Week 34, 2023 - Weekly Market Outlook

Introduction

In this weekly market outlook, we examine the most recent advancements in the crypto space. We also examine Liquidity Provider Derivatives, which is becoming more popular. With an emphasis on Bitcoin and Ethereum, we analyze the post nuke price action. We also go through the DeFi sector's results, emphasizing the large increase in Base. 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.

Sam Bankman Court Case

Sam Bankman-Fried, the founder of FTX, is planning a defense based on "good faith" actions. He argues that his decisions, such as loaning funds to FTX and Alameda executives, setting Signal messages to auto-delete, and establishing North American entities, were made following legal advice. Specifically, he cites guidance from the law firm Fenwick & West. His defense team released a letter outlining this "advice of counsel" strategy. The letter states that evidence will be presented to show that both in-house and Fenwick lawyers approved these actions.

The letter also emphasizes that reliance on legal advice is relevant to Bankman-Fried's intent. It clarifies that this relevance isn't confined to situations where formal legal advice was sought and followed. The defense team's letter also criticized the Department of Justice for demanding more information, noting that prosecutors had earlier resisted their attempts to gather details from the law firm.Bankman-Fried recently appeared in court to plead not guilty to new charges of wire fraud and conspiracy. His trial is scheduled for early October.

Tether new reserve report

Tether has updated its financial attestation for the second quarter of 2023, revealing an $850 million increase in its excess reserves, bringing the total to $3.3 billion. For the first time, the company also disclosed its holdings in U.S. Treasury bills, which amount to $72.5 billion. These holdings are not only in direct U.S. Treasuries but also include those held by money market funds and as collateral in overnight repos.

Tether's CTO, Paolo Ardoino, mentioned that the company's U.S. Treasury bill holdings are on par with those of sovereign nations like Mexico. He emphasized the importance of building up excess reserves, especially in light of the collapse of FTX and bankruptcy of cryptocurrency lending firms such as Three Arrows Capital. According to Ardoino, the aim is to address vulnerabilities in the cryptocurrency ecosystem caused by undercollateralized assets or operations.

The company reported operational profits of $1 billion for the quarter, marking a 30% increase from the first quarter. The report also states that 85% of Tether's reserves are in liquid investments like cash or cash equivalents. The company's total assets are estimated at $86.4 billion, while its liabilities related to circulating USDT tokens stand at $83.17 billion. Additionally, Tether plans to conduct a $115 million share buyback to strengthen its group. Profits from Q2 have also been allocated to other energy-related investments

FTX Bankruptcy proceedings

FTX is planning to liquidate its $3 billion in crypto holdings and aims to return the funds to creditors in fiat currency. To maximize the value from these sales, the company is considering hiring Mike Novogratz's Galaxy as an advisor, according to recent court filings. FTX is looking to carefully trade its holdings in bitcoin and ether to avoid negatively impacting their value. The company's lawyers stated that hedging these assets would limit potential downside risks, while staking some of them could generate low-risk returns.

FTX is also concerned that selling all its crypto assets at once could cause their prices to drop, benefiting short sellers and other market players. To mitigate this, the company is exploring options like setting weekly sales limits. Galaxy Asset Management, part of Novogratz's crypto empire, is being considered for its extensive experience in digital asset management and trading.

It's worth noting that Galaxy Digital, another arm of Novogratz's conglomerate, had tens of millions invested in FTX when it filed for bankruptcy. New filings outline procedures to manage this conflict of interest, ensuring that Galaxy acts in FTX's best interests.

FTX, now led by restructuring expert John J. Ray III, hopes that interest generated on its crypto holdings will add to the funds it can return to waiting customers. The company had previously indicated it had $3.4 billion in liquid crypto assets and plans to convert these into cash before distributing them to customers. Unlike other bankrupt firms like Celsius, which chose to make distributions in cryptocurrencies, FTX prefers to return funds in fiat currency.

All these plans are subject to approval by a Delaware bankruptcy court. The court recently heard that FTX is incurring $1.5 million per day in legal fees as it works to wind up its operations.

The Narrative

LSDfi has been one of the biggest narratives in recent times. But now a new potential narrative is brewing. Introducing Liquid Provider Derivatives (LPDfi). LPDfi is a new field in protocols that focus on creating derivatives centered around LP (liquidity providing) on Uniswap V3. This narrative could be particularly bullish as it recycles the LP positions to create more structured products. This also benefits LPs as they will earn much higher fees, finally rewarding the LP risk. You can read more about LPDfi in our article here.

Crypto Market data

Since the recent Bitcoin dump nothing has really happened. We have been trading in a range and will continue to trade in this range until someone ignites the next move.

This is the range that has been developed. In my opinion it doesn't look very good. I'm of the opinion that we are going to trade at $24,000 soon. The reason for this is that we filled 80% of the liquidation candle and grabbed a lot of liquidity lower, which is bullish. But instead of having a proper follow through to the upside we grabbed liquidity higher and fell right back into the range. It's possible that we can trade higher but for that to happen we need to sweep the lows and trade back into the range. Till a move is ignited to the upside or lower there is no reason to buy any spot Bitcoin.

Ethereum looks even worse. I expect us to trade at $1500 soon enough. Between $1450 and $1500 is where you could see a bounce. I'm of the opinion that in the next 6 months trade at the lower end of this range.

The DeFi Sector

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

Base’s Onchain Summer has recently started and now over $180 million TVL has been locked up in the chain. Friendtech has captured most of the attention on base. Friend.tech is a crypto social finance network that recently launched on Base. Users on friend.tech must buy shares of another person in order to chat with them. Users sign up on friend.tech using their Twitter accounts. Each individual will have shares tied to their account. The shares tied to an individual can be bought and sold, depending on which the price of their shares goes up and down. Friend.tech presents an exciting way to power social media platforms with cryptocurrencies.

Best and worst performers

There isn't any narrative when it comes to the winners. These are all random coins that could potentially run if the market doesn't fall on its head.

Unibot, Bitcoin and OX have been some of the strongest coins in the summer. These seem like opportunities for buying rather than seeing them fading away in the sun.

The week ahead

This is the range that has been developed. In my opinion it doesn't look very good. I'm of the opinion that we are going to trade at $24,000 soon. The reason for this is that we filled 80% of the liquidation candle and grabbed a lot of liquidity lower, which is bullish. But instead of having a proper follow through to the upside we grabbed liquidity higher and fell right back into the range. It's possible that we can trade higher but for that to happen we need to sweep the lows and trade back into the range. Till a move is ignited to the upside or lower there is no reason to buy any spot Bitcoin.

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.