Crypto Santa Claus Rally This Christmas?

Traders often predict these two catalysts will drive crypto prices up or down in December. Is this a ‘Santa Claus rally‘ and tax loss harvesting?

The two terms are older than cryptocurrency, commonly discussed by stock traders at the end of each financial year. Just how accurate are they for making stocks or crypto price predictions?

Pentoshi On Crypto Prices Narratives

One of the most popular crypto Twitter accounts, @Pentosh1 told his followers to expect those two ‘narratives‘ in December.

Furthermore, he added Wall Street bonuses, as did many in the replies. Also not excluding the Chinese New Year as a 2023 narrative for crypto prices. Many holders around since the 2018 bear market will recall these ideas.

While he didn’t expand on that tweet thread yet this November, Pentoshi has been critical. He has been critical of this type of fundamental analysis in previous years. He says ‘just trade the charts’ and ‘what matters is the trend’.

Crypto Santa Claus Rally

Last Christmas for example, Pentoshi tweeted the image below and his comments that bad traders rely on narratives.

Investopedia explains the justification for a Santa Claus rally. It explains it as ‘general feeling of optimism and seasonal happiness on Wall Street, and the investing of holiday bonuses’.

The theory dates back to Yale Hirsch’s Stock Trader’s Almanac written in 1972. However thats not all thats happening this season of yuletide.

There is Tax harvesting. Tax loss harvesting is defined as selling assets to ‘limit the amount of taxes due on short-term capital gains. Gains which are generally taxed at a higher rate than long-term capital gains’.

Meanwhile, last December Pentoshi noted one narrative was that institutions would sell until the last business day of the month. Afterwards, the crypto markets would rally. However the Bitcoin price action was bearish at the 2021 close, with the overall macro downtrend being the deciding factor.

In July 2022 Pentoshi made an interesting prediction that more funds ‘will blow up.‘ This is the kind that focus on these type of crypto price narratives. Russian Oligarchs, Tax harvesting, etc. Most of these narratives came from the same VCs, TradFi guys. And funds that blew up or will blow up in a few months.

Bitcoin Prediction Following FTX Collapse

Earlier this month it emerged Sam Bankman-Fried’s Alameda Research were insolvent and lost $3.7 billion. The FTX exchange linked fund were previously imagined by many to be made up of expert traders and quants.

Heading into December, Bitcoin is trading sideways, stuck in a 2% range at the time of writing around $16,500.

Since hitting an all-time high of $69,000 on Binance, Bitcoin has crashed as low as $15,476. This is happening one year on. A 78% correction.

Well, here’s the  downside. Some analysts predict the $12-$14k level could be tested as support.

The 2019 high was $13,970. This was plotted on the Bitcoin price chart above, just above the 2018 yearly open of $13,715. Pentoshi is unsure if Bitcoin will see a capitulation event and crash that low.

He’s predicting more sideways accumulation, for an extended period of time – neither a Santa Claus rally nor tax loss selling. To the upside, some traders predict a bear market rally could take the Bitcoin price up. They predict that the coin will go as high as high as the 2021 lows for a bearish retest. The June 2021 monthly wick hit $28,805.

Celsius Customers Have Till January To File For Claims

The U.S. Bankruptcy Court of the Southern District of New York has approved a request by bankrupt crypto lender Celsius. A request to set a deadline for its customers to submit proofs of claim in the ongoing bankruptcy proceedings.

Celsius Bankruptcy Proceedings And Deadline

“The bankruptcy court approved our motion to set the bar date, which is the deadline for all customers. A deadline for all customers to make a claim. The bar date has been set for January 3, 2023,” Celsius wrote in a Twitter post Sunday.

According to Celsius, the firm’s claims agent Stretto is going to notify customers regarding the bar date. This notification will contain their next steps via email or physical mail for those customers with an address on file.

Additionally, customers should expect to receive a notification in the Celsius app. The court ruling also listed several categories for which customers will not need to submit a proof of claim. These include customers whose claims are not scheduled as “disputed,” “contingent,” or “unliquidated.”  It also includes cases where the claimant does not disagree with the amount, nature, and priority of the claim.

The Celsius fallout

Celsius became one of the first major crypto lenders to freeze user withdrawals. This followed the crypto market crash in June this year. Furthermore, after weeks of silence, the firm eventually filed for bankruptcy. This revelation revealed a $1.2 billion dollar hole in its balance sheet.

Celsius CEO Alex Mashinsky, who was allegedly responsible for a series of poor trades in early 2022, resigned in September. Mashinsky reportedly withdrew as much as $10 million from the company’s account in May. This happened several weeks before the firm halted withdrawals.

In September, the Vermont Department of Financial Regulation alleged that Celsius had been secretly insolvent since 2019. They also revealed that CEO Alex Mashinsky had made false and misleading statements to exaggerate the firm’s financial health.

Meanwhile, the firm is also facing allegations of running a Ponzi scheme. Judge Martin Glenn of the U.S. Bankruptcy Court is ordering the court-appointed examiner and the official committee of Celsius creditors to settle on who will lead a probe into the firm’s use of customer money. 

At the time, Greg Pesce, the creditors committee’s lawyer, gave a statement to the Wall Street Journal. The statement goes thus; “We don’t know if Celsius was a Ponzi scheme, but there are flags that came up.” He went further to add that the probe was “looking into whether it is.”

The broadened scope of the probe into Celsius’ operations now also includes the company’s marketing practices. It also includes representations it made to onboard new customers, as well as its handling of the platform’s native token. The next hearing in the Celsius case is scheduled for December 5.

Meanwhile, FTX Is Owing $3 Billion To A Few Of Its Biggest Creditors

Cryptocurrency exchange FTX said it owes $3.1 billion to its top 50 creditors. This information is according to documents filed Saturday in Delaware bankruptcy court.

Even though the filing did not disclose the names of the parties wrapped up in the swift demise of FTX, the document makes clear the scope of the potential losses its clients face. 

Consequently, FTX’s top ten creditors alone have more than $100 million each in unsecured claims, according to the filing. This figure equal to more than $1.45 billion combined. The filing explained that the debt does not involve anything owed to company insiders. It also explain that everything is subject to change as more information becomes available.

Coachella NFTs Now Stuck On FTX

FTX customers around the world have assets frozen on the cryptocurrency exchange. This happened after its sudden collapse last week. Apparently, this freeze is to the tune of billions of dollars’ worth in total. And it’s not just cryptocurrency or DeFi tokens either—some users have NFTs stuck in FTX, too.

NFTs Stuck In The FTX Saga

Discord servers tied to projects that launched via the FTX NFTs platform over the last year are now filling up with complaints from users who cannot withdraw their Solana-based assets from the FTX account wallet.

In some cases, even those who transferred their NFTs to external, self-custody wallets now can’t see the NFT artwork. This, however, is due to apparent FTX server issues. Links to many of the projects launched through the FTX NFTs marketplace are likewise now broken. FTX announced on Friday that it had filed for Chapter 11 bankruptcy protection.

Furthermore, the affected projects include major music and sports brands. This includes concert festivals Coachella and Tomorrowland, NBA star Steph Curry’s 2974 NFT collection, and Formula One-themed NFTs.

What Exactly Happened

Coachella announced its partnership with FTX US in February, and its plan to release 10 lifetime festival passe. This happened as NFTs was hailed by some as a step forward for mainstream Web3 adoption. And not to mention real-world utility for such digital assets.

The festival released various other NFT collectibles alongside the passes. Billboard, which first reported issues around the NFTs on Tuesday, made a statement. It said that the sale generated $1.5 million in total.

Now, however, users in Coachella’s Discord server are reporting that they cannot transfer their NFTs out from their FTX wallets. Others say that the Coachella NFTs held in their self-custody wallets aren’t displaying artwork. Discord moderators have said that it’s apparently due to FTX’s server being down.

We do not currently have any lines of communication with the FTX team,” a Coachella server administrator wrote on Friday. “We have assembled an internal team to come up with solutions based on the tools we have access to. Our priority is getting Coachella NFTs off of FTX, which appears to be disabled at the moment.”

In a statement today, Coachella Innovation Lead Sam Schoonover affirmed that the festival is trying to respond for NFT holders. “We’re actively working on solutions and are confident we’ll be able to protect the interests of Coachella’s NFT holders,” he wrote.

Custodial Concerns Over FTX NFTs

Unlike many NFT marketplaces, FTX NFTs was a custodial platform which means that it held purchased NFTs for buyers. The only exception is if they opted to transfer it to an external wallet. 

Also, given that FTX’s partners were major mainstream brands, it may have served more casual buyers. Buyers that didn’t bother to transfer the assets to self-custody wallets.

On top of assets initially sold through the FTX NFTs platform, there is a change. Now, anyone trying to sell another supported NFT through the marketplace would have to give FTX custody first. 

Currently, those NFTs are stuck on the platform as the firm begins bankruptcy proceedings.

Metaplex, the creator of Solana’s NFT protocol, worked with concert festival Tomorrowland. Their job was to develop its first NFT drop on FTX NFTs earlier this year. 

Furthermore, CEO Stephen Hess said that the situation illustrates the risks involved with centralized, custodial marketplaces. Especially as users currently have no way of accessing their purchased assets on the platform.

Hess said… “We hope this serves as a wake-up call to NFT collectors and creators that escrow-based marketplaces present significant risks.

How North Korea Became Cryptocurrency Cybercrime Mastermind

Created by a Vietnamese gaming studio, Axie Infinity offers players the chance to breed, trade and fight Pokémon-like cartoon monsters to earn cryptocurrency. 

It also includes the game’s own “Smooth Love Potion” digital token. At one stage, it had more than a million active players.

How Exactly North Korea Started To Dominate The Cryptocurrency Space?

But earlier this year, the network of blockchains that underpin the game’s virtual world was raided. It was by a North Korean hacking syndicate. One that made off with roughly $620m in the ether cryptocurrency.

The FBI confirmed the crypto heist, one of the largest of its kind in history. The FBI also vowed to “continue to expose and combat [North Korea’s] use of illicit activities. This includes cyber crime and cryptocurrency theft — to generate revenue for the regime”.

The successful crypto heists illustrate North Korea’s growing sophistication as a malign cyber actor. 

Furthermore, western security agencies and cyber security companies treat it seriously. They treat it as one of the world’s four principal nation state-based cyber threats. They put it alongside China, Russia, and Iran.

However, according to a UN panel of experts monitoring the implementation of international sanctions. This money raised by North Korea’s criminal cyber operations is helpful. They fund the country’s illicit ballistic missile and nuclear programmes.

Meanwhile, Anne Neuberger, US deputy national security adviser for cyber security, said in July that North Korea “uses cyber to gain, we estimate, up to a third of their funds for their missile programme”.

North Korea Link To FTX Crash

Crypto analysis firm Chainalysis estimates that North Korea stole approximately $1bn. This was stolen in the first nine months of 2022 from decentralized crypto exchanges alone.

The rapid collapse last week of FTX, has highlighted the opacity and erratic regulation. The kind that have been the central features of the market for digital assets. 

North Korea’s growing use of crypto heists have also served a purpose. One that demonstrates the absence of meaningful international regulation of the same markets.

Analysts say the scale and sophistication of the Axie Infinity hack exposed just how powerless the US and allied countries appear to be to prevent large-scale North Korean crypto theft.

Only about $30m of the crypto loot has since been reacquired. That was after an alliance of law enforcement agencies and crypto analysis companies traced some of the stolen funds. This they did through a series of decentralized exchanges and so-called “crypto mixers.” This is a software tool that can shuffle the crypto holdings of different users so as to obfuscate their origins.

How Law Enforcement Are Trying To Combat This Cryptocurrency Cybercrime

Furthermore, in one of the few law enforcement actions since the theft, in August the US sanctioned the Tornado Cash mixer. The US Treasury said the hackers used this to launder more than $450m.

The US has since designated the crypto mixer. This Crypto mixer is instrumental in the hands of hackers. Hackers who were in turn supporting the country’s weapons of mass destruction programme.

Furthermore, it also highlights the opportunities afforded by the unregulated world of crypto to many other rogue regimes and criminal actors around the world. This is with experts warning that the problem is likely only to get worse over the decade as crypto exchanges are increasingly decentralized and more goods and services — legal and illicit — are made available for purchase with cryptocurrency.

We are not anywhere near where we need to be when it comes to regulating the cryptocurrency industry.” The above statement was by Allison Owen, a research analyst at RUSI’s Centre for Financial Crime and Security Studies.

Crypto Hacking: FTX Chief Share A Solution To End It

Over the last few months, crypto hacking has turned rampant, especially in the decentralized finance (DeFi) market. This month itself, more than $750 million have been already lost in crypto hacks as per data from Chainalysis.

Rewarding Crypto Hackers?

Crypto billionaire and FTX chief Sam Bankman-Fried have recently outlined a framework to deal with this problem of crypto hacks. Interestingly, the solution proposed by SBF involves rewarding the hackers.

In his latest blog post, the FTX chief proposed a “5-5 standard” wherein the hackers get to keep 5% of the total funds stolen. Alternatively, they can also keep $5 million whichever is smaller. 

Other provisions include that the hacker acts in “good faith” and intends to cooperate on returning most of the crypto-assets.

In crypto hacking, some of the hackers are also white-hat hackers who seek to expose vulnerabilities. The hackers will do this in the protocol in return for a reward instead of making malicious gains. The SBF chief noted:

“Hacks are extremely destructive to the digital asset ecosystem. The 5-5 approach would have curbed the impact of hacks more than 98%.”

However, SBF is unsure of what would be the right standard for this process. The FTX chief also stated:

Keeping DeFi and peer to peer transfers free is crucial. There are policies I honestly think are key to achieving that. I could be wrong about those policies–I probably am wrong about some! But in the end the most important thing is to keep commerce and expression free.

As said, DeFi protocols have been the most vulnerable to hacks this year. So far in 2022, the DeFi protocols have lost a sum total of more than $4.4 billion.

FTX On Crypto Regulations

Sam Bankman-Fried also said that the U.S. arm of the crypto trading platform FTX will start conducting its own analysis. Their analysis will be on whether the crypto assets work as securities before listing them.

In the blog post, SBF said that FTX plans to use its internal framework for crypto securities. This they will do until there’s more clarity from the SEC. However, this internal framework doesn’t guarantee that FTX will be free from scrutiny by the U.S. SEC.

Meanwhile, Elon Musk Does Damage Control

The crypto market struggles due to a wide variety of macroeconomic factors. The altcoins market in particular faced a major crisis. Ethereum fell by 2% in the last 24 hours and is trading at $1281. 

Meanwhile, Cardano and Solana fell by 3% and 5% respectively. The Tesla earnings report was an important reason for the poor performance of the altcoins market.

Tesla missed its expected earnings for the third quarter and the company’s stock plummeted as a result. In the after-market, $TSLA is down by 6.25%. 

Tesla CEO Elon Musk informed investors that despite strong demand in the fourth quarter, the company will miss its vehicle delivery target in 2023.

Tesla was expected to earn over $22 billion in the third quarter. However, the company revealed that its third-quarter revenue was $21.45 billion. Tesla’s gross automotive margin also missed the estimates.

Why Tesla Earnings Impacts The Altcoin Market

The crypto market is strongly correlated to the broader general market. In particular, it shows a strong correlation between technology stocks and the tech-oriented NASDAQ. As major companies miss earnings estimates, the stock market plummets. As a result, the crypto market struggles too.

Moreover, Tesla’s earnings stoke fears of a slowdown in the economy and a potential recession. The World Bank believes that the economy will face a recession in 2023. Major figures such as Amazon founder Jeff Bezos believe that a recession is inevitable.