Monthly Chartbook - Uncertainty Reigns Supreme Post-FTX Collapse

Introduction

The Monthly Chartbook is a collection of interesting charts and trends we’re watching across crypto and markets. This month’s edition focuses on:

• Macro Outlook
• Crypto Market Review: Market Structure and On-Chain Observations
• L1s, L2s, and DeFi Analysis
• NFTs and Gaming Analysis

Macro Outlook

This month’s macro section will be a shortened version of what we usually publish. The upcoming The Year Ahead for Markets report will cover the macro environment in much greater detail, and will give some insight into what we think the most important themes will be for 2023.

Keeping with the theme of previous iterations of The Chartbook, we ask ourselves the same high-level question. Has anything changed on the macro front given the macro-driven bear market? This month, the answer is…we’re getting closer.

Dec. 13th and 14th bring the final two key economic events of the calendar year — the final CPI print and the final FOMC meeting. First on the docket was CPI. For the second month in a row, CPI came in lower than expected. These are the first signs of what the Fed has said they are looking for in regards to their fight against inflation, and how long it will take for it to come back in line with their stated goals.

Risk assets briefly rallied into and immediately after the CPI release. However, this rally was short-lived. At the time of writing, most assets have retraced nearly the entirety of their CPI-related price moves. Markets are attempting to digest how the Fed will respond in the upcoming FOMC meeting, and what the implications are for the first half of 2023.

Speaking of the FOMC meeting, it is currently underway. The release of the FOMC statements and the ensuing press conference will come tomorrow, Dec. 14th, around 2pm ET. As we’ve mentioned, the second consecutive lower-than-expected CPI print will be a welcome sight for committee members. The market has continued to price in a slowing of the pace of rate hikes as we approach tomorrow’s announcement. Perhaps more important than this is the continued guidance provided by Powell around how long rates will need to remain in a restrictive zone in order for their inflation goals to be considered a success. Previously, Powell has stated that they believe a prolonged period of below-trend growth will likely be needed for this to occur. Will the rhetoric soften, or will the committee remain steadfast?

Over the previous two Chartbook iterations, we have noted the cyclicality of crypto markets as we head into Q4. We stated, “Q4 has been the best quarter for BTC when taking into account ALL datasets since inception.” This can be seen in the above backtest for BTC forward returns for Q3-Q4.

We also noted that investors should look beyond surface-level data when looking at seasonality. When filtering for quarterly returns during bear markets only, Q1 and Q4 are the worst quarters (within a few percent). As we head into the Q4 close, we can see how the current cycle has played out similarly to previous bear markets.

Crypto Market Review

Market Structure

Last month’s Chartbook came at an interesting time for crypto markets. At the time, the collapse of FTX and subsequent contagion was playing out in real-time. Today, it continues to do so, with the most recent update coming in the form of