Did someone say echo bubble?
The markets have been on a run, and everyone’s wondering what’s going on.
Here’s what we got today:
- Are we in an Echo Bubble? A possible explanation for recent crypto pumps.
- The 3AC boys are back. They’re trying to launch a new exchange called GTX.
- Around the Web. SEC takes on Genesis and Gemini, Uniswap’s new airdrop, and more.
Let’s Dive in!
📉 THE MARKETS
“It is better to be roughly right than precisely wrong.” - John Maynard Keynes
Crypto’s Pumping: Are we in an Echo Bubble?
The crypto markets have been pumping for the past two weeks.
And everyone’s scrambling for a reason why. Some explanations I’ve seen:
- CPI came in lower than expected
- FTX liquidators keeps finding money
- the Chinese are excited for the year of the rabbit
There’s one phrase that keeps being thrown around in Crypto Twitter:
Renowned trader, GCR, had predicted that an Echo bubble might happen this year.
What’s an Echo Bubble? After a market bubble bursts, a smaller bubble may emerge. Last year, we saw the Crypto bubble burst, and ending a two year bull run. Right now, we might be witnessing the smaller bubble, aka an echo bubble.
What Causes an Echo Bubble? Ideally, the corrections should fully run its course in the aftermath of a bursting. It should wipe out overenthusiastic traders in theory.
In echo bubbles, emotional buyers will fuel a rally before the contraction has fully run its course. The speculative and economical factors that drove the initial bubble might still be present, but there won't be any change in fundamental factors.
Hence, echo bubbles will give a temporary boost to prices. But without sound economic fundamentals, there could be a downtrend.
The Macro hasn’t changed, and it’s not as if there has been major retail adoption in the past few months.
Are we in an Echo bubble? Some believe we are in an Echo bubble.
Andrew Kang wrote an excellent thread arguing for the Echo bubble.
Some Key Points:
- $BTC and $ETH have reclaimed important support-levels and broken above diagonal trend lines & moving averages.
- Amount of stablecoins relative to the total crypto market cap is very high. These will act as rocket fuel for an upward move.
- We are at historically low levels of volatility. Largest/longest rallies typically follow periods of low volatility.
- Recent NFT activities are increasing on-chain activity. This may result in $ETH going ultrasound.
- There's a supply squeeze in the market. Mt Gox release is delayed to September, major liquidations are over, and many assets are locked up in bankruptcy proceedings.
This isn't the first time an Echo Bubble has happened in crypto.
In 2018, Bitcoin prices crashed hard. And in 2019, an echo bubble occurred.
BTC prices during the 2018 bear market. There was an echo bubble in 2019.
What Edgy’s Doing. Bull run? Nah. The Fed has to turn on the money printer, and my cousin has to start investing in Dogecoin again for me to think it’s a bull run.
Here’s what I’m doing:
- Dollar cost averaging tokens that I believe will perform well into 2024-2025 such as ETH, Matic, Frax, and more. Basically, this is what I’ve been doing since late 2021.
- This run has cause parts of my portfolio to go up - I'm taking profits when they hit certain thresholds.
- The majority of my portfolio is in long term bets and stablecoins. I have around 15%~ set aside for trading different narratives. For example, I entered some real yield tokens over the summer.
So many people got rekt’ed by trying to trade in the 2018 - 2019 markets. They would’ve been better off simply holding ETH and living la vida loca.
One important concept in Poker: choosing which table to play at.
Bull markets = playing poker in a table full of drunk millionaires. That’s when retail starts coming in and they have no clue what they’re doing.
Bear markets = playing poker against pros like Daniel Negreanu and Phil Ivey. You’re up against battle hardened and sophisticated players.
It’s completely ok to ignore playing Poker against the Pros, and waiting until the drunk millionaires are back.
So in the meantime, keep learning and find ways to increase your cash flow.
Together With Metronome
Introducing Metronome Synth’s Beta Launch
There are dozens of synthetic asset protocols in DeFi. If you’re like me, it makes you dizzy just trying to keep up.
Finding a platform without fragmented liquidity, absurd collateral requirements, and a narrow range of assets seems like a hail mary. That is, until today’s sponsor came to the market.
I’m excited to have Metronome Synth sponsoring a series of our newsletters over the next several weeks.
What They Do: Metronome has been a staple in DeFi since their initial launch in 2018, which featured a novel set of smart contracts at the time.
Now, they’re bringing a one-stop-shop for synthetic assets to DeFi with Metronome Synth!
- The beta launched on January 10th! It’s centered around capital efficiency and yield diversity through both multi-asset collateral and multi-synthetic minting.
- Metronome Synth will be FRAX’s first synthetic integration!
Founder of FRAX, Sam Kazemian commented:
“We’re very excited to see Metronome use FRAX collateral and FRAXBP for their liquidity needs. Their innovative design and unique synthetic offerings will help users earn best-in-class DeFi yields.”
Stay tuned in the coming weeks to hear more about Synth and their industry-leading architecture. They’re pushing DeFi forward - just as they did in 2018.
For now, head over to Metronome to get started trading through their beta launch!
New exchange, who dis?
Unfortunately, it looks like this slide is legit.
The 3AC boys are back, and they’re raising $25 million for a new exchange.
You can see a pitch deck for yourself. (I linked to a thread with screenshots. There’s nothing to download)
What was 3AC (3 Arrows Capital)? Su Zhu and Kyle Davies were the founders of 3AC. At one point, they were one of the largest VC / Prop trading firms ($18b AUM at their height) .
They borrowed billions of dollars for trading. Without proper risk management, they degened it away. Over 2021 and 2022, they lost more than $3 billion. This led to the collapse of 3AC.
If you want a refresher:
What’s CoinFLEX? Mark Lamb and Sudhu Arumugham are also in the founding team. (Co-founders of CoinFLEX platform). It is a distressed crypto exchange that’s going through restructuring.
They had a whale account that went into negative during June’s market volatility. We’re talking about $84m worth of delinquent debt! And the whole exchange went down because of it.
So what are the degen Akatsuki trying to build?
What is GTX? Their vision is to create a platform for trading claims, crypto, and stocks. And they want to be in the market by the end of February 2023. But, they will start with focusing on the claims market.
The Problem: The biggest CeFi firms collapsed in 2022 (such as BlockFi, FTX, and Celsius). Well, they owe a ton of people money in the form of claims. However, these claims are illiquid and may take up to 10 years to be paid out.
Remember Mt. Gox? People will haven’t been paid and that happened in 2014!
The Solution: GTX will onboard these claims onto their platform. And users will be able to trade these claims. Those who hold claims and trade them might be eligible for pro-rata equity in GTX. The team estimates the notional value of crypto claims at $20 billion.
What will happen next?
On one hand, this sounds like a crazy enough idea that it might actually work if there was a great team.
- CoinFLEX already has the technical expertise to create an exchange.
- Onboarding claims will be the responsibility of a legal team.
- Echo bubble may last enough to make people blind.
On the other hand, the crypto community is not going to let this happen.
- Using claims as collateral? This is next-level leverage.
- 3AC had a big role in the CeFi blowup. Trying to monetize it is ironic.
- Su Zhu and Kyle have been trying to blame Sam for the collapse of 3AC, but no one’s buying their story.
What People on Twitter are Saying. These people are seriously disconnected from the crypto community. The GTX news created a gigantic backlash in the crypto twitter.
Wintermute Founder said that those who invest in this fundraise are jeopardizing their relationship with his firm. Wintermute is one of the largest crypto market makers.
Therefore, this venture has an uphill battle ahead. Even raising the money is going to be difficult for them.
🌍 What’s Happening?
🗞️ Industry News
SEC accused Genesis and Gemini with the sale of unregistered securities. To make this accusation, the SEC focused on Gemini’s Earn product. Earn promised yield on deposited crypto assets.
Sam Bankman Fried denied stealing funds and claimed that FTX & Alameda Research collapsed because of a market meltdown. He said Alameda didn’t hedge market exposure sufficiently.
Binance launched its off-exchange settlement solution. They claim it’ll help institutions access products without having to post collateral directly on the exchange.
Yuga Labs unveiled a new free NFT mint, Sewer Pass. This was open to holders of BAYC & MAYC NFTs. It’ll be an access token for a new game, Dookey Dash.
Genesis Global Capital is preparing to file bankruptcy as soon as this week. This is the latest domino in the FTX saga.
🗞️ DeFi News
Ethereum’s KZG ceremony is live. Scaling tech like proto-danksharding requires a cryptographic foundation. The KZG ceremony is the creation of that foundation. Z-cash had used similar event to bootstrap their chains' privacy features.
Aave is discussing onboarding rETH as a reserve to the Ethereum V3 market. This will be a beneficial move for Aave, RocketPool, and the broader Ethereum ecosystem.
Uniswap airdropped 0.01 $ETH to everyone that purchased NFT on Uniswap from Nov 30 - Dec 14. Uniswap had said that the gas on the first NFT purchase was on them.
Dopex released the Option Liquidity Pools. It is an innovation that will allow users to exit their options positions mich-epoch.
Polygon completed their hard fork. The upgrade will reduce gas spikes and address chain reorganizations.
RocketPool’s OracleDAO is adding a new member, Coinbase Ventures. Members of Oracle DAO run RocketPool’s nodes. It is the technology required to stake Ether.
MetaMask now allows users to stake Ether through their Portfolio Dapp. Two liquid staking services are available through the app, RocketPool and Lido.