DAIM Issue 10 - Robots vs Apes
Welcome to DAIM's Newsletter. DAIM is the first licensed Registered Investment Advisor and asset manager for digital assets. Please enjoy the summary video and read our full thoughts below. #Bitcoin
May 5, 2022
Forecast
Apes**t
1. Forecast
Digital Asset prices continue to move sluggishly with the broad equity market as assets struggle to gain footing among rising interest rates and geopolitical issues. On Wednesday, to no one’s surprise, the Fed raised interest rates 50bps and signaled with confidence that the same increase will happen during the next two meetings. With the status quo seemingly in place for the next few months, the correlation between Bitcoin and equities could remain high. The rolling 40 day correlation between Bitcoin and the Nasdaq (the index most likened to Bitcoin, being primarily composed of tech stocks) reached an all time high of .6945. We think this correlation remains high because of the development of institutional grade Bitcoin products and the dominance of Algorithmic trading. This can change quickly if BTC whales jump in and push it in a desired direction. We project prices will continue to trade in the current range into July.
With Bitcoin and equities moving hand in hand, crypto investors looking to increase their risk adjusted returns will need to rely on smart inter-class diversification. Discerning investors that can put in the time to research, will find high quality crypto related investments standing out and performing well. They can be tough to identify early on and are quick to pull the rug on people who FOMO into these projects, but the ability to capitalize is there for first movers. If differentiating between quality projects seems daunting, we recommend leaning on full time experienced professionals to help you invest and capitalize. This is not to dismiss Bitcoin, we still feel it will continue to be the best performing alternative store of value.
2. Apes**t
On April 30th Yuga Labs, creators of Bored Ape Yacht Club, conducted their virtual land sale, Otherdeed for Otherside. Despite a chaotic Saturday night that saw people pay thousands of dollars for a failed transaction and $180 million in burned ETH, it was an overall success. While people are quick to dismiss the primate themed NFTs, it’s hard to argue with the popularity of the BAYC universe. The lowest listed price for a Bored Ape is currently 120 ETH. Ape Coin, who launched in March, is a top 30 cryptocurrency, and generated $320 million from the land sale. They raised $450m in March, and this land sale alone, over one weekend, almost covered that.
Detractors will point to the gas war that the land minting caused. The Ethereum network became bottlenecked during the sale causing people, who wanted to make sure their transaction was processed, to pay more than $10k in gas fees in some instances. The average fee was more than $400 during this period and that extended to people wanting to conduct non-Otherdeed Ethereum business. So is this a bad thing for Ethereum? DAIM CEO @Bryan_Courchesn weighed in:
While high gas fees may not be palatable to small participants, the economic gatekeeping that fees provide can have a positive effect. As long as the network continues to grow and consumers keep coming back for more, we foresee the DeFi and NFT space attracting more investors, even during uncertain economic times in the real world.