3 January 2022
Last week of 2021 was rather disappointing, as Santa Claus rally seen in the traditional market did not make its way to digital counterparts. BTC (-7.5%) and ETH (-6.7%) failed to hold breakouts, and are back to chopping in their previous ranges ($45.5-$52k for bitcoin). Most Top 100 alts also were in reds, with the exception of select Layer 1s (ALGO +2.6%, ATOM +7.9%, FTM +2.8%, KLAY +4.2%, ONE +9.4%, ROSE +10.4%), and a few DeFi names (CVX +14%, SPELL +6%, SUSHI +13%, YFI +32%). With bitcoin now trying to hold 200dma ($47,964), we are not overly optimistic on near-term price action (especially if it breaks), and would rather have exposure in selected alts with better price action. In terms of market structure, bitcoin dominance remains stable at ~40%, and open interest (Chart 1) and funding (Chart 2) are starting to pick up. We are curious as to how market would be allocating/reallocating its capital in the first few weeks of of the year.
On the institutional side, it was largely quiet as market slowed down in the last week of the year. MicroStrategy once again doubled (tripled, quadrupled?) down on bitcoin as it bought another 1,914 bitcoin between Dec 9–29 for ~$94.2mio, bringing total holdings to 124,391 bitcoin at average price of $30,159. Other interesting things in cryptoverse were airdrops as 2 decentralized autonomous organizations (DAOs) gave Christmas/New Year presents in the form of airdrops. The OpenDAO airdropped $SOS token to OpenSea users in a move against OpenSea’s decision to go the Web2 route (so claim them if you’ve used OpenSea!), while GasDAO airdropped $GAS tokens (a nice but small subsidy to all the gas we’ve spent). With DAOs disrupting the conventional wisdom and modus operandi of how companies and people work, and how value accrues, it’s one of the areas that we will be keeping a close pulse on for 2022.
On the macro side, market closed on a high note with Santa Claus rally, as major indices recorded gains for the week (ES +0.9%, NQ +0.0%, DJIA +1.1%). This helped wrap 2021 to be the 6th best year for US equities since 1990, with little pullbacks throughout the year. UST was generally steady against backdrop of light trading and few key economic data releases. On the COVID-front, daily COVID cases rose to record highs (US COVID case reached ATH of ~585k last Thursday), but market seemed less concerned given 1. contained hospitalization and death rate, 2. decent economic activity (weekly jobless claims back to near 5-decade lows, holiday sales +8.5% YoY according to MasterCard, biggest gain in 17 years), and 3. purported benefits of Omicron strengthening immunity against more severe delta strain. Looking ahead, NFP on Friday will set the tone for first month of 2022.
What is Happening?
Square Enix plans to invest more in blockchain gaming in 2022. Square Enix is a Japanese entertainment conglomerate and video game company, best known for its long-running Final Fantas, Dragon Quest, and Kingdom Hearts role-playing video game franchises. Its president, Yosuke Matsuda, spent much of January 1st letter discussing what he termed “decentralized gaming,” noting that he hopes it becomes a major trend in gaming going forward. Square Enix first used NFT in Mar’21, in partnership with Double Jump Tokyo.
2021 was one of the most exciting years in crypto, and we are optimistic that 2022 would be continuation of the history, as innovations in Web3 space and institutional adoption continue. Going into 2022, we have a few themes (metaverse, infrastructure, value-plays) in mind that we’d like to accumulate positions into, but more than anything, we will continue to respect the market, and act accordingly.