In This Issue

• I share my thoughts on the state of the market, FTX contagion not done, decentralized exchanges, EU banning privacy coins, money is still here & an SEI airdrop.
• Rebecca breaks down the latest news.
• REKT has a TA report on Bitcoin’s 3 macro triangles.

Premium Subscription highlights this week:

• My Portfolio: See what coins I sold this week.
• Neptune Mutual Interview: I sat down with the team from Neptune Mutual, a crypto insurance provider, to learn more about them and protect against risk in the crypto market.
• Airdrops: Stay up to date with this week’s airdrops and incentivized testnets.

What’s On My Mind by Lark

The State of the Market

What a crazy week…. If you are still here and reading this then congratulations, because you just survived one of the rarest events we can imagine in this market. 

One thing that I have found rather noteworthy in this madness is that while Bitcoin put in a new low for 2022, Ethereum did not. In fact ETH has shown a lot of strength versus BTC in this crash. 

Still though crypto has been shattered in many ways this week. Events like a major exchange melting down have a way of shattering markets and the ripple effects can be significant. 

Huge outflows of Bitcoin from exchanges have happened over the last week. Unsurprising considering the mayhem of FTX, which caused widespread fear. In the long run though, this is good. You should be holding your Bitcoin in your hardware wallet. Exchanges are marketplaces, not banks. 

Also, don’t forget that while things look pretty grim now that the risk reward ratio for Bitcoin and Ethereum just keep getting better. Buying at all time highs is always risky. Buying after a massacre. Usually a lot less risky, even if it doesn’t feel like it. 

FTX Contagion Not Done

This week has seen a flurry of paranoia about possible contagion from FTX. 

Nexo has come under intense scrutiny, after they used their “risk management” to get 200 million of customer funds out of FTX days before the collapse. The real question though is why were funds there anyway? Nexo is supposed to be a lender, not a hedge fund! 

There were also fears that Crypto.com and Gate.io could be facing insolvency issues. We should all be paranoid about centralized services right now. While it seems like Crypto.com is working hard to show they are doing ok with AMAs from the CEO, and topping up their stablecoin reserves. At this time it seems like crypto.com has survived the bank run successfully, which is what any exchange should be able to do. Although, I do fully understand the deep skepticism towards all exchanges right now. 

There are also questions as to whether the crypto.com transfer of about a billion bucks worth of ETH to Gate.io was used to make Gate’s numbers look better to pass an audit. Although crypto.com said it was just a mistake? Also it has been revealed that gate.io was hacked for 230 million back in 2018 which it never revealed. So much is hidden in crypto. Such a big chasm of trust. 

Anyway here is what we know for certain about FTX contagion. 

Genesis Trading has run into solvency issues. AKA they don’t have your money. This is HUGE NEWS because Genesis is the biggest Bitcoin OTC desk in the world and the biggest lending desk. They are owned by the Digital Currency Group which also owns the Grayscale Bitcoin Trust. They lost 2.4 billion when Three Arrows Capital collapsed. They also had big exposure to Babel Finance when it went under. The Genesis collapse could be much more impactful than the market realizes right now. Because companies like Gemini use Genesis for their EARN program. Meaning that customer money from multiple exchanges could be tied up in this mess. The downfall of Genesis could spark an entire new wave of contagion. 

Here are Genesis’ Q3 numbers to give you an idea of how big they are. 

Gemini a crypto exchange run by the Winklevoss twins, seems to have been impacted by the downfall of Genesis. Their earn program users may be left in limbo for a while as the impact of the Genesis story continues. Although it does seem that this only affects earn users and that the rest of the exchange is operating as usual. 

Blockfi seems well and truly done for. Their line of credit from FTX is obviously done for. Is there any path forward except for bankruptcy? Sadly, withdrawals are stopped and customer funds may be gone.  

Voyager is another distressed crypto lender that went bankrupt earlier this year. FTX had been in the process of bailing out Voyager when it collapsed. The fate of Voyager and the customer funds locked up in the bankruptcy remain to be determined. 

SALT, an old and less used crypto lending platform from 2018 has halted withdrawals citing exposure to FTX. 

Liquid, a once popular exchange that was bailed out by FTX has halted withdrawals. 

Ikigai is a hedge fund that has announced that they had the majority of their funds on FTX. Terrible risk management with their customer funds. How many other funds will announce exposure in the coming days and weeks? 

Star Atlas is a gamefi coin who announced that they had half of their treasury on FTX, ouch! 

Oxygen… some random shitcoin… anyway, they said that 95% of their total supply was locked up on FTX. Good night! 

As Jesse mentioned to me the other day, we may even see some projects use FTX as an excuse to exit scam. Not saying any of the above have, but I suspect that indeed some will.  FTX and Alameda were invested in dozens of companies, and even more crypto start ups, and lots of companies had invested in FTX or held funds on their exchange. Still lots of room for chaos. 

The side bonus of all of this have been the exchanges all now scrambling to offer proof of reserves via merkle tree proofs. Kraken already did this. Coinbase has transparency as a publicly traded company. Others like Binance, Bybit, and Phemex are all in progress of implementing these proofs to reassure users. 

Decentralized Exchanges 

In the wake of the FTX meltdown traders have been fleeing centralized exchanges and flocking to decentralized exchanges. Here are a few examples of what I am talking about. 

Uniswap was the second biggest exchange of ANY exchange in Ethereum trading volume. Uniswap also hit a new yearly high in daily users. 

GMX a decentralized perpetual swap exchange that just hit over a billion dollars in volume for the first time ever!!! WOW!

As mentioned in the October Alpha Report the narrative around decentralized trading is really starting to take off. While GMX has been a massive player on the scene, we do have other hot upcoming contenders like Gains Network. 

The shocks of this year from the meltdown of centralized lenders and the meltdown of exchanges like FTX has made the case for using things on chain stronger than ever! 

EU Looking To Ban Privacy Coins

 A new proposal in the EU could see all privacy coins banned in the EU. This would mean that coins like Monero, Dash, and Zcash would be banned and would not be able to be bought on exchanges. It is a move that is both anti-freedom and which will long term hinder the adoption of crypto tech. Sadly politicians keep pushing for ways to invade our privacy. Needless to say I don’t see this as a positive price catalyst if it happens. 

Money Is Still Here

While the chaos of the last week has hit many hard, the truth is that big money is still very interested in crypto. There are plenty of new blockchains and applications which are still being funded by VCs. We must remember the big picture beyond the collapse of one criminal exchange. This space is only getting bigger. Crypto is not going anywhere. Bitcoin is still making blocks. Defi didn’t break. Monkey pictures are still chilling on chain. 

SEI Airdrop 

Sei, not Sui, is having an airdrop as Jesse mentioned in last week’s airdrop report, and it is one of the more promising testnets that we are tracking. Markets have been brutal, but spending the time to get yourself on board for free coins could play out very well in the next market cycle. Sei is a layer one blockchain designed for trading. They will be airdropping 1% of the token supply to those who participate in the testnet. Learn more here.

In Case You Missed It by Rebecca

Crypto market news

Subway is trialing Bitcoin payments at three of its franchise restaurants in Berlin, Germany. Source

Shell, the oil and gas giant, has signed a two-year sponsorship deal with Bitcoin Magazine and will showcase its Bitcoin mining solutions at the Bitcoin Conference in 2023. Source

Cathie Wood’s Ark Invest buys 315K shares in Grayscale’s Bitcoin Trust, worth around $2.8B. Source

The Supreme Court of the Bahamas has approved provisional liquidators to oversee FTX’s assets. Source  

Sam Bankman-Fried apologies on Twitter for the FTX collapse and announces that Alameda Research is set to wind down trading. Source

FTX’s Chapter 11 bankruptcy filing has revealed potentially 1M creditors, rather than the 100,000 initially estimated. Source

FTX-owned Japanese crypto exchange, Liquid, has halted all withdrawals. Source

FTX has reportedly been hacked in what looks like an inside job to take user funds, with wallets tied to FTX and FTX US seeing $659M in cumulative outflows in 24 hours. Source

Crypto exchanges OKX and Kucoin have announced they will be providing proof of reserves, AKA proof of funds, within the next month in response to the FTX collapse. Source

Kraken, Coinbase, and Gate.io publish proof of reserves, including liabilities as part of the audit. Source

Binance has released a list of its cold wallet addresses to prove its $69B reserve. Source

Huobi and Gate.io are under scrutiny for sharing proof of reserves using loaned funds that can be seen on-chain. Source

Trezor has reported a 300% surge in its hardware wallet sales revenue week-on-week due to the FTX collapse. Source

The New York Times launched a “puff piece” article interviewing FTX CEO, Sam Bankman-Fried, with no mention of fraud, crime, or stolen funds. Source

Meta announces 11,000 job cuts, making up 13% of the company, as it focuses on the Metaverse. Source

Twitter has registered with the US Financial Crimes Enforcement Network (FinCEN) to become a payments processor. Source

Sam Bankman-Fried is “under supervision” in the Bahamas, as it’s rumored the getaway plan is to flee to Dubai to avoid extradition. Source

Apple job listings and patents hint at exploring a “3D mixed-reality world” as engineers with AR and VR experience are wanted. Source

OKX reportedly announces a $100M fund to support companies with liquidity issues. Source

Coins and Projects

MetaMask has aggregated bridge services, allowing users to move up to $10K of supported tokens across Ethereum, Avalanche, BNB Smart Chain, and Polygon. Source

Ethereum turns deflationary for the first time since the Merge as more tokens are burned than created. Source

Viltalik Buterin may have sold almost $4M in ETH less than 24 hours after the FTX collapse, in three separate transactions on Uniswap. Source

Uniswap overtakes Coinbase as the second-largest exchange trading Ethereum, as investors turn to DeFi after the FTX saga. Source

USDC stablecoin issuer, Circle, says merchants who already accept USDC can now interact with Apple Pay. Source

Binance will launch an industry recovery fund to help struggling firms and projects during a liquidity crisis. Source

Binance is to launch the first in a series of NFT collections with Cristiano Ronaldo, with the first drop launching on 18 November ahead of the World Cup. Source

Nike has launched its beta Web3 platform, called .Swoosh, allowing fans to collect and co-create virtual items, and will launch Polygon NFTs in 2023. Source

Solana’s total-value locked (TVL) dropped 32.4% in the 24 hours after the FTX collapse. Source

Solana liquidity hub, Serum, is to be forked after potentially being compromised in the alleged FTX hack. Source

Sollet-wrapped tokens on Solana issued by FTX are no longer redeemable and are trading at a 77% discount. Source

Aptos has partnered with Google Cloud which will see the company validate nodes, launch an accelerator program, and co-host a hackathon. Source

Tron’s DAO is to buy $1B in USDT to safeguard against the current market conditions. Source

Adidas’ Bored Ape NFT makes an appearance in the new World Cup trailer alongside footballing superstar Lionel Messi. Source

CryptoCom holds 20% of its reserves in meme token SHIB, making it the second largest holding for the crypto exchange. Source

The W Hotel in Dubai has begun accepting Shiba Inu as a payment method. Source

Macro news

US inflation came in lower than expected for October at 7.7% year-on-year. Source

St Kitts and Nevis may adopt Bitcoin Cash, not Bitcoin, as legal tender by March 2023. Source

US banks, including Citigroup, HSBC, BNY Mellon, and Wells Fargo, are taking part in a digital dollar proof of concept pilot program, with the Federal Bank of New York. Source

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Market Analysis by Rekt Capital

Bitcoin’s Three Macro Triangles

In late May, we spoke about some key historical tendencies:

Specifically, the following points:

• Bitcoin tends to retrace -52% to -63% below the 20-month MA. By late May, price had retraced -38%.
• We discounted the -46% 2020 deviation below the 20-month MA as well as discounted the 274 day period between price top to price bottom, discounting this period as a bull market and so excluded it in our analysis.
• It takes around 365 days to 396 days from Bull Market top to Bear Market bottom. By those standards, a bottom should come in Q4 of this year.

These are all important points that we’ll cover in more detail today.

In June, we discussed the three macro triangles for Bitcoin.

Price was in its downtrend acceleration phase following its breakdown from the macro descending triangle and price has since continued its downtrend acceleration in search of a generational bottom.

Price had previously retraced -50% to -65% upon breakdown from the triangle:

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Final Notes

Thank you so much for your support, and I truly hope that today’s issue will give you insights needed to help you master your wealth.

If you are reading this it means you are on the free version of the Wealth Mastery Investor Report, which is great for news and tips on the crypto markets.

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See you next time!

Lark and the Wealth Mastery Team

Legal Disclaimer

TCL Publishing ltd (director Lark Davis, owner of Wealth Mastery) is not providing you individually tailored investment advice. Nor is TCL Publishing registered to provide investment advice, is not a financial adviser, and is not a broker-dealer. The material provided is for educational purposes only. TCL Publishing is not responsible for any gains or losses that result from your cryptocurrency investments. Investing in cryptocurrency involves a high degree of risk and should be considered only by persons who can afford to sustain a loss of their entire investment. Investors should consult their financial adviser before investing in cryptocurrency.

You can find a full disclosure of all my crypto & venture investments here.