GM friends,
It’s been a volatile time in crypto with some unwelcome downward price action, but are there reasons to be optimistic?
Maybe so, as it’s looking like a potential liquidity injection could be incoming later this year, so let’s start with a look at how that might work out.
Here’s what’s in today’s issue:
- Sam shares his thoughts on FTX cash payouts coming, Germany taking BTC off exchanges, the largest ever password leak, Taiwan mobile entering the crypto market & the US House is voting on SAB 121 again.
- Week 21 crypto portfolio updates.
- This week on chain.
- This week’s trending coins by Rebecca.
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FTX Cash Payouts Coming
Amid panicky sentiment, it’s easy to overlook potentially positive catalysts, and one such welcome event is a future injection of cash from the collection of rubble once known as FTX.
The bankrupt platform played a central role in sending crypto to apocalyptic depths in the bear market of 2022, and founder SBF is now a convicted felon, but what about the exchange’s out-of-pocket customers and the money they’re owed?
It turns out that if current plans from the FTX estate are approved by the courts, then around $16 billion is due to be returned to FTX customers who lost crypto assets held on the platform.
But there are a couple of important points to this:
- Assets are to be valued at late 2022 crypto prices, which are a lot lower than crypto prices now.
- Assets are to be returned in cash, not crypto.
So, there’s good and bad in that.
Creditors won’t be happy that by using 2022 prices to calculate refunds, they’ve missed out on two years of crypto gains.
But on the positive side for the broader market, FTX crypto assets have already been sold off for cash, so there’ll be no sell pressure when refunds are delivered, and in fact, the opposite may occur as there’s a reasonable likelihood that some of that cash will be injected back into crypto.
As for when this might happen, FTX customers have until August 16th to vote on these payment plans, and then on October 7th the judge in the case will look at giving approval to the proceedings, meaning–potentially–that payouts could begin in Q4 of this year.
Of course, there are no guarantees about how creditors will use the cash–maybe some will never touch crypto again–but if, as many expect, crypto looks more bullish after the summer, following seasonal and cyclical trends, and with the US election taking place, then some of that liquidity might be channeled back into crypto.
What do you foresee happening though? Will reimbursed FTX users pump their cash straight back into crypto, and if so what effect might that have on the market? Reply to this email and let us know what you think.
Germany Receives BTC Back Off Exchanges
One factor playing into negative sentiment as the bitcoin price dipped recently, was news that the German government has been selling off some of its stash of seized coins.
The German government has been transferring BTC every day since the beginning of July, has sold $175 million worth, and now holds just under 39,000 BTC.
German government BTC holding, from Arkham Intelligence
However, last Friday it became apparent that the Germans had then received 1,915 BTC (worth around $111.5 million) back from exchange-linked addresses, and had also transferred some BTC to Flow Traders–whose services include OTC trading and liquidity provision–and to another address.
While it’s not entirely clear what the German government’s bitcoin plans are from here–and more coins have subsequently been moved back to exchanges–it looks as though they may be looking to offload some of their holdings using OTC facilities.
That could be good news from a market impact perspective, or even just from a sentiment impact perspective, since fears of governments tanking the market look out of proportion to the real capacity for government selling to tank the market (not forgetting though that fear itself can tank the market).
Largest Ever Password Leak
Security breaches are a huge issue in crypto, but the reality is that hacks are a constant danger everywhere, as seen last week when it was revealed that almost 10 billion passwords have been exposed in what looks like the largest ever password leak.
The password list is called RockYou2024, and the file containing the compromised data was posted by a user known as ObamaCare on a hacking forum on July 4th.
A research team from the Cybernews platform then found that the passwords were a mixture of new data and data from older breaches, and it appears that the leak contains combined information taken from across two decades.
The passwords contained can be employed to conduct brute force attacks, which may, in the words of the Cybernews team, “contribute to a cascade of data breaches, financial frauds, and identity thefts”.
And the upshot of that is that now is probably a good time to change your passwords on any important accounts and services, and particularly on anything related to finance or crypto. Also, it’s always a good idea to use multi-factor authentication, and you can use password generators to create securely random passwords.
Taiwan Mobile to Enter Crypto Market?
Switching our attention to Asia, there’s speculation in Taiwan that mobile phone operator Taiwan Mobile, which is the country’s second largest telecommunications company, may be preparing to launch a crypto exchange.
This comes after Taiwan Mobile’s acquisition of a VASP license (VASP stands for virtual asset service provider), which would enable it to operate crypto services, and the latest speculation follows on from reports last year that the company had been in partnership talks with several crypto firms.
This comes after news at the start of this month that Sony would be launching its own crypto exchange in Japan (although this is actually a restarted, revamped version of an older exchange named Whalefin, which was acquired by Sony last year), and so it looks right now like crypto platforms are an area of growing interest for big corporations in Asia.
US House to Vote Again on SAB 121
And finally, politics is on the crypto agenda again, as in the US the House of Representatives is this week set to vote again on matters relating to SAB 121.
Just to remind you of the story so far: SAB 121 is a set of new accounting rules from the crypto-hating SEC that make it harder for regulated financial institutions to hold crypto assets.
The Senate last month voted in favor of a resolution (H.J.Res. 109) that would nullify SAB 121. Which sounds great! But then… President Biden vetoed that pro-crypto resolution.
And that brings us to this week’s proceedings–there is a constitutional obligation for the House to vote on whether or not to uphold the presidential veto, offering it the opportunity, effectively, to veto the veto.
However, that would require a two thirds majority in both the House and the Senate, which is more than was achieved for the initial ani-SAB 121 resolution (the one that was vetoed by Biden), and so overall, a positive outcome is possible but looks like a tall order.
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Week 21 Crypto Portfolio Update
Not much to report, basically a savage week. Thinking about dumping the rest of the cash into memecoins.
Tech altcoins have been savaged hard. Memes have been the best performers.
Will update when / if I do this.
With reports of the German government offloading seized BTC at the same time as Mt Gox moves to pay bitcoin back to creditors, the BTC market experienced the second biggest liquidation event of its entire history, with only the implosion of FTX, back in October 2022, triggering a bigger round of liquidations.
That was the kind of week it was for crypto, with sentiment hitting rock bottom, and adding to the sense of doom, spot BTC ETF volumes also took a hit, with July 3rd registering the fifth lowest daily trading volumes on the top seven funds since they launched back in January.
Additionally, 30,000 BTC were moved onto exchanges during the week, at the same time as the price plunged, indicating escalating panic in the market as some sellers moved rapidly to dump their holdings.
And while we’re on a bearish roll here, there is also the matter of miners capitulating to an enormous degree, with the network hashrate last week dropping by 7.7%.
This, again, calls to mind the situation immediately after the FTX collapse, as it’s the largest miner capitulation since December 2022. But it should also be noted that back in 2022, this kind of capitulation marked the market bottom.
And besides that possibility of the bottom being signaled (although it is just a possibility, and not certain) there are further reasons to maintain a positive outlook.
First, we can put things in perspective by recognizing that up until last week’s major dip, BTC had gone 427 days without a 25% drawdown, which is the longest such run in its history–the second longest is 364 days way back in 2012–so a dip was overdue and is not out of the ordinary.
Also, remember Mr 100, the mysterious buyer who has this year been regularly scooping up BTC in clips of around a hundred coins each time? We still don’t know his identity, but he stepped in last week to grab 700 BTC at a price of around $55,000, which is a great example of how to buy the dip without fear.
What’s more, there have recently been increases in bitcoin daily active addresses, which grew to over 900,000 at the beginning of July.
And at the same time, numbers of new Ordinals wallets have also been growing, with the largest single day spike in numbers of addresses occurring on July 1st.
With that all said, a good indicator of how the market might behave next is the number of stablecoins in circulation. Stables equal liquidity, and liquidity means prices can rise, but it’s apparent that recent months have seen a slight stablecoin decline, after a larger run up prior to that.
Looking over at altcoins, there’s positive data when it comes to Aptos, which has enjoyed a big increase in daily active users, taking this metric to a new all-time high of around 3.9 million.
And when it comes to DeFi, quarterly revenue at Maker hit a new all-time high in Q2 of around $85 million, which also looks very positive.
And finally, let’s check in on what’s happening with memecoins, and if you were thinking about picking up some memes on the dip, there’s an interesting recent comparison to keep in mind.
Looking at performances across H1 2024, we can find that the top five memecoins on Solana all individually outperformed their equivalently ranked counterparts on Ethereum, and on average, the top five Solana tokens outperformed the top five on Ethereum by almost 800%.
Here are my key takeaways from the trends this week and if you ignore the price action, there are a ton of integrations and launches happening throughout the market.
- Ether.fi is a liquid restaking protocol on Ethereum that’s launched its season 2 claims checker which will see over 53 million tokens distributed.
- Toshi is a memecoin on Base that’s dumped 10% in the past week as part of the broader market sell-off but has rebounded 5% in 24 hours.
- LayerZero is a protocol for cross-chain messaging that’s in Brussels to attend the ETHCC and ETH Global conferences. LayerZero will also be going live on GravityChain to support an omnichain future.
- Notcoin is a Telegram-based game that’s partnered with Telegram and Helika gaming to launch a $50 million gaming accelerator leveraging the TON blockchain.
- Jupiter is a Solana DEX aggregator that’s been listed on the South Korean exchange Ubit. Jupiter has also launched a $60M staking rewards program on Solana.
- ZKsync is an Ethereum zkRollup that’s seen PancakeSwap announce an airdrop of 2.45M zkSync tokens as a community reward.
- Solana is a Layer-1 blockchain that’s seen OKX wallet announce support for Solana Blinks. Solana led the losses from this week’s market dump but has rebounded sharply.
- Brett is a memecoin on Base that’s launched its token on the TON blockchain. BRETT has also been listed on Rollbit and Ourbit.
- Toncoin is a Web3 ecosystem within Telegram messenger that will be at the heart of Notcoin’s Telegram Gaming Accelerator to boost its gaming ecosystem.
- Ethereum spot ETFs could be approved for trading this coming week with the deadline for S-1 resubmissions on July 8. Bitwise is predicting a massive ETH bull market due to the ETFs with $15 billion in inflows in the first 18 months.
- Ondo is a Real-World Assets (RWA) platform that’s seen BlackRock send $2 million to Ondo Finance in 12 hours.
- Pepe is a memecoin that’s suffered a 22% price drop in the past week after losing a key support level.
- Bitcoin dropped to $53K after mounting fears over the imminent $9 billion Mt Gox payouts. The German government has surprised the market by buying back $111 million in BTC that it just sold.
- Dogwifhat is a Solana-based memecoin and NFT collection that’s suffered a 23% price drop in the past week. The dump started after WIF was rejected at the 200-exponential moving average (EMA).
- Arbitrum is a Layer-2 Ethereum scaling solution that’s seen Aave’s GHO stablecoin launch on the network leveraging Chainlink’s CCIP interoperability protocol.
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.
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