November Overview

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Your Monthly Brief into the World of Digital Assets

Article by Lesia M.
Photo by: Monstera | Pexels.com
  • November in Review
    - BTC Health Check
  • Institutional Crypto Adoption
    - VC Investment Growth in Q3
    - Institutional Adoption News
  • DeFi, Exchanges & Misc.
    - ConstitutionDAO Phenomenon
    - More DeFi & Misc. News
  • Regulators on Crypto
    - Inflation is no longer ‘transitory’
    - News in Crypto Regulation

NOVEMBER IN REVIEW

November turned out to be yet another volatile month for crypto:

• BTC is down 7% this month, ranging between $69K high on November 10 and $53.3K low on November 28;

• ETH is up 8% in November, ranging between $4.9K on November 10 and $3.9K on November 26.

Open Interest on BTC continues to grow at a faster pace than cryptocurrency’s price, pointing out at new leverage entering the market. Series of corrections that started back in October did NOT wipe out existing leverage, which has been accumulating since the end of September. Predominantly positive funding rate across exchanges indicates that the new OI is entering as long positions, signalling a bullish consensus amongst derivatives traders.

Source: JKL Research | app.intotheblock.com

We are closely watching fib retracement for potential bounce back levels. In the previous bull run which took place from the end of 2020 until May 2021, BTC corrections retraced down to .5-.618 fibonacci levels before bouncing back to continue the upward trend.

Source: Tradingview.com

We witnessed the same pattern unfold during the July-Sept 2021 uptrend.

Source: Tradingview.com

In the current cycle, BTC has bounced back from .5 fib levels on November 26–28, and is currently consolidating around .38 levels. We will be closely watching the cryptocurrency’s price action in the next few days, since breaking back over .38 levels has historically been a good indicator of bullish momentum for Bitcoin.

Arbitrage

While both basis and funding rates were high beginning of November, providing enough room for arbitrage, last couple of weeks have seen flattening rates and an overall slowdown in perpetuals market. Arbitrage opportunities are currently rather low, as market consolidates before its next move.

INSTITUTIONAL ADOPTION

VC Investment in the crypto space reached an all-time-high in Q3 2021 as per Galaxy’s research report dating 23/11/2021. At the same time, the gap between crypto VC valuations and broader venture market continues to widen, raising questions of whether such build up is sustainable in the long run.

Nevertheless, such meaningful institutional inflow in crypto space goes in line with our view that November corrections are not a sign of crypto winter and we are yet to witness another upside move.

More on Institutional Adoption:

• Crypto Venture Firm Paradigm Announces $2.5B Fund, Industry’s Largest (Read More)
• Tim Cook says he owns cryptocurrency and he’s been ‘interested in it for a while’ (Read More)
• Twitter sets up crypto team to explore decentralised apps (Read More)
• CME Group to Launch Micro Ether Futures on December 6 (Read More)
• Bitcoin Futures ETF Frenzy Is Fading Fast as Another Fund Debuts (Read More)
• SEC Rejects VanEck’s Bitcoin ETF in Latest Spot-Listing Snub (Read More)
• Fidelity launches a Spot Bitcoin ETF in Canada, not waiting for the SEC in the U.S. (Read More)

DEFI, EXCHANGES & MISC.

ConstitutionDAO Phenomenon

ConstitutionDAO emerged out of nowhere with over 17 thousand people coming together in a flash mob-type quest attempting to buy a 243-year old original paper copy of US Constitution. And even though the group failed in their endeavour losing the auction to a higher bidder, DAO organisations stole the attention of those closely watching the crypto space. (Read More)

In short, a Decentralized Autonomous Organization (DAO) is a form of a blockchain governance structure run purely on smart contracts, coded by people who started the DAO. Instead of having a CEO or a tall hierarchical structure, all organizational decisions on how to run the DAO are made by an open vote of token holders. At the same time, votes are weighted by the amount of tokens held — so whoever holds more tokens will have higher voting power.

As such, DAOs fit well with the broad blockchain narrative of increased decentralization in all aspects of life. However, there are a few major concerns around DAOs, security being the primary one. In the best blockchain traditions, DAO’s code is open source, giving everyone — including attackers — access to organization’s code and smart contracts. Unless this code is bullet-proof, there’s always a chance for various attacks (like in The DAO’s 2016 case of a $150mil theft).

Finally, DAOs are gaining ever growing attention in the crypto industry. At their current development stage, DAOs are not advanced enough to replace any traditional corporate board. However, they do seem to emerge as the ‘next big thing’, and we will be monitoring them closely in the near future. (Read More)

Recently, DAO projects are competing to offer the highest APY for staking their native coin, some offering as high as 70,000% APY. Promising high staking return on their staking pool ensures good performance of the project’s native token, protecting the protocol having to redeem liquidity from the pool. With so many crypto retail investors hungry for (ultra)high risk / high return endeavours, TLV of these projects continues to grow exponentially, threatening to replace ongoing NFT hype.

More on DeFi, Exchanges & Misc.:

• Taproot, Bitcoin’s Long-Anticipated Upgrade, Has Activated! (Read More)
• LA Lakers’ home to be renamed Crypto.com Arena in reported $700m deal (Read More)
• Rehabilitation plan for defunct bitcoin exchange Mt Gox is now finalized (Read More)
• 10% of China’s population have opened digital yuan wallets, per PBoC official (Read More)

CRYPTO REGULATIONS

Month of November started and ended with Federal Reserve finally acknowledging inflation concerns and looking to taper monthly bond purchases. On November 3rd, the Fed announced it will trim monthly bond purchases by $15b a month. (Read More) This did not come out as a big shock, with US 2s10s curve remaining quite flat at around 120 bps (vs June highs at around 160 bps). The narrative did not end here, however.

Wednesday, November 10th, CPI inflation figures hit the market with 6.2% increase from a year ago. This signifies 5th month in a row that inflation figures are rising at over 5%. Markets are not taking the FED’s ‘transitory inflation’ narrative any more, looking for alternative store of value assets as real interest rates are plunging deep into negative territory. (Read More) Following the announcement, BTC reached a new all-time-high of $69K and ETH peaked at $4.9K.

In view of this, November 30th Jerome Powell indicated to a Senate committee that the announced tapering schedule may be accelerated, as the economy faces further inflation pressure. (Read More)

More on Crypto Regulations:

• Biden’s Working Group calls for stablecoins to be regulated like banks (Read More)
• Senators Seek Crypto Reporting Fix as Biden Signs Infrastructure Bill (Read More)
• El Salvador Buys 100 More Bitcoins as Crypto Market Falls (Read More)
• New York City’s mayor says he wants to be paid in Bitcoin (Read More)
• Eric Adams Aims to Make NYC Crypto-Friendly With Coin Similar to Miami’s (Read More)
• Miami’s Mayor Says He’ll Take His Next Paycheck in Bitcoin (Read More)
• Kazakhstan Limits Crypto Investment for Retail Players (Read More)

DISCLAIMER

The contents of this material have not been reviewed by any regulatory authorities. You are advised to exercise caution in relation to the contents of this material. Although information contained in this material has been compiled from sources believed to be reliable, JKL does not represent or warrant the accuracy, completeness or reliability of the information contained in this material. If you have any doubt about any of the contents of this material, you should obtain independent professional advice. Neither JKL nor any of its affiliates, nor any of its or their respective directors, officers, employees, and representatives will accept any responsibility or liability whatsoever for any direct, indirect, or consequential loss arising from the use of or the reliance upon any information contained in this material. This material does not constitute an offer or an invitation to subscribe for or purchase any financial product. It is not intended to provide the basis of any credit or other evaluation and should not be considered as a recommendation to purchase any financial product.

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November Overview was originally published in Coinmonks on Medium, where people are continuing the conversation by highlighting and responding to this story.