For Those Who HODL: Boring Times Will be Good Times

The crypto markets continue to slump as we usher into the new year, and data from major exchanges shows that the traded volume of BTC is near half of its yearly average.

In other words, the market participants are either highly indecisive or have just plain lost interest in crypto at the moment.

Such indecisiveness or disbelief is what marks market bottoms. I am still not confident enough that I dare to call the bottom of crypto, but I can strongly hypothesize that we are edging toward the final stretch of the bear market.

If that is the case or not, we will know soon enough.

Currently, there are still plenty of reasons to be bearish but I’ve always found it worthwhile to be among the earliest bears to go bullish, and right now, I recognize the negative sentiment and disbelief as a clear signal that those who wanted to sell, have already sold.

The question that sits with me currently is who could be left that will be forced to sell?

In my mental model, there currently exist two strong factors that can lead to more selling:

1. **The macro terrain changes from bad to worse \ There are more than enough individual factors that could turn from bad to worse: the Ukraine war, worldwide inflation, trade embargos, the Chinese economy, and so on.
   

2. More fallouts in the crypto domain

   The crypto space has been heavily plagued by contagion during the year 2022; first, with the crash of TerraLuna and 3AC, and later with the implosion of FTX and Alameda Research. Are there still more bearish catalysts left in store for us?

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Equities Bounced Back (Shortly)

Following a (finally) better-than-expected CPI read, and some positive remarks at the latest FOMC meeting, the equities markets showed some positivity and took a quick jump upwards.

The momentum was soon discontinued, and we seem to have now completed yet another ‘lower high’ and keeping the downward trajectory intact.

Notable Shakers

• Bitcoin miners are facing hard times given the generally high hashing power on the network as well as the fall in Bitcoin valuations. Typically, such conditions will force weaker miners to capitulate due to the low profitability of operations.

  
  

  This time, even the big boys are feeling the pinch; Core Scientific, one of the largest publicly traded crypto mining companies, is in the process of filing for a chapter 11 bankruptcy in the U.S.

• Many commentators believed that SBF stayed in the Bahamas to see if he could face legal charges there rather than in the U.S. But perhaps the conditions in Bahamas prisons are worse than he thought.

  
  

  Other news stories are now reporting that. According to Reuters, SBF also recently managed to of a measly $250M.

• Justice seems to be one step closer, FTX’s new management recently said in a statement that it will be clawing back political donations made by SBF and other FTX affiliates.

  
  

  SBF, along with FTX U.S. and other top executives, had donated close to $70 million in the 2021-2022 election cycle. Already some recipients have approached the new management seeking to return the funds.

• Binance U.S. is eyeing an expansion in the U.S. market following an agreement to acquire Voyager Digital at $1.022 billion. This proposal is set for a hearing at the Bankruptcy court on January 5, 2023.

  
  

• Should it go through, Binance U.S will reimburse Voyager’s clients in accordance with court-approved disbursements and platform capabilities.

• It’s another no from the SEC for Grayscale’s Bitcoin ETF; the commission reiterated its stance last week, noting that such products are prone to manipulation and fraud.

  
  

• And in a more recent , Grayscale seems to be preparing to throw in the towel; the firm said it is exploring options to return a portion of investors’ capital if the SEC does not approve its spot Bitcoin ETF.

• The European Parliament recently outlined 164 legislations as a top priority before the 2024 elections; among them is legislation to govern the Digital Euro. Currently, the ECB is working on a prototype, with the design phase set to be completed in March 2023.

  
  

  The European Commission plans to table a proposal in the second quarter of 2023, which is much earlier than most stakeholders expected.

  
  

That’s it for this week! Share my letter with a friend if you liked its content!

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