The Weekly Roundup: Terra 2.0, the "Bitcoin Decoupling," Trippin Ape Tribe NFTs
Market Movers
The largest coins by market cap saw another week in the red, highlighted by Ethereum dropping almost 11%
Bitcoin spent the majority of the week under $30K and did not react positively, at least not yet, to the S&P 500 ending the week in green for the first time in 7 weeks
Bitcoin Gold (BTG) was our biggest mover of the week, rising approximately 18.5%
BTG is a currency with Bitcoin fundamentals that differs from Bitcoin by restoring equity in the mining community by enabling smaller miners to be more successful
BTG uses a different Proof of Work hash algorithm called equihash that only enables the use of GPU mining rigs (which cost roughly $5K) instead ASICS mining rigs (which cost upwards of $100K) that are optimized for computing the Bitcoin hash algorithm SHA-256 (via Bitcoin Gold)
First Sip
If you’re already a crypto native, feel free to skip to “Table Talk.”
PERPETUALS EXPLAINED
One of the many unique features of crypto is a derivative called a perpetual. Perpetuals are like non-crypto derivatives called “options” in that owners of the option can go “short” or “long” on a stock. By going “short,” you’re predicting that the value of the asset will go down and that it will increase by going “long.” Like the classic bet, when taking a long or short position, someone else needs to take the other side. If you bet long, then someone else must take the short for it to be a valid contract. Options are settled within a time period that is agreed upon prior to the investment.
For example, if you were to take out a 2-week option with one of us where you bet that the price of SOL would drop, aka were going short on SOL, and CRYPTOPONG took the long position, betting it would rise. We’d check the price after two weeks, and if SOL had risen $10 in value, we’d make that $10; otherwise, if SOL dropped $7, you’d make that $7. The way that happens is that SOL for the amount invested is bought on the day we make the options contract by agreeing to both sides of it. Then, it’s sold after the period we agreed upon ends, and the difference up or down is paid out to the long or short holder, respectively.
Perpetuals work a bit differently. In their case, there’s no 2-week period, but instead, a “funding rate” is paid out to the long and short holders constantly as the value of the underlying asset changes until you decide to sell your perpetual.
Perpetuals are pegged to the underlying value of the asset and so aren’t involved in the buying or selling of the real asset. They can be a way of mitigating the risk of owning the asset while gaining exposure to it. You can buy perpetuals on many popular exchanges like dydx, Coinbase, and Binance.
Table Talk
BITCOIN DECOUPLES FROM STOCK MARKET
This past week, the stock market began to flash signs of recovery as The Dow (+6.2%), the S&P 500 (+2.5%), and the Nasdaq (+6.8%) all finished in the green for the first time in seven weeks (via CNBC).
In spite of the stock market’s surprising rally, Bitcoin and other major cryptocurrencies did not recover in a similar fashion. Come Sunday, Bitcoin was down 2.60%, while Ethereum dropped 10.75%. Contrasting price movement between Bitcoin and the stock market is unusual given the pairs’ typical strong, positively correlated relationship over the last 12-months, in which Bitcoin typically followed the general markets’ movement for both upticks and downturns.
Moreover, the graph below shows the correlation between Bitcoin and major U.S. asset classes over the past 90 days. More specifically, the graph portrays how the correlation between Bitcoin and the S&P 500/Nasdaq has not only been positive but also has also become stronger over the last three months (a higher correlation coefficient, plotted on the y axis equals a stronger positive correlation).
As a comparison, Bitcoin’s correlation to the S&P 500 was either weak or close to non-existent in 2021, as it ranged from 0.0 to 0.2 (via CoinDesk).
However, this past week’s contrasting price movements between the two asset classes may signal the beginning of a decoupling, or “the moment when bitcoin’s price diverges from equities and starts going up when equities go down (and vice versa)” (via CoinDesk).
The graph below highlights price movements between BTC (blue) and the S&P 500 (orange) from this past Wednesday (May 25th). If you look all the way to the left of the graph, you can see Bitcoin (blue) moving down, whereas the S&P 500 is moving upwards, or a clear, temporary decoupling.
This singular movement represents the theme of the week: stock markets rally, crypto still down. In spite of these indicators, more evidence over a longer period of time is needed to prove decoupling to be the case. A delayed, bearish response could be in store this coming week for crypto. Stock market indexes did not rally until Thursday and Friday. Will Bitcoin and other major cryptocurrencies follow suit?
NFT Buzz
TRIPPIN APE TRIBE: THE NEXT OKAY BEAR?
A few weeks ago, we wrote about a Solana-based NFT collection named OkayBears. The 10,000 beautifully illustrated bears, who unite under the acronym WAGBO (we’re all gonna be okay), became the first-ever Solana-backed NFT project to surpass all Ethereum projects in 24-hour sales volume.
This past Tuesday, Trippin’ Ape Tribe, a collection of 10,000 free-thinking apes joined Okay Bears by beating out all ETH-based projects in a 24-hour time span the day after their mint (via Decrypt). According to CryptoSlam, the project netted approximately $14.5M in a 24-hour period whereas the nearest Ethereum project, Bored Ape Yacht Club, accumulated $3.5M in the same time frame. Quite a disparity.
The ability of projects like Trippin’ Ape Tribe and Okay Bears to outperform Ethereum-based collections signals a potential shift in power in the NFT community. Moreover, OpenSea, the world’s largest NFT marketplace, saw this shift and adapted accordingly by beginning to accept Solana-backed projects this past April through its beta program, which they are still testing.
Solana’s increased popularity in the NFT space is no surprise, given the blockchain’s cheaper gas fees and quicker transactions in comparison to Ethereum. In spite of OpenSea’s move to begin accepting Solana-backed projects, Magic Eden (ME) still holds over 90% of the Solana NFT market share.
You can read more about the comparison of the two marketplaces here.
DeFi Demographic
TERRA 2.0 COMING ON FRIDAY
This week, the TerraDAO, holders of the LUNA token, voted to pass a proposal submitted by Do Kwon, the founder of Terra, to build a new blockchain and abandon UST (via The Defiant). We discussed Terra’s collapse in our special edition newsletter two weeks ago, and now, they’ve finally come up with a way forward.
Notably, many of the largest holders of LUNA voted to abstain from the vote or against the proposal. The Orion Money staking pool, the largest LUNA holding entity, voted to abstain from the proposal, as did Smart Stake, the third-largest holder (via The Defiant). Validator Stake Systems, which owns a stake of similar size to Smart Stake's, voted against the proposal (via The Defiant).
LUNA 2.0—ticker LUNA—was airdropped to holders of LUNA 1.0, which was renamed LUNA Classic under the ticker LUNAC. 12 hours after its launch, the new LUNA token dropped over 70% (via Decrypt). The price peaked at around $20 and now has settled at roughly $6 at the time of this writing (via CoinMarketCap).
Sentiments like: “Rug me once; shame on you. Rug me twice; shame on me.” have echoed around the crypto community (via Twitter). It’s notable that the supporters of the LUNA plan were owners of the failed LUNA stablecoin and so likely were motivated by simply trying to recoup some of their investment and not register as much of a loss. We’ll see if Terra 2.0 gets off the ground in a meaningful way after their implosion.
Final Cup
Bitcoin began to decouple from the S&P 500 this past week. Let us see if crypto maintains its 2022 trend of mimicking the general stock market’s movement in the coming week/weeks.
Trippin’ Ape Tribe became the second Solana-backed NFT collection to outperform all Ethereum-based collections over a 24-hour time period. One can reasonably expect more SOL projects to reach this milestone in the coming months.
Terra 2.0 is here and falling. We’ll see if the Terra community ever recovers from the UST implosion, but this week didn’t look good.
Meme of the Week (via BrilliantRead)
Not a meme, but some inspiration and paying of respect to David Goggins (former Navy SEAL) and all of the veterans who have risked their lives for us on Memorial Day Weekend.
— Pat + Ari ✌️
Disclaimer: None of this is investment advice, financial advice, or trading advice. CRYPTOPONG does not endorse any of the cryptocurrencies, DeFi applications, or NFT collections mentioned in this article. Perform your own due diligence and/or consult a financial advisor before investing.