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Altseason has arrived.
For the moment, Bitcoin appears to be stalled out and trading sideways around $35,000, but investors are looking for excitement – there’s only one place to go: alts.
I talked about the why of altseason in last week’s newsletter but now that it’s happening let’s look at the technical data:
Earlier in January, Bitcoin breached $40k but the progress was quickly met with heavy selling that drove the price back down into the low $30k range. This event marked the end of the bullrun we’d been experiencing since mid November.
Bitcoin then began to coil and tighten its trading range on falling volume (see A and C). From here I expected a breakout, but it was unclear which way it was going to trade…
Bitcoin ended up breaking out upward, taking another shot at $40k but it was quickly routed and retreated back into a coil like we saw earlier (see B). All along, this has been happening on falling volume (see C).
The setup is the same as before, this eventually means we will see another breakout – direction again is unclear – but in the meantime all of that missing volume has to go somewhere…
And the result is that alts are exploding:
The explanation here is simple, Bitcoin put on a ton of weight in market cap and investors are taking profits and funneling them back into alts looking for returns.
Many alts are still trading below all-time-highs which tells me this altseason is just getting started. Bitcoin dominance is one of the leading indicators backing up this trend:
Still sitting at an extremely high 66% Bitcoin dominance has a long way to go before alts achieve an equilibrium against the King. For comparison, at the height of the 2017-2018 altseason, Bitcoin dominance bottomed at 33%. If a similar trend were to happen, that would mean hundreds of billions of dollars in market cap would need to be soaked up by alts.
Alts right now are only a $300B market. Even a slight shift in market cap from Bitcoin to alts (or net new market cap) will move this comparatively thin market upward very quickly.
Altseason 2021 is just beginning, and with the expansion in total market cap skewed heavily towards Bitcoin, it is shaping up to be an exciting time – certainly more so than 2017. Alts remain a thin market compared to the explosive growth in Bitcoin.
My eyes will be focused on DeFi projects as I believe they will experience a hype-cycle similar to what ICOs went though in 2017 – except this time these are vetted and used protocols generating hundreds of million of dollars in annual fees for their service. It’s not all smoke and mirrors. Crypto is real this time.
Forward and Upward.
The Portfolio Rundown
Last week’s rebalance is starting to pay off with altseason beginning. Cardano and Chainlink have taken off – their growth is eating away at Bitcoin’s dominance in the portfolio and hopefully this trend will continue.
While I’m still building the Aave position, its performance has been impressive and is up close to 80% since last week – I have strong conviction on Aave and am excited to see what this project does in 2021.
Kleros has been notably lacking since I started buying, but this is a moonshot position. Currently at a $79MM market cap, this is a micro-sh*tcoin – but a high quality one. The team is early and so is the product, as this project ages I expect market cap to grow quickly. Their work in DeFi via Uniswap Ninja has been very impressive so far and I will continue to watch closely as this name starts to circulate. Expect a deep-dive edition of the newsletter on Kleros sometime in the near future (hit that subscribe button to have it delivered to your inbox).
Nothing in this email is intended to serve as financial advice. Do your own research.