☀️ Hot Coin Summer ☀️

Alts explode, could it be a sign of things to come?

Hi Operators 👋,

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The crypto market is on fire right now 🔥

Ethereum skyrocketed past $3k, Binance Coin took the #3 spot in the market cap lineup, Dogecoin is worth $73B — and Bitcoin is… flat?

Amidst the chaos I’m starting to see the beginnings of Hot Coin Summer, AKA #altszn.

Let’s check out what’s going on…

Bitcoin remains flat 😐

Bitcoin is up 85% on the year and a lot of people have made a lot of money.

But the recent dip of -27% wasn’t your average correction – it was a momentum killer. The dip broke the upward trend set at the end of last year and sent Bitcoin in search of support — yet to be found.

Looking at NVT Signal (a form of P/E ratio for Bitcoin) it’s clear we’re in a downtrend and I don’t expect Bitcoin to move upward until this trend is broken to the upside.

So what’s the outcome of all of this? Sideways trading *yawn*.

But remember what I said earlier about tons of people making money? Well that money needs to go somewhere — and it went to alts.

Ethereum is back baby 💅🏻

In all that time Bitcoin’s been in a sideways slumber, Ethereum has exploded posting a 127% gain and climbing.

Several other altcoins have followed posting smaller but similar numbers.

So what’s going on here? Did Vitalik Buterin drop a sweet new mixtape?

Nope, it’s the start of the altcoin cycle.

Pump it up 🏋️‍♀️

Just like all of us, alts are getting their Hot Coin Summer beach bods in shape and are hitting that preseason pump.

To explain what’s going on here I’m bringing back a graphic from several editions ago on the altcoin cycle:

The cycle is simple, gains in Bitcoin are filtered down through alts as investors and traders hunt for gains. Ultimately these gains are traded back up to Bitcoin and the cycle starts again (with a portion typically taken off the top to fiat).

Currently we’re witnessing the Bitcoin ➡️ Large Caps stage of the cycle.

This is evident in the ETH/BTC chart going parabolic.

Year-to-date (to all-time highs) Bitcoin has added $689B to its market cap.

With the upward momentum now (temporarily) broken, traders are moving these gains down into alts in the hunt for compounding.

With alts only representing $1.2T in market cap, sizable contributions from Bitcoin can and will move the market upward quickly.

Bitcoin dominance (or its percentage of the total crypto market) took a sharp dive downward when all of this kicked off…

At the peak of the 2017/2018 bull market Bitcoin dominance bottomed out at 34% – which means there’s likely plenty of room left to run from the current level of 46%.

Regardless of whether this lasts or not it is a glimpse at the exciting things to come this summer as the bull cycle develops…

Tl;dr

👉 The most recent dip was violent enough to break BTC’s upward momentum

👉 BTC is in a bearish/sideways pattern

👉 Traders are now starting the first stages of #altszn by cycling profits out of Bitcoin into Ethereum and other large caps

👉 Depending on how long this lasts we may see Ethereum profits cycled deeper into alts = more pumps

👉 A Bitcoin pump would likely break this cycle and defer it to later in the year as it sucks value back in to climb

Forward and upward.


The Weekly Fund Rundown

#Altszn is alive and well in the portfolio as Ethereum gains percentage share from Bitcoin. Chainlink and Aave are telling a similar story as well.

Last week, in addition to the previous top up of Kleros, I added to the Aave and Link positions as well. At this point in the bull cycle new capital will have the biggest impact deeper in the stack on projects that have more room to run relative to the majors.

Obviously this ratchets up risk but the silver lining here is that I’ve already put in the work on the majors over the last few years and now it’s time to shift to a more passive stance in that segment and focus on new opportunities – mainly around DeFi.

One significant bet I’m feeling currently was the swap of Ethereum for Bancor – that investment is largely flat against ETH’s run of 100%+. Ultimately Bancor is a great project with fantastic use cases but nobody is immune to FOMO. Here’s to hoping that one pays off…

Yield-land

  • ADA position is 100% delegated earning ~5% annually

  • ETH position is 75% staked in Bancor liquidity pools earning ~7% annualized

  • BNT position is 100% staked in Bancor liquidity pools earning ~40% annualized

Worth noting that since I’ve been staking in Bancor yields have dropped significantly, I expected this to happen but not on such a short time scale. I’ll be watching this closely as I do have a personal risk premium for allocating to these pools – if I can’t collect yield above my threshold those assets are better off in cold storage.


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