By Frances Yue
Hello! Welcome back to Distributed Ledger, our weekly crypto newsletter that reaches your inbox every Thursday. I’m Frances Yue, crypto reporter at MarketWatch, and I’ll walk you through the latest and greatest in digital assets this week so far. Find me on Twitter at @FrancesYue_ to send feedback or tell us what you think we should cover.
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Crypto in a snap
You know how bad the market has been when the top five performers, among the 100 largest tokens, are all dollar-pegged stablecoins.
Fears around the Fed tightening its easy monetary policy is not fading, and bitcoin /zigman2/quotes/31322028/realtime BTCUSD -0.12% lost 13.6% over the past seven days. Ether /zigman2/quotes/108573964/realtime ETHUSD -0.67% is looking at a 22.5% loss over the past seven trading sessions. Federal Reserve Chairman Jerome Powell said on Wednesday that the central bank “is of a mind” to raise interest rates in March to fight inflation.
Meme token Dogecoin /zigman2/quotes/226077044/realtime DOGEUSD +1.26% is down 12.5% over the past seven days, while another dog-themed token Shiba Inu /zigman2/quotes/231473891/realtime SHIBUSD +0.19% posted a 25.8% loss during the same period.
|Biggest Gainers||Price||% 7-day return|
|Source: CoinGecko as of Jan. 27|
|Biggest Decliners||Price||% 7-day return|
|Source: Coin Gecko as of Jan.27|
Buying the bitcoin dip?
Some analysts argue that bitcoin hasn’t bottomed yet, as we’ve discussed here .
However, according to Louis LaValle, managing director at crypto fund manager 3iQ Digital Assets, bitcoin is “at really attractive buying levels if you are a long-term buyer.”
“Because you could be averaging around a 50% discount versus where we saw the all time highs,” LaValle told Distributed Ledger in an interview.
The price range between $30k and $40k is critical for bitcoin. “At a $30,000 price point, I think most folks are buyers, and at $40,000, what you have to watch is will the trend reverse and will we break out to the upside,” LaValle said.
But the range may not hold for an extended period, according to LaValle, as the market eyes the Fed meeting in March, which is less than two months away.
“I don’t really think we potentially test below $30k,” LaValle said. “Again, I think we could, but my rationale is that the risk for those 70% to 80% type drawdowns that we saw in 2014 or 2017 during the last bear cycles is much lower today.”
“Because we have more public adoption, more institutional investor participation. It’s a much different ecosystem,” LaValle said.
DeFi tumbles, NFT booms
Most crypto assets have been hit hard, but not equally.
Bitcoin lost 27% for the past month, while ether posted an even larger loss of 38%. DeFi Pulse Index, a capitalization-weighted index that tracks the performance of decentralized finance tokens, is down 39% from a month ago, and down 75% from its all-time high in May.
Prices of some DeFi protocols are dragged down by those of blockchains they are built on, such as Ethereum, Solana /zigman2/quotes/229898318/realtime SOLUSD -1.29% and Avalanche, 3iQ’s LaValle noted.
LaValle also highlighted the amount of leverage on many DeFi protocols. “If you have forced liquidations or forced selling that’s going to be more pronounced if there’s any cascading effect,” LaValle said.
A total of $295.4 million has been liquidated on decentralized credit platforms Aave, Compound and MakerDAO over the past seven days, according to data from Dune Analytics.