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A lot is happening across global markets on and off chain.
Today we’re helping you make sense of it.
Below we’re sharing the top 5 charts (and themes) we’re watching to help you capitalize on the opportunity that is the migration of just about everything to the onchain world. ⛓️
Here’s what we’re covering:
Inflation: Dead or Alive? 💀
Crypto ETFs: Boom or Bust?
Pudgy Penguins: Are NFTs SO Back? 🐧
Friend.tech Ecosystem: Composability at its Finest 🫂
DraftKings Reignmakers: The Next Big Onchain Consumer App? 🏈
At the end of this report, you’ll have a good understanding of where we’re at in the markets, what the latest trends are, and how you can capitalize on the opportunity.
Let’s get into it, frens. ⏬
1. Inflation: Dead or Alive? 💀
From a macro perspective, inflation in the US is still a big debate.
As we should all be aware by now, we want interest rates down and the money printer up, so that our beloved digital assets (and stocks) will head back to the moon. 🚀
However, the big thing holding back the FED from lowering interest rates is the inflation scare. 😨
We’ve gone from 9% down to 3% in US CPI over the last year, however we’ve now moved back up just below 4% in the last 2 months.
This is causing a stir in markets. Many are saying, “we told you inflation wasn’t dead and it’s here to stay”.
But for those who truly understand how inflation cycles work, this “blip” in inflation numbers always happens. Here’s why…
There are many components that make up inflation (i.e., shelter, food, commodities, etc.). Each component moves at different rates depending on how it was impacted and also where it exists in the supply chain.
You can think of this like a domino effect, as certain components fall or rise, others will do the same afterward.
For example, food and rent always lag behind things like commodities.
There is always a point in an inflation cycle where markets are smelling that economic growth is going to take off in the future, and thus investors start buying commodities.
For context, companies need commodities to build things. So, if we're about to go into a growth phase, it makes sense that companies will start creating more things and thus need more commodities. ♻️
The current blip can be attributed to us reaching that turning point. Commodity prices have surged over the past few months, driving up inflation. 📈
However, many overlook the fact that costs like food, rent, and several other inflation components are just starting to decrease. 📉
These components make up more than 65% of the inflation numbers, whereas commodities only make up about 17%.
So even if commodities continue to rise, the impact of shelter, rent, and others going down in the coming months will be much greater and, thus, drive the inflation rate down.
This is a typical phase in the inflation cycle, and so far, this one mirrors the patterns we've seen in the last five historical cycles (see chart at the top of this section 👆).
Another nice chart to look at is comparing this inflation cycle to the one post World War 2, which had a similar cause in terms of extreme money printing and dysfunctional supply chains.
While it reached an insanely high peak, it quickly came down after the crisis concluded.
My base case is that inflation is dead, some people just don’t know it yet. The moon mission is still intact, my friends! 🌕
2. Crypto ETFs: Boom or Bust? 💥
9 Ethereum Futures ETFs went live in the last week. 🚀
While that’s exciting news and legitimizing for ETH (as it can no longer be thought of as a security), the results on day 1 were a bit of a letdown.
Between all 9 ETFs, there was less than $2 million in trading volume… Low-end shitcoins get more volume than that on Uniswap on a daily basis 🤣
But it’s not all bad news…
First, the day 1 numbers were actually pretty average vs. other ETFs, so it’s not THAT bad.
Plus, the volumes are actually beginning to pick up this week, reaching almost $20 million in volume by Wednesday.
Second, this opens the door for Ethereum Spot ETFs, which is what investors really want. In fact, Grayscale has already filed to convert their $ETHE fund into a spot Ethereum ETF.
We now have at least 4 Spot Ethereum ETF filings (that we know of), and more will likely follow soon.
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Thirdly, while the SEC delayed the Bitcoin Spot ETFs the same day as approving the Ethereum Futures ETF, we now have word that the SEC is working closely with the companies to improve the filing to hopefully allow it to be approved. ✅
This is a great sign!
Bitwise CIO Matt Hougan: “I expect we’ll see a spot bitcoin ETF this calendar year.”
VanEck CEO Jan van Eck: “It looks like early in 2024 we will probably see a spot product.”
Ethereum Futures ETF → Spot Bitcoin ETF → Spot Ethereum ETF.
The pieces are falling into place for the next big influx of capital into web3.
3. Pudgy Penguins: Are NFTs SO Back? 🐧
Where would the NFT world be without Pudgy Penguins? 🤷
It’s the one NFT PFP project that hasn’t dropped the ball in the last year.
The floor price is nearing all-time highs at a time when the NFT industry (at least the PFP sector) is standing on its last brittle leg.
So what are Pudgy Penguins doing differently than everyone else? 🤔
Simple. They are doing what Jay and I have been saying NFT projects need to do for the last 2 years… Start a REAL business and generate revenue! 💰
Pudgy Penguins have toys that are sold on Amazon and in more than 2000 Walmart stores, and each toy has a QR code that drives the customers into their digital world using NFT technology.
This is how you build a business. This is how you use web3 tech. And while value accrual to the Pudgy PFPs still does not exist, nor should it this early in a business, it appears that they are working on some tools to make this happen directly onchain.
As you can see. Pudgy Penguins sales have been on a consistent climb throughout the entire bear market. This is one of the most impressive things I’ve seen in web3 to date.
Hats off to Luca Netz for literally being the ONLY one to lead an NFT PFP project to the promised land during this NFT bear market.
While there is still a lot of work to do, it's impressive to see what this team has been able to accomplish in such a short period of time.
NFTs need Pudgy Penguins just as much as Pudgy Penguins needs NFTs.
4. Friend.Tech Ecosystem: Composability at its Finest
We’ve said a lot about Friend.Tech over the past month, so I won’t bore you with much more.
The one thing I want you to wrap your head around however is the ecosystem being built around web3’s first onchain consumer app and the speed at which it's happening. ⚡
The image above shows some of the prominent tools used to improve the experience and add new forms of utility and speculation to the Friend.Tech app.
We can also see forks that will further push the speed of innovation through competition.
This new ecosystem forming in front of our eyes in just a matter of 2 months can happen only because of the composability and interoperability benefits that exist by building onchain.
To be fair, some of the integrations with Friend.Tech are occurring because of their APIs, not necessarily because of it being onchain, but the onchain aspect opens the doors to so much more.
With each new onchain consumer app that gains traction, new onchain ecosystems will form around it at speeds that simply aren’t possible in web2.
This innovation space is going to be very exciting to watch and be a part of over the coming years. 👀
5. DraftKings Reignmakers: The Next Big Onchain Consumer App? 🏈
Fantasy Football is a massive consumer application in the US.
DraftKings has created an entirely new form of Fantasy Football by bringing the players onchain with DraftKings Reignmakers NFTs.
Since the start of the football season, Reignmakers has seen some serious growth, with more than 20k new buyers in the last 2 months.
Keep in mind, these are REAL humans, not bots or wallets, as you need to pass certain verification steps to use their app.
Monthly trading volumes surpassed $21,000,000 in September. 🤯
With almost 800,000 trades!
These numbers are pretty big and appear to be growing fast, with October already showing some serious growth, just 5 days in.
It appears that most of this growth is happening because fantasy players from the web2 DraftKings app are realizing that there are big prizes in Reignmakers ($30+ million), yet it has nowhere close to as many users as the web2 DraftKings app, so the odds of winning are much higher.
While most of the Reignmakers game is not actually onchain (yet), if these numbers continue to rise and players enjoy this game more than the web2 version, then DraftKings may have found product market fit.
If that’s the case, they can put more resources into building the game fully onchain, where DraftKings has the opportunity to generate more revenue and create a gaming experience, unlike anything we’ve seen before.
My guess is that Draftkings wanted to test the waters first before building out the necessary tools to make this game work completely onchain (i.e., NFT marketplace, wallet, security measures, etc.).
Hopefully, they are soon ready to go all in. We’ll keep you posted.
Final Takeaways 🧵
So much is happening in the onchain world and almost no one is watching. It’s a beautiful thing.
These are the moments where generational wealth is created, whether that be through building or investing.
Continue to use this time to learn, build, and accumulate because this opportunity likely isn’t going to happen again (...or maybe it will if these cycles continue).
We're in a special moment in time right now.
We get to learn, build and accumulate in peace while tech improves with each passing week and our understanding of where this onchain world is heading improves. 🌊
All while those who are not paying attention are falling behind.
This is all compounding to give us the best chance at massive success when the crypto mania is unleashed once again.
Stay curious, build your conviction, and stay humble, friends… our time is near!
Thanks for reading. And remember, you're strong, you’re powerful, you’re alpha! ❤️
See you soon. ✌️
ABOUT THE AUTHOR
Kyle Reidhead
Founder of Web3 Academy and Impact3
Find him on Twitter
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Disclaimer: This article is for informational purposes only and not financial advice. Conduct your own research and consult a financial advisor before making investment decisions or taking any action based on the content.
