Use TVL to Spot the Next Hot Coin| Crypto Market Update 12.28
Crypto Market Update | Major News | Notable Events | NEWBIES’ lesson of the day: How to spot fast risers utilizing TVL metrics
Disclaimer: I am not a financial advisor, everything on this report is financial opinion. Please consult your financial advisor before participating in crypto
“In Web3, cryptocurrencies and NFTs are the digital goods of the new economy. DeFi is the native financial system, Layer 1 networks are the rails that power everything, and DAOs are how the frontier gets governed. It’s all coming together and it’s going to be absolutely beautiful.”
— Ryan Selkis via the Messari 2022 Theses.
Today, most of the report will focus on the NEWBIES section, part three of a short TVL metrics series. This lesson is the most in-depth out of the three and the most beneficial to learn. You can find parts one and two on my Medium page, where I add all my reports. You will have a solid basis in basic TVL fundamentals if you learn all three.
The NEWBIES section is near the bottom of the report.
Crypto Market Update
Bitcoin (BTC) is down -6.36%, and the low volume will likely continue until the new year. Bitcoin is hovering near the Max Pain options level of 48k. Today’s selloff liquidated $160 million worth of over-optimistic leveraged BTC positions and $472 million in total market liquidations. I wouldn’t eliminate the chance of another rebound and selloff (bull trap) before the beginning of the year. The market remains highly overleveraged.
Bitcoin Dominance (BTC.D) and Ethereum Dominance (ETH.D) are flat. Traders did not rush into BTC or ETH for protection during the selloff today.
Aragon (ANT) is a surprising gainer and is up 36%. ANT has been up 77% in the past week. Aragon is a tooling platform that aids with the creation of DAOs. DAOs will be a hot subject in 2022. If the fundamentals check out this project, it might just be an excellent investment next year.
Metaverse Tokens
The hype surrounding the metaverse seems to be dying down. Many metaverse tokens are down 40–70% since their highs, and the talking heads on social media have appeared to move on. Nevertheless, Metaverses will play an essential role in the future, and prices will likely reach new highs in 2022, but the recent uptrend was too fast and too soon. Hype leads to significant sell-offs during market downturns. My past report on spotting hype in the market (NEWBIES).
Since Highs
WILD -54%
SAND -32%
POLIS -56%
MANA -44%
Take the time to research and discover the best metaverse projects while this sector is getting hammered, and you may find them at an 80% discount in the coming weeks.
Major Crypto News
Iran is banning crypto mining until March to save power. It’s the second time Iran has taken such a measure to reduce power strain.
Cardano Founder Charles Hoskinson lays out 2022 plans. Dr. Hoskinson is likely feeling ongoing pressure from the community concerning the poor performance of the Cardano network and ADA token in late 2021. Video
Dogecoin has laid out its first-ever roadmap. Ethereum co-founder Buterin is one of the advisors to the project.
Notable Events
SandBox (SAND) is having a Xmas Eve Miracle NFT drop.
ICON (ICX) will have a snapshot for the ICY & ICZ airdrop
Ulti Arena (ULTI) is having its proof-of-gaming release.
NEWBIES lesson of the day: How to spot fast risers with TVL
Part 3 of a TVL series. Part 2. Part 1
Let’s begin with a few examples of how to spot fast risers utilizing TVL, and afterward, I can add some context. TVL charts are from DeFi Llama.
Around February, Ethereum began having significant issues with rising gas fees. DeFi and the rising usage of Uniswap, AAVE, and Curve ushered in high traffic into the chain. As a result, retail participants began looking for alternatives to save on gas fees, particularly Asia. They turned their attention to Binance Smart Chain (BCS). Binance began releasing several DeFi projects, mainly forks of popular Ethereum projects, that bolstered high APYs.
On Feb 18, BSC had 2.28% of the Total TVL. BNB, the native token of Binance, was at $199. Three months later, BSC possessed 18.10% of Total TVL, and the BNB token was at $606, coming off $692 highs a week before.
A similarly recent case was Terra (LUNA). Near the end of 2021, the maturation of the DeFi economy and looming NFT markets quickly evolved the landscape of Crypto, opening the door to various new chains and projects. In early November, LUNA was at $50, and Terra owned 4% of Total TVL. Terra has nearly doubled TVL to 7.23%, and the LUNA token has recently come off $100 highs.
I know what you’re thinking. A chain’s price will rise if the TVL is rising. And you’re correct in thinking it’s a basic correlation. The point here is to combine this tool with news, updates, sentiment, fundamentals, and other data to aid in disseminating a chain’s performance.
If a chain is not gaining significant ground on its competitors during a bull market, you may be too early, or the chain may have low participation. It’s good to be early at times, but you better have high convection if the growth is not matching your theses. If not, it may just be better to find a better investment. In addition, a chain with low TVL will mean the project has more tokens available to sell off during a bear market. Of course, there are exceptions like Cardano that bolsters 60–70% of circulating supply in staking, but they are far and few in between.
Significant price moves in projects with little TVL also indicate that large investors are positioning themselves for either a price catalyst, insider information, or a project update. But be wary because these investors are here for profits. By the time impactful news reaches the retail crowd (us), it is usually too late; the price has already climbed significantly. These investors will ultimately add selling pressure during price highs for profits and/or to seek fundamentally superior projects. Here is a Zilliqa chart as an example. Zilliqa held very little TVL in early 2021 despite its aggressive price hikes. Notice how quickly ZIL sold off and never recovered. Sorry ZIL holders!
TVL is a good indicator when paired with other data. Of course, it won’t provide a complete story or solely spot the next SOL or LUNA, but studying various aspects of a project in addition to TVL might give you that slight edge.
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I hope you enjoyed today’s report!
Thanks for reading fam!
Gabi
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