Week 30, 2023 - Weekly Market Outlook

Introduction

In this weekly market outlook, we examine the most recent advancements in technology and money. Sam Altman, CEO of OpenAI, co-founded the ambitious initiative Worldcoin, which we examine. The tokenomics of the project have generated both curiosity and debate. We now focus on prospective adjustments to the Bank of Japan's yield curve management plan. Then, we talk about Elon Musk rebranding Twitter to X. Elon wants to make X into an everything app. We also examine the staking of Ethereum, which is becoming more popular, and the appearance of liquid staking derivatives in the cryptocurrency market. With an emphasis on Bitcoin and Ethereum, we present an update on the state of the cryptocurrency market at the moment. We also go through the DeFi sector's results, emphasizing the large increase in optimism. Finally, we rank the crypto market's top and bottom performers and offer a prediction for the coming week. Whether you're an experienced investor or an interested spectator, this article gives insightful perspectives into the changing worlds of finance and technology.

Worldcoin, a new paradigm

Sam Altman, CEO of OpenAI, is also the co-founder of Worldcoin, a project with ambitions of being both a financial and identity network. This project has been met with mixed reactions, primarily due to its tokenomics. The network’s native token, WLD, saw its value surge after Worldcoin's launch. According to the whitepaper, the max supply of WLD tokens is 10 and in 2038, voters may decide to implement an inflation rate of 1.5%.

The fully diluted valuation of these pre-minted tokens is around $20.6 billion, while the circulating supply, represented by 106 million WLD tokens, has a market capitalization of approximately $219 million. This discrepancy between total and circulating supply has been deemed concerning by industry observers, who caution it could make the token prone to sudden sell-offs. The project has sparked interest, but also controversy, with its distinctive method of creating so-called World IDs, using biometric data gathered from devices known as Orbs. The launch saw a capped circulating supply of 143 million WLD tokens, deemed "relatively low" compared to the total supply. This is due to Worldcoin's mission of creating a network that includes as many human beings as possible. The circulating supply comprises 43 million tokens for early users and 100 million tokens loaned to five market makers outside the US. These loans, set for three months, offer market makers an option to buy WLD tokens instead of repaying the loan.

Bank of Japan Interest Change

In response to news that the Bank of Japan (BOJ) is considering changes to its yield curve management strategy, the yen has increased in value relative to all of its major rivals. This topic is anticipated to be discussed at the future meeting on Friday. The Japanese yen increased by up to 2% versus the euro, which was the most since March, while it increased by 1% against the dollar. According to the Nikkei story, the BOJ may in some cases allow long-term interest rates to exceed their 0.5% target.

For several weeks, market participants have been speculating that the BOJ would discontinue restricting the yields on government bonds. This expectation has grown as a result of the bank's revision of its strategy last year. As a result, traders are putting up barriers to prevent a potential yen rise, which is likely to occur if the yield cap is lifted. With this news, Japanese bond futures witnessed their biggest dip since March, plunging sharply by 87 ticks.

When policymakers declared in December that they would double the previous cap of 0.25% and allow Japan's 10-year bond yields to go to about 0.5%, there were strong reactions on the financial markets. As government bond yields increased as a result, the yen sharply increased, having an impact on everything from US markets to the Australian dollar and gold. The top foreign holders of US government bonds are Japanese investors, who also hold significant positions in Brazilian debt, European power plants, and riskier loan bundles in the US.\

The market may become uneasy if they decide to switch from these abroad investments due to higher home yields. There hasn't been much movement so far despite the BOJ's leadership changing earlier this year, which raised market hopes for the end of a decade of historically low interest rates. Any policy modification might have a big impact on the yen. The currency has been under pressure as a result of Japan's ultra-loose monetary policy as other central banks have raised interest rates to fight inflation. As a result, the yen has decreased by around 6% this year when compared to the US dollar.

Elon Rebrands Twitter

Twitter might eventually turn into a payment platform as a result of Elon Musk's big X plan to upgrade the popular social media program into a more comprehensive service. Musk has indicated a desire to create a "everything app" that integrates communications, social networking, and financial transactions.

Tesla holds bitcoin, and Musk frequently discusses DOGE. He even tweeted in 2019, "Dogecoin might be my fav cryptocurrency. It’s pretty cool." Additionally, the Twitter logo was briefly replaced with the dogecoin symbol earlier this year, leading to a temporary surge in DOGE's value. Doge is obviously special to Elon, who frequently treats it as a running joke. Nevertheless, if he really does want to enable DOGE payments, it wouldn't surprise me. The Financial Times reported earlier this year that Musk asked the business for payment infrastructure, initially for fiat currencies but maybe later for cryptocurrency.

Despite having a brief flirtation with widespread adoption, particularly during the bull market that concluded in 2021, cryptocurrencies haven't yet fully taken hold of the market. Given his dubious reputation, Musk's prospective inclusion of cryptocurrency payments on X might not ensure widespread acceptance of cryptocurrency. X (previously Twitter) has millions of users, which might expand the use of cryptocurrencies.

Musk first developed his idea for X while working at PayPal, which was formerly known as X.com before combining with Peter Thiel and Max Levchin's Confinity. As it secretly develops its payment capability, Twitter has already obtained money transmitter licenses in three U.S. states.

The Narrative

Ethereum staking has surged as a result of this. The use of liquid staking derivatives has increased. The Liquid Staking Derivatives financing space is a recent development in the market.

LSDfi expands on LSDs to open up new market potential involving validator monopolies, staking yields, risk reduction, and even validator censorship. By encouraging healthy competition among validators and preventing one party from controlling the consensus layer, these approaches offer special potential for users.

LSDs, tokens that users obtain when they stake their assets, are the foundation of LSDfi. These tokens improve network security while also enabling users to increase their income beyond their staking payouts. The flexibility and liquidity that LSDs offer consumers is a crucial component. This means that even without locked assets, users can still benefit from staking cryptocurrency. Staked assets are represented by LSDfi, which can be exchanged, lent out, restated, or used in arbitrage transactions on secondary markets. Read more here to learn more about LSDfi

Crypto Market data

Bitcoin appears to have finally broken out of its month-long range. The unfortunate news is that it collapsed downward. Do not attempt to cross in front of an oncoming train at this time. The wisest course of action is to wait for the market to stabilize. Between $27,000 and $26,000, I think the market will strike an equilibrium. Prior to that, I'm not particularly interested in interacting with Bitcoin or Ethereum.

Ethereum appears to be in dire straits and may be headed lower. For Ethereum, a claim of $1700 or $1918 is the best long. There is no purpose in interacting with Ethereum until that. It is preferable to go on chain and start trading the alts there if you are eager for gains. There are thousands of alternative launches every day, but be careful—you can be roughed up.

The DeFi Sector

With Ethereum chopping around this week, the best performing chain is Optimism

Optimism has rallied significantly this week. The rally for Optimism has been due to the recent hype for the Ethereum Cancun update and EIP 4844. EIP-4844 aims to implement the temporary storage and retrieval of off-chain data through Ethereum nodes to meet the data storage needs of blockchain applications. After the Cancun upgrade, Ethereum L1 data will be moved into a new temporary 'Blob' storage. Blobs are cheaper with larger space, allowing Ethereum to handle more data, increase transactions per second (TPS), and reduce costs. In this case, EIP-4844 is expected to mitigate the cost of Layer 2 rollups. This cost reduction will ignite the breakout of the Layer 2 ecosystem, expanding Ethereum's advantages and narrowing the window of opportunity for other Layer 1 chains.

Best and worst performers

There seems to be a new narrative approaching crypto markets. Telegram Bots is a new narrative. Telegram bots for decentralized applications are automated programs that allow users to implement on-chain trading or farming strategies through tthe messaging app by linking wallets to the bots, or creating new Ethereum wallets within them. Unibot stands out as the most popular Telegram bot in this sector. Some other Notable Telegram bots are Lootbox,Genie and Wagie.

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

For now Bitcoin is trading sub $30,000,We broke below the month-long range. I think we will start trading back at $27,000 and that is when you want to potentially position yourself. 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 appears to be in dire straits and may be headed lower. For Ethereum, a claim of $1700 or $1918 is the best long. There is no purpose in interacting with Ethereum until that. It is preferable to go on chain and start trading the alts there if you are eager for gains. There are thousands of alternative launches every day, but be careful—you can be roughed up.

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.