Markets
Crypto Hits New Lows. What's Happening?
The crypto market crashed again.
In an hour, crypto erased ~$92 billion in value.
- Bitcoin dropped below $105,000 for the first time since June.
- Ethereum declined under $3,500 for the first time since August.
- Solana hit $156.
Leverage was the culprit—over $1 billion in positions liquidated.
In our last market update, I listed the arguments for the bearish state of the market in the short term. All the arguments still hold true.
- The 4-year cycle pattern says we should be in a bear market. Since many people believe this, it'll have a self-fulfilling prophecy effect.
- Most of the crypto-natives are rekt after the 10/10 disaster. Without crypto-natives, nobody will pump alts. So Alts are dead for the foreseeable future.
- After the 10/10 liquidations, the sentiment on the timeline is also really bad. Everyone was selling at every small rally. This is reinforcing negative conditions.
- Metrics associated with TradFi interest are also bearish. Net ETF flows for both BTC & ETH are still largely negative. mNAV premiums on DATs are still horrible.
- Uncertainty regarding the 2nd-order effects of 10/10. We still don't know if any big crypto companies have gone underwater.
Today's crash seems to be in line with the uncertain/choppy conditions since 10/10. We just had the worst October since 2018. We're down ~23.59% below avg.
Today, let's cover some more bearish events that just happened.
#1. Balancer hack.
Balancer—an OG DeFi protocol—was hacked for $100M+ despite being battle-tested.
Why is this bearish? Because it questions the credibility of DeFi itself.
If we cannot trust 4+ year old code that has been audited and forked multiple times, what can we trust in DeFi?
When investors perceive higher risk for DeFi, they won't participate in it. In other words, onchain activity will decline.
I'm not sure how much impact this will have. But imo, since DeFi capital is already risk-on, the impact will be much less than many people would expect.
#2. Fed's Hawkish Cut
On October 29th, the FOMC approved its second consecutive rate cut. In theory, lower rates reduce borrowing costs, boost market liquidity, and drive investment toward riskier assets like crypto.
But in his post-meeting comments, Powell highlighted deep divisions among officials and cast doubt on another reduction in December.
This was bearish for the markets.
Why's only crypto lagging?
Compared to equities and gold, crypto has been underperforming.
But if we look at the data in more detail, we'll see that Magnificent Seven (Mag7)—Apple, Microsoft, Amazon, Alphabet, Meta, Nvidia, and Tesla— was the major driver of those gains. And Mag7 benefits from the AI narrative.
When it comes to gold, the "debasement trade" has been driving its price. Aka, investors & central banks are buying gold to store value since the US is printing a ton of dollars and devaluing it.
So Gold is up ~52% YTD, silver's up ~66% YTD. But BTC is only ~12%.
Bullish people claim BTC lagging is an opportunity for a catch-up trade. There's some truth to that. But we also need an explanation for why BTC lagged this much.
Jordi Visser gives a good explanation in his article. TLDR: OG whales and holders are exiting. This isn't because the Digital Gold thesis is done or something. It's cuz with ETFs, they finally have the liquidity to sell their massive positions without completely killing the chart forever.
This is a healthy distribution phase. Not the traditional multi-year bear market.
This price action is similar to IPO lock-up expiries.
Also, ~$103k could be a good support line for the sideways chopping. If we lose that as well. I'll be a bit more worried.
The current sideways market can last for months. In the worst case, it can even stretch until the new year. But as I said in the last market update, the global liquidity is increasing. Macro is bullish.
For now, protect yourself and survive. Make it through the short-term volatility, Valhalla awaits in the long term.
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Right now, there's a $LITKEY staking competition to select the genesis validator set for its upcoming v1 Mainnet, open to anyone who wants to participate.
Ecosystem
What's Cooking on MegaETH?
MegaETH just completed its token sale.
It is coming with a lot of hype. Part of the reason is the many apps that are "only possible on MegaETH". I'll introduce some of them in this article.
Since MegaETH is on testnet, these apps are also on testnet. You'll need invite codes to use many of them.
#1. Noise
Everyone knows about Mindshare now. It tracks how much attention a project or trend occupies on X. (The concept can be applied to other platforms as well, but crypto people only track X mindshare for now.)
There's a huge demand for trading them. Imo, the memecoin meta is proof of that. Most viral memecoins are almost always leveraging a trend.
But memecoins are a bad instrument to trade memecoins. They're easily manipulated by cabals.
Noise fixes it. It tracks mindshare using KaitoAI and allows users to trade that. You'll be able to long or short the mindshare of a trend/narrative/project.
Rocket is a newer project that claims to do something very similar, but broader.
It aims to "price everything that moves".
#2. Euphoria
Tap trading is a form of perp trading that leverages the real-time nature of MegaETH.
In the new mobile-focused UX, users have to predict where the price will be touched within a select timeframe. The UX gives users to satisfying feeling of tap-to-earn games. The social features like leaderboards and rewards add more fun
TLDR; Euphria makes trading very addictive and entertaining.
I don't think it's the best way to trade perps. But it'll be a viral app that gets a lot of traction.
Euphoria has a copy on Monad as well. But MegaETH is probably ~10x faster than Monad. So Euphoria has the UX advantage.
#3. Cap Money
Cap Money is a stablecoin protocol from the MegaETH accelerator program. But they've already launched on the Ethereum mainnet.
Here's the 80/20: Cap allows users to mint cUSD by depositing USDC/USDT. Whitelisted operators will generate yield on this USDC/USDT & share it with users. Restakers will back the operator so that cUSD is always 100% backed.
The image below shows the flow pretty well. For more details, read this article.
Right now, Cap TVL has already crossed $350M and has fine yields. Additionally, they also have a points program.
So if you want a mainnet protocol associated with MegaETH to play around very early, Cap is good.
#4. GTE
Price discovery still happens on off-chain exchanges.
Why? Market makers need very fast order books. Liquidity providers on slow chains, like LPs on Ethereum, will lose money to MEV arbitrageurs between Ethereum & CEXes. Only CEXes have order books that are fast enough for price discovery.
With MegaETH's architecture & colocation, they can be competitive with CEX performance. MegaETH can potentially bring price discovery onchain.
GTE is the leading app poised to do that. They're building everything related to trading on their platform.
- Token Launchpad
- Permissionless Token Launcher
- Hybrid DEX with Constant-Product AMM for long-tail tokens & Spot CLOB for others.
- Additionally, the GTE DEX aggregator will aim to find the best price from all sources.
- It'll also have a perp trading platform.
You can read more about GTE here.
Valhalla is another MegaETH project that focuses on perp trading.
#5. Avon
It describes itself as the first lending protocol to fuse
- Lending Pool Flexibility that'll allow passive users to deposit assets and earn yield.
- Order Book Matching to find the most competitive rates and customized terms for active users.
With any new ecosystem, you should pay attention to native protocols for core DeFi primitives. If there's some notable differentiation, that's even better.
Avon is shaping up to be the money market for MegaETH. You can read more about it here.
MegaETH is a very exciting new ecosystem. There are many more projects I'm curious about.
- Rainmaker is their launchpad for AI Agents, Memecoins, & even utility tokens.
- Top Strike allows you to trade football cards and earn based on their performance.
- Pump Party claims to be a live, interactive game show where users can win prizes.
If you want to explore the projects, make sure to check out the app discovery tool for the MegaETH ecosystem.
🚀 DeFi Catalysts
Fx Protocol introduced fxMINT. It allows users to mint fxUSD, its stablecoin, directly against ETH & BTC without interest in regular market conditions.
Frax has launched FraxNet. It is described as the hub for minting, redeeming, and earning with frxUSD.
Ore introduced a brand new mining protocol. It's been redesigned to generate protocol revenue and support sustainable tokenomics.
Pump.fun introduced Spotlight. With it, they'll expand to utility tokens and tap into the Internet Capital Markets narrative.
Polynomial launched onchain perpetuals for SPX, Gold, Oil, & Forex with up to 20x leverage on its platform.
VII Finance went live with a Uniswap v4 hook on Unichain that allows users to earn lending interest on top of swap fees.
Ethereum has completed the Fusaka upgrade on the Hoodi testnet. The mainnet has been finalized for December 3rd as well.
ASTER is targeting 70-80% of S3 fees for $ASTER buybacks. The exact allocation will depend on market conditions.
Plume, the RWAfi chain, has launched fourteen tokenized funds from WisdomTree on its platform.
📰 Industry News
SharpLink, the 2nd largest ETH DAT, is planning to deploy $ETH worth $200M on Linea in partnership with EtherFi, EigenLayer, and Anchorage.
Balancer, an OG DeFi protocol, was hacked this week. Balancer reportedly lost ~$128M.
Berachain halted its network to prevent hackers from getting away with money on its Blanacer-based pools.
🐦⬛ X Hits
- Crypto x AI overview.
- x402 ecosystem market map.
- Ecosystem review of Neobanks.
- ERC-8004: the trust layer for AI Agent payments
- Top 5 prediction market ideas from a16z 10² Hackathon.
😂 Meme
Until next time,
Edgy
Today's email was written by Edgy and Yayya.
DISCLAIMER: I'm NOT a financial advisor. This content is for education and information purposes only. Crypto and DeFi are risky and speculative. Please do your research before investing.
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