Amidst Siege and Splendor

The Castle Chronicle: Volume 17

Author

Atomist
May 18, 2023 • Est. Reading Time: 17 minutes

The markets are at a crossroads and have yet to decide their course. Macro experts are calling for a recession and two big trading firms are pulling back from crypto in the United States.

However, there are endless opportunities in crypto, especially on-chain.

Step into a realm of opportunity and intrigue👇️ 

 👀 What’s to Come in Volume 17

🔑 Key News: Janestreet and Jump pull back crypto trading, Metamask integrates Paypal, Pulsechain LIVE & more from CJ

🔥 Hot Narratives: LSDs are trending again, DeFi protocols experimenting with AI, and a Possible DeFi Summer?

📈 Macro Outlook: Experts calling for recession and volatility still in a downtrend from Hansolar

📉 HTF Price Action Scenarios: Uncertainty and re-accumulation from Vlad

⛓ On-Chain Sleuthing: feature along with Smart Money Moves from Cl & Amir Ormu

⚔️ A Call to Arms

Think you have what it takes to enter the Castle and contribute to funding and advising projects across the space?

🔑 Key News

Major Headlines

Adoption is not stopping!

  • Goldman, Microsoft, Cboe and others team up to launch blockchain network.

  • EY launches Eth-based carbon emission tracking platform.

  • NY introduces bill to accept stablecoins as payment for bail.

  • LG Electronics Seeks Patent for TV Which Lets Users Trade NFTs.

  • Metamask integrates Paypal.

  • Samsung to research South Korea’s CBDC for offline payments.

  • Ankr partners with DMCC.

Weekly Defi Updates

Some interesting projects to look out for:

  • Vega Protocol: Just launched alpha mainnet which allows anyone to create products and markets.

  • 0xKyc: Incubated by newOrderDAO.

  • Protocol FX: New product by AladdinDAO, decentralized low vol asset paired with a new leveraged long ETH perpetual token.

  • Pepe Analytics: AI analytics dashboard for memecoins built by ZoomerOracle.

  • Ghast Protocol: Presale on GMD/GND launchpad, leverage farming liquidation-free money market.

  • sCanto: Liquid staking CSR generating version of Canto.

  • Stroom Network: Liquid staking for Bitcoin to secure Lightning Network on Ethereum.

  • Layer N: Modular rollup.

Courtesy of CJ - check out his telegram channel for daily news, project updates, and new releases.

🔥 Hot Narratives

LSDs are back with a Bang

As a result of the recent Ethereum upgrade, those depositing ETH for validator staking have to queue in order to get a position. The current queue sits at over 4 days, causing many to look for quicker alternatives. Enter liquid staking derivates of ETH. This demand for the ETH-LSD (e.g. wstETH) has pumped native LSD tokens (e.g. $LDO). Other, smaller cap winners so far are $USH, $ZERO, $LBR.

DeFi Protocols Harnessing AI

We recently saw both Maker and Kyber announce the use of AI in their product suites. Kyber in the form of a trading tool, KyberAI, uses AI to analyze on-chain data, trading volumes, and price movements to predict future trending tokens. Maker, on the other hand, has dedicated an entire phase of their future roadmap to pioneering AI Tools in an effort to allow anyone to participate in governance at a very high level.

Scope for a DeFi Summer?

Although the market is generally quite uncertain at the moment, there are lots of exciting things bubbling up under the surface. Curve’s launch of crvUSD is starting to print very competitive fees, DEX volume on BNB Chain just hit its highest level in a year, GMX v2 is around the corner (stay tuned here 👀 ), and exciting derivatives protocols are launching (e.g. Rysk, GammaSwap, InfinityPools, Perennial).

💹 Macro Outlook

Previous Macro Events

  • 3/17 BTFP Starts 👉 SPX, Gold, Crypto rally

  • 3/22 08:00 FOMC : 0.25% 👉 SPX & crypto fell, but gold rose and bond yields fell

  • 3/31 12:30 PCE Inflation : A 0.3% F 0.4% P 0.5% 👉 SPX & crypto rally on softer print

  • 4/12 12:30 CPI(MoM) : A 0.1% F 0.2% P 0.4% Core CPI A 0.5% F 0.4% P 0.5%

  • 4/12 18:00 FOMC Minutes : Admission of light recession towards eoy

  • 4/13 PPI : A -0.5% F 0.1% P 0.0% 👉 Large fall leads to risk-on rally

  • 4/20 UK 👉 10.1% inflation numbers sparks sell off

  • 4/28 Core PCE, Personal Income/Spending : A 0.3% F 0.3% P 0.3%

  • 5/3 23:00 JOLTs Job Openings : A 9.59m F 9.68m P 9.93m

  • 5/4 03:00 FOMC : A 5.25% F 5.25% P 5% 👉 SPX sell off BTC and GOLD up

  • 5/5 12:30 Nonfarm payrolls A 253k F 180k P 165k | Unemployment Rate : A 3.4% F 3.6% P 3.5% 👉 SPX up Gold and BTC down

  • 5/10 12:30 Inflation Rate MoM : A 0.4% F 0.4% P 0.1% YoY : F 4.9% F 5% P 5% 👉 whipsaws

  • 5/11 12:30 PPI : A 0.2% F 0.3% P -0.5% 👉 No large changes

  • 5/12 14:00 Michigan Consumer Sentiment : A 57.7 F 63 P 63.5 👉 No large changes

  • 5/16 12:30 Retail Sales MoM : A0.4% F 0.8% P -0.7% 👉 No large changes

Upcoming Macro Events

  • 5/17 12:30 Building Permits: F 1.43m P 1.43m

  • 5/24 18:00 FOMC Minutes

  • 5/26 12:30 Core PCE Price Index, Durable Goods Orders, Personal Spending/Income

  • 5/31 14:00 JOLTS Jobs Openings

  • 6/1 14:00 ISM Manu PMI

  • 6/2 12:30 Unemployment Rate

BTC, ETH, and Macro

  • After 8 days of red and a flip in the 100ema trendlines, BTC saw a bounce at 26k; the neckline of the recent range. Current crypto sentiment seems to be on shaky ground considering the ‘air’ below, yet SPX and Gold however continue their seemingly never-ending range.

Inflation

  • CPI data mostly came in at expectations, but FED officials still consider inflation being too high due to tight labor markets. They really want to see employment rates come down.

  • Consequently, we’ve seen the implied probabilities for a rate hike in June range between 14% to 21%.

Plenty of bearish data lately… Recession is Coming?

  • Nearly the highest recession odds for 40 years.

  • Credit squeeze: Senior Loan Officer Opinion Survey (SLOOS) points to tight lending standards due to the regional banking crisis. The worrying part is that it has been a good indicator of recessions.

  • Loan Delinquency rates rising(similar to 2008).

  • Anon ex-GS Cat Influencer warns of recession in Q3.

  • And more doom and gloom from another economist… literally like 20 bearish tweets.

Debt Ceiling issue is taking center stage

  • As talks failed yesterday, seems like the debt ceiling issue is not going away…

  • Reposting Lynn Alden’s article on the impact of the Debt Ceiling. TLDR: When the debt ceiling is raised, the US government will raise funds by issuing new bonds. The US government increases demand for bonds and hence yields may increase, which is bad for risk on markets.

Volatility Downtrend Continues

  • Vols have been suppressed as option sellers have been outweighing option buyers for a while now. For the past three months both BTC and ETH have been on a continuous downhill trend.

  • ETH in particular which historically has higher realized volatility has been very quiet as of late and option market makers seem to have taken this into account with lower IVs in the front end of the term structure.

  • Vol Sellers have been on a winning streak for a while now, but markets are known for punishing complacency. Vol will likely return in the coming months.

Courtesy of Hansolar - check out his telegram chat for all things options, crypto, and DeFi.

📈 HTF Price Action Scenarios

Nothing has really changed since last time. Price is still at the low of the daily range and is consolidating. My thoughts are re-accumulation and I’m looking for LTF bullish setups.

The lower timeframe is currently bearish, so I’ll be waiting for new bullish ranges to form before entering anything. That being said, this bearishness can continue all the way to the daily demand zone while still remaining “HTF bullish”.

Currently, I think the best thing to do is to wait, as I wouldn’t enter shorts here (due to the overall HTF bullishness of the market). I will wait for some 4h breaks to the upside with the expectation of overall accumulation to take price higher.

Courtesy of Vlad - trend-based trader and MentFX student.7

⛓ On-Chain Sleuthing

Arca accumulates $GNS (Gains Protocol)

Arca is a new ACCUMULATORRR of gains protocol. Our team has recently observed that the Hedge funds have been buying $GNS in the last weeks. They now hold a bit more than 850k USD of the token.

CT persona DeFi Surfer buys $LVL

DefiSurfer is a new $LVL holder. The famous $GMX bull now holding a position on $LVL, the BSC perp platform.

Crypto Condom now holds 1% of all $UMAMI

Crypto Condom love story with $UMAMI is NEVER ending. He now holds a bit more than 1% of all umami supply.

FroyoFren selling his entire $GRAIL position

FroyoFren is the co-founder of the options strategy platform Jones DAO on Arbitrum. After months of bullish $GRAIL tweets, Froyo suddenly changed his mind and market-sold his entire $GRAIL position in one go.

He used the funds to acquire $170k worth of $ALCX and deposited those in Balancer. Perhaps he knows something? After all, he predicted $GRAIL going to $10k.

Smart Money Moves - Tokens

  • Notable Smart Money activity has been detected in $OGV, likely influenced by the latest news from Origin Protocol.

  • Certain Smart Money addresses participated in the Ghast Protocol's Whitelist Presale ($GST/$GHA).

  • There has also been observed Smart Money movement in $ZERO, aligned with the LSD Narrative.

Smart Money Moves - Farms

  • In the recent week, Smart Farmers have actively engaged in farming on Chronos, particularly focusing on the Volatile Pools of the protocol.

  • Smart Farmers have also shown interest in farming within the Volatile Pools of Ramses and The Ennead.

  • Silo Finance and Tarot have garnered attention from farmers on Arbitrum this week.

  • All of the solid protocols mentioned earlier have made Arbitrum the go-to chain for Smart Farmers.

  • The Granary continues to be popular among Smart Farmers.

(Quick tip: you can leverage the APRs by looping funds few times on it)

  • Thena, Arbidex, and Wombex have emerged as reliable protocols for stablecoin farming.

  • MUXLP is still well-liked by Smart Farmers.

  • For those seeking a suitable option to park stETH, Asymetrix Protocol can be an interesting option(https://app.asymetrix.io/).

  • Smart Farmers are actively farming in the Volatile Pools of Hermes Protocol and Velodrome.

  • Lybra Finance has gained attention from Smart Farmers in the recent week as well.

Smart Money Moves - NFTs

Research and analysis by Cl & Amir Ormu.

Thanks for reading, please give us a follow at Castle Capital and subscribe to The Castle Chronicle for an update each week!

Virtually yours,

Atomist & The Castle

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