Q9 Markets: Patience + Time
3rd December 2021
Q9 Capital: www.q9capital.com
- Markets rebound after Black Friday Sale
- ETH, SOL, UNI, BAT outperform
- VC’s allocate more crypto in 2021 than last 10 years combined
The market has recovered from last week’s Black Friday Sale where crypto plummeted over 10% in just a few hours. The sell-off was largely driven by the news about the outbreak of the COVID-19 omicron variant which forced majors and altcoins to slip. The market cap of crypto dropped by $100bn.
ETH has been unstoppable ever since and is now well and truly in a breakout against Bitcoin (see chart below) which traded sideways searching for a boost to break the key resistance area. The ETH rally is largely spot-driven, as evidenced by the completely flat funding rates.
On Tuesday, Fed Chairman, Jerome Powell, said it was time to retire the word “transitory” while describing inflation and told lawmakers that it would be appropriate for the bank to consider faster unwinding of stimulus when top officials for the U.S. central bank meet next on December 14th — 15th. Powell’s comments have forced markets to reprice greater odds of quicker and early tightening and challenged the dominant narrative that the central bank would never tighten screws at the expense of financial markets, even in a high inflation scenario.
The probability of Bitcoin meeting the widely-predicted year-end target of $100,000 now looks lower.
Despite Bitcoins lacklustre price performance this week, the number of addresses with a BTC balance has surged to an all-time high according to Glassnode. The data analytics firm also notes that the number of BTC addresses holding 0.01+ BTC skyrocketed to an all-time high of 9.33 million on Monday, and the number of addresses holding 0.1+ BTC hit 3.28 million on Sunday, another all-time high.
Breakout — BTC vs ETH, 1 Month
BTC Number of Addresses Holding 0.01+ Coins
Alts-Watch
SOL outshone ETH and was the performer of the week, posting gains of 13.1%. Solana has enjoyed explosive growth in 2021, increasing from around $1.50 at the start of the year to $234 today. As we wrote about last week. Some of the performance can be attributed to Greyscale launching a new trust exclusively dedicated to Solana. It follows similar products from the firm that offer exposure to prominent digital assets such as Bitcoin, Ether, Bitcoin Cash, Litecoin and Stellar Lumens.
Uniswap also outperformed with a rise of 7.4%. Decentralised exchanges such as UNI are growing in importance and cleared near $100bn in monthly volumes just for November. Uniswap is now able to seamlessly allow crypto traders to swap more than 30,000 different crypto assets.
Basic Attention Token (BAT) is also flying high, posting YTD gains of 614% and weekly advances of 20.1%. BAT is the token that powers Brave, a blockchain-based digital advertising platform designed to fairly reward users for their attention, while providing advertisers with a better return on their ad spend. Here’s a deep dive on the token.
Adventure Capital
Venture capitalists have bet big on crypto start-ups in 2021, investing more than $27 billion globally as of late November, more than the previous 10 years combined, according to PitchBook. Many of the investments were made by the venture capital arms of crypto companies, businesses whose continued growth will depend on the ecosystem expanding. Supporting the crypto ecosystem is the investment arm’s main focus.
In the third quarter of 2021, Coinbase Ventures made more deals than any venture capital firm, according to CB Insights. The investment arm of the Coinbase is backing companies building infrastructure such as Solana, businesses offering crypto financial services, decentralized finance projects, and entities working on the digital economy of the metaverse.
Other VC’s have also made enormous bets that blockchain will be as big as the internet. Andreessen Horowitz launched a $2.2bn fund in June, and Paradigm launched a $2.5bn fund in November.
Global Venture Capital Investment in Crypto and Blockchain Companies
VC’s aren’t the only institutions getting involved. A recent survey (2021 Global Family Office Report) of 385 family offices globally shows a greater appetite in Asia for new asset classes like crypto. The report shows that families in Asia-Pacific have been more willing to invest in riskier assets, with the potential for greater returns.
Offices in this region are more willing to invest in new asset classes, with 38 per cent indicating that they would increase their exposure to cryptocurrencies, a much larger share than the global average of 28 per cent. The 76 offices surveyed in Asia-Pacific managed families with a combined net worth of US$122 billion, an average of US$1.6 billion in wealth per office. Additionally, more than 90 per cent of family offices in Asia-Pacific said they plan to increase or maintain their private equity investments next year.
Great Things Take Time
The sheer size of these funds and flows are reflective of crypto being the most exciting frontier in technology for a generation. Web3 applications have now grown to reach tens of millions of users, but they are still a far cry from the many billions of Web2 users. It will take time. Yet just a few years ago most institutions, family offices and private wealth investors were still arguing if cryptocurrencies are a real asset class. This has changed. Crypto is now firmly part of the zeitgeist. It is not just general consensus that crypto and blockchain technologies are here to stay — the asset class is driving a cultural revolution that is creating new frontiers and blurring the lines between gaming, finance, fashion, social media, art, and much more.
The journey is just beginning, and the potential of crypto has never been more clear.
In the News…
- SEC denies WisdomTree’s spot bitcoin ETF proposal
- Blow to UK crypto exchanges as new law prohibits tax returns claims
- Report Says India Will Regulate “Private Crypto,” Not Ban
- Twitter’s share price jumps as Jack Dorsey steps down as CEO
- Badger DAO Protocol Suffers $120M Exploit
- People leaving Ethereum is ‘just never going to happen,’ says Solana co-founder
- Traders Are Accumulating Seven Altcoins Built on Ethereum, According to Crypto Whale Watcher
- Explain It Like I’m 5: GameFi
- Why Investors are Paying Millions for Virtual Land in the Metaverse
Legacy Markets
Risk off sentiment seen across the board. Oil futures nosedived -13% and the SPX retraced -2.6% as markets priced Omicron and inflation risks. 10-year US treasury yields dropped 17 bps, the US Dollar index slipped -0.8%, and the Gold & Silver index dropped -6.1%.
Crypto Markets
- BTC/USD drifted -1.4% lower while ETH/USD rose +5.5%. The total market cap of the crypto universe flirted with the $2.6tln mark while Bitcoin’s dominance dropped below 41%.
- SOL/USD jumped 13.4% and BAT/USD continued to move on and upward trajectory posting +20.1% in gains
- Annualised volatility spiked, rising to 80% for BTC and 102% for ETH
Flows
- Client pad was skewed towards buying (1.5x buyers vs sellers) on a tad muted volumes
- Buyers in BTC and ETH on modest volumes
- Two way flow on SOL as it continued to get interest from clients
Q9 Capital: www.q9capital.com
