Dispatch #69: New Year, New Market

Jan 07, 2022 4 min read

Dispatch

The Big Idea

Why the Market Is Turning Over

Boy, if you thought 2022 was going to be calmer than 2021, the first work week in January had something to tell you.

It started at the beginning of the week when the rising tensions in Kazakhstan led the government to completely shut off internet access. The problem is that, in the wake of the China mining ban, a significant amount of Bitcoin hashrate had moved into the country. Pre-shutdown, Kazakhstan accounted for about 18% of the global hashrate – behind only the US. Within hours of the shutdown on Wednesday, top mining pools had lost an average of 10% of their hashrate. This will be one of the more important stories to watch not only for Bitcoin but for geopolitics.

That on its own could have put some price pressure on BTC. But when the minutes of the Federal Reserve’s December FOMC meeting came out, they were much more hawkish than anyone expected, even discussing quantitative tightening (or “balance sheet normalization” as they called it) in 2022. This sent risk assets of all stripes cratering, and crypto was certainly not immune.

So here we are, one week in, with major geopolitical and macro policy intrigue? Welcome to 2022! :mild-panic:

The Latest In…

NFTs

With the last two weeks taken up by a 2021 recap here on Dispatch, an absolute trove of news piled up. In NFTs, that looked like some big moves from celebrities in the space. Miami’s uber-popular nightclub E11EVEN purchased Bored Ape number…yup, 11. Eminem spent $425,000 on the “EminApe.” Even bigger, the BAYC flipped Crypto Punks in terms of floor value for the first time.

Although the rest of the crypto markets weren’t looking so hot, NFTs also game out of the gates in January with blistering speed. OpenSea saw more than $1B in volume in just the first five days of the month. To top it all off, Samsung announced an NFT-integrated TV that will help users browse, purchase and display NFTs. We’re sensing a key trend for the coming year…

The Latest In…

Central Bank Digital Currencies

One of the notable absences in the big trends of 2021 was more news around CBDCs. But the turn of the year saw a flurry of announcements that suggests that maybe this won’t be the case in 2022? These included:

The Federal Reserve Bank of Boston is looking for a new director to lead its CBDC efforts
The Mexican President’s office tweeted that the country will have its own CBDC by 2024
Switzerland’s and France’s central banks reported that their first CBDC test is a success
A pilot version of China’s e-CNY digital yuan wallet went live on iOS and Android
Jamaica completed an eight-month CBDC pilot
The Reserve Bank of India published a report on banking with a more positive tone around an Indian CBDC

The Latest In…

Nexo

New year, new asset listing. We are pleased to partner with Uniswap, the largest DEX by trading volume, and to add their native $UNI to our impressive list of supported tokens. Use the Nexo Exchange as an onramp to get some of that Uniswap pink with your bank card, exchange some of your other cryptocurrencies for $UNI, or top up your existing stack to borrow against it and get liquidity for your everyday or business needs. Welcome, Uniswap to Nexo!

The Week’s Most Interesting Data Story

HODLers Ain’t Scurred

Sentiment in crypto markets has taken a dramatic turn for the worse. The Crypto Fear and Greed Index is approaching levels hit during last Summer’s trough. But at the end of the day, it remains a truism to watch what people do, not what they say. One of the best indicators for the bearishness of a market has to do with whether people are putting their coins onto exchanges or taking them off. When coins move onto exchanges, it tends to signal that they are preparing to sell. When coins move off, it’s usually into cold storage. Cold storage moves are a sign of confidence.