Today we’ll look at a little-known indicator that clarifies a lot with Bitcoin (BTC-USD), plus we’ll check in with the “crypto banks” and venture capitalists. Here’s the latest and greatest from The New Digital World:
Obscure Bitcoin Indicator Shows Why $20K is Actually an Important Price
Even as the bear market wears on… Bitcoin just refuses to break $20,000 for long. (Even touching $24,000 last week!) But why?
One clue could lie in bitcoin’s “HODLer Supply Concentration” around $20,000, as Glassnode calls it in today’s Week On-Chain newsletter.
Glassnode broke down the BTC market into long-term versus short-term holders (and exchanges), measuring each group by their “Unspent Realized Price Distribution.” The analysts found way more URPD at $20,000 than other price levels of bitcoin. And this was mainly driven by the Short-Term Holders – who also showed “elevated demand” at $30,000 and $40,000.
Big picture: “Long-term supply dynamics continue to improve as redistribution takes place, gradually moving coins towards the HODLers,” concludes Glassnode.
But $20,000 is especially telling because it attracted such a “large cluster” of Short-Term holders, suggesting “a significant transfer of ownership from capitulating sellers to new and more optimistic buyers.”
My takeaway: It’s easy to dismiss these “big, round number” prices as an arbitrary way of analyzing the markets. But it’s about investor psychology – and that’s everything in a market that’s still so speculative (versus driven by fundamentals).
Clearly, the psychology is having an impact. So, when the media makes a big deal of the round numbers – I’d have to say it’s worthwhile.
Later in this issue: We’ll see how BTC $20,000 plays into Luke and Charlie’s latest forecast for their Crypto Investor Network.
Risk Factors: Let’s Check In With the “Crypto Banks”
On Thursday, we got some notable numbers from Sam Bankman-Fried’s “crypto bank” of choice for his acquisition spree: BlockFi.
In the “Transparency Report,” we learned BlockFi’s liquidity and credit risk as of June 30. There was a handy infographic and everything.
The headlines: “BlockFi has $1.8B in outstanding loans, $600M of which are uncollateralized,” as CryptoSlate worded it. This was the angle most other reporters took on it…
But, proportionally, $600 million doesn’t seem too bad. If 75% of BlockFi’s loans are more conservative, I don’t know if that’s some huge indictment of the company, in and of itself.
Bigger story: “Many, but not all” institutions are required to post collateral to get a loan from BlockFi.
It gets more interesting when you see how the different clienteles break down:
- Institutions have borrowed $1.5 billion from BlockFi as of June 30.
- $600 million (out of the $1.5B) may be uncollateralized, as BlockFi said these loans represented “exposures to individual loan counterparties.”
- Retail clients have borrowed $300 million. And “we typically allow retail clients to borrow funds with a value of up to 50% of their collateral.”
So, BlockFi is saying all the retail loans are collateralized – even overcollateralized… But that’s only 16% of its loan business.
Red flag: If Terra and Celsius are any indication – $600 million is more than enough to kick off a “waterfall” of trouble in the crypto markets. Lenders in the crypto space may want to take a page from DeFi’s book, instead. DeFis like Aave (AAVE-USD) require collateralization, like with its new stablecoin, for example.
Luckily for the crypto banks, though… FTX (FTT-USD) and Alameda Ventures (both founded by Sam Bankman-Fried) are ready to ride to the rescue.
The latest: FTX and Alameda are looking to bail out Voyager Digital users who were affected by its bankruptcy. In return, those users would simply become FTX users. The total price tag of the deal isn’t totally clear – but Voyager is calling it a “low-ball bid dressed up as a white knight rescue.”
I have to wonder, though, if the dollar amount is the issue… or the fine print. After all, as Cointelegraph explains, “FTX is proposing to buy out all Voyager Digital digital assets and digital asset loans, except loans to Three Arrows Capital, which would remain Voyager Digital’s problem.”
The 3AC founders have been, shall we say, hard to pin down since becoming poster boys for the June crypto collapse…so, good luck to Voyager and their other creditors.
JPMorgan Counts $18 Billion Worth of VC Deals in Crypto This Year
If you were with me in The New Digital World last Monday, you’ll remember that Crunchbase reported $9.3 billion of crypto VC deals in the first half of 2022.
Turns out: Crunchbase may have been low-balling it! At least, according to JPMorgan. Per Bloomberg this morning: “As of July 14, the year-to-date venture capital investment in the crypto and blockchain industries stood at $17.9 billion, according to the investment bank.”
JPMorgan counted $9.8 billion in the first quarter alone! This then fell to $7.9 billion in the second quarter. But still: “It exceeds most prior full-year totals, representing more than 60% of the $29.4 billion VCs poured into crypto in [all of] 2021,” Bloomberg notes.
Looking back at some of the major deals cited in Bloomberg’s glowing feature:
- Trade Republic, a German crypto app, raised $1.2 billion in June.
- ConsenSys – which owns the leading crypto wallet MetaMask and plans to launch a crypto for it – enjoyed a $450 million round in March.
- Circle, best known for the increasingly popular stablecoin USD Coin (USDC-USD), raised $400 million in April.
- The NEAR Protocol (NEAR-USD) blockchain raised $350 million in April.
Quote Of The Day:
“When bad news leads to positive price action, that usually means we are in the midst of a bear-to-bull-market trend reversal.”
– Luke Lango & Charlie Shrem, Crypto Investor Network
The “bad news” they’re referencing? “This past week, Zipmex (a crypto exchange operating in southeast Asia) halted withdrawals, and Quebec’s pension management fund (which invested $150 million into Celsius) said that its losses related to that investment will take ‘time to resolve.’ The contagion continues to spread. Yet, crypto prices are moving higher.”
The “positive price action” they’re referencing in Saturday’s Crypto Investor Network update? When BTC traded above $23,000 late last week, it was “a rare break for BTC above its 50-day moving average while its 200-day moving average is still declining. Such short-term upside breakouts in a longer-term downtrend often represent critical turning points for the crypto.”
“To be clear: We do not expect current strength to last. We do believe that this breakout will end with BTC consolidating in the $20,000 range,” Luke and Charlie wrote on Saturday. “Certain alts – like ETH – may pop on discrete catalysts (like the ETH Merge). But we expect most of the altcoin market to remain rangebound until early 2023, at which point we expect the new boom cycle to begin.”
So… Some cryptos will pop higher while most of them consolidate. After the events of May and June, I’ll take a boring market any day (over a collapsing one!) Especially when certain cryptos have unique catalysts that many investors are “sleeping on.” Put it on your radar with this urgent briefing walking you through the steps you should take today.
Afterwards, Luke and Charlie will have an investor report for you: The Burn Coin With 10X Potential. Click here to see the strategy and the new pick to take advantage.
On the date of publication, Ashley Cassell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines. To have more news from The New Digital World sent to your inbox, click here to sign up for the newsletter.