DAO's day in Court - Fundamental Trends

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DAOs Aren’t People, Crypto Lawyers Tell Court in CFTC’s Ooki Case

Decentralized autonomous organizations (DAOs), collectives that typically govern activities by voting through the use of crypto tokens, are not people and should not be treated as such, a group of lawyers and developers told a California court Monday.

The LeXpunK Army, a group that received permission to file an amicus (or friend of the court) brief in the ongoing Commodity Futures Trading Commission (CFTC) lawsuit against Ooki DAO, argued that the federal regulatory agency should be required to identify and directly serve any person it believes has violated federal law, rather than the DAO as an entity. (Coindesk)

Stablecoin Transparency Act

The bill S.3970 “Stablecoin Transparency Act,” requires a stablecoin issuer to hold all reserves associated with each fiat currency-backed stablecoin they issue in (1) certain government securities; (2) fully collateralized security repurchase agreements, or (3) U.S. dollars or other nondigital currency. A fiat currency-backed stablecoin is a digital asset backed by a nondigital currency and is redeemable on a one-to-one basis in that currency.

One of the few bills that looks like it may get approved this year is S.3970. Although it has nothing to do with bitcoin, it will be the first regulation passed by U.S. regulators. This will allow institutional capital to come into stable coins, which ultimately affects bitcoin.

Lets take a look at Glassnode

In this week’s Glassnode report, we dove into the Realized Volittly, SOPR (aSOPR) and the 7-day moving average. It is very uncommon for BTC markets to reach periods of such low realized volatility, with almost all prior instances preceding a highly volatile move. Historical examples with 1-week rolling volatility below the current value of 28% in a bear market have preceded significant price moves in both directions. 🟦.

We are seeing a large divergence between price action and Glassnode’s aSOPR metric. This chop zone is when the price trades sideways or slightly declines. In short, the degree of losses is diminishing, indicating some seller exhaustion just above $18K.

The divergence between price and spent profitability is resulting in a more neutral profitability stance. AKA, there’s not enough volume from buyers to push the price higher and not enough sellers below $18.5K to drive the price lower, so we see the neutral manifestation in price.

Glassnode suggests that equilibrium is highly correlated to major sell-off events. IDK, ascending wedges have a pretty good win rate with breakouts 2 out of 3 times.

Looking at short-term holders this week, the 7-day moving average is approaching breakeven profitability. Whereas the STH-SOPR multiple (the above chart) is attempting its fifth breakout of this bear cycle. which is also supported by the look of the Ascending Triangle success rate. However, each prior attempt was rejected and was followed by a decline in prices. Glassnode emphasizes that the severity of drawdowns in the STH-SOPR multiple is decreasing over time.

Looking at LTH-SOPR (7d Moving Average) LTH (long time holders) spent profitability has only been worse on 144 trading days out of 4304 trading days, which implies a cycle low is near.

Looking into the future for the tell and the Option ATM Implied volatility has reached an all-time low of 48%, indicating that we are nearing a double bottom.

Whereas we’ve had a consistent increase in future volume since the LUNA-UST collapse and we have returned to 2020 volume of $24B a day, which is constructive. The Bitcoin denominated futures contract has reached a new ATH of 633k BTC, which is an 80% increase since May this year.

Lastly, forced liquidations have declined significantly since the LUNA-UST collapse. Yet, open interest has not fully recovered to pre-LUNA-UST collapse highs.

Closing thoughts’!

When one considers the totality of the indicators, on-chain spending behavior is condensing to some discernible tipping point. With declining liquidations and the increase in futures volume, one can’t help but hold a positive bias. Yet, with the few outliers such as RSI and Bollinger Bands deviations, we can’t help but believe we are either on the cusp of a historical breakdown (capitulation low) or we are in a bottoming process destined to put in at least one more lower low. Do the LTHs continue to trim or do they hold? Again, I think that is up to the Fed and CPI.