JZL Capital Blockchain Industry Weekly Issue 25: Winter Is Coming
summary of the week
first level title
- What is the reason behind the NFT market remaining strong compared to cryptocurrencies?
1. Industry dynamics last week
secondary title
1. Industry dynamics last week
Last week, the encryption market finally failed to resist the double blow of the interest rate hike and the gray rhino event. After a month of repeated shocks, Bitcoin continued to fall below the support level on Monday, falling from $28,000 to around $23,000. The intraday drop was nearly 17%, which became the largest intraday drop since May 19 last year. Even if the negative interest rate hike temporarily landed and the U.S. stocks rebounded slightly, it did not affect the encryption market. The thunderstorm caused the encryption market to go out of the "independent market". As one by one liquidation platform was triggered, Bitcoin also fell for several days. As of the date of writing, Bitcoin closed at 19384, a drop of 30.99% within the week, and the price returned to the end of 2020 s level. At the same time, Ethereum was also affected by a large number of liquidations, with a drop of 29.78% within the week. The total market value of the entire Crypto market also fell to more than 800 billion U.S. dollars, and more than 230 billion U.S. dollars in market value evaporated within a week.
There are many reasons for this round of digital currency plummet. Among them, a large number of centralized and decentralized institutional thunderstorms in the market during this period played an extremely important role. Last week, we shared the possible insolvency of Celsius in the near future. Last week, more institutions had similar or more serious problems:
1. Three Arrows Capital Thunderbolt
The first is the well-known Three Arrows Capital 3AC, a Tier 1 Fund founded by Zhu Su and Kyle Davies in 2012. After LUNA suffered a death spiral, Three Arrows Capital was also affected. At the beginning of last week, there were rumors that its capital was not Debt repayment also made the whole circle to stand up and clarify this incident: exchanges such as FTX, BitMEX, BitFinex, Deribit, etc. stated that they had liquidated 3AC’s positions on their platforms; Lost 3AC’s collateral; in addition to exchanges and lending platforms, several DeFi agreements that it has invested in also claimed that the whereabouts of the funds deposited in TPS Capital, an OTC platform of Three Arrows Capital, were unknown.
Officially speaking, Kyle Davies gave the reason for this incident that affected by the Terra incident, in February LFG’s US$1 billion financing, Three Arrows Capital invested US$200 million in capital, but these investments were made in UST in May. The incident dissipated, and while 3AC was able to absorb the loss of Luna, the subsequent chain of events that caused the price of cryptocurrencies to plummet also created bigger problems for them. Kyle’s move to push the problem to Terra is a little suspicious that it is 3AC’s blame, but in fact, the bigger reason behind it should be its random use of funds; short-term debt mismatch; a large amount of GBTC (3AC is the largest holding of GBTC) Institutions), stETH, NFT and other low-liquidity positions were forced to sell; the consequences of arbitrary use of leverage allocation. In particular, its OTC platform TPS Capital promised to provide users with a stable annualized return of 8%, and many of its invested projects would return their funds to 3AC, thus forming a vicious circle after the 3AC thunderstorm.
The current founder of 3AC, Zhu Su, has not heard from him since he tweeted on 6/15, and Kyle Davies claimed in an interview with WSJ on Friday that 3AC was looking for a plan to sell assets or accept rescue from other companies. It began to try to sell equity, and its bankruptcy liquidation may already be a matter of time.
2. PayPal Gold Financing Insolvency
Coincidentally, on June 17, PayPal Financial, a leading asset management organization, informed its partners that they were insolvent and announced that they would freeze all account withdrawals, citing "abnormal liquidity pressure". And last month, PayPal also received $80 million in Series B financing, and due to the market crash, PayPal’s chain leveraged lending model required a large amount of BTC replenishment, and PayPal’s funds were trapped in high-leverage chain operations In the process, PayPal had to lock up funds by freezing withdrawals.
In fact, PayPal was almost bankrupt in the 312 incident in 2020. In the end, Tether relaxed the time limit for replenishing its positions to one month before saving the company. Later, Tether also stopped its cooperation with PayPal. After the incident in 2020, the industry generally believes that PayPal has strengthened risk control and adopted more hedging tools, but in fact PayPal’s leverage ratio is still the highest in the lending industry, about 3-5 times, and its profit is also 3-5 times the profit of similar companies, this is still a relatively safe leverage multiple in a bull market or even a volatile market, but the recent incidents of Terra and Three Arrows have caused the crypto market to plummet, and PayPal has also been swirled into the vortex of high leverage .From a rational point of view, PayPal has just completed a round of large-scale financing, coupled with its enhanced risk control and low-key behavior. As long as the current round of market decline stabilizes, its bankruptcy risk must be lower than 3AC, but this still gives investors enough alert.
3. In addition, BlockFi in the field of centralized asset management is also in a liquidity crisis.
Affected by 3AC and the unanchor of GBTC, BlockFi's gamble on GBTC (BlockFi is the second largest holding institution of GBTC) made it difficult for him in the current market. In addition, the centralized exchange Anyin AEX also stopped withdrawing coins, and other events are foreseeable gray rhinos in the bear market. Because there is no supervision, these institutions can use funds at will, which is also the negative side of crypto when it grows wildly. Accumulation, although we can enjoy the extreme bubble when it grows, but at the same time, we should bear the risk when the bubble bursts.
In terms of U.S. stocks, the broader market continued the downward trend last week, but the overall decline has slowed down. The Nasdaq rebounded on Wednesday and Friday, closing at 10,798 points, down 4.88%. On Wednesday, the Federal Reserve announced that the rate hike result was 75 basis points. Judging from the dot matrix of the rate hike forecasts of the 18 members of the Federal Reserve, the interest rate target for the end of this year's rate hike is 3.4%, which means that it can add another 150 points to 190 1 point, and can raise interest rates several times substantially. And in 2023, there may be room for further interest rate hikes, and it is very likely that the interest rate will not be cut until the end of 2023 or 2024. In the long run, the market will only recover after the interest rate drops to between 2% and 3%. In addition, the price of crude oil is an important indicator of whether short-term inflation can be alleviated. The price of crude oil has risen from the "negative oil price" in April 2020 to a maximum of 130 US dollars a barrel. Since March, the price of crude oil has experienced an increase. The resistance to interest rates fluctuates repeatedly around US$125-100. If crude oil prices plummet, the pressure to increase prices of downstream products will subside, shipping will become cheaper, and inflation problems will be alleviated. This Monday, the U.S. stock market will not open due to the newly established June Independence Day by the government. The encryption market has 3 days of free development time. The news in the encryption field is constantly coming out, and we still need to pay attention to the trend of the US stock market for a long time in the future.
2. Macro and technical analysis
secondary title
2. Macro and technical analysis
At the macro level, we judge that if the CPI declines in the short term, the pace of Fed tightening will slow down. The focus will be on how the Biden administration will use diplomatic means to reduce oil prices and lift tariffs on China before the midterm elections.
In the short term, BTC fell below 20,000 USDT, and the lowest fell to around 17,000. We judge that although 20,000 USDT has been withdrawn in the short term, it will hover at 20,000 USDT in the short term due to the selling pressure. In the medium term, there is a high probability that it will fall below 20,000 USDT.
We judge that the possibility of oversold again in the short term is gradually decreasing, and the market is more likely to be weak and volatile.
BTC has fallen below the previous low point, currently there is no support, and there is no danger to defend. In the short term, it will fluctuate weakly around 20,000 USDT.
The trend of ETH is worse than that of BTC. We judge that BTC's short-term cost performance is higher than that of other digital currencies. In the short term, you can short the ETH/BTC trading pair.
The Nasdaq index fell below the previous low as scheduled and rebounded weakly to 10,798. We judge that the possibility of falling below 10,000 in the medium term is high.
U.S. bond interest rate: The 2-year Treasury bond fell back to around 3.19, pricing the Fed’s interest rate hike range target for this year between 3% and 3.5%.
1.Ahr999: 0.26 positions We still recommend starting to increase the fixed bet.
2. MVRV: 0.90, the cost performance is the same as ARH999.
3. Number of BTC addresses: The number of addresses holding less than 10 coins entered the market very quickly, and the number of addresses holding more than 10 coins basically dropped slightly.
secondary title
3. Summary of Investment and Financing
1. Investment and financing review
3. Summary of Investment and Financing
1. Investment and financing review
• During the reporting period, 31 investment and financing events were disclosed (down 40% month-on-month), and financing was approximately US$379 million (down 44% month-on-month). In terms of specific tracks, 18 projects on the Web 3.0 track accounted for nearly 60%, 3 projects on the Defi track, 6 projects on the Cefi track, 3 projects on the Infrastructure track, and 1 on the Nft track;
• During the reporting period, there were no projects with a financing amount exceeding 100 million yuan.
2. Direction of this week - Citadel: From Naysayer camp to Ready to step
• "The world of cryptocurrency is small, but the world of finance is big." As more funds from traditional fields flow into the Crypto world, the transaction scale and depth of cryptocurrency transactions will further increase, and top market-making institutions such as Citadel Security are required to participate. At the same time, give full play to the customer resources owned by Robinhood and Citadel Security in the traditional financial field, and expand the customer base of cryptocurrency;
• Citadel founder Ken Griffin changed his anti-crypto stance in the past. In an interview with Bloomberg Wealth in March, he began to embrace crypto and planned to expand the digital currency market-making business within the year, "It's fair to assume that over the months to come, you will see us engage in making markets in cryptocurrencies.” – from Ken Griffin
4. Encrypted ecological tracking
1.NFTs
secondary title
4. Encrypted ecological tracking
1) NFT dynamic summary
• In the past 7 days, the market value of the NFT market has remained at around 22 billion US dollars, and the price level has once again shown its relative independence from the cryptocurrency market; in contrast, the peak trading volume has shown a clear downward trend, reflecting the anxiety of NFT participants in the bear market Emotions.
• Consistent with our analysis last week, blue chip coins have become hard currencies in the bear market, and short-term preferential prices have been discovered and captured by investors. Therefore, after ETH stabilized at $1,000 in the latter part of this week, the blue chip coin There is a gradual upward trend.
• We analyze the differences between the NFT market and the cryptocurrency market mainly in:
The NFT transaction itself is mainly attached to Ethereum. When the price of the currency rises, the large amount of Gas Fee will slightly hinder the smoothness of the transaction, resulting in the fluctuation of the encrypted market cannot be transmitted to the NFT market in the first place;
The increase in the currency price leads to an increase in the price of NFT, coupled with the increase in the frequency of user bidding, and the appreciation of assets will also make users more inclined to hold; on the contrary, the fall in the currency price leads to a sharp drop in the price of NFT, coupled with the decrease in the frequency of user bidding, the cost High users are more inclined to hold;
The NFT market itself is in an emerging trend, and because it is at the application layer, the difficulty of innovation in design and gameplay is lower than that of the currency circle as a whole, resulting in constant hotspots and reaching users the fastest;
Finally, the NFT market does not have financialization and leverage similar to DeFi or CeFi in this round of bull and bear. NFTFi has yet to be developed by large institutions, so it is relatively safe to avoid various thunderstorms.
• Key news this week:
Yahoo is launching a series of Metaverse events in Hong Kong exploring the use of immersive advertising technology. The company will hold virtual concerts and exhibitions on the metaverse platform Decentraland, inviting local idol groups and artists to participate, and also plans to release limited-edition NFTs.
French fashion brand Lacoste announced the launch of the NFT series "UNDW3" to enter the Web3 field. The company said the move was aimed at building an online community and engaging with customers in a new way. The number of NFTs released this time is 11,212, representing an iconic polo shirt of the brand called L1212, and the unit price of NFT is 0.08 ETH (about 97 US dollars).
Jay Chou posted an NFT promotional video co-produced with the Paris Saint-Germain football team on Instagram, or will cooperate with the Paris Saint-Germain football team to launch the NFT series. The video information shows that the NFT will be sold exclusively on Crypto.com.
As of June 15, 2022, according to incomplete statistics, the number of domestic digital collection distribution platforms has exceeded 500. In stark contrast, in February 2022, there were more than 100 domestic digital collection platforms.
The Sandbox announced that it has reached a cooperation with Lionsgate Films to launch a virtual plot "Action City" and establish a movie-themed metaverse. Lionsgate will host movie-themed events in The Sandbox to engage with users, introducing movies including First Blood, The Expendables and Hellboy.
2) This week's NFT project introduction: Sneaker Heads
• Basic information: initial mint price = 0.25 ETH
• Created by artist Ali Dawood, a digital artist who blends rap and sneaker culture. Through the combination of split sneakers and portraits, Ali Dawood has gained a lot of fans on Instagram. Travis Scott x Air Jordan 6 Cactus Jack is also one of his well-known creations.
• Although the team did not clearly state the roadmap and utility in the future on the website, but according to the reports in the first quarter, it can be seen that they will add their own elements in The Sandbxo and Decentraland, and plan a virtual fashion show at the same time, and carry out through social media live streaming. The aim is to bring real-world effects into the digital realm, giving users an experience they will never forget.
•However, according to the information exposed in March, the final number of issuances dropped from 8,888 to 5,000. At the same time, the price in the secondary market also reflects the impact of the bear market and the lack of detailed Utility.
•Outland
• In the later stage, we predict that more NFT projects will start to develop interesting Web2 content experiments with well-known artists as the core, and translate the successful experience to Web3.
3) This week's investment introduction:
The emerging encrypted art platform Outland announced that it has received US$5 million in seed round financing in March 2022, led by OKX Blockdream Ventures, and participated by IMO Ventures, DragonRoark, and JDAC Capital.
As the first NFT platform in the world that is founded by core managers of important art institutions, art galleries and galleries, Outland hopes to establish a circle composed of important voices in the field of digital art creation, criticism and collection. Professionals are injecting vision and rich and unique industry experience into the young blood of Outland. Provide technical and strategic support and guidance for traditional artists, take the artist's creation as the starting point, and build a platform for in-depth display and understanding of works through videos, articles, etc. A new path to the market, Outland's network is constantly growing and expanding.
Unlike other trading-based marketplaces (marketplaces), Outland, an encrypted art platform established in November 2021, did not choose to start NFT transactions by reading on-chain data at the beginning of its launch, but chose to use art content His writing and criticism intervened. Contents such as Criticism, Collections, Conversations, News and Commentary set up on Outland’s official website try to understand the importance of art from the artist’s resume, creative background and creation. Discuss and explore cultural and social significance. The attempt and formation of Outland is an olive branch thrown to both sides at the practical level by practitioners in the two fields of blockchain and contemporary art. Behind the unique project structure, choosing to open the trading market with Fang Lijun's works marks the height of the platform's starting point, which has something to do with the identities and backgrounds of the two founders. https://www.adriftworld.io/This will be the world's first series of narrative, iterative and interactive NFT works that form their own unique movie universe. Outland will also present 3FACE, the first large-scale NFT project of the famous New York artist Ian Cheng in July. Lan Cheng has participated in the Venice Biennale and held solo exhibitions in many famous art institutions such as the Serpentine Gallery in London, and MoMA PS1 in New York.
2. GameFi blockchain games:
1) Data review
2. GameFi blockchain games:
1) Data review
• During the reporting period, the main currency of the Gamefi concept showed a downward trend (a drop of more than 10%). Among them, the Illuvium token ILV, which just completed the land sale at the beginning of the month, fell by 29%, the YGG token of the leading game association fell by 25%, and AXS , TLM, CHR and other tokens all fell by more than 10%;
•Although the overall market situation and the price trend of the Gamefi concept token are relatively negative, it does not affect the financing progress of the Gamefi project. During the reporting period, Immutable Ventures’ USD 500 million fund and 2 Gamefi project financings became market highlights.
2) Item of the week – Immutable: $500 million fund mainly funded with IMX tokens
• Immutable, the parent company of Ethereum Layer 2 solution Immutable X, announced the launch of Immutable Ventures, a $500 million fund, to promote developer adoption of the platform. Fund investors include a number of investment institutions including AnimocaBrands, BITKRAFTVentures, and GameStop;
•The fund will use the combination of "tokens (500 million pieces) + cash" to complete the deployment of all funds within four years, with an average investment size of between 100,000 and 500,000. Provide subsidies and financial support for projects deployed on Immutable X. In addition to providing developers with funds and subsidies, the fund will provide developers with technical support, tokenomics advice, and community and marketing support involved in the development process;
• In March 2022, Immutable completed a US$200 million Series C round of financing led by Temasek, with participation from ParaFiCapital and Tencent Holdings, at a valuation of US$2.5 billion. This round of financing was mainly used for team expansion;
• As of press date, the IMX token price is $0.72, down 91% from its November 2021 peak price of $8.92.
3) This week's project – Clockwork Labs: a construction game with strong social attributes created by the founding team of the top capital + technical background
•Blockchain game company Clockwork Labs completed a US$22 million Series A round led by a16z, Roblox founder David Baszucki, CCP Games CEO Hilmar Petursson, and Unity co-founder David Helgason. This round of financing is mainly used to expand the team, recruit data scientists and professional game development talents, and help its first MMORPG project Bitcraft go online as scheduled;
•Clockwork Labs was founded in 2019 by Tyler F. Cloutier (who worked as a data scientist at Machine Zone, the developer of "Game of War: Age of Fire" and "Thunder World") and AlessandroAsoni (who was a senior software engineer at Bloomberg). The founding team combines "data" and "development" to provide technical support for the game development team while developing the game;
•Bitcraft is built with the Unity engine, which is creative and highly social. From farming, hunting, processing to city construction, players can choose to work together to create impressive towns and cities anywhere in the world, and they can also unite cities Build an empire spanning continents and seas;
•The game is currently in the Pre-alpha stage, and the team has not disclosed the specific roadmap and economic model will be released through Discord (22545/69875).
4) This week’s project – Wildcard: The scale of financing is not directly proportional to the enthusiasm of community operations
•WildcardAlliance, a Web 3.0 game development company (a game development agency under PlayfulStudios), completed a US$4,600 Series A round of financing led by Paradigm and participated by Griffin Gaming Partners and Polygon. The financing is used to develop and produce the MOBA game project Wildcard deployed on the Polygon chain;
• Playful Studios by Paul Bettner (formerly a software engineer at Microsoft, General Manager at Zynga) and Katy Drake Bettner (director, producer). Unlike Bitcraft, the founding team of Playful Studios is a combination of "big guys in the industry" and "art";
3. Infrastructure
•The game is currently in the development stage, and the team has not disclosed the specific roadmap and economic model will be released through Discord (1261/4861).
3. Infrastructure
• The TVL of the encryption market has experienced a big downturn this week. The overall lock-up volume (including staking) of each public chain has decreased from US$83.8 billion to US$63.2 billion, a decrease of about 25%;
2) Key investment introduction
•NFTPort
• Ethereum's share is basically the same as last week. The top five rankings have not changed, indicating that there is no difference at this stage, including Tron, which has risen sharply in the past few weeks. Later, as USDD is close to issuance, if the market remains cold, it will receive greater impact and challenges .
2) Key investment introduction
NFT infrastructure startup NFTPort completed a $26 million Series A round of financing, co-led by Taavet, co-founder of Wise, Sten, co-founder of Teleport, and Atomico, a European venture capital firm. As part of the deal, Tamkivi will join the NFTPort team as a co-founder.
It is reported that the funds will help Estonia-based NFTPort expand to new blockchains, add new features and increase the size of the team. The startup also plans to bring a decentralized NFT infrastructure protocol to market.
•Kaleidoco
The NFTPort infrastructure includes application programming interfaces (APIs) for data, minting, and forgery detection. Data API provides access to NFT data from Ethereum, Polygon and Solana blockchains. The Minting API lets developers deploy, manage, and customize NFT smart contracts without writing any smart contract code. And the counterfeit detection API is able to cross-check that the NFT has not been previously minted on any of the supported blockchains.
Last October, Polygon Studios partnered with NFTPort to provide an API to support developers building NFT applications on the Polygon blockchain. Developers can easily find Polygon and Ethereum NFT data through the API, including contracts, tokens, assets, metadata, and ownership information. With NFTPort's minting endpoint, developers can turn anything into an NFT with a single API call in less than 5 minutes. NFTPort also provides enhanced APIs to build advanced NFT search and AI-based recommendation engines.
Kaleidoco, a Web3 entertainment technology company, announced the completion of a $7 million seed round of financing, with participation from AnimocaBrands, GameFiVentures, Gemini, JaneStreet, AditVentures, MeritCircle, Nexo, HexTrust, SuperChainCapital and TSG (TheSeelig Group).https://www.particleink.com/gallery
Kaleidoco said the funding will be used to recruit new employees as the company continues to build out its AR technology platform and “Particle Ink Metaverse.”
Kaleidoco recently debuted the 2.5-dimensional hybrid display Metaverse Particle Ink at the opening ceremony of TED2022. Meanwhile, Kaleidoco is patent-pending for their augmented reality multi-view technology, which enables nearly 1,400 attendees to simultaneously experience AR, projection mapping, and live performances via synchronized tablets.
3) Cosmos ecology
Osmosis, the largest decentralized exchange in the Cosmos ecosystem, launched a cross-ecosystem token swap provided by Axelar as a cross-chain bridge. Already supports exchanges between Ethereum assets (including USDC, DAI, WBTC and WETH) and Cosmos ecological tokens, and will soon use Axelar to support Avalanche, Binance Smart Chain, Polkadot and Polygon ecosystems. This option was previously voted on by a community proposal.
This move will undoubtedly introduce new vitality to the ecology. However, the security of cross-chain services is always worth worrying about. Asset losses due to cross-chain bridges being attacked by hackers are not uncommon. In addition, last week Osmosis lost about $5 million due to a code loophole in its own asset pool. For Osmosis, which has just been online for one year, whether it is too hasty to introduce Axelar at this stage remains to be seen.
4.DAO Decentralized Autonomous Organization
•DAOLens
Axelar is a universal cross-chain basic protocol developed through the Cosmos SDK for the interoperability of Cosmos chains, EVM chains and other chains. The founder, Sergey Gorbunov, is a CS Ph.D. at MIT and an associate professor at the University of Waterloo. Axela had completed a US$35 million Series B round of financing in February this year. Investors included DragonflyCapital, PolychainCapital, North Island Ventures, etc., with a valuation of US$1 billion.
4.DAO Decentralized Autonomous Organization
On June 15, the Indian start-up project DAOLens completed a pre-seed round of financing of US$5 million led by Nexus Venture Partners, BetterVentures and iSeedII. Several individual investors also participated in the round, including GokulRajaram (Coinbase Board Member), Sandeep Nailwal (Polygon Co-Founder), Raj Gokal (Solana Co-Founder), Simon Doherty (Vice President, Animoca Brands) and Arjun Sethi (TribeCapital Co-Founder) )wait. Funds raised will be used for product development and talent introduction.
DAOLens tries to solve the operational pain points of DAO, and is committed to creating infrastructure-based DAO tools that touch the entire contributor life cycle, from discovery to onboarding, to meaningful contribution and participation, and finally to successful operations, reducing the loss of contributors , to simplify the way DAO links people. The project is currently in the Early Access stage.
Real builders build now.
In the bear market stage, investors are obviously more interested in infrastructure projects.
We are always looking for creative ideas, business and cooperation opportunities, and we also look forward to your reading feedback, welcome to contact hello@jzlcapital.xyz.
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JZL Capital is a professional organization registered overseas, focusing on blockchain ecological research and investment. The founder has rich experience in the industry. He has served as the CEO and executive director of many overseas listed companies, and has led and participated in eToro's global investment.
The team members are from top universities such as University of Chicago, Columbia University, University of Washington, Carnegie Mellon University, University of Illinois at Urbana-Champaign and Nanyang Technological University, and have served Morgan Stanley, Barclays Bank, Ernst & Young, KPMG, HNA Group , Bank of America and other well-known international companies.
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We are always looking for creative ideas, business and cooperation opportunities, and we also look forward to your reading feedback, welcome to contact hello@jzlcapital.xyz.
If there are obvious facts, understandings or data errors in the above content, welcome to give us feedback, and we will correct the report.
Note: JZL Capital currently has a Cosmos ecological theme fund. The opinions in this article may have a high degree of interest correlation with the company. This report should not be used as investment advice.
