It was no doubt a rough start to the year. This has left many wondering whether we are likely heading into that inevitable bear market.
I don’t happen to think so, and I will be telling you exactly why in my market update.
But before that, I want to bring your attention to one of the most insightful research reports that I have read of late.
This is a report by the folks over at Arcane Research. They are the research arm of a listed crypto company based out in Norway and I have been a long time fan of these reports. That is because they are comprehensive, insightful, data rich and often developed with a slant towards institutional investors.
Their 2021 summary report is one of their longest yet and it takes a look at some of the most important trends, topics and events of last year. They also have a number of predictions about what we could see this year for Bitcoin and the entire altcoin complex.
In my video today, I break down the report page by page. I explain some of the key data and analyse exactly what it means for the markets. I also give my view of some of their predictions for the year and tie that in with some of those I have been making over the past 2 weeks.
You can watch that right here.
📊 Main Portfolio 📊
Decided to pick up a bit more ETH, SOL & DOT. This was done with the remaining UST as well as the PAXG in my portfolio. I have chosen these three cryptos to buy mainly because I think they are the most undervalued given ecosystem development.
I also moved over some USDC that I had placed in a lending pool and will be keeping it as dry powder in my portfolio.
Updated portfolio is:
ETH 28.42% | BTC 20.81% | SOL 12.89% | DOT 11.16% | ATOM 6.67% | FTM 4.55% | HNT 3.11% | MATIC 2.37% | RUNE 2.02% | ADA 1.90% | INJ 1.25% | AR 1.24% | LINK 1.21% | USDC 1.07% | YGG 1.04% | XDEFI 0.29%
🖼 NFT Portfolio 🖼
MAYC 93.33% | Meebit 6.66%
📈 Thoughts on Market 📈
If you’re here for hopium, I’m happy to say that I have no shortage of it. Last week’s crash was brutal, but I am confident that it’s not the end of the bull market. This is for three simple reasons:
- BTC balance on exchanges are still dropping (people not selling)
- BTC dominance still dropping (money moving into alts)
- BTC exchange leverage continues to hit record highs (traders are bullish).
This third factor is more important than you think, because it makes almost all short term technical analysis null and void. BTC and ETH saw lots of liquidations last week, especially ETH (hence why I loaded up on ETH). The downside volatility created by leveraged longs has a tendency to violate short term price patterns, or make bearish ones appear to have confirmed.
This is why I chose to zoom out last week and take a look at what BTC was doing on the weekly. The Bollinger Band and RSI indicators suggest that we’re in the perfect dip buying zone. However, this doesn’t mean our troubles are over just yet. We could see another red candle for the crypto market next week, so bear that in mind before you go all in.
And who’s to blame for this crash you might ask? Well, that would be the Federal Reserve, who hinted in their December meeting that they might start selling some of the trillions of dollars of government bonds they’ve bought over the last few years. If they do this, it will raise interest rates beyond what they initially promised. This is why asset markets around the world tanked.
And why is the Federal Reserve wanting to raise interest rates? Well, that would be inflation which has been running hot for months. Here’s the kicker though. The Bureau of Labour Statistics announced in December last year that they will be changing the way the CPI is being measured in January this year.
So, riddle me this: What happens if the new CPI figures coming out next Wednesday mysteriously show a sharp decline in inflation? Chances are, asset markets will start to recover as they start to speculate on the possibility that the Federal Reserve will reconsider exactly how quickly they want to continue with the taper. You can bet that Fed officials will discuss this at their end of January meeting.
This will be confirmed in mid February when the minutes (summary) of the Federal Reserve’s January meeting are made available. I bet that their rhetoric around tapering will be more relaxed, and when you combine that with the fudged CPI numbers for January that come out a few days before the meeting minutes, markets will have all the hopium they need to rally.
If you want to get a sense of just how broken the CPI is, be sure to check out my video about that by clicking here.
🔚 When in Doubt, Zoom Out (A lot) 🔚
As many of you will know, altcoins are highly correlated with Bitcoin. If Bitcoin pumps, chances are altcoins will pump, and vice versa. As such, you can think of the price action of most altcoins (especially the larger ones) as being an imperfect reflection of BTC’s price action.
This got me thinking, what is BTC’s price action an imperfect reflection of? Put simply, what exactly influences the price of BTC?
This is a topic I covered in a video last year, and if you watched that video you might remember that BTC and other cryptocurrencies exist in the deep end of the pool that is the financial market. When uncertainty is high, be it because of some pandemic or global conflict, investors tend to flock to safer assets. Conversely, when things are looking certain, investors crave risk (crypto).
As such, it’s safe to say that BTC’s price action is an imperfect reflection of the price action in the stock market. A correlation between the two has been known for quite some time, and has been getting stronger as of late. When it comes to zooming out, this is about as far as most crypto analysts get, including YouTubers such as myself.
But that’s not zooming out enough. What exactly influences the prices of assets in the stock market?
If you answered the Federal Reserve, you would be correct. As pointed out by one of my favorite crypto YouTubers, the price action of the S&P 500 over the last 10 years appears to be heavily influenced by the Federal Reserve’s monetary policy. When they lower interest rates and spend, markets rise. When they raise interest rates and stop spending or sell, markets crash.
But we’re still not zoomed out enough. What is it exactly about the Federal Reserve’s activities that causes the markets to rise and fall?
The short answer is that it’s the effects its policies have on the US dollar, specifically its supply. Right now, most of the money in circulation is technically debt, which is why banks consider US dollars to be liabilities. Contrary to popular belief, most of the money isn’t created by the Federal Reserve per se. It’s created by the banks who lend that money into being.
This money is of course lent out to individuals and institutions. What these individuals and institutions are ultimately doing is borrowing from their future earnings, because eventually that debt needs to be repaid. When that debt is paid back, money is technically destroyed – removed from circulation. This causes the price of the US dollar relative to other assets to rise.
And because investors are always “forward looking”, when the Federal Reserve says it’s going to increase interest rates in the future, investors react today by paying off some debt in anticipation, which requires selling assets if they’ve taken on too much leverage.
In sum, you could say that crypto prices are an imperfect (inverse) reflection of what’s going on with the US dollar. I could zoom out further to tell you what else influences the price of the US dollar, but I think it’s best you listen to the experts when it comes to that one.
🕹 Why GameFi 🕹
Over the past few weeks I have stated that I was quite bullish on GameFi especially in 2022. However, I haven’t fully explained why.
Quite simply, it’s because of the sheer size of the current traditional gaming ecosystem and how fast it is growing. Here are some stats from an article in CoinTelegraph last year:
- The gaming market is worth $180 billion. This is greater than $100 billion for film and $73 billion for sports
- Three of the top four most-viewed sporting events in 2018 were E-sports events
- Some predict we will see the number of streamers rise to 1 billion in 2025
- Gamers spent 15 billion on in-game “loot” last year
Ok, but why would these gamers benefit from blockchain gaming you ask?
Well, because these entire gaming ecosystems exist in walled gardens. The developers own the assets and can do whatever they want with it. In fact, this reality is one of the prime reasons that Vitalik Buterin became so interested in decentralised technology. According to this post:
“I happily played World of Warcraft during 2007-2010, but one day Blizzard removed the damage component from my beloved warlock’s Siphon Life spell. I cried myself to sleep, and on that day I realized what horrors centralized services can bring”
With NFTs and a decentralised blockchain, you own those assets. You can move them wherever you want and sell them freely. Not only can they be converted into cryptocurrency but also fiat. This therefore means that you have an ecosystem and economy where people can realise real world tangible results from their gaming.
This is where the “Play to Earn” factor comes in. People playing online games in order to generate wealth and income for themselves. The sector is massive and games like Axie Infinity have demonstrated just how much demand there is for these non-traditional sources of income.
It’s not just hopium. Here are some stats from last year:
- During Q3 of last year, we saw $2.32 billion in sales of NFT assets which was 20% of all sales
- As of early December, GameFi’s weekly active users have reached 9.21 million, a record high.
- Five of the top 9 dApps in dApp rankings are GameFi related
- The market cap of virtual world reached $4.6 billion and some land sales topped $42 million
So, it’s quite clear that the trend is moving in that direction.
What I often hear from gamers, however, is that blockchain games are far removed from being really “playable”. I tend to agree. You are not going to get the hardcore gamers to drop what they are playing to battle with Axies.
However, there are a number of titles that are launching this year that are looking to transform that. Games that are built from the ground up to be playable first. One of these is BigTime gaming that recently completed a public sale of their in-game SPACE NFT tokens. I bought a bunch of these and will be adding to my portfolio once they are released in the game.
Having said all of this though, I am also aware that some gamers are incredibly averse and sceptical of NFTs. Sometimes, they are openly hostile towards them. In some cases, this can be justified especially when the NFTs are just used as a money grab. However, as we have seen in the traditional finance space more broadly, crypto was ridiculed and attacked for years before the banks started getting on board. I happen to think that the hardcore gamers could eventually come into the fold.
Beyond this though, it’s also worth seeing where the smart money is positioning their investments. It seems that a great deal of them are diving into Play-to-Earn games, guilds and blockchain gaming titles.
As they say: Follow the money!
I will be doing a video on some of the most exciting projects in the GameFi space in the coming few weeks – so keep an eye out for that.
🔥 Deal of The Week 🔥
🔒 Upgrade Your Crypto Security: Yes, the markets are pretty bloody right now. However, now might be a good time to take your mind off the stress of the markets and instead focus on something you can control: Your Crypto Security!
Most people just leave their crypto on an exchange or use a free self custodial wallet. However, the crypto savvy try to stack the deck in their favour by upgrading that security to a hardware wallet.
But which one do you choose?
With Trezor you can store over 1,000 different cryptos – so, chances are that even the most ardent altcoin dabbler can store their whole portfolio on this device!
👉 Get A Trezor & Secure Your Crypto!
🔮 Video Pipeline 🔮
- Coinmarketcap Vs Coingecko: Which is best?
- Top Crypto Tax Tools 2022!
- Kucoin Vs Binance: Which is best?
- Top 5 Polkadot Projects
- Aave Update: Still worth it?
- Crypto Developer Report: What you need to know!
- Upcoming Crypto Events: What to keep an eye on!
- The Great Web 3.0 Debate: What It Means!
🏆 What’s New At CoinBureau.com This Week? 🏆
✅ Crypto Investment Products: The Key to Mass Adoption?
That’s about all for this newsletter. However, I hope you are looking forward to 2022 as much as I am.
I’d also like to thank you for your continued support of the channel, in spite of these rocky markets. It means the world to the me and the Coin Bureau team. It gives us the fuel we need to keep on producing all this content for you!
For now, have a great Sunday and I hope you enjoy our latest vid!
Guy your crypto guy