‘The only reason I think people are a bit on edge here is because technicians, who really don’t follow the crypto markets at all, they’re just technicians. They follow equities and bonds; they don’t care what these companies do or what kind of fixed income investment they are. They just have their technical and just off the cuff they will say, “Well, if it breaks from here it could go to 11 to 13,000 from this 19.5.” And the reason they say that I can see this on the charts is that’s where there is a huge amount of support where it’s peaked a lot of times in a trading range.’
The crypto market has shown systemic risk as of late with the collapse of Terra Luna leading to a domino effect of other firms collapsing, the latest being Voyager, amidst the firm’s collapsing, Bitcoin trading below its 200-weekly moving average and massive layoffs within the industry.
In her latest monthly update, Cathie Wood, CEO and CIO of Arc Invest, still has confidence in the crypto industry at large. Cathie Wood discussed her conviction in the crypto industry despite all of the turmoil. Cathie believes the fast fall of many of these firms is a good thing, and ultimately the crypto industry’s transparency will be the biggest reason it wins out in the long run.
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‘It has been an incredible month and fears of systemic collapse have been rife in the marketplace. So we’ve seen Bitcoin, it peaked way back in November at $69,000 and it is now at $19,500. It is still higher than its pre-covered seven to ten thousand ranges and it is just about at its 20th 2017 high, so this could be some support. It’s also at its 200-week moving average, which is at $22,500. So there is some concern that that is the new resistance now as we’ve seen the last month play out. Talk about a reach for yield, Crypto personified, DeFi personified. We knew that the Luna Terra experiment with algorithmic stable coins was not going to work. It was backed by nothing. I am an economist by background, so I really do try and noodle through these things, and I just didn’t think that was going to work, and it failed in spectacular fashion in May and has taken Celsius down with it. Capital Voyager digital three-hour arrows BlockFi. It was very interesting to see BlockFi’s last funding round at $3 billion.
This is a lending platform and tried to do another round recently at $1 billion. He couldn’t get it done, and today it seems that FTX is going to either buy it out or have the option to buy the equity for $240 million. A report this week had it at $25 million, much better than that but much worse than a tenth of its last round. It’s not just happening in crypto. Klarna just announced, I believe, that its last round was in the $45 billion range. This is a FinTech company, and it is doing around now at $6,5 billion, so big down runs are happening very quickly, and as you know, if you saw our last report, we have a lot of on-chain analytics which give us a sense of the capitulation in the marketplace and also a sense of what is going bad out there.
Transparency in the market I think this is the reason we’ve seen a lot of failures very quickly compared to the opacity in the traditional financial markets. I think the shakeout in crypto has happened sooner and faster than it would have in the traditional financial markets. It’s interesting that BlockFi is going to FTX. We know that two other platforms or companies, London, which is a lead platform, and Canada, which is a lending platform, also seemed to be interested, as did, I believe, Morgan Creek. Now these are people who really know what’s going on in DeFi, and if they’re willing to step in here, that has increased my confidence to some extent that the systemic risk is diminishing here with time. We’re seeing that each meltdown seems to be a smaller one. With that said, I will say that I am feeling a lot better about what’s going on in the crypto world right now. I would say we’re neutral to positive. We’re waiting for a few more capitulation signals. Of course, time will tell on the systemic side here, and we haven’t heard of another stress signal in the last few days. So that’s good as well.
So what I will leave with is that what’s happened in the crypto market gives you a sense of why it’s going to work in the long run. It’s transparent, and there’s a lot more trust in the crypto ecosystem because of the transparency and the over collateralization than I think there is in the traditional financial markets, and when we wonder “Why are the CDs going up on these banks?” We wonder about the reach for yield and how leveraged some of these situations are and we don’t know where they’re hiding. Maybe that’s all this is like, okay, the crypto market has alerted us that this reach for yield has gone way too far. There are too many excesses, too much leverage around. Hedge funds are leveraged ten to one when yields are 2%. Maybe there are some problems out there and we will find out, but for right now, I’m really nervous that we have so many signals that will get to the Fed in some way, shape, or form, even if they have to wait for the CPI, they will get into the CPI and that they are suggesting to me that the Fed has already gone too far and that if it increases rates again, I doubt it’ll be 75%, maybe 25%, or 50%. I even think that will be a bit too much given what’s going on out there and given the recession we’re in, but at least the numbers and part of this is downward revisions. The Fed thought these numbers were very strong. Consumption is very strong. No conception is falling apart. So, believe it or not, bad news is good news now, as tends to be the case in a bear market when inflation is a concern, so bad news is good news. And it’s always darkest before the dawn, and I believe we’ve passed the darkest place. There are others out there. We’re reading about them in the press. They say we’re only halfway there. I think they follow algorithms. I’ve watched a bunch of algorithmic behaviour that just chases as an idea, chases an idea, until it stops, and I think we’re getting close to that point where they seem to so, with their negative stance over the last year or so, they will be on the wrong side of that trade.’
What do you think of Cathie’s thoughts here? Do you agree with her views on the crypto industry? Would you rather copy trading crypto?
[This article is a transcription of a video made by Only The SAVVY]
Original video: https://youtu.be/jnN7OAJTKu0]