Monthly Crypto Alpha Report – January 2024
Animal spirits are back… Moon math is back… Meme coins are back… Are you not entertained?
But also… overwhelmed. Coins are pumping left and right, and just like with popcorn in an oven, it’s hard to predict which ones will fly next.
Don’t let it make you nervous. Let’s have a look if we can make sense of it all.
As if on cue for the holiday season, BTC started moving on the first of December. Sats were stacked and leverage was built up: according to Coinalyze, roughly 11 billion of BTC was in leveraged positions, up 50% from back in September.
The rally met resistance, first topping out at around 44.4k on December 5th. A lot of leveraged longs were flushed, which is always healthy.
Several Glassnode indicators suggested a degree of near-term exhaustion. One is the rising amount of short-term holders sending coins in profit to exchanges, presumably to cash out (green line in the below chart).
So what’s next for the King?
The Bitcoin Spot ETF is less than a week away, it seems. The potential approval of spot bitcoin ETFs by the SEC could come between Jan 8 and Jan 10. As investors are holding their breath, the BTC price is getting trapped in an ascending wedge, a bullish pattern. Interestingly, the apex of the wedge lies right around the date of the potential ETF approval date.
An ETF approval is probably already largely priced in. Trading these kinds of news events is hard: the price often whipsaws.
Maybe the BTC price will still pump on ETF approval: great. Maybe it pumps then dips, then chops around. In case of a denial (unlikely) we’ll dump but we will be saved by the halving in a few months.
Overton Window Shifting
In December, the traditional media started catching on to what is happening in crypto. An Economist article compared Bitcoin to the cockroach that simply won’t die. Articles like these show us that the ‘Overton window’ is shifting. Media are walking back their position that crypto is bad and dead. Crypto is slowly getting in favor again.
And the early bull welcomes strange allies. I watched a recent speech by Kristalina Georgieva, head of the IMF. To my surprise, it’s pro-crypto. She had had a peek at what’s possible by the folks at Project Guardian, a collab between the Singaporean government and fintech industry.
In this speech, you hear her utter things such as: ‘Crypto assets are not going away’, and, ‘Potential gains [of crypto] could be large’. Seems like the Overton window is also shifting in governmental organizations. Part of me feels paranoid. Another part of me thinks: the worst of the then-they-fight-us stage might be behind us?
Ethereum
If you had told me on July 1, 2023, that holding a portfolio without ETH would have outperformed basically any reasonable portfolio with ETH, I wouldn’t have believed you. No one would have.
This isn’t to say that Ethereum will perform badly from now on. It just shows that Ethereum has been trapped between the BTC spot ETF hype on the one end and fresh crypto spring narratives on the other end.
The lackluster performance of Ether in this market phase is also a reminder that ETH didn’t tumble so deep as alternative Layer 1s such as Solana and Avalanche.
Below is the SOL-measured-in-ETH chart. You see the pump of SOL since October 2023 and ETH being left in the dust (in SOL terms).
Zooming out, you see that SOL is simply almost back at the price in ETH it had in December 2021. Had you simply held your ETH and SOL bags of those days, the relative value would have hardly changed. It’s just that SOL has been more volatile.
The SOL frenzy has finally cooled off since Christmas. It’s fascinating to see how the price of SOL, as measured in ETH, reached the bull market top level before retracing. Top signals were SOL and BTC maxis pronouncing Ethereum dead. A great time to rotate a bit of your capital.
Ever since, ETH has been on the rise, and its ecosystem plays – For example, its Layer 2s (ARB, OP) and DeFi coins (UNI) have broken out of their accumulation zones.
Fade ETH at your peril, of course! EIP 4844 (aka Proto-Danksharding), an Ethereum scaling upgrade, is coming in the first quarter. It will reduce layer two fees by at least 10x and make prices roughly competitive with Solana and the like.
This is bullish for Ethereum L2s such as Optimism and Arbitrum. The Layer 2 trade is where the real money will be made!
And then there’s the narrative shift from the Bitcoin spot ETF to t
The markets are looking bullish for 2024. Time to shake off the bear market PTSD, guys.
Sure, the market could have a pullback in Q1. But the stars are aligning for an impressive bull run.
The Bitcoin ETF is coming, which is a once-in-a-market liquidity event. The American Central Bank will have to cut rates, boosting risk assets. And then obviously the Bitcoin halving in April.
Strap in and enjoy the ride.
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TCL Publishing ltd (director Lark Davis, owner of Wealth Mastery) is not providing you individually tailored investment advice. Nor is TCL Publishing registered to provide investment advice, is not a financial adviser, and is not a broker-dealer. The material provided is for educational purposes only. TCL Publishing is not responsible for any gains or losses that result from your cryptocurrency investments. Investing in cryptocurrency involves a high degree of risk and should be considered only by persons who can afford to sustain a loss of their entire investment. Investors should consult their financial adviser before investing in cryptocurrency.
You can find a full disclosure of all my crypto & venture investments here.
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