The crypto market is like Nasdaq in the early 2000s. Here’s why

As the Federal Reserve raised its benchmark interest rate for the fourth time this year on Wednesday to cool inflation, I caught up with Ben McMillan, founder and chief investment officer of IDX Digital Assets, to chat about the recent state of the crypto market.

Crypto in a flash

Bitcoin BTCUSD,
+4.99%
gained 0.8% over the past seven days, and was trading at around $23,908 on Thursday, according to CoinDesk data. Ether ETHUSD,
+8.39%
advanced 6.4% during the seven-day stretch to around $1,732. Meme token Dogecoin DOGEUSD,
+5.95%
was down 3.5% while another dog-themed token, Shiba Inu SHIBUSD,
5.84,
down 5% from seven days ago.

Cryptometrics

Nasdaq in the early 2000s?

The current crypto market “looks very much like Nasdaq in the early 2000s after the washout,” IDX’s McMillan said in a phone interview. Over the past two months, the crypto market has struggled with contagion as digital hedge fund Three Arrows, broker Voyager and lender Celsius went bankrupt.

“You’ve had a couple of very high-profile large liquidation events,” McMillan said. “Like Long Term Capital Management in the late ’90s or Pets.com, there were a lot of flawed business models that were simply driven by the hype of digital assets that have gone away.”

“Ultimately, we saw a similar paradigm play out in the early 2000s with technology stocks, and it ended up being a generational buying opportunity,” according to McMillan.

Still, in a risk-off environment, IDX’s mutual fund Risk-Managed Bitcoin Strategy Fund BTIDX,
+4.29%
has kept its investments mostly in cash since late last year, when bitcoin is trading more than 67% down from its peak in November, McMillan said.

The fund has recently begun to “put some risk back on the table,” according to McMillan.

“What we’re looking for is what we call a sort of persuasive buying behavior. We want to see that, especially with a volatile market like bitcoin or other digital assets. For an asset class that is no stranger to 50% plus withdrawals, managing risk becomes very important, especially for institutional clients, which is primarily who we serve,” according to McMillan.

Hear from Mike Novogratz at the Best New Ideas in Money festival on September 21st and 22nd in New York. The Galaxy Digital boss has ideas for navigating the crypto winter.

FTX’s rescue plan for Voyager?

Bankrupt cryptobroker Voyager Digital has rejected a proposal, made by Sam Bankman-Fried’s crypto exchange FTX and Alameda Ventures, saying it is a “low bid dressed up as a white knight rescue.”

On July 22, FTX and Alameda jointly proposed to purchase all digital assets and cryptoloans of Voyager except for claims on the hedge fund Three Arrows, in “immediately available cash” at fair market value. Such value would be “calculated by Alameda in good faith based on market practices and available pricing information,” with Voyager’s confirmation, according to the proposal.

Under the proposal, FTX and Alameda also offered to provide early liquidity to Voyager customers, where they could choose to open a new account with FTX and receive a cash balance equal to portions of their claims with Voyager.

In response to FTX and Alameda’s proposal, Voyager’s lawyers said it would harm the company’s customers, undermine efforts to maximize value in the bidding process, limit users’ crypto claims to their dollar values ​​and leave consumers bearing the tax consequences of transactions, among other concerns.

“The AlamedaFTX proposal is nothing more than a liquidation of cryptocurrency on a basis that benefits AlamedaFTX,” Voyager’s lawyers wrote in a July 24 court filing.

Still, “the deal is not necessarily dead,” Bankman-Fried said Tuesday in an interview with Yahoo Finance. “Ultimately, the shareholders will get to decide what they want to do next. And I don’t think we’ve seen the last journey on that side.”

In a series of tweets, Bankman-Fried argued that their proposal would benefit consumers by allowing them to be reimbursed earlier. “The longer the bankruptcy process drags on, the more choices customers lose,” the crypto billionaire tweeted. He also tweeted that some other third parties may offer plans that will give customers more haircuts.

Crypto companies, funds

Shares of Coinbase Global Inc. COIN,
+5.42%
rose 3.4% to $60.84 on Thursday, while being down 17.5% over the last five trading sessions. Michael Saylor’s Micro strategy Inc.
MSTR,
+4.30%
climbed 2.3% Thursday to $268.32, while shares are down 7.4% over the past five days.

Mining company Riot Blockchain Inc. RIOT,
+1.82%
shares rose 1.5% to $7.25 on Thursday, while losing 4.8% over the past five days. Shares of Marathon Digital Holdings Inc.
MARA,
+5.03%
advanced 5.5% to $12.99, with a 3.7% gain in the last five days. Another miner, Ebang International Holdings Inc. EBONY,
+0.70%
shares rose 1.8% to $0.48 on Thursday, on top of a 15% loss over the past five days.

Overstock.com Inc.
OSTK,
+8.70%‘s
shares rose 7.7% to $30.45. Shares rose 3.8% during the five-day period.

Shares of Block Inc.
SQ,
+0.81%,
formerly known as Square, fell 0.3% to $72.56, while shares were down 2.7% for the week. Tesla Inc. TSLA,
+1.96%
shares rose 1.5% to $836.90, adding to a 3% gain over the past five sessions.

PayPal Holdings Inc.
PYPL,
-1.38%
fell 2% to $84.68, although shares rose 2.9% in five sessions. Nvidia Corp.
NVDA,
+0.68%
shares lost 0.3% to $177.45, off 1.3% in the past five trading days.

Advanced Micro Devices Inc.
AMD,
+1.09%
shares rose 1.4% to $90.21 on Thursday, down 0.6% from five trading days ago.

Among crypto funds, ProShares Bitcoin Strategy ETF
BITO,
+5.17%
jumped 5% to $14.80 Thursday, while its Short Bitcoin Strategy ETF
BITI,
-4.98%
tank 4.9% to $32.58. Valkyrie Bitcoin Strategy ETF
BTF,
+5.13%
advanced 4.9% to $9.21, while VanEck Bitcoin Strategy ETF
xbtf,
+5.86%
was up 4.9% to $23.28.

Grayscale Bitcoin Trust
GBTC,
+4.29%
rose 3.2% to $14.69.

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