Week 40, 2023 - Weekly Market Outlook

Introduction

In this weekly market outlook, we examine the most recent updates in the crypto space. We also examine the recent Real World Assets craze, which is becoming more popular. With an emphasis on Bitcoin and Ethereum, we analyze recent price action. We also go through the DeFi sector's results, looking at the large increase in Avalanche. Finally, we rank the crypto market's gainers and losers and offer an insight for the coming week.

XRP Court Ruling

The U.S. Securities and Exchange Commission recently faced a setback in its case against Ripple. A federal judge, Analisa Torres, denied the SEC's motion to appeal its significant loss against Ripple. Following this decision, XRP's price experienced a surge of about 5%. The judge's ruling highlighted that the SEC couldn't sufficiently demonstrate that there were controlling legal questions or significant grounds for differing opinions. However, this doesn't mark a total defeat for the SEC. Judge Torres has scheduled a trial for April 2024 to address unresolved issues. The SEC might also consider appealing the entire case later on.

Previously, in July, the judge determined that Ripple had breached federal securities laws when selling XRP to institutional investors directly. However, the same wasn't true for making XRP accessible to retail customers via programmatic sales to exchanges. This ruling raised questions about the extent to which securities regulators could oversee the crypto sector. The SEC had announced its intention to file an interlocutory appeal and sought to pause any further decisions, aiming for an appellate court review of Judge Torres' decision.

This recent development is seen as a positive sign for XRP and the broader space. It underscores the challenges regulatory bodies face in defining and policing the rapidly evolving world of digital assets. The denial of the SEC's motion to appeal not only boosts XRP's position but also hints at a potential spot ETF.

SBF Was Always Losing Money

Sam Bankman-Fried faced significant financial setbacks in the early days of Alameda Research, as detailed in Michael Lewis's biography titled “Going Infinite.” After successfully raising nearly $170 million from the 'Effective Altruism' community, Bankman-Fried ventured into the volatile crypto markets with high hopes. His aim was to exploit price discrepancies across various markets and implement high-frequency trading strategies. However, the initial months were challenging, with Alameda incurring losses amounting to over $500,000 daily during a particular month. Some trading funds even disappeared due to inadequate fund management. A trading bot named Modelbot, designed to trade a vast array of tokens, failed to differentiate between major cryptocurrencies and lesser-known memecoins, raising concerns about the potential loss of the entire invested amount.

The company's fortunes began to turn when Gary Wang and Nishad Singh, both of whom later became FTX directors, joined Alameda. Wang developed a quantitative trading system that started generating profits, while Singh streamlined the company's operations. This marked the beginning of Alameda's transformation, eventually leading to the establishment of FTX.

SBF Trial

Sam Bankman-Fried, is currently facing a trial where U.S. prosecutors have labeled his crypto empire as a house of cards that was constructed on deceit. Contrarily, his defense team argues that Bankman-Fried always acted with integrity. They believe that the downfall of FTX was not due to any wrongdoing on his part. Instead, they point fingers at Caroline Ellison, for failing to implement necessary safeguards. Ellison has already admitted her guilt and is expected to testify during the trial.

The prosecution's stance is that Bankman-Fried misled his customers and utilized their funds to amass wealth, power, and influence for himself. Assistant U.S. The prosecution also highlighted that Bankman-Fried transferred over $10 billion from FTX to settle debts of Alameda Research, another company he was associated with. They allege that he tried to conceal this by directing the creation of fraudulent financial statements. This deception was exposed when Alameda's financial records were leaked online.

The defense, on the other hand, portrays Bankman-Fried as a hardworking individual who was simply caught up in the rapid expansion of his businesses. They argue that the government is misrepresenting facts and taking things out of context.

The trial began with testimonies from two witnesses. The first, Marc-Antoine Julliard, a commodities trader based in London, shared his experience of losing approximately $134,000 due to FTX's collapse. The second witness, Adam Yedidia, a former associate of Bankman-Fried from their days at the Massachusetts Institute of Technology, provided insights into the inner workings of FTX and Alameda Research.

The Narrative

Acting as a bridge between the decentralized world of crypto and the legacy financial system, the term Real World Assets (RWAs) originates from within the crypto industry and refers to the tokenization of traditional financial instruments of value such as stocks, precious metals and credit. RWAs are a key building block for crypto’s long term vision of “the tokenization of everything”. Read more about RWA in our deep dive here.

One of the significant moves that have caught attention is MakerDAO's shift in collateral. Instead of relying on non-interest-bearing stablecoins, MakerDAO has transitioned to using US treasury bonds and stablecoin financial products as collateral. This strategic shift has not only enhanced its projected revenue but has also positioned MakerDAO as a pioneering force in integrating traditional financial instruments like US treasuries into the decentralized finance ecosystem. By doing so, Maker is increasingly seen as the new RWA blue-chip, symbolizing a blend of traditional finance and innovative DeFi solutions.

Crypto Market data

When we look at the Bitcoin weekly chart, bullish market structure has been broken. From higher lows to higher highs, we have made our first lower low. Now that structure has been broken I think we will be developing a lower high. From a high time frame perspective I think we will be entering a new down trend.

When we look at a lower time frame, the price action looks pretty good. We have developed a new range. $28,100- $25,000 seems to be the new range, and if we are able to flip $28,100 I can see us trading back at $30,000 in no time.

The DeFi Sector

The best performing chain this week has been Avalanche.

Avalanche is one of the best performing chains because a new social fi protocol has appeared on Avalanche. Stars Arena is a new Friend Tech fork. It currently only has $1,000,000 in TVL, but SocialFi has been the stickiest narrative we have had in recent months. It might be worth checking out the new SocialFi app on Avalanche.

Best and worst performers

Our best performers seem to be the RWA and Rollbit. Canto has started playing into the RWA narrative as they have recently started issuing their native yield bearing stablecoin NOTE. Thss has caused an influx of capital to the ecosystem. Rollbit is also a top gainer due to the fact that they started burning their tokens on chains.

Radix seems to be one of the biggest losers this week. This is due to the market selling off as their ecosystem and mainnet just went live. It will be worth keeping an eye on the capital inflow into the radix ecosystem.

The week ahead

This week we won't be looking at Bitcoin, but at its grandpa the S&P 500 (SPX). Since the start of the year SPX has been in a great uptrend. When structure broke, it entered into a new downtrending environment. Where it's currently at seems like a great place for it to bounce. For if it does not bounce between here and 4100, I think you can target 3500 as a new low for the SPX. For now, I will be watching it from the sidelines of the arena, always observing.

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 crypto narratives here.