The state of the market
And where to look for opportunities
Introduction
First of all, I did not see SBF and FTX going under anytime soon I actually thought FTX had probably 1% chance to go under and was one of the most safe CEX to use (like the majority of CT).
Man I was dead wrong.
However I knew these guys were shady because they were involved in border line activities looking to destroy (DeFi) projects over the years with yield farming, doing VC seed rounds with huge FDV + perp hedging on FTX when the token was released to hedge themselves and dump on retail, etc. And probably the most famous case was the Reef OTC deal when it backfired for them because the Reef CEO had the balls to call them out in public.
The state of the market
Now let’s be clear. The whole crypto market is in shambles. It looks very bad from any point of view. At least in the short term.
To sum up, lots of people’s investments have been completely wiped out by Luna, Celsius or now FTX. Even if you were not directly impacted, the whole market has collapsed in the last few months so are any crypto tokens.
On top of that, firms previously saved by SBF are now on the verge of bankruptcy again: Voyager, BlockFi, etc.
As prices have fallen, a lot of projects either decentralized or centralized will have to fire people to go through the bear market as well, making everything worse.
Less people means less demand to buy crypto assets and as the supply of tokens grows (yes crypto tokens have inflation, even Bitcoin), price will mechanically fall ceteris paribus.
The only deflationary asset is ETH but it hugely depends on activity (and gas prices). If there is little to no activity going on, ETH supply will increase. Then the staking unlocks are coming in 2023 so it might also put downside pressure on ETH price as people might have to sell.
The macro situation is also bad unfortunately, not gonna lie (inflation, global recession, dollar strength, Russia/Ukraine war, company layoffs, climate change, China zero covid policy, and so on).
Last but not least, regulation is here. Harder than ever. And rightfully you could say: who does not need regulation when Luna, Celsius, 3AC, FTX, etc did what they did. Sorry to disappoint but regulation is coming and we will have to bend the knee to lord Gensler and the UE thanks to these mfs.
I never thought half of the biggest players involved in crypto were actual clowns or greedier people than the worst of Wall street guys.
The next domino’s
Who are the next domino’s to fall? I don’t have the answer to that question. I don’t even know if there is another one ready to go. But what I can say is to avoid centralized parties to keep your crypto holdings whether exchanges, lenders or credit card providers, anything centralized basically because you never know what’s going on behind the scenes (see FTX).
Remember: “Not your keys, not your coins”.
Other domino’s could be Michael Saylor and his company MicroStrategy, El Salvador, Bitcoin miners, Tron and its stablecoin, Tether, etc.
Some bear market tips
As of May we published some tips to survive bear markets. It is more than ever accurate.
Opportunities ahead
I painted a dire situation of the current state of the market but “crisis is opportunity” say the Chinese. We are in the middle of a big crisis but there lies opportunities:
Opportunity to learn: how to code in Solidity, launch a smart contract in Rust, what is behind the Zero Knowledge Proofs, how bridges work technically speaking, how to secure your crypto holdings, etc etc
Opportunity to research: a lot of projects will dissapear. The ones which continue to build are worth checking and interacting with whether getting to know them to join them later on when bull resumes or to get an airdrop if they don’t have a token yet, etc.
Opportunity to invest: projects are already trading at distressed valuations. The only unknown is how much farther can they fall 10%? 50% 90%? DCA is probably the most accurate solution to buy right now because we don’t know where the bottom is.
Where to look
In a bear market there are lots of opportunities obviously as everything is on sale. Below you will find a list of themes and ecosystems we like.
Themes
DeFi
For obvious reasons.
All the mess was created by centralized entities. More than ever they should be avoided.
Actual DeFi is the way forward because it enables full transparency of what’s going on and a smart contract can never lie (except if it is hacked but that’s another topic).
It should also show to regulators that DeFi shall not be regulated just like centralized entities because everything is transparent already.
Decentralized Identity
Using ZK tech to prove who you are without revealing your credentials is potentially a huge market. And it can be applied everywhere in the world.
NFTs
Bluechip NFT collections have been very expensive in the past but now it might be time to scoop up some that you like.
Social Networks
Social networks are a hot topic right now whether it is Twitter and the bot issues, Meta/Facebook in free fall or actual social networks built on chain, social networks are part of the future.
FYI there is a good one being built on Polygon by Aave founder called Lens. It might be a good idea to get your profile (you never know in case they airdrop a token or something).
Decentralized Storage
We have seen it. Meta will be using Arweave to archive its NFTs on Instagram., which validates the model of decentralized storage going forward. More companies will use decentralized storage in the future.
Ecosystems
Ethereum and L2s
Ethereum is now a PoS network and can be deflationary is usage is high enough as there is ETH burnt on every transaction happening on Ethereum. If L2s are really picking up in terms of activities, ETH could very well become deflationary durably. It is not the case right now.
Optimism have already given its airdrop but Arbitrum, ZkSync, StarkNet, Aztec and Specular have not. So are many projects building on these L2s. That was the object of our latest articles.
TEST EVERYTHING YOU CAN.
That’s how you can get airdrop which can really help you navigate this bear market.
Solana
Will Solana survive the FTX and SBF collapse? That’s a difficult answer to provide right now as SBF had a huge SOL position which will get dumped.
But I would say yes Solana will survive thanks to their hard working team. You can say anything even if you don’t like Solana, the founders and team are there 24/7. Solana also has a huge community around NFT projects. It won’t dissapear. Hopefully they can recover from SBF shenanigans.
Cosmos
Cosmos tech is really good and there are many IBC networks launching. Worth checking.
Near
Near is sitting on 500M cash and has enough money to work for the next 5 years.
Polygon
Polygon has amazing tech and founding. They have pivoted as an hybrid network (between a sovereign L1 and a Ethereum Layer 2). It works as they have attracted many big projects on their network and they continue to invest massively in their tech stack. I would not dismiss Polygon at all.
Conclusion
The market is in bad shape so act accordingly.
It is not the time to take risks but rather to survive the bear market. Once it will be over there will be lots of opportunities ahead.
Crypto is here to stay because the tech is superior to web2. Nobody can deny it. The thing is it was just put in the wrong hands and cleansing the bad actors now is better than in 5 years when we reach 10 Trillion USD Market Cap.
Be patient.
It is gonna get better.
Thanks for reading.
Secret Salsa
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