absent CEO. These unexpected outflows from Multichain's Fantom, Moonriver, and Dogecoin bridge contracts sparked concerns on crypto Twitter about a potential hack. Multichain did not immediately respond to requests for comment.

As detailed information was scarce, certain crypto projects began notifying their communities on Thursday that they had not been impacted by Multichain's potential exploit. For instance, the team behind Magic Internet Money stablecoin announced on their project Discord that Abracadabra was not affected by the potential Multichain exploit and that they were working with involved parties to learn more.

The Multichain Fantom bridge saw assets transferred out, with altcoins including DAI, LINK, and USDT worth at least $20 million going to address 0x9d57. Other notable transactions included transfers of 1,023 wBTC (approximately $30.9 million), 7,214 wETH (around $13.6 million), and $57 million in USDC between two separate addresses. Multichain's Moonriver bridge contract also witnessed significant token outflows, with nearly all of its wBTC, USDT, USDC, and DAI (worth about $6.8 million) going to address 0x48BeAD. An address associated with Multichain's Dogecoin bridge saw over $600,000 in USDC outflows.

The Narrative

With this increased interest staking in Ethereum. Liquid Staking Derivatives have also grown. A new sector growing in the space is the Liquid Staking Derivatives finance space.

LSDfi builds on LSDs to create new market opportunities related to staking yields, validator monopolies, slashing risks, and even validator censorship. These mechanisms provide unique opportunities for users, promoting healthy competition among validators and preventing one party from monopolizing the consensus layer.

At the core of LSDfi are LSDs, LSDs are tokens that users receive when they stake their assets. These tokens enhance network security and allow users to earn an additional yield on top of their staking rewards. An essential feature of LSDs is that they provide users with flexibility and liquidity. This means users can still reap the benefits of staking crypto without locked assets. LSDfi represents staked assets and can be traded, loaned, restated, or used for arbitrage trading on secondary markets. To learn more about the potential of the market, read more here.

Crypto Market data

The last week has seen Bitcoin trading between $30,000 and $31,000. After last week's market outlook, I said that new yearly highs would be made. Bitcoin proceeded to make new yearly highs right after that. Now you want to see buyers step in and continue pushing prices higher. Right now, this push higher is a liquidity grab. I can see us trading as high as $32,500 this coming week, but before we can push that high, $31,000 needs to be broken. For now, we are trading in a range. If we break above, we can trade as high as $32,500. If we break below $29,500, we are trading back at $27,500. If you want to position yourself, waiting for strength or a leverage flush is best. Till then no point in trying to force a trade.

In my opinion Ethereum still doesnt look better than Bitcoin. While it did reclaim $1750 and shot straight up to $1900, it has now fallen back into its previous range. If we have some daily closes above $1925, I can see Ethereum running up to $2300. Till then, Bitcoin looks like the better chart.

The DeFi Sector

With Ethereum chopping around this week, the best performing chain is once again Solana.

Solana has rallied significantly this week. The chain has been seen dead since the FTX collapse, but some projects are doing some cool stuff there. Solana is one of my dark horses for a potential upcoming bull run; everybody is writing it off, so I want to research it. A cool project on Solana is MarginFi.

MarginFi

MarginFi is a decentralized margin protocol that has been developed for trading across the Solana network. This protocol simplifies access to margin, enhances risk management, and optimizes capital efficiency across the Solana ecosystem, all from a unified platform. MarginFi recently released their new points system,this single-window functionality offers users an easy way to earn points on mrgnlend through lending and borrowing of assets, and by referring new users.

Although all points are equal in value, some activities offer more potential for earning. For example, while a lending point is equal to a borrowing point, users can accrue borrowing points with less capital, effectively incentivizing them to deposit capital into the app for borrowing or lending on the Solana network.

Moreover, there's an ongoing speculation within the user community that these earned points might convert into a token airdrop in the future. This possibility could be particularly attractive for those who see the Solana DeFi as the most asymmetrical bet in the crypto world at the moment. Given the current relative lack of attention on this area, users could potentially receive a larger share of any airdrop allocations compared to those from other ecosystems.

Best and worst performers

There really isnt a big narrative when it comes to the winners but there might be a narrative forming with MakerDAO. One of the most significant plans for MakerDAO is the refocusing of MKR's governance. The organization aims to create specialized entities known as MetaDAOs to accelerate growth. This strategic move is designed to streamline decision-making processes and stimulate innovation, thereby fostering a more dynamic and responsive ecosystem.

Innovation is a crucial aspect of MakerDAO's future, especially in the face of emerging competition. The organization is cognizant of competitors like the Spark Protocol, which intends to launch a lending platform rivaling AAVE and MKR's LSD EtherDai. This competitive landscape is likely to spur MakerDAO to persist in its innovative endeavors and enhance its offerings continually. Another noteworthy strategy is the planned token distribution for each MetaDAO. Each of these entities will have its own associated token, distributed via yield

There isn't any narrative when it comes to the losers. These are all random coins that had previously spent time in the sun.

The week ahead

Right now, this push higher seems to be a liquidity grab. I can see us trading as high as $32,500 this coming week, but before we can push that high, $31,000 needs to be broken. For now, we are trading in a range. If we break above, we can trade as high as $32,500. If we break below $30,000, we are trading back at $27,500.

If you are not in any positions yet, it might be best for the market to show some strength. It's also great to start researching new narratives and projects. You can read those here.