Cryptoassets Weekly: Increasingly Bitcoin-Friendly Politicians and Fast & Furious Money

The following report is a guest contribution from Youwei Yang, PhD. Youwei is the Director of Financial Analytics at StoneX. In the coming weeks, we look forward to bringing you more of this deep-dive, institutional-level research from our partners at StoneX. If you find this report interesting, please consider subscribing to Youwei’s research directly to receive all of his insights directly and review past reports.

We have lightly edited the text for clarity.

Crypto Market Cap: $3 Trillion

BTC: ~$66K    ETH: $4750 (New ATH!)

DeFi TVL: $269.3 Billion   

MACRO & MONEY FLOW:

Stocks continue to build momentum and experience money inflows, while running up to one after another record high, as the Federal Reserve starts to taper with a gradual pace in the next 8 months that didn’t surprise the markets. In addition, the passage of the infrastructure bill over the weekend has further eased the already supportive fiscal and monetary environment. Besides, the rising inflation and wages, better-than-expected job reports, as well as the lowering treasury yields, are together boosting stocks, commodities, as well as cryptos. There’s simply too much money in the system (M2 money supply up $5.5 trillion or up 35% from pre-pandemic levels) to find a place to sit, and crypto seems to be a hot and interesting spot – the total crypto market capitalization recently surpassed the remarkable level of $3 trillion. Moreover, a growing number of politicians have become more Bitcoin-friendly amid mid-term elections, with New York City’s mayor-elect saying he wants to be paid in Bitcoin and developing the city to become more Bitcoin-friendly, adding on to already very friendly places like Miami and Wyoming. The mayors of Jackson, TN, and Tampa, FL, have also committed to convert their next paychecks into bitcoin. The community expectation is that more places and people will follow suit, as each one chases the others to become the innovative center of crypto development.

Source: St. Louis Fed

SENTIMENT:

The Metaverse and Zootopia craze has calmed a bit, while attention on the Squid Game coin rose as the Netflix TV show topped global viewership lists! Getting used to the speed of money in crypto is critical; it is the game of Fast & Furious in money. Some anonymous team quickly developed Squid Game token seeing the TV show’s popularity, the price went up from a few cents to near a thousand dollars, and then it quickly dropped back to near zero, bilking 40,000 retail investors’ money with total losses of more than $170 million.

Source: CoinMarketCap

Seperately, Edward Gaming’s (EDG) victory in the World Championship for League of Legends has boosted the price of EDG coin suddenly, followed by a drop. These stories, added on top of the MEME craze around the Metaverse and Zootopia themes the last few weeks, really worries me, about the development of the crypto community and the potential to attract regulations. As much excitement crypto becomes more mainstream with ETF development and inclusions in the infrastructure bill, the details in it still worth digging into and potentially worrying – futures contango and backwardation, unrealized capital gains taxes, and more rigorous transaction / trading reporting for tax and AML / KYC purposes as crypto exchanges navigate their way to become more regulated and on the ground.

Source: CoinMarketCap

FUNDAMENTALS: Web3 and Layer2, the New Concepts for Real?

The new and evolving innovations of blockchain technology, such as Web 3 and Layer2 projects, have been trying to improve the scalability of blockchain and internet activities, and that theme continues to gain investment and fundamental progress. These trends show the growing and prospering ecosystem building around the crypto economy, alongside with the mainstream attention Bitcoin and Ether have been gaining. The “hodling” culture continues to firm as exchange balance of Bitcoin remains low, and as people hold and stake to wait for higher prices, the supply shortage may persist as long as no major black swan event occurs.

Source: Coin98

Source: Glassnode

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