tl;dr
A brief look into the world of alts, both good and bad.
Market Snap
Market Wrap
A very brief breach of $17k to the upside threatened to bring on a cascade of forced liquidations to the leveraged (short) children. That (upside) risk remains though with reduced impact as perpetual futures funding rates inch their way back to neutrality.
Curious Cryptos’ Commentary — altcoins are having a tough time
That headline should not come as a surprise to anyone. The crypto markets are highly internally correlated, with alts outperforming to the upside, and underperforming to the downside.
The cascading collapse of centralized and leveraged organizations such as 3AC, Celsius, Voyager, and the baddest of them all, FTX, has dealt a series of body blows to the confidence of crypto markets, and to some peoples’ belief in the crypto revolution.
With BTC down 75% from its ATH (all-time high) it is easy to find a bunch of alts that are down 90% or more. For sensible investors — the CCC’s guiding philosophy is to have 10% of total crypto exposure to the alt space — this scenario is actually a great opportunity, if you continue to believe in the crypto story.
During the good times, maintaining a 10% exposure necessarily involves selling alts as they outperform. During the bad times (aka 2022) maintaining a 10% exposure necessarily involves buying alts as they underperform.
Much like DCA (dollar cost averaging) then with all other things being equal, this discipline and structure is virtually guaranteed to give better returns than any other possible approach to investing in alts, if that is what one wants to do.
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The problem of course is that not all other things will be equal.
There are some DeFi (decentralised finance) platforms that are struggling.
Aave has frozen multiple lending markets due to concerns about volatility. These include the following alts: YFI, CRV, ZRX, MANA, 1inch, BAT, sUSD, ENJ, GUSD, AMPL, RAI, USDP, LUSD, xSUSHI, DPI, renFIL, and MKR, along with several of the smaller stablecoins.
Bancor has suspended its minimum guaranteed amount payable for one-sided liquidity, the only real option available for those who wish to avoid the risk of impermanence loss which — despite its name — is almost always permanent. It has also suspended BNT pay outs for providing that liquidity on V2, though I believe V3 is not suffering the same constraints.
DeFi platform Serum — whose native token SRM looks now likely to become utterly worthless — has effectively shut down though a community hard fork is trying to keep the show on the road. The CCC treasure has a very small investment in SRM, which just proves my belief that all crypto investments should be viewed as having a value of zero until sold.
Binance has suspended a few trading pairs focused on some small cap and illiquid alts.
Coinbase Wallet has support for Bitcoin Cash, XRP, Stellar Lumens, and Ethereum Classic following a drop-off in dropped user interest. They might come to regret at least one of those decisions if the SEC vs XRP court case goes our way (see CCC 29th November 2022 amongst others).
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The point of today’s ramblings is not to big up the potential opportunities in the alt space.
Indeed, whilst criminals like Sam Bankman-Fried, former CEO of FTX and future jailbird for the rest of his life in a dismal high security prison not noted for the polite and respectful behavior of its inmates, continues to lie (“I think its value (FTT) is more economically underpinned than the average token was”) there is likely to be a gap until the alt market recovers.
But recover it will. I just hope I don’t have many more SRMs in my portfolio before it does.
Compliance Stuff
Trigger alert warning.
If any reader feels that they are “literally shaking” (a claim made by a Durham student who cannot cope emotionally — and certainly not intellectually — with a different point of view expressed by Rod Liddle) after reading my commentary, then I can only suggest you don’t read, or don’t shake. It’s up to you.
Cryptos — none of my commentary should be seen as a recommendation to get involved in cryptos. I might be talking complete nonsense without knowing it. Any crypto investments must be viewed as extremely high risk and treated as if they are worth zero until sold.
Stocks — just to make it clear this is not a stock advisory service. The CCC team does not provide financial advice in any way at all. Any reference to asset prices in this commentary are there to simply give context to the commentary and to give color to the performance of certain stocks related to cryptos.
For the avoidance of doubt, this newsletter is not an incitement to buy cryptos, buy stocks, or even to sell family members in the hope of buying cryptos or stocks.
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