In this patch of your weekly Dispatch:
- Celsius, 3AC, Babel are among crypto institutions in distress
- Five tips for combatting the bear market blues
- Interest in Bitcoin & Nexo growth persist
The Big Idea
Crypto institutions are in distress. Prices are tanking. The US Federal Reserve seems to have completely lost control of inflation (even while driving towards a recession). All in all, it is a brutal time in markets, both crypto and beyond.
As if the market wasn’t shocked enough when Celsius halted withdrawals on Sunday, rumours started emerging shortly after that a major hedge fund had been margin called and was potentially insolvent. It was even more shocked when that fund turned out to be Three Arrows Capita (3AC), one of crypto’s biggest. 3AC was soon liquidated by another embattled crypto lender, BlockFi, after speculation that the fund had outstanding uncollateralized loans.
Let’s be straight, there is still a huge amount of unknowns and institutional catastrophe is good for no one in this space. But in this watershed moment, there won’t be any federal government bailouts to help the struggling ones.
Therefore, it will be the likes of Nexo – well positioned, profitable companies with sustainable business models and substantial liquidity and equity buffers — that are best positioned to protect people’s crypto holdings and keep building. We’ve said our piece and made our offer about Celsius’ qualifying collateralized loan receivables, which you can read about here. In addition, we've been approached by several household names in Wall Street banking and are in ongoing talks to help with the provision of liquidity for those facing solvency issues.
Regardless of how this plays out, we are committed to being part of the solution that will result in healthy competition, the consolidation of the space, and the restoration of best practices in lending.
What’s our remedy? Watch our Co-founder Antoni Trenchev on Bloomberg to find out.
The Latest In…
A Simple Set of Steps
In times like these, it can be easy to lose hope, succumb to fear and FUD, and turn away. While no two experiences will be the exact same, here are five ideas for beating the bear:
- Return to Fundamentals – What was it that got you excited about this space in the first place? What are the products you’d still like to see developed? Take the time to rediscover your conviction.
- Filter the Noise – There is a lot of noise during bull markets, but it takes an angry turn during bear markets. Be extremely careful who you give your energy and attention to and be nice to each other.
- Focus on the Builders – Speaking of which, it won’t take long to discover who wants to spend the bear market fighting and who wants to spend it building. We know who we’d rather pay attention to.
- Work to Develop Your Theses – There is a lot more time to think when prices go down. One of the best things to think about is what you believe will drive and shape the return of market excitement. Soulbound tokens? Metaverse NFTs? This is your chance to build those theses.
- Remember History’s Lessons – This too shall pass. Cheesy. Trite. True.
The Latest In…
Last Friday, US markets got a nasty surprise when inflation came in at a higher-than-expected 8.6%, much to the Fed’s chagrin. Almost immediately they signaled that instead of the 50bps hikes that the market had completely priced in for June and July, they might consider a 75bps hike. On Wednesday, that’s what happened, as the Fed increased rates by the largest amount since 1994. The market’s initial response was positive – investors thought the Fed might finally be willing to do what it takes to stamp out inflation. At the same time, the predictions of recession rise ever higher, showing what a rock-vs-hard place situation this is.
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Our hearts go out to all those impacted by the painful set of layoffs that many in the industry have been forced to undertake. Against this backdrop, we’re humbled that we’re able to continue our growth because building quality products means finding the best talent. At Nexo, we tripled our headcount in the past year and we have open roles across the board – from engineers, marketing, and product to M&A and finance. HODLing our people no matter the weather!
The Week’s Most Interesting Data Story
Interest in Bitcoin Hasn’t Gone Away
One of the characteristics of an extended bear market isn’t just that the price goes down and people get angry. It’s that big parts of the market stop caring about Bitcoin and crypto entirely. Glassnode analysis shows, however, that while BTC price is circling around the drain, apathy is nowhere to be seen. Bitcoin is still being looked up at levels much higher than during the 2019 and 2020 bear markets. Now, whether that means Bitcoin is more durable this time or simply that we’ve got a lot farther to fall, we’ll leave it up to you, our intrepid readers!
What the Community Is Discussing
The lack of self-awareness is a little disappointing.
Almost zero. We can think of one. 😎
What to Watch for Next Week:
- Will the Fed’s hike rally turn into a drain as recession reality hits?
- Will crypto be able to go a week without an implosion?
- Can an NFT project save us?