🧘‍♂️What Just Happened To Bitcoin?

Market Meditations | September 8, 2021

$2.6 Billion Liquidated in Minutes.

Dear Meditators

? Many crypto enthusiasts would have had their party hats on at the beginning of the day yesterday. Afterall, it was the day Bitcoin became legal tender in El Salvador.

❌ The hats came off quickly. In what was one of the most volatile days of the year, Bitcoin declined nearly 19% from the $52,000 resistance level. 

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? El Save Bitcoin

Historically September has not been a great month for Bitcoin but that was going to change this year. September 7th was the day that El Salvador would adopt Bitcoin as a legal currency, invalidating critical beliefs that Bitcoin was just magic internet money. 

  • Many crypto enthusiasts pledged to buy $30 worth of BTC as a show of solidarity with El Salvador residents. 

  • Perhaps it was that show of solidarity that crushed the infrastructure of the exchanges causing massive outages worldwide, especially for US residents. 

  • Not to be outdone by exchanges, Bitcoin price also plummeted

  • Blockworks reported $2.6 Billion crypto long positions had been liquidated by 4:33 pm (BST).  

  • El Salvador bought the dip and added 150 Bitcoin, making their total Bitcoin held 550.

Liquidated leverage positions partially account for the massive bearish candle we saw yesterday but many Crypto Twitter users also felt there was something more nefarious at play, including the president of El Salvador

After the Bitcoin law was passed, the International Monetary Fund (IMF) and the World Bank strongly discouraged the move by President Bukele. Their public disapproval caused many to speculate that accepting Bitcoin as legal tender would limit the control (and possible manipulation) both entities could wield over El Salvador

Whether the Bitcoin Day Crash was whale manipulation or normal market activity, Plan B has long predicted the floor price of Bitcoin to be around $43K in September; hopefully, President Bukele saved some of his fiat reserves for later this month as well

Our Market Meditations are longer format educational segments. Each letter features a Market Meditation which will deep dive and analyse a relevant crypto event, theme or tool. 

☄️ You, Me & Finding The Best NFTs

NFTs are one of the largest opportunities in crypto right now. Just this week, Pranksy made over $1 million in 26 minutes whilst flipping a CryptoPunk. These types of headlines lead to a lot of frustration amongst the community: 

  • Many people want exposure to the hottest NFTs like CryptoPunks but they are unaffordable to most people. 

  • With the number of headlines and projects out there, it can be difficult to decide which project is worth researching.

In our experience, when it comes to navigating crypto and NFTs, the more tools you have, the better your chances. A simple table from Nansen can go a long way in solving the listed frustrations ?

Data: Nansen.AI : 08/09/2021 : 09:15 GMT 

This table shows the top 5 NFT projects on the Ethereum Network by market cap. Ways to read this resource:

  • Strength of the market leader. Unsurprisingly, sitting at the top of the leaderboard is CryptoPunks, with a huge market cap of $3.5 billion. By considering BoredApeYachtClub in second place, we see CryptoPunks is double the size. Clearly, the narrative behind CryptoPunks is paramount. An NFT project derives its value from its story and the story of cryptopunks is that they are “one of the first NFT collectibles”. 

  • Similar narratives. We’ve established the strength of CryptoPunks reading the table and the average price of 107 ETH clearly makes it inaccessible for many. Looking across the table, Meebits is more affordable at around 8 ETH. A quick google search reveals that Meebits was created by Larva Labs, the same team behind CryptoPunks. Through this exercise, Nansen has shown us how to gain exposure to Larva Labs at a much more affordable price level. 

  • Trending projects. The media is full of headlines about trending NFT projects. It’s only when they are quantified that we can really get a sense for their momentum. Note VeeFriends is also on the list. After being released in May, creator Garry Vee has constantly built out the story behind the project. This helps focus our research to a smaller list of names. 

These types of insights make us proud to be partnered with Nansen. Nansen.Ai allows us to use on-chain data to generate an edge in the markets. This is just one example and we’ll be sharing many more.

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? Crypto Panamánia

Yesterday El Salvador became the first nation to make Bitcoin legal tender after splashing out $21 million on BTC on Monday. But not to be outdone by their Central American neighbours, Panamá introduced a crypto regulation bill only a few hours beforehand. Let’s take a closer look:

  • Congressman Gabriel Silva presented “la Ley de Cripto” (the Crypto Law) to the National Assembly on Monday night.

  • The sub-title of the document publicly released is: “What Makes Panamá Compatible With The Digital Economy, The Blockchain, Crypto Assets, and The Internet”.

  • After describing how fast the internet has grown the paper introduces the blockchain concept and how it enables crypto assets and for a variety of use cases.

  • It claims that there is a misconception that there is a high risk of money laundering when compared to fiat, and points to the example of the FBI recovering funds from the Colonial Pipeline hack.

  • The document outlines three objectives for Panamá to achieve in order to be compatible with crypto:

    • Digitalise the country to be blockchain ready

    • Stimulate innovation and attract external talent

    • Establish bank interoperability

  • And finally, tucked away in Article 701 at the back is the proposal that income tax be charged at 10% on all profits.

If the law makes progress, this could be the start of a domino effect in Latin America, where lawmakers in other countries such as Paraguay, Brazil, Argentina and Mexico have all expressed interest in cryptocurrency. And we’re sure El Salvador was happy to see the spotlight shift this week, given that both their Chivo Wallet system (and Bitcoin) crashed on launch day

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??‍♂️✍️ Stories in this newsletter were written by D. Beverly, Isambard FA, Nick T., Max P., Kimia K., Ellen B. and Koroush AK. Graphics were produced by Gerasimos P.

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