Delphi Office Hours Call (June 29th, 2022)

Below is the full recording and transcript of the Office Hours call our team did on Wednesday June 29th, 2022.

• Overview (00:35)
• Macro #1 (01:11)
• Macro #2 (03:41)
• DAO Banking (06:08)
• Private Markets (11:50)
• NFT Update (14:07)
• Q&A (20:30)
  • $3T Market Cap: Over/under 18 months? (20:30)
  • One (DeFi, Metaverse/NFT, L1/L2) sector to buy and hold?  (29:04)
  • GBTC being approved?  (35:09)
  • Will private markets mirror public markets? (38:48)
  • Fair value for Solana? (40:31)

Transcript

00:35 · Nick
Welcome everybody. Today is June 29th, 2022, and this is Delphi Pro’s Office Hours. Today, we’ve got lined up for you some commentary around macro and markets. Then we’ll talk about a recent post around DAO debt markets and DAO banking. We’ll provide some commentary around what we’re seeing in private markets, and then we’ll finish with some NFT insights for you. Of course, as always, please add some questions in the chat. We’d love to answer them towards the end. With that, I’m going to turn things over to the macro team. Guys, what are you seeing in all this doom and gloom right now? 

01:17 · Kevin
Awesome. Thanks Nick. Yes, we put on this long form, Pro report earlier about searching for market bottoms. This is a very important topic right now as we try to assess the market landscape. One of the questions we got was, “What are some of the key indicators or events that we would look for to really give us confidence or conviction that a market bottom is in?” Let’s take a step back. We’ve talked a lot about how Bitcoin and other crypto assets / the market itself is very highly correlated to risk assets in general. We use the S&P 500 as a benchmark for the equity market. We expect that high, strong correlation to continue at least for the foreseeable future. Why that’s important is because, if we take that step back and we look at the equity market right now, one of the things that we’ve been tracking is those long-term support trends. 

02:13 · Kevin
In the case in which we do see a recession actually take place here in the US, and potentially even just a sharp growth shock or slowdown, what we typically would expect is for big benchmark indices like the S&P to start trading potentially below the 200-week moving average, which it has in the past two big, major recessions of 2001 and 2008. While it doesn’t show it on this chart, what you can see in the report is that the S&P is still roughly 8% to 9% above its 200-week moving average. If that were the case, and if we were to see another lower in the equity market, that’s part of one of the reasons why we’re still a bit bearish, at least in the short to medium term, and don’t necessarily think the bottom is entirely in for this market quite yet. 

03:02 · Kevin
I wanted to show this chart because one of the things that you look for big market bottoms in equities is this last leg lower capitulation event where you see volatility blowout and you see a big VIX spike. That’s what this chart is showing, the S&P in white versus the VIX in orange. We haven’t seen that volatility spike quite yet. Again, I think the risk of that happening in the equity space is still pretty high, at least at this point. It’s one of the things that we’re looking for potentially to give us more conviction that a market bottom will be in. Just one of the things we’re tracking right now and wanting to bring to everyone’s attention. 

03:40 · Nick
Wonderful. Jason, what are you seeing more on the Bitcoin side of things? 

03:46 · Jason
Kevin just gave a pretty good overview of a few things of what a macro bottom would look like. We can switch gears and talk about what a local bottom might look like post the nuke that we just had. We’re starting to see it form a little bit. We’re starting to develop some ranging price action that you would tend to expect in the aftermath of like a 30, 40, 50% liquidation cascade, both on-chain and in centralized exchanges across the board. What are we looking for over the next couple of weeks? Kevin outlined that the market is pretty macro driven at the moment. The base case right now is: until we get more macro prints to see what’s going on in the global situation, i.e. whether things are abating/getting better or getting worse, that will likely determine how this next price range resolves. 

04:46 · Jason
As Kevin was saying, there’s still elevated risks with equities and equity market pullbacks, as we haven’t seen VIX blow outs or anything that you would expect to see for a bigger bottom there. Given the fact that Bitcoin and crypto markets have had extremely high correlations to equities over the last several months, you would expect that the range would move in the direction that equities would move. At the moment, the probability is higher there. What we’re seeing right now is funding is stagnant. You’re seeing open interest start to increase again, which is the appetite to partake in the market. As you see funding down and open interest going up, it could be a sign that you have some late sellers or shorts coming in here trying to force this lower. Should the range hold, which you would likely to expect it to until we get some kind of external shock, it might actually be fuel for this move higher in the price range to say 21 – 22 K. 

05:48 · Jason
Again, I wouldn’t bet on this being a breakout and a continued leg higher at this point. I would just play it as it is. As you move into the resistance zones, take risk off if you’re trading or things like that. 

06:02 · Nick
Great. I would direct people to check out our latest Market Insights topic. Shifting gears, we have Ceteris here to talk about a recent post around DAO debt / DAO banking. Can you give us a high-level talk about the thrust of the post and what you’ve found in the research?

06:21 · Ceter