Stock Analysis & Ideas

This Week in Crypto: Performance Mixed as Sam Bankman-Fried Hogs Spotlight

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Crypto market volatility continued to ebb over the last seven trading days as all the attention moves squarely to the saga of former FTX CEO Sam Bankman-Fried, who remains free despite growing allegations against him.

Bitcoin Roughly Unchanged, Regulators Add to Pressure

Bitcoin (BTC-USD) prices have stayed relatively steady week-over-week, slipping back below the $17,000 psychological level at one point before making a slight recovery. Positive U.S. economic data contrasted with the Federal Reserve’s latest outlook for interest rates, raising speculation that the pace of future rate hikes might not decelerate like previously anticipated.

Comments from regulators emerged as a big source of fear, uncertainty, and doubt over the last week after U.S. Securities and Exchange Commission Chairman Gary Gensler warned crypto firms that they must comply with securities laws. Although volatility in the biggest cryptocurrency by market capitalization cooled, renewed calls by European Central Bank Executive Fabio Panetta to ban Bitcoin’s energy-intensive proof-of-work consensus mechanism within the European Union and implement crypto taxes added to pressure on Bitcoin. 

Despite the darkening regulatory and policy outlooks, Bitcoin accumulation data told a starkly different tale. In a recent CryptoQuant post penned by Dan Lim, data highlighted that Bitcoin holders’ rapid accumulation at the fastest pace in the latest bear market might signal a potential bottom in Bitcoin prices. In past bear market cycles, similar accumulation trends have foreshadowed a rebound in prices.

Play-to-Earn Axie Rebounds as Trust Wallet Gains Momentum

Over the last week, the biggest outperformer in the crypto sphere was Web3 play-to-earn game Axie Infinity. The latest rally, which has propelled the game’s native AXS token 20.5% higher, has been driven by a recent tweet highlighting the platform’s advancing decentralization. The latest “Town Builders” and “Axie Contributors” plans unveiled by the platform to pursue community governance as part of its roadmap have improved the outlook for the Web3 game, alleviating growing investor concerns as the number of players on the platform declines.

Meanwhile, in the wake of centralized exchange and lending protocol collapses, wallet providers continue to gain from the exchange coin and token exodus as traders and crypto users revisit self-custody. Among wallet providers, Trust Wallet has been one of the biggest beneficiaries of shifting coin flows, helping propel the wallet software provider’s native TWT token 18% higher over the last seven trading days. This latest reversal higher follows a pullback in the uptrend after the FTX meltdown sparked an over 100% gain in TWT.

1inch Retreats as Helium Returns to Earth after Ackman Gains

After a mixed week for the aggregate crypto market, the major market underperformers were decentralized exchange aggregator 1inch Network and decentralized internet hotspot provider Helium Network. 

1inch faces growing concerns from its community as 222,187,500 1INCH tokens are set to be unlocked on December 30. This figure, representing 15% of the total token supply, will be released from a smart contract, potentially sparking a cascade of selling. The last token unlock in June saw the 1INCH token lose nearly 25% of its value. Moreover, according to reports, a wallet moved 15.56 million 1INCH to Binance on December 2, adding to the token’s shaky outlook and sending 1INCH spiraling 15.4%. 

Coming on the heels of comments from famed investor Bill Ackman just weeks prior that briefly sent HNT tokens surging higher, Helium Network crashed back down to earth over the last seven sessions after the hedge fund manager retracted his earlier praise of the initiative. Ackman reversed from his initially supportive remarks amid revelations concerning Helium’s performance figures, trying to backtrack by characterizing HNT as overvalued and stating that he was making a case for tokenization as a useful technological leap. In the aftermath of the latest flip-flopping, HNT has tumbled 10.30%.

Crypto Exchanges Remain in the Crosshairs & More

Centralized crypto exchanges are working hard to rebuild user and investor trust as concerns about reserves, collateralization, and transparency continue to climb. The FTX debacle has added scrutiny to the entire industry, forcing top exchanges like Binance and KuCoin to hire auditors to report on their efforts. KuCoin just hired Mazars to verify the exchange’s proof of reserves, and Binance already revealed that its own Mazars audit underlined that the company’s bitcoin reserves are overcollateralized.

Amid Binance’s efforts to clean up the industry’s image by establishing a recovery fund and undertaking other confidence-building measures, other crypto financial services providers are rapidly retreating. Among the services taking heat is Nexo, which has decided to pull its offerings from the American market. The company is also embroiled in a UK lawsuit over its actions to prevent a high-net-worth customer’s withdrawal. ByBit is another exchange making news after unveiling plans to reduce its staff by 30% as the crypto bear market hurts revenues.

In the meantime, Sam Bankman-Fried faces growing calls to testify in front of U.S. congress as he is ridiculed for his statements feigning ignorance regarding FTX’s exposure and relationship with Alameda. Taking to Twitter to continue his apology tour, the former FTX CEO has also attracted the attention of Twitter owner Elon Musk, who has speculated that SBF donated as much as $1 billion to Democratic candidates, which might help him avoid prosecution.


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