Still Buying the Dip this Christmas

Still Buying the Dip this Christmas


The Omicron variant and less dovish Fed speech created market jitters and deflated the year end melt up scenario. However, the dip did lead to the largest inflows into equities in four years, with buying from institutions, private wealth offices and retail investors. Years of Fed backstops, despite Powell’s latest speech, have conditioned investors to believe markets only go up. The lower month over month CPI print is encouraging as are lower commodities prices but some cautiousness remains ahead of the Fed meeting next week. In digital assets, sentiment hasn’t recovered from the recent sell off. The most important event of the week was the constructive marathon hearing on Capitol Hill that saw many lawmakers taking an open, knowledgeable tone to the industry. At this rate, perhaps 2022 will be the year we get an overarching regulatory framework and the approval of a spot ETF.  VC investment remains high in the space, with NFTs gaining a bigger piece of the pie.


Quote of the week: “We don’t believe in cryptocurrencies” Zimbabwe Central Bank Director

The country has suffered from very high inflation for years, taming it to still high double digit levels only this year. Zimbabwe ranks 61st in bitcoin adoption according to Coinalysis, with 30% of young people invested in digital assets.



Pavlovian reactions

Investors took advantage of the OmiFed scare by pouring $7 billion into the market, moves that amounted to the largest inflows in four years. The dip buying was led by institutions although private wealth and individuals were also heavily involved. As a percentage of US market capitalization, the buying marked the largest since December 2020. Markets took a breather ahead of the November CPI data, which came in at 6.8% yoy, almost in line with expectations. The month over month number at +0.8% was down from the +0.9% peak.

Pavlovian: Investors have been conditioned to buy the dip

Source: FT, WSJ

The Atlanta Fed Nowcast for Q421 came in strong

China eases as inflation ebbs

Going in the opposite direction to the Fed, the People’s Bank of China reduced reserve requirements (liquid assets relative to deposits) for banks by 0.5% to 8.4%, releasing $188 bn into the financial system. It's the second time this year this has happened, as they also eased requirements in July. This came as inflation is abating and the authorities seek to minimize the impact  from Covid flare ups and the downturn in the property sector. On Monday alone, Evergrande’s shares fell almost 20% to HK$ 1.81, closing at their lowest level since 2010. 

The PBOC said it would avoid flooding the economy with stimulus, though the Politburo emphasised that stability would be the priority for the economy. This year, GDP is expected to grow by 8%. However, given demographics and the property issues, with real estate accounting for a quarter of the economy, these relatively small measures are unlikely to keep China from slowing in 2022. The OECD estimates growth of 5% next year.

Downward trend in Chinese RRR but don’t expect large scale credit stimulus

China’s factory-gate inflation eased in November after hitting a 26-year high. The producer-price index rose 12.9% from a year earlier in November, down from 13.5% growth in October.

With China slowing into next year, the question of its repercussions on the global economy is important. While it is still a huge market, things have changed. In the last decade, China has turned inward, with exports as a percentage of GDP falling from 35% to under 20%. China is now 25% of global growth, down from 35%, according to Morgan Stanley data. Developing countries that are reliant on exporting raw materials to Asia can look forward to other sources of demand for copper, lithium and nickel, such as the electric vehicle industry.

China’s growth correlation with the rest of emerging markets has weakened and the growth gap has narrowed


Source: FT



A recap of last weekend’s selloff

The chain of contract closures on Saturday amounted to 58,202 BTC in value. In BTC terms, this liquidation was the second largest single day change in Open Interest this year, with May 19 being the highest, at 79,244 BTC. Activity in the options market was also high. Options volume has jumped over 259% to over $1bn per day since July. 

Positive takeaways, as per Glassnode metrics:

  • Over 97% of the supply older than 3 months has remained unspent since the recent all-time high and pullback. 
  • The average baseline level for 2020 was a Dormancy level of 40 days, and we are well below that level, at 25 days. In fact, Dormancy has been in a macro decline since the height of the bull run in January so activity on-chain is dominated by younger coins.
  • Recent peak exchange inflows (2-3k) are small versus May sell off figures (10-14k net BTC deposits).
Crypto goes to Main Street

Grayscale, the company behind digital asset investment products, released the results of its online survey of 1,000 U.S. consumers between 25-64 years of age. The survey revealed increased adoption, holding behavior and interest in the digital asset, especially in an ETF. 

Key insights:

  • According to the survey, the number of Americans who own Bitcoin has increased to 26% in 2021. More than half (59%) chooses to invest via a cryptocurrency trading app.
  • More than half (55%) began investing over the last 12 months and  most are “hodling,”. 
  • Approximately 66% of those who purchased Bitcoin more than 12 months ago still own it today. Of the investors who have sold, 91% have sold at least some Bitcoin at a profit. 
  • More than three-quarters (77%) of U.S. investors said they would be more likely to invest in Bitcoin if an ETF existed. 
Demand for crypto indexes spurs the creation of new benchmarks

FTSE Russell, the company behind the benchmark index of the U.K. stock market, is planning the development of a crypto index containing 43 digital assets. The index will sit alongside the FTSE 100 and Russell 2000 and was developed as people are demanding data around this market. No one really dominates the crypto benchmark category so it will be interesting to watch its evolution.

Bancolombia-Gemini program

The American exchange, Gemini,  plans to allow Colombians to trade crypto through a partnership with its largest private bank, Bancolombia. It will start with a government-sponsored pilot program this month to test banking services for crypto exchanges. Latin America is proving to be an area where interest in digital assets is high and governments have been proactive.

Bitmart refunds hack victims

The CEO of Bitmart announced on Twitter this week that the exchange will refund users who were victims of a large hack due to a security breach. Ethereum and BSC hot wallets were compromised and almost $200 million was lost, one of the largest incidents of late.    

Talking their own book

Three Arrows Capital, one of the most high-profile crypto hedge funds founded by Su Zhu and Kyle Davies, bought $400 million worth of ether over the weekend, according to Nansen, the blockchain analytics firm. This really confused people as only a few days beforehand, Su Zhu had tweeted that they’d given up on Ethereum. This sort of behaviour is not putting the best face on the industry at a time when regulators are scrutinising it.

Every bank should have a crypto strategy: Visa

Visa, the global payments firm, in its efforts to remain relevant in a world where payment rails are evolving, has formed a global crypto advisory practice to help financial institutions develop their cryptocurrency businesses. Banks have seen demand for crypto products from their consumers continue to grow and they’ve finally realized they need to react.  “We think it’s a critical role for Visa to play to help be this bridge between banks and the crypto ecosystem, such as exchanges and wallets” Cuy Sheffield, Visa’s head of crypto.

Microstrategy buys again

Michael Saylor’s firm reveals that it bought another 1,434 BTC for $82.4 mn at an average price of $57,477. Microstrategy now holds 122,478 coins acquired for $3.66 bn at an average price of $29,861.

Wright versus Kleiman

This week was the Florida trial of Craig Wright, an Australian computer scientist who claims to have invented Bitcoin, versus the family of his late partner, who claimed the right to half of Satoshi’s 1.1 mn bitcoin stash, as he was supposedly a co-creator. The jury decided not to award any bitcoin to Kleiman’s estate, meaning victory for Wright but it did say Wright owed US$100 mn to W&K Info Defense Research, a company the pair co-founded, for breach of intellectual property rights. If Wright is indeed Satoshi, why have the coins never been moved? Like who killed JFK, it may forever remain a mystery and spawn endless conspiracy theories.



Congress calls on crypto CEOs 

The United States House Committee on Financial Services held a hearing on digital assets, summoning eight executives from the crypto world to Capitol Hill. The hearing, entitled “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits” discussed four key aspects: crypto exchanges, stablecoin offerings, regulatory concerns in digital assets and federal regulatory responses. Despite a previously hostile reception from politicians, the mood seemed more inquisitive than confrontational. Perhaps we’re entering a new era? North Carolina Republican Rep. Patrick McHenry, who expressed a more crypto-friendly view on Wednesday remarked:  “I ask my friends on the Hill, do you know enough about this?” he said

Bitfury CEO Brian Brooks spoke bluntly to lawmakers; ‘If the US does not act quickly enough, cryptocurrency firms are going to move to other nations with more favorable regulations.’ “There are some products that are legal in other countries and are just not legal here,” Brooks said. Overall, legislators seemed open to DLT and asked knowledgeable questions, though with some scepticism. At this rate, 2022 could be a watershed year.

While this is all happening, it turns out Congresspeople are getting in on the action regardless of progress on the Hill. According to a financial disclosure report filed with the U.S. House of Representatives, Illinois Representative Marie Newman bought between $15,001 and $50,000 of GBTC in November and December. In addition, she conducted four separate purchases of shares of Coinbase shares during the same time period.

A section of Marie Newman's financial disclosure report for 2021

According to, six other members of Congress currently hold cryptocurrency or some exposure to crypto assets, including Wyoming Senator Cynthia Lummis, Texas Representative Michael McCaul, Pennsylvania Representative Pat Toomey, Alabama Representative Barry Moore, New Jersey Representative Jefferson Van Drew, and Florida Representative Michael Waltz.

A comprehensive crypto bill in the works?

Senator Lummis of Wyoming has been a tireless advocate of digital assets. “You will see a major piece of legislation in the next days and weeks.” She spoke about the need to educate Congress ahead of the hearings this week and underscored the need for statutory frameworks as the technology gets ahead of the ability of politicians to understand and accept it. 

Together with other Congress members, she is working on a comprehensive bill via the Financial Innovation Caucus. They plan to roll it out by year end so that the industry, community and regulators can provide feedback. It will then be broken up into parts, such as consumer protection, anti-crime and banking, that can be advanced with bi-partisan support. Elements will have clear definitions so as to better decide what regulatory agency should supervise.

Crypto Down Under

Australia’s Treasurer, Josh Frydenberg, said the country will announce its biggest reform in the country’s payment systems in 25 years, including crypto, They will broaden the products and services that can be regulated to include cryptocurrencies and digital assets and want to create a “world-leading” regulatory framework. 

Firms that buy and sell cryptocurrencies will have to be licensed and the government will also work out a licensing plan for crypto exchanges next year. The treasury will also be working with the central bank on a digital currency, to stay ahead of global competition (read: China).


As in the U.S.. Japan’s banking regulator will introduce new legislation in 2022 to limit the issuance of stablecoins to banks and wire transfer companies. The aim is to protect consumers from risks associated to the likes of Tether and prevent money laundering by giving regulators oversight over wallet providers and adding more KYC (know your customer) measures. However, yen-denominated stablecoins are not popular so the impact will be limited.

Meta’s digital wallet now on WhatsApp

Some US WhatsApp users can now send payments in USD stablecoins via Meta’s pilot digital wallet program, Novi. They weren’t allowed to issue their own digital currency but Meta wants to be a part of the new ecosystem. Novi says it aims to bring affordable financial services to billions of unbanked people worldwide by allowing them to send and receive money across borders quickly and at low cost using mobile phones. 



As Ethereum fees continue to rise to new highs, at almost $50 per transaction this month, alternatives like Solana continue to gain traction. According to Grayscale, Solana is where Ethereum was in August 2020.

Is Solana following the same trend as Ethereum?

Source: Grayscale

Coinbase launches DeFi, ex-US

After having been curtailed by U.S. regulators in its attempt to offer lending products,via Lend. Coinbase announced that users outside of its jurisdiction in over 70 countries will have access to (relatively) high yields via DeFi. They are touting no fees, lockups or hassles of set up. It could be a game changer as one of the main obstacles to mass adoption has been cumbersome user experience. At the moment, DeFi has over 3 million users and a large component are professional or high net worth users. If made accessible, users in countries with low interest rates or weak currencies may flock to the yields on offer using Dai stablecoin on Compound. Rates on Compound have hovered around 3% to 5%, not high by DeFi standards but certainly by TradFi ones.

OpenSea as the new eBay

OpenSea, the dominant NFT marketplace, has appointed former Lyft executive Brian Roberts as the start-up’s first CFO. “I haven’t been this excited about something in a very long time,” he told Bloomberg. “It reminds me of 1995 eBay.” The appointment led to speculation about a potential IPO in the pipeline, which the company has since toned down.

From high end virtual gallery to mass aggregator

NFT marketplace Nifty Gateway recently shifted from its role as a seller of curated art to an aggregator of Ethereum NFT marketplaces and they will unveil a new way to cut Ethereum fees by up to 70%. The method removes some aspects of wallet to wallet trades off-chain to avoid gas fees. The strategic pivot may be a good one as volumes on Nifty Gateway have not picked up after a strong start to the year.

The Sandbox partners with BlockchainSpace to access 680k gamers

BlockchainSpace has become an official partner to The Sandbox, the Minecraft-like space where players build their own virtual worlds. BlockchainSpace build platforms for NFT games to promote user growth and traction via its network globally. They focused in the past on creating a Philippine community in the virtual world, with for example, the first dedicated Phillipine land experience. The Sandbox currently has 500k digital wallets so the partnership could move the needle significantly.

Decentraland becomes a developer fund sponsor

Decentraland members voted to contribute to the Blender Development Fund, becoming the first crypto-native project to do so. The fund uses donations to finance developers and community initiatives and some of the major donors include AWS and Meta. Decentraland ($MANA) has a sizeable treasury now.

NFL-DraftKings partnership

The NFL Players Association partnered with online sports betting firm DraftKings to allow players’ names, images and likeness to be used on its new NFT platform in time for the 2022 season. People will be able to play against each other using NFT tokens they buy for specific players in a fantasy style game. This is similar to Sorare in Europe.

NFT from behind bars

The alleged founder of dark web marketplace Silk Road, Ross Ulbricht, has sold his first NFT for $6.2mn at auction to fund efforts to release him from prison. FreeRossDAO purchased the NFT which was created from prison and auctioned off via SuperRare. The buyer plans to fractionalize the NFT into ROSS governance tokens and distribute them pro-rata in return for donor contributions. Ulbricht’s NFT ranks among the largest sales within the last week. 



Source: Delphi Digital

Another round for FTX

FTX CEO Sam Bankman-Fried is looking to raise a total of $1.5 billion for his derivatives exchange and U.S. affiliate, FTX.US. The funding round would potentially value FTX at $32 billion and FTX.US at $8 billion. This is less than six weeks after FTX closed a $421 mn Series B-1 funding round, in which BlackRock and Tiger Global participated. Investors valued the exchange then at $25 billion. 

Singapore entity of Binance acquire 18% of Hg Exchange 

In keeping with its strategy to be one step ahead in innovative products, Binance Asia Services, the Singapore entity of Binance, announced that it is acquiring an 18% stake in Hg Exchange, a Singapore-based private securities exchange, subject to regulatory approval.  Hg Exchange (HGX) is a private securities exchange built on the Zilliqa blockchain, which facilitates trading in tokenized shares of private companies. HGX is also working on listing alternative digital assets, including wine, art, and real estate.

Binance reportedly eyeing the Indonesia market

Binance, the leading digital assets exchange, is reportedly in talks with Indonesia’s richest family, the Hartonos and their bank, BCA, to open a crypto exchange, according to Bloomberg. The company has not yet confirmed this though they currently have a JV there. The venture would also involve the state-owned telecom provider, PT Telkom Indonesia. The news would not be surprising given the size of the market and the fact the regulators have already deemed digital assets as commodities and allow trading.

Silvergate Bank look to raise nearly half a billion dollars

Silvergate Bank is looking to raise around $461 million through the sale of 3.31 million shares of common stock. According to a filing on Wednesday, the crypto-focused bank estimates that net proceeds will be around $532 million if underwriters exercise their option to purchase additional shares in full. Proceeds would supplement regulatory capital levels and support growth through strategic acquisitions and other initiatives.

10T file for third digital assets investment fund with SEC 

Tapiero’s 10T has filed with the SEC to create a third digital assets fund, targeting mid-to-late firms. It is set to raise $500m. Like the first two funds, this one will invest in a fresh batch of those more mature cryptocurrency businesses. 10T currently has $770 million in assets under management. Tapiero said that more than 90% of its first two funds have already been deployed. Previous investments include Kraken, eToro, Ledger, Figure, Gemini, Bitfury and Huobi. In total, 12 of the 14 companies in the 10T portfolio are unicorns,  valued at more than $1 billion. 

Paradigm shift has closed a $35 million Series A round co-led by Alameda Ventures and Jump Capital. The liquidity and communications platform for institutions and professional traders, with a third of the options market, is now valued at $400 million. Use of proceeds will be to move into DeFi derivatives.One of several platforms to secure funding of late, including Gemini and FTX.

Polygon acquires Mir in $400 mn acquisition 

Polygon announced it is acquiring a zero knowledge startup Mir in a $400 million deal, as part of its efforts to scale Ethereum and bring users to Web3. The Ethereum scaling and infrastructure platform said when the deal was structured through 250 million of Polygon’s tokens, MATIC, or about $400M, based on the price of $1.60 per coin when the deal closed on 26th November. The platform has about 3,000 applications hosted, 1 billion total transactions processed, 100 million unique user addresses, and $5 billion in assets secured.

Lydia raises $100 million in Series C funding, attaining unicorn status 

French fintech Lydia has raised $100m to secure the status as a unicorn. The funding round includes new investors Dragoneers and Echo Street along with existing backers Tencent, Accel and Founders Future. Lydia recently allowed its 5.5 million users to invest in digital assets including crypto and fractional stocks in partnership with Austrian exchange Bitpanda.

Nexo set for institutional access 

Nexo announced this week it is partnering with Fidelity Digital Assets to boost institutional access to digital assets by offering custodial and lending services. The specialists of cryptocurrency-collateralized credit, Nexo, and Fidelity Digital Assets as a custodian and collateral agent, are set to develop a product suite and compliant infrastructure for institutional investors.

TRM Labs raise $60m through Tiger Global-led funding 

On Tuesday, TRM Labs said it had raised $60 million in fresh capital through a funding round led by investment giant Tiger Global, becoming the latest blockchain startup in the booming crypto economy to seek funds. TRM Transaction Monitoring is used by major crypto firms like FTX US, Circle and MoonPay to detect suspicious activity and comply with Anti-Money Laundering (AML) regulations. Founded in 2019, TRM has grown its team to a headcount of 60, with revenues up 600% year-over-year.

Until next week! We welcome comments and suggestions. Martha @reyeshmartha

Disclaimer: The views expressed in this newsletter are my own and not intended as financial advice or a recommendation, but only for informational purposes. You should carry out your own independent research or consult a financial adviser if you are unsure. Please also be advised that I hold investments in some of the assets mentioned in this report, including digital assets, equities and ETFs.


Martha Reyes Dec 10, 2021

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