FPG’s Weekly Perspective on Crypto Markets: December 27th, 2022
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Crypto markets were quiet heading into the last week of the year, with BTC and ETH still hovering around last week’s levels. However, while the market was experiencing low volumes and volatility typical of the year-end holiday period, it seems that malicious attackers have not taken a break, with reports of DeFi protocol Defrost Finance purportedly falling victim to cyberattacks.
Barring any new market catalyst, prices and volumes are expected to remain range bound as market participants look forward to 2023 and leave a tumultuous year behind. To note would be this Friday’s end of year options expiry where $2.4b worth of BTC and an equivalent amount of ETH options are set to expire with more than half of ETH options set to expire out of the money
On the global macro front, it would be good to watch how the pent up Chinese demand will play out in the coming months as China rapidly opens up.
Thursday 29 December
- US — Unemployment Claims
Saturday 31 December
- CNY — Manufacturing PMI
- CNY — Non-Manufacturing PMI
Notable Events and News
Brazil to Allow Investment Funds to Invest in Crypto
The Brazilian Securities and Exchange Commission (CVM) approved the ability for investment funds to include crypto assets among their holdings. In order to be part of fund portfolios, crypto assets would have to follow a set of criteria in line with a new regulatory framework.
DeFi Protocol Defrost Finance Reportedly Hacked
DeFi Protocol Defrost Finance has claimed that it had been the victim of a hack which drained $12 million of its funds. The hacker allegedly first attacked by using a flash loan to drain funds out of its V2 protocol and subsequently conducted a larger attack which used the owner key to exploit its V1 protocol. However, blockchain security firm Peckshield as well as Certik have claimed that the hack had been an elaborate rug pull instead, with members of the Defrost Finance team being uncontactable after the hack. In a twist of events, Defrost Finance has stated that the hacker has returned the funds stolen from the hack on its V1 protocol.
Top Solana NFT Projects DeGods and Y00ts Migrate to Other Chains
The team behind Solana NFT projects DeGods and Y00ts have announced that DeGods and Y00ts will be moving off Solana to Ethereum and Polygon respectively in early Q1 of next year. DeGods and Y00ts are the one of the more popular NFT projects in the Solana ecosystem, with DeGods commanding a price floor of 514 SOL and Y00ts commanding a price floor of 154 SOL. The team has not yet announced the technical details of the upcoming migration.
BIT Mining Limited Releases Statement on Subsidiary BTC.com being Hacked
BIT Mining Limited released a statement announcing that its subsidiary BTC.com suffered a cyberattack on December 3rd in which approximately US$700,000 in asset value owned by BTC.com’s clients, and approximately US$2.3 million in asset value owned by the company were stolen. The company has stated that BTC.com is operating its business as usual and apart from its digital asset services, its client fund services are unaffected.
Market Technicals and OnChain Analysis
The end of year holiday season is typically a quiet period as market participants go on a break. Transaction count on Ethereum is also at a near two year low, a clear lack of market activity.
ETH and BTC held on exchange have also fallen to a new two year low after FTX. What happens next? In the long run, holders will want to find alternative areas where they can extract more yield out of these assets without holding it in centralized entities / platforms. This may be a catalyst that causes some activity to return toward DeFi and NFTs as the market evaluates alternatives to centralized platforms.
We may already be seeing the first signs to indicate that shift in market sentiment toward DeFi and NFT after a long period of inactivity. Weekly NFT trading volume is starting to see a slight uptick as interest in NFTs over the past few months have fallen to a new low after peaking in the spring. Holders of ETH or SOL are making use of NFTs as a potential “leveraged” second layer value store since the “highest quality” projects are at multi month lows.
We have also seen new marketplaces popping up, latest of which is blur.io which seeks to challenge Opensea’s dominance with their simple interface and airdrop reward scheme. With several large changes in market share over the 18 months, it seems the NFT exchange race is still open to new competition.
One final remark, BTC miner reserves have also stopped falling over the past month, which could both be evidence of renewed miner accumulation as well as groups like Core Scientific, who recently filed for Chapter 11 bankruptcy, depleting their reserves.
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