Skies Clearing above the Kingdom

As we witness alts retracing across the board and memecoins popping off, one has to question whether it’s over for this multi-month rally. The positive is that BTC and ETH look relatively strong against traditional markets, but whether that’s because crypto is moving faster or lagging is another discussion.

The FOMC last night has the potential to fill the market with optimism moving forward as the Fed’s tightening cycle comes to an end and we can finally get the pivot everyone has been waiting for.

Without further ado, let’s get stuck in 👇️ 

 👀 What’s to Come in Volume 15

🔥 Hot Narratives: crvUSD Finally Dropped and Milady Outperforming Market

📈 Macro Outlook: Simplified Round-up and Implications from Hansolar

📉 HTF Price Action Scenarios: A Ranging Market from Vlad

⛓ On-Chain Sleuthing: Algod, Foodfarmer.eth and Digits DAO feature along with Smart Money Moves from Cl & Amir Ormu

⚔️ A Call to Arms

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🔥 Hot Narratives

crvUSD Finally Dropped!

Keen on-chain snoopers would have seen the crvUSD contracts deployed yesterday with several pools being launched and over $20m liquidity added to crvUSD pairs already. The UI is yet to be launched for those of us too redacted to interact on a smart contract level.

Most Curve-ecosystem tokens have been struggling recently but have experienced some much-needed relief with this news (e.g. Convex, Conic, CLever, Concentrator).

Milady Outperforming Market

As we continue to see general uncertainty in the market and poor performance across most alts, one asset stands out above most others.

Milady.

The NFT collection has experienced a strong wave up from 1 ETH to 3.4 ETH in the past month or so. Once again, crypto proves that cults/culture can outshine even the soundest fundamental analysis.

💹 Macro Outlook

Past Week 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 : Act 0.3% Fore 0.4% Prev 0.5% 👉 SPX & crypto rally on softer print

• 4/12 12:30 CPI(MoM) : Act 0.1% Fore 0.2% Prev 0.4% Core CPI Act 0.5% Fore 0.4% Prev 0.5%

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

• 4/13 PPI : Act -0.5% Fore 0.1% Prev 0.0% 👉 Large fall leads to risk-on rally

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

• 4/27 21:30 GDP growth QoQ : A 1.1% F 2% P 2.6%

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

• 5/1 23:00 ISM Manu PMI : A 47.1 F 46.7 P 46.3

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

Upcoming Events

• 5/3 23:00 ISM Services PMI : F 51.8 P 51.2

• 5/4 03:00 FOMC : F 5.25% P 5% ⭐️⭐️⭐️

• 5/5 21:30 Unemployment Rate : F 3.6% P 3.5%

• 5/10 21:30 Inflation Rate : F 0.4% P 0.1%

BTC, ETH and Macro

• SPX rejected off local highs, with more than a dozen regional banks falling +10% yesterday.

• Many view today’s FOMC as the (near) end of the raising cycle. Could incite some optimism.

• Over the past month, BTC and ETH seem to be moving one step ahead of SPX, rising faster on the FED’s Silicon Valley Bank save, and falling faster off the highs.

Regional Bank Dominos

• Pacific Western Bank $PACW tumbles -20%, Western Alliance Bank $WAL -25%, Metropolitan Bank -24% and nearly a dozen banks plunge as regional bank fears persist.

• Equities and bond yields react sharply risk-off, while gold and BTC rise as the safe haven bet.

  👉 Although the Crypto space would love an early dovish pivot, with inflation being as stubborn as it is, I think the FED will use other toolkits like expanding the scope of BTFP and using government-led acquisitions(like First Republic being acquired by JPM) before lowering interest rates.

End of Tightening Cycle

• The FED has almost reached its goal of 5.25%. However, it could be too early to bring out the champagne as markets are considered to be pricing in cuts too quickly. GS says this could be based on recession probability models, which they predict is avoidable.

  👉 So basically markets get trigger-happy on a rate pause only to realize rates are still super high and the liquidity environment continues to be constricted leading to continued choppy price action.

Debt Ceiling

• While the debt ceiling is at an impasse, net liquidity goes sideways. Once passed, net liquidity is likely to fall, so watch out for when this passes.

  👉 Crypto thinks raising the debt ceiling is a liquidity-positive event, when in fact the mechanics are strongly negative on net liquidity.

Charlie Munger’s Interview

• Banks saddled with bad loans, signalling trouble ahead in the US commercial property market

• BRKB usually buys banks during the crisis, but due to the CRE-related risks, they stayed away

• There are lots of troubled office buildings and shopping centres, and every bank is tighter on real-estate loans.

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

📈 HTF Price Action Scenarios

Gm frens!

Last week the expectation was for price to continue its reaccumulation to eventually break to the upside and continue its bullish push.

The daily swing is still in play here, as any dump beneath it has been quickly bought up. Therefore, a point must be made that price could move up from here.

On the lower timeframe, we had our 1st strong bullish push in a market that is already bullish, which led me to believe we could see a new uptrend form here. However, we know that price can re-accumulate for longer before reversing, therefore more downside is still an option (potentially all the way to the daily demand zone).

Overall we’re still bullish and I’m looking for ways to get involved bullish. It is however a good idea to wait for clearer directional clues of what the market wants to do. Right now we’re trapped in this range and I’d like to see price break out on either side to better understand what’s going on.

That’s all for this week! See y’all next time.

Courtesy of Vlad - trend-based trader and MentFX student

⛓ On-Chain Sleuthing

Algod Exiting to Fiat

Algod, the famous Bahamian citizen, seems to have withdrawn to fiat, via Kraken, a big chunk of his profit made on his $GMX position during 2022. He is still holding close to $2.4m in USDC and ETH on another addy connected to his old GMX one.

Foodfarmer.eth Liquidaes SNX?

Food farmer, the synthetic bull & known Twitter shill seems to have liquidated his $SNX bag via CEX.

Digits DAO exits

Digits DAO has been slowly exiting its $GRAIL position over the last 3 weeks. The DAO only has a small $5k position of xGRAIL left.

Smart Money Moves - Tokens

• Smart Money has been buying crETH2 because of the ~20% discount (*It's a long-term move as it will take 3-6 months to redeem the underlying ETH)

• $JAY has been gaining attention, and most of the Smart Money addresses have added Jay-USDC LP and staked it for additional returns

• Smart Money was also detected in $DEUS, a promising project

• We have observed Smart Money buying memecoins confidently, with a higher risk appetite this week

• Additionally, they bought $LVL after the exploit, seeing the dip as a good buy opportunity. Some long-term players looking to get exposure to LEVEL Finance were also able to get exposure in the dip.

• Moreover, Smart Money has bought $EDE after the $LVL exploit, as it's LEVEL Finance's competitor.

Smart Money Moves - Farms

• Moving on to yield farming activities, we have observed that Smart Farmers were farming ETH on Structured LSD, but they exited the pools quickly as the yield was unsustainable, which is a common trend for new LSD projects. Nonetheless, the strategy is still profitable.

• Smart Farmers have parked some ETH on Swell recently and also have staked some ETH on Asymetrix Protocol, which has been gaining traction lately.

• Furthermore, we have observed that Smart Farmers are still farming MUXLP on Mux Protocol, and farming LGO while adding LP on LEVEL Finance.

• Velodrome has also been popular among Smart Farmers for a decent amount of time.

• Equilibre continues to be one of the most in-demand protocols on KAVA CHAIN. Hermes Protocol is also well-liked among smart farmers.

• Smart Farmers have been farming xDEUS on DEI Finance recently.

• Velocimeter continues to be one of the most popular yield-farming options on Canto.

• Although Glacier Finance on AVAX has been able to save its popularity among Smart Farmers for now, SoliSnek wasn't as successful in this case.

• Ramses is still one of the leading protocols on Arbitrum as Smart Farmers continue to like it and remain active on it.

• Lastly, if you are looking to farm some stablecoins, Arbidex and Thena are good options. We have observed that a decent amount of Smart Farmers have parked some stables in these protocols.

• Additionally, if you're looking to LP some $ARB, 3xcalibur can be a good choice, as Smart Farmers have been farming it in there recently.

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