1. Summary of Industry Dynamics
Last week, the crypto market had an independent trend, outperforming the US stock market in the first half of the week. The crypto market showed signs of stabilization as the US stock market continued to fall. However, as the US stock market continued to rise on Thursday and Friday, the crypto market plummeted on Friday. Bitcoin fell by about 4.5% in a single day, and continued to fluctuate during the weekend. As of writing, Bitcoin closed at 22444.39, down 3.48% on the week, with an amplitude of 9.08%; Ethereum's performance was still inferior to Bitcoin, closing at 1570.92, down 2.23% on the week, with an amplitude of 9.83%. At the same time, the trading volume of centralized exchanges fell significantly this week, down 30% to 20+ Billion USD. The main black swan event in the crypto market this week came from the sudden collapse of the crypto-friendly bank Silvergate. This black swan event began with a Bloomberg news report that Silvergate postponed the date of its financial report disclosure, making the outside world suspect that its losses in the crypto market may exceed the previously announced $1 billion and doubt its ability to continue operating, which caused its stock price to plummet on the same day, closing down a staggering 58%. The impact on the currency circle is that Silvergate has cooperation with several heavyweight institutions in the crypto market, including Circle, the issuer of USDC. Silvergate is the channel for collecting USD collateral for USDC, which means that part of USDC's reserves are stored in Silvergate, but the specific proportion is unknown; another point is that part of USDC's reserves are invested by the treasury fund and managed by BlackRock, and BlackRock also invested in Silvergate in January, which directly dropped by 65%, which also makes people worry about the profit and loss of its reserves. Fortunately, USDC also has relevant cooperation with 8 banks, so Silvergate is unlikely to account for too high a proportion. Currently, USDC has deleted Silvergate from the cooperation list and is looking for new partners. At present, the impact of this incident on the crypto market is limited. The decline may also be an airdrop taking the opportunity to smash the market, and it has no substantial impact on USDC at the center of the vortex. We will continue to follow up.
On the other hand, the US stock market continued the downward trend of the previous week at the beginning of last week. The S&P and Nasdaq continued to fall from Monday to Wednesday, and the S&P fell all the way to the 200-day moving average and had a brief breakthrough, but this was just a false breakthrough. The market rebounded strongly on Thursday and Friday, and two consecutive big positive lines basically wiped out the decline of the previous two weeks. The S&P index returned to 4,000 points, and the Nasdaq also broke through the upper track of the rectangular consolidation. The market showed strong resilience. The current Fed's decision is not very clear. The market has no clear judgment on the prediction of interest rate hikes in the short term, the interest rate peak, and the start of interest rate cuts in the long term. Powell will make a work report to the Senate on Tuesday this week and to the House of Representatives on Wednesday. The content of the speech will become the basis for stock market trading. In addition, there will be a small non-agricultural data on March 8, and a large non-agricultural data on Friday, because the Fed itself cannot say to what extent it will raise interest rates, so non-agricultural data is an important reference. Not many officials spoke last week. Bostic, president of the Atlanta Fed and alternate member of the FOMC, said he was inclined to raise interest rates by 25 basis points in March and stop raising interest rates in the summer. He also said he would not repeat the mistakes of the US inflation in the 1970s, when US interest rates soared to 20%. However, his statement was slightly neutral and did not have a clear direction, but the market mostly interpreted his speech in a dovish direction. It seemed more like the mainstream financial media was taking advantage of the topic to induce the market to go in the direction that Wall Street wanted. Judging from the current market performance, the market is still likely to fluctuate upward.
Industry data
1) Stablecoins
As of March 4, 2023, the combined supply of the top four stablecoins (USDT, USDC, BUSD, DAI) was approximately 129.311 billion, a slight decrease from last week, a decrease of approximately 360 million (-0.28%). Funds in the cryptocurrency market are still continuing to flow out, but at a slower pace.
Among the three major fiat stablecoins, the supply of USDT and USDC increased as expected. USDT increased significantly by about 539 million (0.6%) this week, and the upward trend continued. USDC supply increased significantly by about 1.17 billion (2.76%) this week.
The supply of BUSD continued to fall sharply this week, decreasing by 2.062 billion (-18.47%) again, and the supply of BUSD has fallen below 10 billion. Since Paxos has been banned from minting BUSD, the stablecoin market will continue to maintain this trend of one rising and the other falling for some time to come.
Overall, the growth of USDT and USDC this week is unlikely to offset the outflow of BUSD. The cryptocurrency market is still experiencing a net outflow trend, which has lasted for two weeks. If the outflow continues until BUSD returns to zero, the overall outflow is expected to be US$1 billion to US$1.5 billion.
The recent failure of the cryptocurrency market to reach a high and the volatile decline also confirms our view that the market is still waiting for the macro environment and sentiment to improve until incremental funds enter the market.
2) BTC Miner Balance
The BTC miner address balance shows the total BTC holding balance marked as miner addresses on the chain, including Foundry USA, F2Pool, AntPool, Poolin, Binance and other addresses.
This data is usually used to judge miners' interest in the current BTC price. When the miner's balance increases, it usually means that the chips are in a state of accumulation; when the miner's balance decreases, it indicates that miners are selling or pledging their BTC.
According to OKLink data, the balance of miners has decreased slightly compared with last week. Although the absolute value has not changed much, this single-week decrease is the largest since December 2022, which reflects the market sentiment to a certain extent. There may be some bottom-profit chips cashed out and left the market. We need to be vigilant about this, and the shock callback may not be over yet.
3) ETH deflation data
As of March 5, according to ultrasound.money data, the ETH supply this week decreased by about 6,265 compared to last week. Since the completion of The Merge, the ETH supply has decreased by 44,000 in total. Based on the data of the past week, the annualized inflation rate is -0.27%. Deflation is still continuing, but the speed has slowed down.
Compared with ETH under the POW mechanism, the supply under the POS mechanism has been reduced by about 1.95 million coins. In terms of US dollars, this part of the selling pressure is about US$3 billion.
2. Macro and Technical Analysis
After a short-term rise, the market entered a period of adjustment and remained sideways, making it difficult to break through upward in the short term.
Two-year US Treasury bonds rose, followed by a 75bp rate hike
Nasdaq rebounds
arh999：1.27
The number of addresses holding more than 100 coins rebounded
The number of addresses holding more than 100 coins began to decline
III. Summary of Investment and Financing
Investment and Financing Review
From February 27 to March 5, 2023, the crypto VC market disclosed 24 investment and financing events, with a cumulative financing amount of more than US$136 million; (https://www.rootdata.com/Fundraising)
During the reporting period, there were 6 events with financing amounts exceeding 10 million US dollars:
Organization News
4. Dynamic tracking of non-performing assets
The latest developments of FTX’s digital distressed asset claims market:
FTX is still in bankruptcy protection for 120 days, and the deadline is March 11, so FTX US and FTX International have not publicly disclosed any progress. Currently, the price of debt in the over-the-counter market remains in the range of 15-20%, and is still showing a slow upward trend.
However, the latest report from FTX's current CEO John Ray does not look optimistic, as it contains serious loopholes such as loss of ledger data, which will make it difficult for equity investors to take over. Therefore, based on the current market signals, the funds that creditors can recover may be reduced to the range of 30%-40% or even less.
One of the hottest topics in the market right now is how much of their assets retail creditors can get back. Based on the analysis of multiple data and interview results, if there are large equity investors during the bankruptcy protection period to do FTX bankruptcy acquisition and reorganization, that is, what we call Bail out (unwinding the creditors), retail investors or small creditors can quickly get back the discounted assets. This ratio is estimated to be 50% - 70%. Of course, this needs to be approved and passed by the creditors committee UCC, the bankruptcy administrator Kroll Administration, the Delaware receiving court and the execution judge.
2. FTX Japan starts user withdrawals
Since FTX Japan resumed user withdrawals on February 21, users of the platform and Liquid Global have withdrawn approximately 6.6 billion yen (approximately US$50 million) worth of cryptocurrencies and fiat currencies. According to statistics, 7,026 account holders have transferred funds from FTX Japan to Liquid Global, involving 5,697 cryptocurrency transactions and 1,947 fiat currency transactions.
FTX Japan held approximately 19.6 billion yen in cash (over $138 million) when it ceased operations, which suggests that as of February 22, FTX Japan's remaining withdrawal limit was approximately $90 million. (BlockBeats)
3. News:
(1) US regulators oppose Binance US’s $1 billion acquisition of Voyager assets
New York state and U.S. federal financial regulators have raised objections to Binance US’s $1 billion acquisition of Voyager, according to information and U.S. Securities and Exchange Commission (SEC) documents released last Wednesday. In December, Binance agreed to acquire the assets of Voyager, a U.S. crypto lending platform that had filed for bankruptcy protection, for $1.022 billion.
Last month, the SEC questioned the deal, saying Binance’s disclosures were insufficient, mainly details about Binance’s ability to “complete a transaction of such magnitude,” how Binance U.S. would protect and legally transfer customer assets, and how it would rebalance its cryptocurrency portfolio.
At a hearing last week, ****Voyager bankruptcy judge failed to make a final ruling on the reorganization agreement,**** because the SEC claimed that some terms in the deal may violate US law. Because Binance US is currently facing a lot of business risks, this may harm its plan to acquire Voyager's assets. In this regard, Binance and Voyager have not yet commented. The final result will be determined by the hearing held by the court. Voyager expects that the acquisition will enable customers to recover about 51% of the value of their deposits when Voyager filed for bankruptcy.
Currently, the bond trading price in the over-the-counter market is stable at 30%.
(2) Silvergate Bank delays filing of annual 10-K financial report
Silvergate Capital Corporation, the holding company of Silvergate Bank, a crypto-friendly bank registered in California, announced that it would postpone the submission of its 2022 annual 10-K financial report and that it would take at least two more weeks to complete the submission of the report. This move also caused its stock price to plummet by more than 30% again in after-hours trading last Wednesday to $9.10.
After-hours trading on Thursday saw another steep drop of 57%, with the stock price now down to $5.68
Silvergate Capital Corporation stated in a filing with the U.S. SEC that the company may have suffered a serious "Less than Well-Capitalized" capital shortage. The company is currently under investigation by the SEC and is answering regulatory questions related to the company. Silvergate's accounting firm and independent auditors are also required to provide more relevant information to the SEC. Silvergate is likely to face investigations from the U.S. Department of Justice DOJ and banking regulators. Silvergate said that the fermentation of these events may seriously affect the company's ability to "continue to operate." Therefore, the company is currently using this time to reassess the feasibility of its existing business and formulate strategic shifts to meet the various challenges it is currently facing.
Financial status:
Silvergate’s current situation is largely due to the close relationship between its business lines and exchanges such as FTX and Block-Fi. The chain reaction caused by the collapse of FTX destroyed the two largest customers of Silvergate Bank: more than $1 billion of Silvergate’s total assets are locked up in FTX, accounting for more than 10%; in addition, the crypto lending platform BlockFi is also a customer of Silvergate. According to chapter11’s bankruptcy application, FTX and its related entity subsidiaries hold approximately 20 different accounts at Silvergate.
Collective short selling:
Cathie Wood's ARK Fintech Innovation ETF sold all of Silvergate's shares, and some of the institutions that shorted it included Billionaire George Soros' family office. According to MarketWatch, citing data from the New York Stock Exchange, Silvergate is still one of the most popular stocks on Wallstreet for short selling, currently ranking second, and is also in a situation of being collectively shorted. As of February 15, about 71% of the outstanding shares were shorted. Moody's credit rating company also downgraded Silvergate's credit rating again.
Coinbase, Circle, Paxos and Gemini are among several companies that publicly announced on Thursday that they had cut ties with SI Bank in their business. Market makers and OTC firms GSR, Wintermute and Blockchain.com also announced that they were abandoning the Silvergate Exchange Network (SEN network). The SEN network allows Silvergate’s customers to convert fiat currencies 24 hours a day, and the network processed more than $560 billion in trading volume last year, making it a key driver of SI Bank’s growth.
All in all, the impact of multiple factors, coupled with the loss of deposits in the fourth quarter, has damaged the reputation of Silvergate Bank. The stock has been falling since the beginning of the year, shrinking by more than 90% from its highest point of US$222.13, and its current market value is only US$182 million.
5. Crypto Ecosystem Tracking
Data collation of each sector
NFT
Blue chip index: fluctuated upward and gradually returned to the previous high point. The correction of the currency market has not yet been reflected in the NFT blue chip market.
Market value & trading volume: Market value increased by 2% year-on-year, and trading volume decreased by 51.6% year-on-year. The main difference came from the abnormal surge in trading volume caused by flash loans.
Holders & Traders: Holders increased by 3.5% year-on-year, and traders decreased by 17.6% year-on-year. The trading enthusiasm caused by Blur has retreated.
NFT Top collection
BAYC, Cryptopunks, and Monkey King rank in the top three
Metaverse
Metaverse Data Inventory
The market value rose slightly, and the transaction volume dropped by more than 12%. Monkeyland, decentraland, and sandbox still ranked in the top three
The popularity of the Metaverse has gradually cooled down after reaching a peak in the first two weeks.
Gamefi Chain Games
Overall review
Overall, the Gamefi industry was mainly affected by the broader market this week, with an overall sharp decline. Judging from the token prices, 90% of the top 10 market value chain games have fallen, and most of them have fallen by more than 10%. Only illuvium rose slightly against the trend this week, rising 4.26% in the past week (new gameplay is about to be released, and the increase was higher in the early part of this week).
https://degame.com/zh/ranking/game/ALL_GAME
According to the on-chain contract interaction volume, among the top ten active blockchain games, 60% of the interaction activity has declined in the past week. Among them, the number of players of Arc8 by GAMEE has increased significantly, up 521% (a blockchain game platform, which has reached a cooperation with the top blockchain game BenjiBananas this week, and the interaction volume has increased significantly).
Data source: https://dappradar.com/rankings/category/games
DeFi & Public Chain Track Data
As of this week, DeFi TVL is 48.45B, and the top five protocols by TVL are: Lido, MakerDao, Curve, AAVE, Convex Finance. Lido and Curve rose 3.75% and 0.35% respectively this week.
https://defillama.com/
From the perspective of public chains, the top three chains in terms of TVL this week are ETH, Tron, and BSC. Arbitrum and Optimism grew by -0.29% and 5.71% respectively this week, ranking fourth and sixth respectively.
https://defillama.com/chains
This week's key events & projects
Para Space (Ranked No. 2 in the NFTFI track)
Introduction: NFT lending agreement, users can pledge blue chip NFT in the platform and borrow money, similar to benddao
Team situation:
Para Space was incubated by Para Labs, which used to work on ParallelFi in the Polkadot ecosystem. Its TVL is still 287m and it has successful project experience.
Investments from Sequoia, Coinbase, Polychain Capital, etc.
Platform data
For several weeks, it ranked second
Investments from Sequoia, Coinbase, Polychain Capital, etc.
Platform data
For several weeks, it ranked second
https://twitter.com/CH_909/status/1631001669579456512
The main function
NFT Collateral Lending
$Ape staking
In conjunction with yugalabs, $ape mining was launched. If you deposit ape without holding bayc, you can get 140% apr. If you hold bayc, you can get 237% apr by depositing ape.
Buy NFT with Credit
Deposit blue chip NFTs as collateral to purchase NFTs on Para in installments
Uni v3 LP token staking
Users who provide liquidity on Uniswap V3 will receive Lp tokens, which are actually NFTs
The liquidation mechanism is different. You can avoid liquidation by adding uni's lp (benddao is a single nft liquidation method, para space uses a series of nft packaging)
Advanced features in the roadmap: short selling mechanism
Main principle: Fragmented NFT allows traders to sell high and buy low to achieve short selling.
Summarize:
At this stage, the ceiling of the NFTFI track is low, the bear market deleveraging is serious, and the market education is immature (the leading Bendao has less than 10k users)
Existing projects in the NFT lending track have a strong first-mover advantage. Currently, the big blue chips are occupied by Bendao. To transfer to Paraspace, it is necessary to repay the original debt.
The liquidity solution of the NFT track is gradually maturing, and Blur has gradually solved the bad debt problem of the lending track. We can foresee the prosperity of the NFT track in the future.
Xterio
Xterio is a high-quality game developer and publisher. It is currently preparing to build a game platform and is committed to exploring the P2E model and Web3 games. Xterio currently has offices in San Francisco, Los Angeles, Tokyo, Singapore and other places.
Team: Xterio's members are composed of senior game professionals from around the world, including NetEase, FunPlus, EA, Activision Blizzard, Krafton, Zynga, Jam City and other companies. The team is a luxurious lineup. Founder Jeremy Horn was VP of strategy at Jam City and has extensive experience in developing and operating free social games. FunPlus's Chief Strategy Officer Dong Ruibao and FunPlus's Chief Technology Officer Guan Yitao will also join the Xterio team.
Financing: More than 60 million US dollars, led by FunPlus, FTX Ventures, Makers Fund, and XPLA. Hashkey, Foresight Ventures, Headline, Matrix Partners, and Animoca Brands also participated in the financing. The last round of valuation was 300 million US dollars.
Product: According to the official website, Xterio seems to have three projects that are about to be announced, namely "Project Jupiter", "Project Mercury" and "Prrject Venus" (corresponding to: Jupiter Project, Mercury Project, Venus Project respectively). Among them, "Project Jupiter" is a 3A RPG game created by the Tokyo team.
The main services provided by the platform:
Currently, there is an event called Titan Team Battle, and participants can share a reward of 30,000 US dollars.
Event Name: Titan Legends Competition Time: March 1st - March 14th
Competition content:
1. Team competition (rewards will be distributed based on the team’s combat effectiveness ranking)
2. Individual participant competition (rewards are given according to their combat effectiveness)
Ps: Each winning team member can get a reward of 499USDT, and individual participants can get a maximum reward of 100USDT.
Currently, there are many kols and communities participating in the game, and it is very popular.
Economic model: divided into the platform's governance tokens and in-game tokens; 15% will be allocated to Marketing and the community
about Us
JZL Capital is a professional institution registered overseas, focusing on blockchain ecosystem research and investment. The founder has extensive work experience and has served as CEO and executive director of many overseas listed companies, and has led and participated in eToro's global investment. Team members come from top universities such as the University of Chicago, Columbia University, University of Washington, Carnegie Mellon University, University of Illinois at Urbana-Champaign, and Nanyang Technological University, and have served internationally renowned companies such as Morgan Stanley, Barclays Bank, Ernst & Young, KPMG, HNA Group, and Bank of America.
【Disclaimer】The market is risky, so be cautious when investing. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions in this article are suitable for their specific circumstances. Investing based on this information is at your own risk.
