Delphi Office Hours Call (June 22nd, 2022)

Below is the full recording and transcript of the Office Hours call our team did on Wednesday June 22nd, 2022.

• Overview (00:35)
• Macro #1 (01:25)
• Macro #2 (04:29)
• DeFi Derivs (08:39)
• NFT NYC (14:23)
• Commerce (18:08)
• Staked ETH (23:14)
• Q&A (30:04)
  • How long will bear last? (30:04)
  • What are catalysts for bull market? (34:33)
  • Risks of “depegged” ETH staking? (40:24)
  • Price discovery of stETH? (44:12)
  • State of DeFi? (48:10)

Transcript

00:36 · Nick

All right, everybody. Thank you for joining us today is June 22nd. And this is Delphi Pro’s Office Hours, we’ve got quite an agenda for you today. We’re going to obviously talk about the macro and market situation going on. We’ll shift gears to DeFi derivatives, a recent post that we have there from our analyst Duncan. We’ll have a little update from the NFT sector from Teng, we’ll be joined with Gui who recently interviewed Shopify’s head of blockchain on the Delphi podcast, and kind of talk about some high level takeaways there. We’ll finish off talking about stETH and the depeg situation happening. As always, we would love to get some questions in the chats. We’ve got a couple ahead of time, but more is more so just ask away and we’ll try our best to get to those at the end. But to kick things off, I know Bitcoin has taken a bit of a hit since our last Office Hours. 

01:33 · Nick

Jason, what metrics are you looking at right now? What are you keeping tabs on? 

01:39 · Kevin

Yeah, I’ll actually, I’ll jump in here and tick things off and I’ll send it over to Jason, I know he’s got some thoughts, but yeah. What a couple of weeks here to come back into, one of the things that we’ve been focusing a lot on, and we’ve been talking a lot during our offsite was at what point do we get more confident that a market bottom really truly is in right? At what point should we think that this market is bottomed out? We’re looking at prior cycles, there’s a handful of things that you can look for in terms of extremely bearish sentiment, clear evidence of price capitulation, and really forced selling, which we started to see over the last week or two that leads to some seller exhaustion companies coming out and cutting costs, laying off employees, which obviously we’re seeing start to accelerate, especially in the crypto space, as of recent and macro trend reversals. 

02:27 · Kevin

That last part on the macro front, while there’s a glimpse of potentially more dovish commentary coming through after last week’s fed meeting, I think it’s still too early to say that we’re seeing a macro reversal there for certain, but when you look at things like price capitulation, some key levels that this latest sell off has put Bitcoin in the rest of the crypto market at this chart here that we’re showing really shows that Bitcoin on that on a longer term trend basis, right on the top of that panel chart shows Bitcoin versus its 200 week moving average, which is a really important long-term support level, not just for Bitcoin. We actually see this in other asset classes like the S&P 500, for example, but this is important because again, historically in Bitcoin gotten to this point in prior cycles, you typically tend to see it bounce off of that, or at least trend sideways, but you typically don’t see it go very much below that 200 a week moving average, which is really trading right at kind of almost on the nose right now. 

03:24 · Kevin

That bottom panel is interesting, is looking at long-term momentum indicators, right? Like a 14 week RSI we’re showing there. This latest sell off actually pushed that 14 week RSI into oversold territory for only the second tower, third time, I should say, in Bitcoin’s history. And so, those prior instances actually did mark, the cycle bottom, which I think is important to point out. If you go to the next chart, Nick quickly, just something to highlight before I kick it over to Jason is just because we’ve seen, extreme oversold conditions doesn’t necessarily imply that we’re going to see a V-shaped recovery in price, at least in the short term, right? Again, this is just showing what post the 14 week RSI oversold levels and the prior two instances versus what we’ve seen today, how price is trended, over the next let’s call it, six to 12 months. What we typically tend to see is price action is pretty sideways and still remains pretty volatile. 

04:20 · Kevin

I think that’s a good point to hand it off to Jason. Cause I know he’s got some thoughts on the more short-term outlook when it comes to Bitcoin in the rest of this market. 

04:31 · Jason

Yeah. Thanks Kevin. Quickly before I jump into this, I just wanted to kind of highlight, now you can go to the next chart. It’s fine. I just wanted to highlight something Kevin said at the end there, just because we are hitting oversold territory doesn’t mean things have to recover immediately or soon for that matter. Things can remain oversold or overbought for extended periods of time. Oftentimes when you’re looking at the bull cycles specifically Bitcoin and other coins and assets will remain an overbought territory for longer periods of time than people usually give credit to them for. So just keep that in mind. Right? It’s just a it’s just a good thing to kind of put in your quiver if you’re looking for that bull case scenario to start playing out, it’s just one good factor. That’s in our camp, at least at the moment. 

05:22 · Jason

Yeah, in terms of near like shorter to midterm market structure, this is something that I usually harp on a lot. Bitcoin or assets in general, either trade in a range or they’re trading through a trend, right? Ranges typically lasts a lot longer than the range of, or the impulse moves that the assets experience. Typically you get liquidation events or short squeezes, right? Short squeezes, or just liquidation events to the upside. Anyhow, when you get a big liquidation event, it typically takes some time for price to kind of find equilibrium after that, before price either decides to reverse course or continue in the direction of that impulse move kind of saw it at the, for the first couple of months of 2022, after we had a big nuke from the October, from the November, December highs, we ranged for a few months before breaking down the breakdown, wasn’t that big of a move. 

06:17 · Jason

It was only like a 20, 30% move or not even, which means we kind of range for a few weeks before having another massive breakdown that we experienced last week. Last week’s move was pretty significant so you’d kind of expect the next couple of weeks to kind of chop around as market participants, try to jockey for position. This kind of is in a vacuum, right? This is kind of assuming we don’t get any big market moving events that come out of the fallout from the 3AC situation. You kind of have to take market structure with a grain of salt, kind of in the context of what’s going on, assuming nothing new comes out, that’s really significant that will either drive price higher or lower, you can kind of expect price to