GM HEARTLAND |
Remember, fear just stands for false evidence appearing real — or FUD exits are rekt. |
—El Prof, Muhammed & Chad |
TOKEN | PRICE CHANGE | PRICE |
|---|---|---|
Solana ($SOL) | +0.08% | $153.53 |
Helium ($HNT) | +18.84% | $5.92 |
Pyth ($PYTH) | -6.68% | $0.29 |
Save ($SLND) | +8.94% | $1.09 |
(Price changes reflect past 7 days as of 8.9.24)
Didn’t think a “recession” would look so green.
The cryptocurrency market saw a sharp decline earlier this week, along with the broader market, with leading digital assets Bitcoin, Ethereum, and, yes — *sniff* — Solana suffering substantial losses.
If you’re plugged into either the decentralized finance (DeFi) or traditional finance (TradFi) market, you probably know why. But no worries if nah. Here’s the general gist.
U.S. jobs data showed companies slowed hiring substantially last month, while the unemployment rate rose more than expected, setting off recession red flags. Against a backdrop of persistent inflation, aggressive interest rate hikes, and geopolitical instability, those alarm bells were particularly hard to drown out. Then, overseas, there was the unwinding of the yen carry trade. For decades, the economy of Japan has been defined by incredibly low interest rates and inflation, as well as its weak currency compared to the dollar. So investors invented the so-called “carry trade”: they’d borrow money in Japan to take advantage of low interest rates, then invest it in U.S. assets to take advantage of high growth. However, the nation’s central bank raised its benchmark rate at the end of July, coinciding with the jarring jobs data. So traders quickly unwound those positions, leading Japanese stocks to crash on Monday as well.
Facing these market conditions, over-leveraged investors panicked and liquidated their positions. Retail traders’ total order imbalance reached -$1 billion by the end of the day. This exacerbated the downward spiral and led to dramatic losses for both DeFi and TradFi assets. $SOL, which had been trading above $166 last Friday, slumped below $112 on Monday.
But the sell-off may have been worse for those traders — many of whom likely liquidated advantageous positions early — than for the long-term outlook of the tokens themselves. See, the sudden downturn apparently didn’t scare off prominent institutional investors like BlackRock and MicroStrategy. These firms, along with several more major players, maintained their crypto holdings through the sell-off, while some even bought the dip, suggesting long-term confidence in the asset class.
That’s probably part of why major tokens like $SOL have already all but recovered their losses from earlier in the week. And retail investors who panic-sold may have missed out on an opportunity to shore up their position with low prices. Meanwhile, industry leaders like MicroStrategy’s Michael Saylor have affirmed the company’s continued acquisition and holding of Bitcoin, even in the face of market volatility.
Although the current market conditions may be unsettling, it’s essential to approach the situation with a long-term perspective. The crypto market has historically exhibited volatility, and past downturns have been followed by periods of substantial growth. By staying informed and adopting a strategic approach, investors can navigate these challenges and position themselves for future opportunities.
—Muhammed
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As teased in last week’s newsletter, one of our personal favorite tokens, Save (formerly Solend), launched a new platform alongside its rebrand last week: dumpy.fun.
The point of the platform — on paper, at least — is to expand Solana’s flourishing meme coin ecosystem. Earlier this year, pump.fun debuted on the blockchain, eviscerating the barrier to entry for launching a Solana meme coin, essentially emptying a barrel of gasoline on an already-raging fire. Now, dumpy.fun wants to equip investors with a proverbial fire extinguisher.
dumpy.fun is purportedly a meme coin shorting platform. For any non-traders, bankers, or degens in the audience, shorting a security (or token) is basically just making money on it when its value goes down. Of course, like any concept in investing, it’s not that simple, but without Margot Robbie in a bathtub on hand to explain it in depth, the general premise will do for now.
Now, it’s hard to understate how useful an investment mechanic this can be, especially for an asset as volatile as meme coins. The fact that its launch coincided with a sell-off makes it even more relevant. If the crypto market does see a prolonged downturn, it could be a lot easier to bet on which lines will go down, not up.
There’s just one problem. As of now, the project is in its beta testing phase, and the tokens users are able to short are mostly just blue-chip names. A slow, curated roll-out is likely a wise decision for a project that’s looking to become a bigger player in the decentralized banking space. Save is more or less pursuing the business model of BlockFi (RIP) from last cycle, offering high interest savings accounts to customers who want to get a better return on their cash than traditional savings accounts offer. So immediately associating with projects like, say, $MILK could quickly undermine the company’s credibility and undercut its longterm financial prospects.
Still, I was personally hoping to see Mother Iggy Coin ($MOTHER) listed on the platform, not because I want to bet against the project, but because it best represents the real value proposition of dumpy.fun. What it currently offers is the option to short tokens like $SOL and $ETH that, while they will surely exhibit volatility in moments, ultimately represent communities that probably aren’t going anywhere anytime soon. What a “meme coin shorting platform” offers is the ability to bet against celebrity shills and grifters, where the swift fall from grace isn’t a question of if but when.
Ironically, it’s the utility tokens that took a larger hit this week, because the truly degenerate degens live by their diamond hands. The most speculative of meme coins are up, and here’s hoping they stay there until dumpy.fun gets its act together and embraces the full promise of its core premise.
—El Prof
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