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Friends, Family, Football – and FTX. This year’s Thanksgiving conversation was much different from the last, particularly in the form of both perception and opportunity.

‍Key Takeaways

• A short, holiday-abridged week provided another period of calm for digital assets: as participants assess potential contagion, price action remains muted
• This year’s Thanksgiving conversation was much different from the last, particularly in the form of both perception and opportunity
• In this short weekly, we discuss the intersection between near-term risks and long-term opportunities, with now 360 days until the next Thanksgiving “deposition”

The holiday-abridged week brought little news to both digital asset and equity markets, a nice change from the norm and certainly a holiday well-needed for many crypto market participants.

Of course, for crypto, this Thanksgiving’s conversation was much different from the last. Sure - Friends, Family, and Football were a common denominator, but this year, another “F” (FTX) was brought to the kitchen table.

“Who’s this SBF?” my grandmother asked nearly immediately after walking in the door. “Not a good look for crypto,” said my skeptical and often-angry uncle. “What’s this mean for bitcoin?” everybody asked.

If it wasn’t already apparent that the constant crypto, financial, and even standard news outlets covering FTX have created the largest awareness event for digital asset history, the conversation around the couch and table certainly solidified the fact.

Sure, explaining the news and year-to-date performance (often twice over) was not a fun part of the Thanksgiving experience this year. After all, about one-year ago on Thanksgiving in 2021, bitcoin closed at a price of $58,855, two weeks after the now record closing peak of $67,734. Ether, which outperformed bitcoin for much of the 2021 year, closed last Thanksgiving at $4,501, after a record closing peak of $4,799.

And at those prices, everybody loved digital assets. Similar to what we wrote in our “recency” commentary, apparently, crypto can “change the world ” when prices are high, but is somehow “dead” when prices are low. This feedback loop of price and sentiment was certainly apparent at this year’s Thanksgiving.

Because for most digital asset hobbyists or market-watchers, price is everything. The overwhelming focus is on the fall from $67,000, rather than long-term returns. Conversation around the consumer, business, institutional, and government adoption occurs, but still, it comes back to the bear market. 1 Even the significance of the historically ranked equity and bond drawdown has little weight for those with a narrow focus on the decline in price.

Fundamentals such as holding trends, hash rate, network effects, and demand through dApps aren’t yet well understood. And, of course, they’re boring to the non-invested pundits around the table.

And so, with price now closing at a level of $16,544 and $1,196  for bitcoin and ether, overall sentiment during this Thanksgiving was much less exciting than the last.

And herein lies the opportunity. Fear has stricken digital asset markets, and rightfully so. There may be another domino to fall, which can keep some investors on the sidelines.

But risks and opportunities occur on multiple time horizons and often coexist. As we believe, digital assets have “staying power” and the long-term thesis is unaffected by recent news. Today’s risks may become a future opportunity, similar to those in the past.

The FTX news has piqued the interest of nearly everybody with a cell phone or television. With around 360 days until the next Thanksgiving, price certainly has enough time to change sentiment for those currently on the sidelines.

Click here to download full report. As always, please reach out with any questions or comments.

Stay tuned,

Joseph Orsini, CFA, CMT
Vice President of Research

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1(We point to our upcoming first distribution of the Adoption Monthly, a short-form research report that highlights the significant adoption taking place under the surface.) 

DISCLOSURES

Investment advisory and management services are provided by Eaglebrook Advisors, Inc., a registered investment advisor. Information presented is for educational purposes only and should not be construed as providing investment advice. Past performance is no indication of future results. Investing in digital currency comes with significant risk of loss that a client should be prepared to bear, including, but not limited to, volatile market price swings or flash crashes, market manipulation, economic, regulatory, technical, and cybersecurity risks. In addition, digital currency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing. Eaglebrook does not offer tax advice. Neither consultations nor information published by Eaglebrook should be construed as offering or providing tax advice.

Volatility Risk: Digital currency is a speculative and volatile investment asset. Investors should be prepared for volatile market swings and prolonged bear markets. Digital currency can have higher volatility than other traditional investments such as stocks and bonds and market movements can be difficult to predict.

Economic Risk: The economic risk associated with digital currency is in the lack of widespread or continuing digital currency adoption. The market and investors could decide that digital currency should not be valued at the current market capitalization due to a variety of factors.

Regulatory Risk: Digital currency could be banned or highly regulated by governments that would deter investors from buying or holding digital currency.

Technical Risk: Digital currency is a dynamic network with a codebase that is updated to add new security and functionality features. The updated code that is merged by the core developers could potentially have an error that threatens the security or functionality of the digital currency network.

Cybersecurity Risk: Digital currency exchanges and wallets have been hacked and digital currency has been stolen in the past. This is a potential risk that clients must be comfortable with when investing and holding digital currency. Theft is less likely when holding digital currency at a qualified custodian in offline systems (cold storage) with institutional security and controls.

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Cryptocurrency, on the other hand, is decentralized by nature and does not have a central authority governing it. The price of cryptocurrencies is determined by several external factors may including, but not limited to: supply and demand, investors’ expectations with respect to the rate of inflation, interest rates, currency exchange rates or future regulatory measures (if any) that restrict the trading of a cryptocurrency or the use of a cryptocurrency as a form of payment. Values of cryptocurrencies have historically been highly volatile, experiencing periods of rapid price increase as well as decline.

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