CAPITULATION: Last week’s 30% crypto price collapse may be a cathartic capitulation. It was a ‘perfect storm of 1) increased correlations to sharp equity and VIX sell-offs, 2) self-inflicted wounds with Celsius withdrawal halt on heels of TerraUSD and Luna collapse, and a 3) ‘doom loop’ contagion of leveraged liquidations, margin calls, and job cuts from Coinbase (COIN) to BlockFi. Such selloffs are not unprecedented and come against the backdrop of continued adoption, creating opportunities for the brave. Smart Portfolios from @CryptoPortfolio to @DeFiPortfolio.
CONTEXT: The 70% bitcoin (BTC) price fall since November is the 16th crash of the decade. The average is -50%, making this only 4th largest. The crypto fall this year has taken its global market capitalization down to around $900 billion, or $1 trillion less than January 1st. This has been painful for many but pales next to the impact of the equity fall, a bigger and better-owned asset class. US$12 trillion, or 13x more, has been wiped off US equity values alone this year.
DEVELOPMENT: Despite the dramatic price fall, the crypto asset class continues to develop and build in the background. This is a medium-term opportunity. Bitcoin blockchain addresses and confirmed transactions (see chart) are up over 20% over the past year and US$ transaction value by 88%. More broadly, 85% of US merchants think digital currency payments will be ubiquitous in five years, and a similar proportion is giving a high priority to enabling these payments today. Whilst we are nearing Ethereum (ETH) merge to PoS, boosting its scalability and lowering costs.
