Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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Crypto Weekly: Unfamiliar territory
Mads Eberhardt
Cryptocurrency Analyst
Summary: Based on historical and statistical data, this bear market is arguably the worst in the history of crypto. Several of the global conditions are new for the crypto market, and cryptos have to maneuver in uncharted territory. Additionally, BlockFi’s shareholders are likely to get fully diluted if the firm accepts a $250mn bailout from FTX, whereas depositors are likely made whole.
Trading below previous all-time highs
Bitcoin and Ethereum reached all-time highs in November last year of $69,000 and $4,850, respectively. Quickly thereafter, fatigue spread across the crypto market leading to a present 6-months period of tumbling prices. At present, Bitcoin trades at 21,150 (BTCUSD) and Ethereum changes hands at 1,210 (ETHUSD) from a low of $17,550 and $880 earlier this month. Thought-provoking, these lows are below the all-time highs of the infamous market cycle of 2017 and 2018 of around $19,800 and $1,400. It is the first time that fatigue leads to lower prices than in a former market cycle, meaning we are entering territory with no similar history. According to Glassnode, the Mayer Multiple (MM) of both Bitcoin and Ethereum is historically low. Based on a 200-day simple moving average as a long-term mean, the Mayer Multiple tracks price deviations above and below this level. For the first time, Bitcoin has recorded a lower MM (0.487) compared to the previous cycle's low of 0.511 in 2018. Out of Bitcoin’s 4,160 trading days, only 84 days have closed with a MM below 0.5. Ethereum’s MM value has recently been as low as 0.37. Considering all Ethereum’s trading days, only 1.4% of these had a MM value below 0.37. Alongside other price metrics and on-chain data, Glassnode largely concludes that this bear market is so far the most significant in crypto’s history.
As we see it, one should be careful about perceiving that it cannot get much worse, because this bear already beats prior bear markets. At this moment, the crypto market is surrounded by conditions it has never dealt with, such as high global inflation, increasing interest rates, global unrest, and possibly a recession on the horizon. Moreover, stressed by the fatigue in particularly growth stocks, investors have arguably reassessed their overall risk sentiment to a degree that crypto has not experienced in prior cycles. Strictly speaking, if investors continue to seek risk-off, it is not unthinkable that crypto is an asset class to be further liquidated by particularly retail investors.FTX bails out BlockFi, Goldman Sachs looking at buying Celsius assets
One of the largest cryptocurrency exchanges FTX has announced its intention to bail out troubled crypto-lender BlockFi. Similar to another crypto-lender Celsius, BlockFi has allegedly been short on liquidity to comply with its liabilities to its clients. FTX has offered BlockFi a $250mn credit facility offer, which might be enough to get the firm back on the straight and narrow. FTX’s offer is structured in a way in which depositors are to be repaid before FTX in case BlockFi becomes insolvent. However, the offer consists of an option for FTX to acquire BlockFi at “essentially zero cost”, effectively fully diluting existing shareholders. Raising money with a valuation as high as $5bn last year, many existing shareholders are not pleased by this fact, so the offer by FTX has not been signed yet.
Speaking of Celsius, Goldman Sachs is reportedly looking to raise $2bn from investors to acquire Celsius’ assets in case the lender files for bankruptcy. The investment bank should be interested in the assets at a hefty discount. For now, Celsius has halted withdrawals without any news on the outlook of the firm.
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