🥛 3 major headwinds in crypto 🌪️
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GM. This is Milk Road. We're your crypto caddie – we carry the clubs and give you the best advice on the course.
Here’s what we got for you today:
3 major headwinds in crypto 🌪️
A deep dive into 5,000 token unlocks 👀
Solana is launching another phone 🍪
3 MAJOR HEADWINDS IN CRYPTO 🌪️
Crypto is battling a 3-headed monster right now. Each “head” represents a selling pressure that is affecting crypto prices.
Today, we’re gonna give you a quick rundown of each one and why people are worried.
1/ Celsius sell pressure
Celsius is a crypto lender that went bankrupt in 2022.
Last week, the bankruptcy estate announced it will be rebalancing assets to ensure creditors get their money back.
This includes ~$1.6B in staked ETH holdings. And the process has already begun.
Why this matters: Many people speculate that once the ETH is unstaked, it will lead to a massive sell-off.
This is why investors are tracking Celsius wallets like a hawk.
The good news? The staking queue is currently ~14 days long, so the sell-off won’t happen all at once.
2/ GBTC sell pressure
The Grayscale Bitcoin Trust (GBTC) is one of the largest Bitcoin holders in the world. (Fun fact: they hold ~5x more BTC than Microstrategy).
But up until recently, most GBTC investors couldn’t sell their shares.
On January 11, that all changed. GBTC successfully converted into a spot Bitcoin ETF and investors were finally able to redeem their shares.
The result? Hundreds of millions of dollars worth of BTC are being sold.
Many investors speculate this continued sell pressure has been one of the main reasons BTC’s price has stalled since the ETF approvals.
3/ Other random sell pressures
On top of Celsius and GBTC sell pressures, there are others like…
Mt. Gox – after a 10-year wait, creditors are finally seeing the first reimbursements.
Bitcoin miners – whenever prices fall or stall for a while, BTC miners are sometimes forced to sell off their BTC reserves to break even on mining costs (i.e. at the end of December, BTC miners sold off $130M worth of BTC as prices decreased).
…. that are also adding fuel to the fire.
Milk Road Take: It’s unclear how these various sell pressures will play out, but we anticipate prices might continue to bleed in the short term.
Either way, we’re here for the long haul. So we’ll keep calm and HODL on.
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A DEEP DIVE INTO 5,000 TOKEN UNLOCKS 👀
Here at Milk Road, we talk a lot about token unlocks.
Why?
1/ They happen often. Millions of dollars worth of tokens get unlocked every single week.
(I.e. over the next 7 days, $201M worth of tokens are getting unlocked).
2/ They lead to price volatility. Prices go up and down like the Drop of Doom at Six Flags.
Well, check it out. Two data nerds analyzed 5,000 token unlocks.
The goal: figure out how big of an impact they have on token prices and long-term stability.
(Btw – shoutout to Mustafa and Carl from 6th Man Ventures for the data. We’re nicknaming you the Jamal Crawford and Lou Williams of crypto research).
Here are some of the key takeaways from the report:
Small unlock events had no meaningful effects on prices. “Small unlocks” increase the circulating supply by less than 1%.
Larger unlocks have a negative impact on prices. These increase the circulating supply by more than 1%. The bigger the unlock, the bigger the price decrease.
Projects that have vested most of their token supply (over 70%) had substantially lower volatility and higher prices than tokens early in their vesting periods.
Just look at the average and median token prices, 2 weeks before and after unlock events:
These results align with basic economics: if supply rapidly increases without proportional change in demand, prices should drop.
BITE-SIZED COOKIES FOR THE ROAD 🍪
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Solana Mobile is launching a second phone. The new phone will include the same features as Saga — including a built-in crypto wallet, dApp store, and custom Android software — but will use different hardware.
JPMorgan says it’s seeing significant capital rotating from existing crypto products into new spot Bitcoin ETFs. Even without new capital entering the market, JPMorgan thinks the new ETFs could still attract inflows of up to $36B.
Jupiter announced it will launch its native token (JUP) on January 31, 2024. Jupiter is the largest decentralized exchange (DEX) on Solana and many are expecting this to be one of the bigger airdrops we’ve seen.
The U.S. Internal Revenue Service (IRS) announced that businesses can hold off on reporting crypto, for now. The IRS “intends to prescribe regulations, to provide additional information and procedures for reporting the receipt of digital assets.”
The number of transactions on the Ethereum network just hit a multi-year high. These are levels that haven’t been seen since November 2021.
Animoca Brands is teaming up with Magnus Carlsen to launch a new decentralized chess game. The game lets players solve daily chess puzzles. By completing daily challenges, users can win Orbs of Power game assets for in-game utility and unlock new puzzles for more rewards.
*This is sponsored content
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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.
