- Can you please give us a brief introduction about yourself and CryptoChronic?
I am Marco Prinzi, and I am here today as the CEO of CryptoChronic, a multi-platform video game that leverages a private blockchain for the first Free-to-Earn model. We reinvent Pokémon as Cannabis-themed digital pet collectibles that you breed, nurture, and battle in multiplayer Smoke-Offs. Our users benefit from consistent, highly competitive pricing and depth of gameplay that adds and preserves value throughout a deflationary ecosystem.
- Do you come from a tech background?
Actually, not really. I come from traditional finance. Although CryptoChronic is the second video game I have launched, with “Blaze: Revolutions” on Steam being my first, and despite the fact that I am currently also launching an innovative e-sports platform called LGP1, my background is very different. For well over 20 years, in fact, I was involved in banking, hedge funds, and the engineering, structuring, and distribution of complex financial instruments, like credit derivatives.
- In your view, given your background, what has been happening to the Crypto markets in general lately, and at CryptoChronic in particular?
We indeed live in interesting times, don’t we? Setting forth this is not financial advice, one cannot help but develop a strong opinion. First, during the launch of CryptoChronic’s Gen 0 NFT collection on May 31st, a significant number of people accessed our server at the same time, resulting in it being unable to handle the volume, leading to a failure in minting and ultimately causing our system to crash. In response, we took prompt and decisive action to halt the sale to protect all interested users, especially our Whitelist members, and maintain the integrity of the CryptoChronic ecosystem. Then, the cryptocurrency industry as a whole faced a setback as the Securities and Exchange Commission (SEC) sued Coinbase and Binance, raising concerns about the regulatory classification of certain popular coins. This development worsened market sentiment, which was already negative due to an ongoing regulatory crackdown that has been impacting the industry since the beginning of the year. Additionally, the combination of reduced liquidity and weak sentiment has made it easier for moderate sell orders to trigger liquidations.
- This occurred shortly thereafter, right?
Yes, cryptocurrency prices experienced a drop following the Federal Reserve’s June meeting. Bitcoin fell below $25,000 for the first time since March. The decline began after the Fed announced that it would not raise interest rates for the time being but indicated the possibility of two more rate hikes by the end of the year. This marked a change from the Fed’s previous pattern of raising rates over the past 15 months. Alongside the rate decision, the Fed also released its latest economic projections, showing an expected terminal fed funds rate of 5.6% in 2023, suggesting that more rate hikes are on the horizon. The perceived risk is that the Fed may take a hawkish stance, pausing at this meeting but signalling a continued bias towards rate hikes.
- But then, did the trend reverse?
Well, it’s a bit too soon to say. Again, due to thinner liquidity and weak sentiment, a sizable, albeit not massive, buy order (this time) was enough to trigger a bullish reaction. Overall, the turbulence in 2022 has eroded confidence in native crypto institutions, creating an opportunity for traditional financial institutions to enter the market. Bitcoin has risen above $30,000 despite some difficulties, driven by the interest of traditional financial institutions. The proposal of a spot Bitcoin ETF led by BlackRock has contributed to this and opened up new possibilities for a potential bull market. Interestingly, the SEC has approved a leveraged Bitcoin futures ETF called the “2x Bitcoin Strategy ETF” offered by Volatility Shares, indicating institutional confidence in cryptocurrencies. Bitcoin has gained 15.4% in the last week, while Ethereum has seen a 10.3% increase. The altcoin market has also responded positively, with tokens like Polkadot showing significant gains. However, the NFT sector, particularly Bored Ape Yacht Club (BAYC) NFTs, has experienced a price decline.
- Nonetheless, you are going to launch very soon. Is there light at the end of the tunnel, therefore?
Again, this should not be intended by any means as financial advice, but despite the challenges mentioned, there are positive indications of resilience in the cryptocurrency market. Both Bitcoin (BTC) and Ethereum (ETH) have maintained their positions above important support levels. Investors are becoming less fearful of higher interest rates, as they believe the rate hike trajectory may be reaching its peak, and market anxiety regarding rate hikes has diminished compared to earlier in 2023. Recent inflation numbers have exceeded expectations, providing the Federal Reserve and investors with a sense of control over inflation. There is growing confidence that rate hikes may eventually be put on hold. The possibility of the central bank easing monetary tightening is seen as a positive factor for cryptocurrencies in 2023 and beyond. Although inflation remains above the central bank’s target at 4%, it has been gradually slowing over the past year. The Federal Reserve acknowledges that monetary policy often takes time to impact the economy, and as the effects of recent rate hikes unfold, inflation is expected to decline further.
Moreover, despite previous discussions, the NFT market continues to perform well when considering various metrics, remaining significantly above the lows observed in November 2022. In May, the number of unique active wallets involved in NFT activities increased by 27%, leading to a rise in on-chain activity and an increase in Ethereum gas fees. While NFT trading volume has been declining, the number of traders and sales remains high, indicating a shift in how traders are behaving. The number of NFT sales is expected to match or exceed the figures from the previous month, whereas trading volume lags behind. This suggests that there may be more NFT traders engaging in smaller transactions. While trading volume is an important measure of capital flow in the NFT market, the current scenario of higher sales counts and lower trading volume confirms a change in traders’ behaviour. Adapting strategies to capture this is crucial.
Very importantly, the recent move by the Federal Open Market Committee (FOMC) was widely expected by the markets, and the initial hawkish comment caused a decline towards $25,000. However, the price found support and quickly rebounded to its current levels. The anticipation of a rate hike at the upcoming FOMC meeting on July 7th is already factored into current market expectations. Prior to the meeting, there was a probability of over 50% for a 25-basis points rate increase in July, and rate cuts at year-end were no longer anticipated. Bearish bets tied to bitcoin were more expensive than bullish calls, reflecting cautious sentiment in the market. Following the meeting, markets are now pricing in roughly a 70% chance of another 25-basis points increase at the Fed’s next meeting in July. Some argue we could possibly have hit a floor and now be on the verge of witnessing the ignition of the bull market that will lead to the Bitcoin “halvening” in 2024.”
- Despite your relative optimism, the NFT market has certainly seen better days?
Yes, indeed. NFT activity is slowly recovering from the lows of the crypto winter but remains significantly lower than the levels seen in 2021 and 2022. Blue-chip NFT projects have experienced declines in their floor prices when measured in ETH terms, breaking the traditional positive correlation between ETH price and NFT activity. Factors driving ETH’s success, such as staking and layer 2 networks, do not primarily involve NFTs, contributing to the contraction of the NFT market and reaching new yearly lows in trade count and transaction volume. Daily trading volume on NFT marketplaces has declined since its peak in late February, with a downward trend each month. The market has shown signs of capitulation but continues to experience a slow decline, down nearly 10% in the past seven days. However, in my personal view, despite the current slump in NFT volumes and adverse news leading to trader liquidation or hesitancy, the NFT market is still in its early growth stage. And, while overall NFT sales have dropped significantly since the beginning of the year, certain high-profile projects like “Otherdeed for Otherside” and, hopefully, CryptoChronic can still raise tens of millions of dollars with their respective launches.
- What are the causes of this market turmoil, in your opinion?
In my outlook, the bear market in crypto and NFTs can be attributed, in great part, to the Federal Reserve’s aggressive series of interest rate increases. The correlation between macroeconomic factors and the crypto ecosystem is evident, as favourable market conditions drive investors towards higher-risk assets like cryptocurrencies. On a daily rolling three-month basis, there has been an inverse relationship between interest rates and the crypto index, with a correlation of 63% since May 2017, increasing to 75% from May 2020. The impact of macroeconomic factors on the crypto ecosystem is evolving, especially as more retail and institutional investors diversify their portfolios to include crypto. Historically low interest rates have fuelled investors’ demand for higher-yielding assets, and the actions of the US Federal Reserve have a global influence, including on crypto markets. Lower interest rates stimulate appetite for assets with higher risk and potential returns. Following the Great Recession, central banks maintained near-zero interest rates for almost a decade, leading to strong demand for higher-yielding assets, including speculative-grade credit. However, now things are different. Higher interest rates generally decrease the appetite for risky investments, which has contributed to the pullback in digital asset prices. The resulting uncertainty and anticipation of policy changes contribute to market volatility. The future of crypto in 2023 will depend on the appetite for risk among investors, which is currently low. However, as stated here before, we feel that it is about to change.
- How does this impact your plans and strategy for the Launch of CryptoChronic?
Overall, we reiterate that, in our view, the crypto and NFT markets are navigating through challenging times, but there are signs of strength and potential for positive shifts in the near future. We are adapting our strategy to effectively capture these changes. First and foremost, we will move our launch until after the next FOMC meeting on the 7th of July. As mentioned, a further 25-point increase is already factored into the current market dip. We do not see markets losing further on this news. Quite the contrary, we will finally be much closer to a resolution, bringing clarity and some degree of certainty. This implies that, in our view, the markets will start climbing from here, and with them, trading volumes of NFTs.
Launching a bit later makes even more sense because, in the midst of all this turmoil, our brave developers led by RiC Cangini and Pierluigi Maori have finished our full game. We are testing and retesting it, debugging it, playing it on repeat, and quite frankly, enjoying every minute of it. We can’t wait for our gamers to do so as well. In this light, and because it is paramount for us to provide our users with as much utility and substance as possible, we have decided to launch both our NFTs and our full game with its three layers of gameplay, all together. The public will finally see that we were not joking when we mentioned Chronics are more than just a pretty face… They will be able to immediately be projected into our Cannaverse, realizing its full potential, and experiencing how fun it really is. There is so much more to CryptoChronic than what can be measured by an arguably whimsical and arbitrary market price! Although we know the launch will happen mid-July, we are still deliberating on the exact date. We will keep our public posted, so stay tuned!
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