Welcome, Anon. It’s time for another brain dump considering the endless chop we are experiencing in the market.
Limbo, in Roman Catholic theology, is the bordering place between heaven and hell where dwell those souls who, though not condemned to punishment, are deprived of the joy of eternal existence with God in heaven.
This is where a lot of people who are still in this market find themselves amid this endless chop as BTC is ranging back and forth killing the majority of market participants.
One-half is concerned about the market structure breaking down and sending us lower.
The other half is hoping that this is a bull market and that we are about to send higher.
Meanwhile, the market does what it does best, which is punishing both sides to ensure maximum liquidatable value.
Where do we go from here?
First of all, I am not a fortune teller, this is just my perception based on being here for several years now. Bulls want to believe that max pain is up, but that is not the case. Max pain is another swift leg down destroying the final piece of hope the last remaining bulls have before reversing.
As everyone believes they can simply allocate around halving, the painful scenario is a swift up-and-down move happening to leave halving-allocators sidelined as they will have to enter higher at that time.
Right now we find ourselves in a scenario where bad news isn't taking us down and good news isn't bringing the price up either. DeFi looks to have survived the worst of storms and the industry's bear market is most likely over with all negative headwinds out of the way.
My view of things is that we are finding ourselves in a similar scenario to 2019 where you could find a lot of DeFi gems for cheap prices which went on to do 10-100x's later on. Right now, people are dumping long-term positions due to 10% moves that will be irrelevant in 1-2 years from now.
The Binance DOJ fraud charges are the absolute worst that can happen. After that potentially takes place, we have seen Coinbase being sued by the SEC and potentially Binance being charged with fraud. That is the two largest exchanges and the market is still waiting for this overhang to resolve itself. If it does take place, the bad news will send prices down and people will claim that the industry is dead. That is your cue to go in heavily and it will release the market from the shackles.
Your job here is to survive and not get liquidated. Increasing your portfolio value by 10-20% in this chop is irrelevant in the grand theme of things as we most likely will be seeing much higher price levels in the coming years and long-term holders will undoubtedly start outperforming short-term holders soon.
BTC Halving & ETF
A large cohort of ETH-maxis would like to believe that the BTC halving is a meme. One is free to believe whatever they like but the fact of the matter is that it has a significant impact on the market structure due to the impact of selling pressure it affects. The rate Bitcoin miners are selling BTC off at record levels based on their revenue.
With this sell-pressure decreasing by 50%, it is bound to have an impact on the market structure of BTC due to the reduction in selling pressure it causes, which normally leads the run into a new bull market.
The results of the impending ETF approvals are being watched closely by the market and a denial will most likely be the catalyst that sends the price further down. An approval is bullish if the institutions applying for it actually hold BTC.
Either way, if a BTC approval goes through, I believe ETH will outperform BTC from that point as that would mark the bottom of the ETH/BTC ratio that a cohort of people continue to complain about on the previously called bird app (now X).
What more narratives do you want to spin up for people to buy BTC? After that, speculation will turn to ETH ETF approvals which most likely will take longer. Personally, I keep DCA’ing into ETH every red day and if we actually get another breakdown, I’ll be buying truckloads of it at once. As mentioned in the previous brain dump, I continue to buy ETH on red days because I don’t operate under the premise that I will be 100% right but under the premise that I might be wrong. Regret minimization is key. Ideally, I would like another 6 months to accumulate but I highly doubt we will get that.
NFT Bottom
The NFT market has most likely bottomed and had its DeFi 2022 moment this summer. Considering all the Blur liquidations that took place along with the Azuki debacle that broke the camel's back, sentiment is at an all-time low.
People tend to forget that the initial NFT surge in 2021 came at the back of crypto natives making significant amounts of financial gains during DeFi summer 2020 which then trickled into NFTs later on. In my opinion, for NFTs to experience another bull market you need people to make a significant amount of wealth in other segments of the market before.
Contrary to some belief, NFTs are not dead and they will continue to be a thing. Why? Because people making money in this industry (or in general) have an inherent need to flex (don't do it kiddo). Considering the majority of people in this industry are online far more than they should be (myself included), they want a way to flex digitally that they have made a significant amount of money. There is no better way to do that than wearing a very expensive PFP.
However, while the market has bottomed it still doesn't mean that the majority of collections will survive as most will die. Your job albeit hard is to identify which ones you believe will survive in the long term. I have my personal list of things I am confident in that will survive the current existing collections. It will be interesting to look back at this in 2 years:
Cryptopunks
Pudgy Penguins
Milady & Remilio
Kanpai Pandas
DeGods
Out of these, I don’t think it’s a surprise to anyone who has been a reader of my articles that I am betting on Milady’s & Remilio’s based on pure upside and strong cult community.
Contextualizing this, I believe NFTs are the last segment of the market to run. Thus, you won't see an actual NFT bull market until ETH, BTC, and DeFi have run their course beforehand creating new wealthy market participants. However, they will still gradually increase in price from here which is why you want to pick your winners now. When the NFT bull market hits, that is when you get the crazy price levels.
Alternative Ecosystems
Solana is looking like it is making a renaissance and will be a significant player in the L1 competitive landscape. They still have a strong community that is rebuilding after the farce of the DeFi landscape that initially was built when SBF was around (High-FDV scam that slowly bleeds out small buyers).
I have been building a position in SOL since Robinhood liquidated users' positions at the local bottom and will continue to add on dips. How do I size my SOL positions?
Essentially, if I believe SOL has the potential to go back to ATH (around $250) and I think ETH will maximum reach around 10k, that is a 10x move on SOL's side in comparison to a 5.5x move (let's say 5x for the easy math)
Thus, I keep my SOL position 2X lower than my ETH stack based on my thesis as a hedge. No need to size it higher as it would give me similar results. Similar return on a risk-adjusted basis as ETH is a lower-risk move.
Note: It’s still not there yet as I build it over time and if it doesn’t reach that level that is fine as I won’t chase. ETH remains the main priority.
People tend to do this differently but it's normally what I do with DeFi positions as well if I buy a market leader and then a potential 2nd runner that is doing well too (except in the current purgatory of a market environment - then you only buy the market leader)
That’s a lot of information to digest so I will leave it there for this one, hope it provided value and see you in the next brain dump.
I hope you enjoyed the post. Don’t forget that you are more than welcome to leave feedback or drop any questions in the comment section.
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You are making sense bro, thank you 📌