DeFi explosion splashes bitcoin (BTC)

Here is our Wednesday BTC/USD analysis. On the menu: the report in chain of GlassNode and the explosion of DeFi. Close up of Celsius berezina.

Weekly Report Summary in chain by GlassNode

GN points out in the introduction that a plethora of metrics suggests that “the market has entered the deepest phase of this bear cycle”. “Even long-term holders are now showing significant unrealized losses.”

The first graph highlighted in the report is that of the “Realized Price”. That is, the average of the price at which all BTC were last traded. This price (currently $23,430) is very rarely reached and signals that we are trudging closer to the end of the bear market.

March 2020 and late 2018 were the last instances where the market overall showed an unrealized loss:

Bitcoin: Realized Price
Orange curve: Average price at which all BTC were last traded

The “holders” continues to accumulate BTC against all odds, very happy to be able to get your hands on sats at a discount. GN notes that they have been cutting back on their shopping in recent days, however, likely sniffing that the DeFi explosion will soon provide them with better buying opportunities.

The rate of monthly accumulation of BTC on addresses not used to selling BTC has indeed dropped by 64% (between 15,000 and 20,000 BTC per month). Wise decision since bitcoin has just dropped 25% in a few days.

The following graph is very interesting. It helps to know who is causing the BTC declines. You can compare the evolution of bitcoin price according to the types of addresses that sell according to whether they contain between 0 and 1 BTC, 1 BTC and 10 BTC, 10 BTC and 100 BTC, etc.

We observe that the blow of the month of May was mainly the work of whales holding more than 10,000 BTC (Zone A on the graph).

Since the shrimp (<1BTC) accumulated very consistently (dark blue). The latter have sucked up more than 20,800 BTC since the May 9 Luna Crash. And over 96,000 BTC since the November high.

In other words, the plebs take advantage of these BTCs on sale. The whales are however already back now that we have fallen below $25,000 for one bitcoin.

Bitcoin: Accumulation Trend Score by Cohort
Red: the cohort in question (left scale) is selling BTC
Blue: the cohort in question accumulated BTC

According to @WatcherGuru, 265,770 cryptocurrency traders were liquid on Monday alone. That’s $1.26 billion that changed hands. Moral of the story: never buy bitcoin with leverage. Whales know where the stop loss

Glassnode report many more analysis graphs contains in chain if you want to dive into it. Here is the conclusion:

“Bitcoin has entered a phase that coincides with the deepest and darkest down cycles in bitcoin history. Prices barely stay above the realized price. Historically, this phase has taken anywhere from 8 to 24 months for the market to reach a final bottom. »

GN is not ruling out the possibility that we will momentarily fall below $20,000…

Where does the carnage come from?

The market capitalization of all cryptocurrencies (stablecoins included) has collapsed by almost 50% since the high of 2921 billion dollars reached last November. Excluding bitcoin, the decline is worse: 70%…

Hence the dominance of bitcoin, which is approaching 50% of the market, while that of Ethereum has fallen to around 15%. An Ethereum is now worth just over 0.05 BTC, compared to almost 0.09 last December.

In question, the explosion of the stablecoin Luna and the explosion of DeFi which is just a gigantic ponzi as NYDIG has masterfully explained.

The panic spread to Celsius Network which offered a fixed annual return to those who deposited ETH with them. The famous “APY” (Annual percentage return). The proposed rate was 6-8% per year on average. 17% in some cases…

celsius add
“Deposit your cryptocurrencies. Take money. Earn interest rates. »

Celsius placed its clients’ ETH with Lido, a firm that is responsible for blocking ETH on the tag string of Ethereum 2.0, a network that will “soon” be merged with the Ethereum mainnet as part of its transition to Proof of Stake.

The reason for Lido is that it takes a whopping 32 ETH to create a node on Ethereum 2.0. This company makes it possible to be part of an ETH node by contributing only a fraction of 32 ETH. While waiting for D-Day, its customers receive a token called stETH (Staking ETH) in exchange for ETH.

We can read on the site that “the price of ‘stETH’ against ETH should be volatile until the start of phase 2 [du processus de mue d’Ethereum en PoS] ». Indeed, these ETH deposited at Lido are blocked until D-Day (“the merge”) which is starting to be late…

The problem is that the fall of the cryptocurrency market is pushing many people to want to resell their ETH placed with Celsius, and that the latter cannot return them since they are blocked at Lido.

Last week, the Celsius team tried to reassure customers that they will be able to meet their obligations: “We have enough reserves (and more than enough ETH) to meet our obligations”. These fine words will probably not be enough to try to put to rest the rumors that Celsius lost a lot of money in the crash of Terra-Luna (which offered a ponzian return of 19.5% via the Anchor protocol).

The inevitable happened. Celsius has just suspended ETH withdrawals until further notice. But then, where is the money?

Celsius would currently have the equivalent of $475 million in stETH. Another four hundred million are believed to be on Maker Protocol, the firm behind the stablecoin algorithmic (Dai) which could soon experience the same fate as Terra-Luna.

Celsius is clearly facing a liquidity crisis. The fact that she has just hired lawyers suggests that a liquidation is in sight. The veil is lifted on DeFi and we “discover” in pain that it is only a giant ponzi blessed by influencers crooks that we will have to stop following.

The only worthwhile DeFi is called Bitcoin. Everything else will end up at 0. This is the opinion of Bryan Brook, the former CLO of Coinbase:

“A lot of projects are going to go to 0…. the scams, the charlatans promising easy money, all of these people are gonna be rocked in the next 6 months, & you should see it now,”

And as if all that weren’t enough, a class action lawsuit has been launched against the US branch of Binance because of its involvement in the Terra-Luna project. Its CEO Changpeng Zhao should soon have to deal with the SEC…

The purge is violent. We learn this Wednesday that the Singaporean fund Three Arrows Capital (3AC) would have been hit by a margin call. The fund had $20 billion in assets under management at the end of 2021…swap Coinbase has just announced that it will part with 18% of its payroll. It will be 20% in the case of BlockFi.

Let’s end by hammering that if this massacre has extinguished bitcoin, it is indeed he who will be reborn from his ashes by sucking up in fine the stolen money via a multitude of projects without tail or head. However, you will have to take your troubles patiently. Especially since the FED will raise its key rate tonight. Probably 0.50%. Even 0.75%…

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Nicolas Teterel

Journalist reporting on the Bitcoin revolution. My solicited papers of bitcoin through geopolitical, economic and libertarian prisms.

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