Week 28, 2023 - Weekly Market Outlook

TLDR

• Ripple Labs Inc did not violate federal securities law by selling its XRP token on public exchanges
• Celsius Network and its former CEO, Alex Mashinsky, are facing multiple lawsuits
• The latest inflation data suggests that the Federal Reserve may hold interest rates steady
• Bitcoin has made new Yearly highs
• 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 variety of topics that have shaped the crypto landscape. We begin with a landmark ruling in favor of Ripple Labs Inc, which has sent ripples through the industry and led to a surge in the value of its XRP token. We then shift our focus to the legal woes of the now-defunct crypto lending firm, Celsius Network, and its former CEO, Alex Mashinsky, who are facing multiple lawsuits from three U.S. entities.

We also explore the latest inflation data and its implications on the Federal Reserve's interest rate decisions, which have a significant impact on the crypto market. We then delve into the burgeoning field of Liquid Staking Derivatives finance, focusing on the opportunities it presents for users and the competition it fosters among validators.

In the market data section, we analyze the performance of Bitcoin and Ethereum, and highlight the resurgence of Solana. We also introduce Jito, a promising project on the Solana blockchain. Finally, we wrap up with a look at the best and worst performers of the week and a forecast for the week ahead.

XRP WINS

In a landmark ruling, U.S. District Judge Analisa Torres declared that Ripple Labs Inc did not infringe federal securities law by selling its XRP token on public exchanges. This decision, the first of its kind favoring a cryptocurrency company in a case initiated by the U.S. Securities and Exchange Commission (SEC), led to a 75% surge in XRP's value by late Thursday afternoon, as per Refinitiv Eikon data.

While the ruling is specific to Ripple's case, it could potentially serve as a precedent for other crypto firms embroiled in legal battles with the SEC over jurisdictional matters. The SEC, however, did find solace in part of the ruling where Judge Torres held that Ripple violated federal securities law by selling XRP directly to sophisticated investors. The ruling is subject to appeal once a final judgment is issued.

Ripple's CEO, Brad Garlinghouse, hailed the ruling as a significant victory not just for Ripple but for the entire U.S. crypto industry. Following the ruling, Coinbase, the largest U.S. crypto exchange, announced it would resume XRP trading on its platform. The SEC had previously accused Ripple and its current and former CEOs of conducting a $1.3 billion unregistered securities offering by selling XRP, created by Ripple's founders in 2012.

Judge Torres ruled that Ripple's XRP sales on public cryptocurrency exchanges did not constitute offers of securities under the law, as buyers did not reasonably expect profits tied to Ripple's efforts. She also ruled that XRP sales on crypto platforms by Garlinghouse and co-founder and former CEO Chris Larsen, and other distributions, including employee compensation, did not involve securities.

However, the SEC did score a partial victory as Judge Torres found that Ripple's $728.9 million XRP sales to hedge funds and other sophisticated buyers were unregistered sales of securities. She ruled that Ripple's marketing to institutional investors clearly pitched a speculative value proposition for XRP, dependent on the company's efforts to develop the blockchain infrastructure behind the digital asset. The ruling has sparked renewed calls for legislation to provide clear rules for tokens.

Celsius sued by SEC

Celsius Network and its former CEO and co-founder, Alex Mashinsky, are facing multiple lawsuits from three separate U.S. entities: the Securities and Exchange Commission (SEC), the Commodity Futures Trading Commission (CFTC), and the Federal Trade Commission (FTC). Bloomberg has reported that Mashinsky was arrested and charged with fraud, according to an anonymous source.

Mashinsky and Celsius' Chief Revenue Officer, Roni Cohen-Pavon, were indicted by the U.S. District Court for the Southern District of New York on Tuesday. The charges allege that they devised a scheme to defraud Celsius Network customers, according to a previously sealed indictment.

The SEC filing on Thursday claims that the company and Mashinsky raised billions from investors through fraudulent and unregistered offers and sales of crypto asset securities. They allegedly deceived investors with promises of a safe investment yielding high returns, with its Earn Interest Program claiming potential annual yields of up to 18%. The SEC also argued that Celsius' token, CEL, and its erstwhile Earn Interest Program are securities. This aligns with the agency's recent assertions in other filings that several cryptocurrencies, including BNB, BUSD, SOL, ADA, and MATIC, are securities.

Celsius Network, once valued at $3.25 billion during its oversubscribed Series B financing round in November 2021, filed for Chapter 11 bankruptcy in June 2022. This came a month after freezing customer assets amidst a turbulent crypto market that led to the downfall of several crypto firms. The SEC filing revealed an internal message from a Celsius executive in May 2022 stating, "we don't have any profitable services." The bankruptcy filing indicated that the company had between $1 billion and $10 billion in assets and liabilities and over 100,000 creditors.

New Inflation Data

The latest data has reinforced expectations that the Federal Reserve may hold interest rates steady after one more anticipated 25 basis point hike at its July policy meeting. This has particularly benefited crypto and shares of large tech-related companies, which are often sensitive to higher interest rates.

The Consumer Price Index (CPI) rose by 3.0% in the 12 months through June, marking the smallest year-on-year increase since March 2021 and a decrease from a 4.0% rise in May. This data was well received by market bullInvestors are currently assessing how much longer the Fed will need to raise rates to control inflation.

The Labor Department report also showed the smallest monthly gain in underlying consumer prices since August 2021. Quincy Krosby, chief global strategist at LPL Financial in North Carolina, suggested that the market is sensing the Fed is nearing its final rate hike. Finally, U.S. Treasury Secretary Janet Yellen's trip to China has sparked hopes in Beijing that tariffs on Chinese imports may be eased. The news was absorbed by investors as trading volume on U.S. exchanges reached 11.20 billion shares.

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 $31,800. Since XRP has partially won its lawsuit, Bitcoin rallied to new yearly highs. The XRP lawsuit is extremely bullish for altcoins, As Bitcoin dominance has tumbled more than 5%. For Bitcoin to take the lead in the market, it has to break above $32,500. The XRP news is the most bullish news we have received in the last year. This is the best possible time for Bitcoin to flip $32,500. For now, we are trading in a range. If we break above, we can trade as high as $35,000. If we break below $29,500, we are trading back at $28,000. 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.

Ethereum finally looks better than Bitcoin. Ethereum needs to hold $1950. Failing to hold $1950 will make me retract my statement. If $1950 is held, there is no reason I can't see Ethereum trading at $2300 in the next couple of weeks.

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 Jito.

Jito

JitoSOL is a Solana liquid staking derivative. Users can exchange their SOL for JitoSOL. In return, holders maintain SOL’s liquidity and DeFi opportunities while earning yield from staking. JitoSOL uniquely provides its holders with additional rewards from transaction revenue associated with MEV extraction on Solana.

The token’s yield accrues in its price rather than an ongoing distribution. At launch, 1 JitoSOL = 1 SOL. As rewards are accrued, JitoSOL will appreciate vs SOL (e.g. 1.05 SOL per JitoSOL). The price appreciation guarantees all JitoSOL holders receive yield regardless of how the token is stored. In addition, the token accrues extra value from MEV rewards.

Liquid staking derivatives typically generate a yield from staking rewards. The network issues new circulating SOL to validators for securing the network. JitoSOL’s structure uniquely provides extra yield from MEV transactions. With Jito’s validator client, traders participate in auctions for the opportunity to profit from MEV. The winning bids are distributed to validators and stakers to access MEV transactions. MEV rewards will be modest at first but, over time, could become a significant source of additional yield.

Best and worst performers

There really isnt a big narrative when it comes to the winners but there might be a narrative forming with Solana. Solana has been one of the most hated coins since FTX crashed, but there are projects being built on there. Keeping an eye on solana is the play here.

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

For now, we are trading in a range. If we break above, we can trade as high as $35,000. If we break below $29,500, we are trading back at $28,000. 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.

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.