36. Why Crypto Is Up +25% And Our Top Crypto Projections For 2023

The biggest thing that I saw, Bergs that happened last week was that we had this short squeeze. So we had nearly $500 million of Bitcoin shorts. So what are shorts are basically positions the traders take to bet that an asset is going down. So there was a huge number of traders betting that bitcoin prices were going to go down. And what happened was that bitcoin started to reverse and bitcoin started to go up. And what happens when you have a short position and the price starts to go up is that you slow, like you get closer and closer to your liquidation price. Welcome back to another episode of the Benneberg Show. I'm your co host Ben, a high school dropout with my co host and NBA graduate Berg. Today we have a cracker episode because crypto is rallying. Bitcoin's up 25, Ethereum up 28, and Solana up 134. This year. @ the time of the recording, Berg's a little bit of green to start the year off. How are you.

Mate? I'm feeling good. And it's amazing what a green candle will do for your life. How much does it.

Help? It helps a lot considering it's been down only for the last year and a bit. It's super exciting because the total crypto market cap actually trickled back above US$1 trillion. Sorry, yeah. US$1 trillion for the first time since early November. It's, it's been good, mate. It's been good to get a bit of a relief.

Rally. Absolutely. And how difficult is it though? Like, even though you know your dollar cost average, you go in and it's like you see bitcoin go from 16 to 21,000, 22,000. You're like, I missed the boat. That's it. It's now like 20 or 30% more expensive or I can't buy anymore. You forget like it was up at the highs at 60,000 and all the psychology starts to come back into play. It's not boring anymore. It's not staying in the same kind of, you know, zone. You're like, oh, you start to get emotional. This is where you need to have a plan, Ben. Need to have a.

Plan. You do. It's amazing how psychology changes so quickly. But there's a couple of things I want to talk about. So first of all, I want to just run through a little bit about why crypto is rallying. A lot of people have been asking, why is crypto going up? Is it back now? What, like why, why, why? So we're going to talk about that. Then we're going to get into some things to watch out for in 2023. So there's some top key takeaways that our analysts have dived into that we think is important to know some of the trends and topics that are going to come to light in so you can take advantage of them before they occur in a short, simple time frame. Because that's exactly what we do here on the Benneberg show and it's exactly what we do at Collective Shift, helping you get ahead of the markets in a fast time. But first of all, why crypto is rallying? The biggest thing that I saw, Bergs, that happened last week was that we had this short squeeze. So we had nearly $500 million of Bitcoin shorts. So what a shorts are basically positions that traders take to bet. Then an asset is going down. So there's a huge number of traders betting the bitcoin prices were going to go down. And what we happen was that bitcoin started to reverse, a bitcoin started to go up. And what happens when you have a short position and the price starts to go up is that you slow, like you get closer and closer to your liquidation price. Let's say you're betting $1,000. A Bitcoin is going to go down as bitcoin goes up. So the reverse of where you're betting against, you either have two options. One is you add more liquidity. So you double down and say add another thousand dollars to your position so you can keep your trade going. Al it's losing or you get liquidated. And if you get liquidated, you lose everything. And basically what happens is that you lose that capital and you basically buy that asset on spot price, but you don't get it. You give it to the person you've just bet against. So what happened was that we had this huge amount of short positions. They all got liquidated and they all bought bitcoin on spot price no matter what the price is. So it pushed bitcoin up like a slingshot. You can imagine like a domino effect when you just get one after.

The other, all buying big, busting through.

Your stops, smashing through them. And it absolutely just Slingshot Bitcoin above 20,000 USD. And now we're currently sitting at home recording around 21,000 USD. So yeah, unfortunate for those that had bitcoin short positions. But this is what happens, Bergs. We've seen this time and time again in the crypto markets when you get so many people that are Bearish, you usually get the opposite effect. And that's why we always teach be fearful when people are greedy and greedy when people are.

Fearful. That's it. If everyone's standing on one side of the boat, it's going to tip. And I, so I looked into shorts a while ago, I think it was when the big short came out and how they fundamentally work. And if you're putting a short position on, you're betting that something is going to go down in price and the differential between the price now and when it goes down is what you get. And you can leverage that as well. Like you can have multipliers. And the way it fundamentally works is at a certain point in time your betting is going down. You buy that asset. So you buy bitcoin and you immediately sell it. But you now owe that amount of bitcoin to the corresponding person. So if it goes down, say it's at $10 and it goes down to seven, you buy one again at seven and you get that $3 for yourself and you get that bitcoin back to that person. The problem is if you buy it at 10 and it goes to 11, 12, 13, you have to cover that position and your money that you owe is increasing, increasing. You've got that negative however many thousand dollars against your name and you have to cover that with money in your account. And if it gets to and you have to keep adding money so that the amount you owe is in your account because they're not going to let you go on credit at all. Right? You have to be able to cover that. And if you've got say $1,000 and that negative position gets towards a thousand bang, you get liquidated instantly. Like Ben was saying, it's a market buy. So you still owe, you've lost that thousand dollars, you've lost how much you bought the bitcoin for and you owe that person that bitcoin. So you have to buy at the current market price. So when that stop, that's called a stop. That's when that hits, that's your limit. It just busts through again and again and again. And that's why you wake up and you're like, why has bitcoin gone up.

$3,000? That's exactly right, mate. So that's one of the biggest reasons why we saw crypto price increase. The other one was the macro landscape. So the first time in months we finally had the CPI data. So the inflation rate mean as expected. So we, we certainly would have seen more of a sell off if crypto sorry if the CPI inflation rate printed higher than what we all thought. But for the first time it's actually come within expectations of what economists have been thinking. So it's now the cpi. US inflation has fallen to its lowest in more than a year down to around 6.5%, down from 7.1% in November, which is good news for all markets, particularly crypto. Now that's really, I think one of the two reasons. There's a few other things we looked at, you know, we looked at, but I think that's probably where we saw the rally over the last week come from. Will prices remain there? I'm not sure. I would expect that we'd have a bit of a rebound, so a bit of a pullback that is healthy and perfectly normal, especially when we have such sharp rises in crypto prices. We do need to continue to be on the lookout for the Fed reserve's policy over the outlook for the next 12 months, especially around, you know, the impact that it's had over last year on the impact of prices and the US inflation is one of the biggest things we need to keep an eye on for that. However, in saying that's been a super strong start to the year and I do think we probably chop up sideways, we've been saying this, chop sideways between that sort of 17,022, 23,000 USD Bitcoin mark for the rest of this year and I think it's a great time to buy bitcoin. So that's where we are currently at the market right now. There are some things that I want to now work towards sort of explaining that we're looking at for 2023 and some of the trends that we think are going to be at the talking points throughout this year. But is there anything else that you're seeing? You've started to dollar cost average back in the market. You mentioned to me that something is really interesting. As soon as the market turned, you got that FOMO back. How fascinating is human psychology in.

Crypto? It's so crazy and especially when you've got this negative sentiment globally and things are costing more people, don't have as much money, everything's in the toilet, your home loan costs more, inflation's going through the roof, you're like, oh, it's all going to zero. So you kind of, you know, if you, if you're lucky enough to have some money on the sidelines, you're kind of waiting for that entry point and you know, your dollar cost averaging a little bit, but you've still Got like a little bit of a sum to that you want to put in. You know, you wake up one day like, oh no, I've missed it. Everyone's talking about crypto, I need to get in now. And that's the kind of psychology you need to look at and be like, why am I thinking this way? I wasn't thinking that way yesterday. What is my plan? I need to look at my plan and be, oh, okay, this is what I need to do if this situation arises. So for me personally, I'm just keeping with my dollar cost averaging and over time I am expecting a pullback to happen because fundamentally what we've seen here and the reasons is that everyone had that mentality of that, you know, negative sentiments. They've got lots of shorts, busted through the shorts and you get price action. And really what we're looking for is a huge reversal in trend. And I personally haven't seen the thing that's come along that's going to say, all right, bitcoin's amazing now this is what's happening, this is where the trend is going. I'm still waiting for that thing to be like, yeah, okay, this is the big.

Signal. Yeah, great, great call. I think one of the things that I believe for this year is a trend is we're going to see defi return. I think from what we saw last year with so much centralization problems with people trying to get loans and earn yield with centralized products and how bad that went and the failure of those yield products, I think there is going to be a lot more movement back to defi because defi again, decentralized finance, nothing's changed there. Like we're actually seeing a higher uptake in some of those defi platforms. For example, the active weekly traders on perpetual protocol in October 2022 soared and this was just after the FTX collapse. So the number of fees usage of those defi protocols is continue to increase. Now it is still down approximately 90% from its all time highs around May 2021 where we saw that defi craze and all the tokens have been hugely beaten down. So defi tokens now only represent around 3%, around 25, sorry, 3% of the total cryptocurrency market. But I think there's going to be more to come. So I think there's an opportunity in the market for some of those defi tokens and maybe winners. So if you're having a bit of a flutter at some of the old coins, I think that's really cool. And I'm also a big believer in players like uni swap, Sushi swap, you know, dydx at a sort of application layer. As more transactions happen on chain, those are the protocols and applications gonna win. So I think defi is gonna be a big pivot back towards that and we'll see how that plays out over the course of this.

Year.

Fantastic.

Man.

Next. I think one of the big talking points last year was around crypto gaming. So we saw this was in 2021. We had a huge increase across token prices for the likes of Axie, Infinity and, you know, Alluvium for me was one that I saw up on the Gold coast at the Australian Crypto Convention last year. I think that's a game to watch in 2023. I think, you know, they've been working really hard on actually creating a game that people actually want to play. And I think that potentially is one. I'm not much of a game. Hubbergs. I know you have done or played a bit of a game. Have you. Have you played around with any of these games? What are your thoughts on the gaming sector for this.

Year? I have on some of them and some of them are quite good in browser. They're. They're getting there. I don't think they've cracked. Like, what we're used to is like, you know, triple A titles and I play stuff like, you know, Apex Legends, I play that heaps. I play stuff on.

A lot of VR as well. And these are the things and expectations we're used to. And just because it's a crypto game doesn't mean people are going to play it. I think the early people, what we've seen generally is people will come in, there'll be big incentives, they'll start to play it, they'll get incentives, they'll get paid. But after a few months, it kind of peters off. So either the game sucks or the game sucks, but the incentives are good and the incentives go away because the economics don't work anymore. You can't keep feeding the machine from a treasury. And really we just need games that are fun. We don't. This is. I. I go back to the Reddit NFTs. People don't know their NFTs. They're just funky little characters and, you know, avatars you can use on Reddit. That's what we need to see in games. And if you want to take up that crypto or ownership or, or incentivization component, you need to know how those mechanics work and needs to work in the game, but the game must work without that and people must want to use it because games work at scale. You're talking like millions and millions of users for the really decent games. And that's what we need to see in Crypto. And it takes God, I would say like five to seven years to build a decent game and to even just build that, because you're not just building a game like people have that expertise, like the big studios. But you need to build a game, but then you got to build token mechanics on top. You have to interact with blockchains, you have to think about ownership and wallets. It's a very hard problem to solve, but I do love the innovation that's happening in the.

Space. Yeah, we need to move away from just speculation on some of the tokenomics of these games and more towards actual practical, you know, use cases and actual practical games people want to play. Totally agree. The next trend I want to talk about is one that our analyst Nick has been talking about for a little while. He's big, big fan of this, and that is Jack Dorsey and Block Inc. So Nick is super bullish on Block Inc. And Jack Dorsey because Jack is building out core infrastructure and utility on the bitcoin blockchain. So there has been a bit of a teaser about a hardware wallet that jackdaws has been creating that's looking to launch later this year. There's not too much information on that, but Nick is really, really optimistic around some of the partnerships that Jack will be able to create. And this is one that's going under the radar a lot. So this is a big impact I think this will have on Bitcoin. And especially when Jack starts to launch other products and features he's been building on, I think we could spark a bit of a narrative around price growth and the infrastructure level of Bitcoin once this comes out, during this bear market. So I think that could potentially be a catalyst. Remember, Jack Dorsey is the previous, where he was the first, the founder of Twitter. Right. This guy knows what he's talking about and he's a massive bitcoin fan. So super pumped to see what he comes out.

With. Just the collaborators on that site are insane. There's like Jay Z, like heaps of big companies and the really wealthy people or the people that have done this before, they're all building on Bitcoin and they're doing that because bitcoin's basically settled. They're like, it's. It's a commodity. You know the rules around it. It is decentralized enough, it doesn't come under SEC regulation. This is what they've said themselves. So you know the playing field and you can build on top of this. And like Andreas has said, this is the Internet of money. You lit Bitcoin is like you're literally building on the Internet. The challenge with other blockchains and especially Ethereum is we've seen things like, you know, innovation like Tornado Cash, which is amazing, but then, you know, which is, which is a, essentially a mixer and people can go in there, they can kind of semi hide their addresses and you know, that's been regulated so addresses have been banned and people building, it's another layer. If you're building a company, it's another thing you have to be wary of. You want to be compliant, you don't want to go to jail, you have to block those addresses. It just becomes really, really challenging. So even though we see Bitcoin is kind of settled and boring, I really see a lot of innovation happening there. It just takes a long.

Time. Yeah, spot on, mate. And the last big trend I wanted to touch on here is Layer twos on Ethereum scaling. So again, this is a big one we've been talking about, especially Nick, our senior analyst around optimism, Arbitrum building on top of Ethereum Layer twos. As we know, there's been a huge change in Ethereum over the last year, moving to proof of stake from proof of work and also like just the usage of Ethereum has, you know, skyrocketed with the likes of NFTs and more games being built on top. So really excited about that. There's another Ethereum upgrade that's coming later this year which is the EIP4844 which is supposed to provide up to 20 times more scaling to the Ethereum network. And the lower and lowering the cost of the gas fees should come towards later 2023 as well. So super bullish around that. Ethereum continues to grow, the network continues to grow and we, we remain really bullish on Ethereum and these.

Prices. Yeah, even like L2s, like Arbitrum, you've got things like magic and that's the way they describe it is basically they've built the Nintendo, you just come and build the game and we've seen, you know, their marketplaces, treasure, LOL. You've got all the NFTs on there, you've got different games you can play. One was like Battleflies, which is really interesting. Everyone went nuts for it. You get Cocoon and then it kind of, you know, morphs and you can combine them together. The game was really. It was not that great. It's a battlefly flying around, you go left and right. The other ones are kind of. They're built different worlds and you interact with your NFTs. Yeah, there's. There's one bridge world, which is what I mean. We've got a guild and we've got a guy that goes in and gets all of our NFTs kind of stakes them. They go on challenges, they go on quests, they bring back additional stuff and treasures and it's quite good. It's not like a game you would expect. It's more like a trading card kind of game. That kind of aspect to it. And look, L2 is a great. Because the transaction fees are like less than a cent. It's incredible. So for those high transaction things, you want to see this on L2 and I'm just looking for again, I'm looking forward to the innovation that happens in the space. I've got the bare bones for people that can project out to the future and people that can interact with it, have a bit of fun, explore and see what's going on. And now I'm really looking forward to all of that being abstracted, making it easy and just like a normal game you would download from Steam and.

Play. So we'll leave it there for the trends to watch for 2023 in crypto. If you'd like to read the full report, you can actually sign up as a collective Shift starter member or Insider member for $1 and read this report. It's a fantastic report. Again, it's in simple terms, it's got a lot more detail but also just gives you what you need to know. It goes through even some top game awards that we've looked at some. Some numbers around a few other trends which I didn't touch on, such as stable coins as well. So you can sign up. We'll leave the link below to crack a report. Check that out. And then next week on our crypto episode, we're going to be talking about some of the altcoins or cryptocurrencies that we're looking at and a bit of a roundup and major announcements for some of those crypto assets as well. So that's for next week, but for now, Bergs, thank you very much. That was a good episode. And more green candles.

Please. Absolutely, mate. Green candle every day, please. Thanks so much for listening.

Champions. If you'd like to leave us some feedback, you can tweet myself at bensimpsonau on Twitter and Babyback Berg. And as I mentioned, if you'd like to read that full report or check out any of our other educational materials, want to get into crypto? Structure your portfolio properly and invest with confidence, you can head to the link below and we'll see you next.

Week. See you later.