MarketWatch: There Is No Shortage of Bad News
After the bankruptcy of FTX, we come across bad news almost every day. Today's first bad news is that Genesis' crypto lending unit has stopped customer withdrawals. I just learned of the existence of such a crypto-lending application. The company had a loan size of $2.8 billion. Genesis' crypto lending unit is a sister company of Coindesk. Coindesk was the news site that exposed the FTX scandal. Moreover, the way of reporting did not include the reporter's composure. The events triggered by the bankruptcy of FTX also hit Genesis Crypto Lending, which is part of Digital Currency Groups like Coindesk.
Why did investors invest their cryptocurrencies in loan firms that are no different from Wall Street financial institutions? Presumably, they were getting a higher return compared to the decentralized alternatives. Considering that these companies are not subject to any audit, it is a bold choice.
The second bad news of the day is that the wrapped tokens of BTC and ETH traded on Solana applications lost their pegs. SoBTC price has dropped to around $1000 on the Raydium exchange. In addition, the RenBTC price is also trading around 10k. The collateral that formed the basis for the wrapped coins of the Solana ecosystem were stored in FTX. They are no longer there. In the past, I invested in a liquidity pool based on wrapped ETH in the Solana ecosystem. A hacker stole the Eths in question. Therefore, the latest developments did not hurt me. :)
Central Crypto Entities
Most black swan events in the crypto market were caused by structures that do not comply with the principle of decentralization. Let's point out Terra Luna as the only exception to this. After all, at Terra, things were running on the blockchain. There was a dominant leader figure and extreme risks taken.
We need to accept that the primary value proposition of the crypto ecosystem is decentralization, and we need to direct our investments within this framework. Decentralization eliminates the need to trust someone. When we direct our investments by trusting a person or institution, we encounter many problems. Recent events are proof of the importance of decentralization.
Broader Market Sentiment
The lower-than-expected US October consumer inflation showed signs of a market reversal. The Nasdaq 100 rose as much as 10 percent in a week. It has turned the 11700 resistance into support for now. The Nasdaq 100 managed to rise above the 10, 20, and 50-day averages but unfortunately failed to exceed the 100-day average and retreated. On the 4-hour chart, it surpassed the 100-period average as well as the 10, 20, and 50-period averages. To decide that the Nasdaq 100 has outstripped the bear market, it must surpass the 200-day average at 12700. So the Nasdaq 100 needs to rise another 10 percent.
The Dow Jones index has risen above the 200-day average. Moreover, it has continued its course above the 200-day average for a week. Industry stocks are less risky assets compared to technology stocks and cryptocurrencies. Still, it's a good sign that the Dow Jones has passed the bear market.
Inflation and Interest Rates
Inflation in the US has fallen 0.5% monthly since June. Truflation app data show that the said decline continued in November.
It is considered inevitable that the FED will raise interest rates by 50 basis points next month. So, at the end of the year, the FED interest rate will be in the range of 4.25%-4.50%. The next Fed meeting will take place in February. If the decline in inflation continues in the current trend, US inflation may reach 6% in February. Considering inflation is on a clear downward trend, the FED may end the interest rate hike cycle by making a final 25 basis point increase.
The crypto market is going through tough times, but it is a fact that the prices of digital assets are at attractive levels these days. The trend of exponential growth in the value of cryptocurrencies is not over. The upside potential increases as the months pass due to suppressed prices. It is difficult to predict when the price increase potential will be realized. We can see a rally toward the middle of 2023.
Thank you for reading.
Posted Using LeoFinance Beta