Exit Liquidity - 0xKyle

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0xKyle's Weekly Market Narratives #3

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Weekly Narratives

0xKyle's Weekly Market Narratives #3

Dalai, Nuke, Chop, Wash, Dalai. 23 Jan - 29 Jan, 2023

0xkyle
Jan 22, 2023
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DISCLAIMER: The information contained in this newsletter is for informational purposes only and should not be considered financial or investment advice. Any opinions expressed in this newsletter are solely mine.


Happy Chinese New Year everyone! Welcome to the third week of weekly market narratives, the only substack in the entire crypto space that covers narratives in the markets. I hope everyone’s doing well in this bear market rally - remember, don’t overtrade!

Cheers, Kyle

Also, if you want to support my work, you can use my dYdX referral link here. Or just share my article with your favourite people in the world!

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Executive Summary

Crypto Total Market Cap, D1 Timeframe

$BTC 7D: +10.1% | $ETH 7D: +6.8% | TOTAL 7D: +6.41%

This week was characterized by a strong nuke in the middle but ended with a bang as we saw an incredible rally on Friday into the weekend. Once again, the strongest performers from last week continued to perform strongly, with coins like $APTOS hitting ATHs and going into price discovery. However, what I find more pertinent to discuss is the price action that we’re seeing play out. Last week I put Hsaka’s Tweet as the tweet of the week, and this week is no different:

Twitter avatar for @HsakaTrades
Hsaka @HsakaTrades
I see we're back to the ltf chop suey slow grind up, burj khalifa, followed by dalai lama, ad infinitum pa, before the breakout candle. A 2018 classic.
8:28 PM ∙ Jan 10, 2023
1,427Likes88Retweets

Why? Well - this morning I was forced to liquidate a big chunk of my profits from the past few months. I’m not a god-tier trader - just a student of the markets (just being transparent here). But the reasons for my liquidations were:

  1. Over-leveraged

  2. Bad price

And I would like to emphasize - as sidelined money feels more “FOMO” from being stuck, they (like myself) will be prone to longing at a bad price - and using too much leverage to “make back on what they lost by not being active before”. In doing so, a drop in price causes a mini liquidation cascade, and many of these late longers get rinsed.

This piece of knowledge is, in my opinion, essential for us to understand if we want to make money in this mini echo bubble. I have since added more rules to my rule book, namely:

  1. To make more spot buys - overleveraged longs will get rinsed, whilst spot buys can ride out choppy PA

  2. To set more limit bids for good entries;

  3. To only use leverage in specific scenario (like news catalysts) - leverage for majors will likely get rinsed

Hopefully, this advice will be useful for you.

Smart Money Stablecoin Flows

  • 26% last week → 25% this week

Current / Upcoming Market Narratives

APTOS HITS ATH, SOL LAGS BEHIND

$SOL 7D: +7.2% | $APTOS 7D: +58.7%

Aptos sees continued strength to ATHs this week as Hsaka continues to be a big believer in the coin. Aptos continues to be a dark horse amongst everything, with incredible strength on retracements and late-longers perpetually fomo-ing in. I would look for a good spot limit bid to capture the remaining upside, but just recognise that a big part of the move has already happened (probably).

Solana seems weaker than Aptos now (I previously believed that Aptos was following SOL). This could be a good place to long, but I believe that better opportunities lie elsewhere with tokens that have upcoming catalysts instead.

AVAX SEES RENEWED STRENGTH

$AVAX 7D: +6.7%

With Amazon AWS and now Shopify partnering with Avalanche, it seems positioned to be the “new” Matic in 2023 in terms of having crazy business developments. While the 7D gains aren’t impressive, Avax saw some pretty crazy candles during these announcements.

I personally always thought that AVAX had a lot of potential with their subnet technology, and am just glad that they’re going through with it. Might not be a bad idea to pick up a few spot longs for the longer term (couple of years).

Twitter avatar for @avalancheavax
Avalanche 🔺 @avalancheavax
Ecommerce generated over $5.4 billion in revenue in 2022. @Shopify was front-and-center of this growth and now, launched NFT capabilities powered by Avalanche to harness the platform's high transaction speed and low transaction costs.
coindesk.comShopify Merchants Can Now Design, Mint and Sell Avalanche NFTsThe new integration streamlines the NFT process for buyers and sellers.
2:00 PM ∙ Jan 17, 2023
334Likes144Retweets

OPTIMISTIC ATHs

$OP 7D: +23.2% | $VELO 7D: +44.0%

Optimism saw ATHs this week into price discovery - however, it has retraced since then and seems to struggle to break out of its current range. Personally both Aptos and Optimism have shown to be incredibly strong coins this cycle, so I wouldn’t count it out just yet.

The secondary thesis would be that it remains the only L2 with a token - an L2 season starting would most likely see a large buy pressure on the token.

Also, Velodrome on Optimism has seen renewed strength as more people pile into the ecosystem. It might be worth checking out the rest of the tokens on Optimism!

LSDs STILL ALIVE AND KICKIN

$LDO 7D: -5.3% | $FXS 7D: +41.4% | $RPL 7D: +10.8%

The LSD narrative is still very much alive, and I’ve noticed that retracements on $LDO have always been quick to revert back higher. Smart money, on the other hand, has been exposed for selling $LDO in the millions recently - however, the continued strength despite this is something to take note of. Bullish selling?

Personally, I’m more biased towards $FXS because you’re not just betting on LSDs - you’re also betting on FXS as a whole. In the final days of Luna, Do Kwon even mentioned that they were working towards Frax’s model of being partially collateralized whilst maintaining algorithmic pegging. I have high hopes for the protocol, and believe that 2023 might be the year we see some integration with IRL products.

v3?? v4?? WEN APP-CHAIN

$dYdX 7D: +8.2% | $SYN 7D: +17.9%

This has been a recurring theme in my newsletter as well, but the continued strength of these app-chain tokens still carries on. However, the longer that this drags on, the less bullish the announcement might be, as traders continue front-running the announcement. I could be wrong, but still - be careful!

Thanks for reading Exit Liquidity - 0xKyle! Subscribe for free to receive new posts and support my work.

NFT INDEX

$APE 7D: +10.9% | $LOOKS 7D: +18.5%

APE as an overall index of the NFT space + a bet on Yuga and whatever they’re cooking these days - APE is seeing renewed chatter on Twitter as people remember that there’s a way to bet on the overall NFT market by buying the NFT coin.

I expect this to trickle down to other NFT coins as well, such as $LOOKS or $x2y2 - however, the one catalyst I am waiting for is the $BLUR airdrop. C’mon, launch already!

DEFI COINS

$AAVE 7D: +9.6% | $CVX 7D: +37.3% | $CRV 7D: +36.8%

Aave v3 rumored to be coming soon could be a nice catalyst - but as for CVX and CRV, I gotta be honest with you guys - I have no clue what’s going on. Probably something gotta do with bribes, though. And possibly a stablecoin.

Twitter avatar for @FroyoFren
Ice v3 @FroyoFren
People finally realising that $CVX is the backbone of on-chain liquidity Any LSD vying for dominance will have to go through it, or Aura Aura and Bal more L2/Arbitrum focused — Expecting big things there as well. https://t.co/akxkp2p5pP
Image
Twitter avatar for @FroyoFren
Ice v3 @FroyoFren
Debated if I should share alpha, but here it is. Working thesis for massive LSD beta: Shanghai and resulting ETH withdrawals are rocket fuel for $AURA and $CVX. They benefit exponentially from competition between $LDO $SWISE $SD $RPL and more. In a war, sell the swords. https://t.co/IHhO2zEmvm
8:56 AM ∙ Jan 16, 2023
86Likes14Retweets
Twitter avatar for @0x4Graham
0xGraham.lens 🦇🔊 @0x4Graham
Big week for Aave. V3 hopefully coming this week 🚀
7:48 PM ∙ Jan 15, 2023
120Likes15Retweets

BAG OF NEW COINS

Lots of coins mentioned here are already talked about above (e.g OP and APTOS), but just wanted to add this section in because it’s an essential element to remember in the crypto space - New > Old.

Others

  • Other coins:

    • $STG saw renewed attention as it rallied +48.7% in a day, on news that a family office wanted to TWAP $2 million worth of $STG. Tweet here.

    • $MAGIC is up +66.6% as the Treasure team shows to have shipped a bunch of products + bullish unlock of a huge chunk of $MAGIC on the 1-year mark.

    • Chinese coins as a possible narrative - hasn’t seen much activity yet, but certain tokens to look at are $FIL / $OKB

    • $HOOK seems to be the new CT darling, with multiple narrative traders citing low float and price nearing price discovery

    • $INJ saw a mini pump of +16.8% on the weekends as a famous trader announced that he was buying

  • Events:

    • FOMC on 1st February

    • Bank of Japan to continue easing - bullish buying

    • Genesis owes more than $3.6 billion to top 50 creditors.

  • NFTs (I’m not active, but these popular ones even found their way to my ears):

    • Createra Genesis Lands - China Minecraft metaverse land, apparently

    • Redacted Remilio Babies - Miladies v2, or something

    • The Memes By 6529 - A punk6529 collection, it has been on the rip recently

Useful Tweets:

Twitter avatar for @snoopieeeee
snoops @snoopieeeee
Sometime ago, I stumbled across an interview with @Trader_Dante where he highlighted what he looks out for in a market. Here's an example of one of them:
9:52 AM ∙ Jan 17, 2023
72Likes15Retweets
Twitter avatar for @ganymede_0x
0xGanymede @ganymede_0x
Over-leveraged longs will get punished, I feel people are getting euphoric, not shorting, but majority in stables. I expect a big dump coming. Not 10k, more like a 20-21k.
Twitter avatar for @CryptoPoseidonn
Poseidon @CryptoPoseidonn
People -“Keep dreaming 10k, it won’t come, bottom is in, you missed all move, you are wrong, you will buy above 30k” Me- https://t.co/OVVuJWKNHw
4:33 PM ∙ Jan 21, 2023
24Likes4Retweets
Twitter avatar for @TraderMotif
Motif @TraderMotif
Notice how I always try to give you a price of where I believe I’m wrong.. Knowing where you’re wrong is the most important part of trading. If you move the goalposts you’re an idiot and need to reevaluate your whole thought process.
11:43 PM ∙ Jan 21, 2023
Twitter avatar for @alphaketchum
Alfa @alphaketchum
Genesis bankruptcy is going to reveal the entire crypto leverage cycle. Enjoy.
Image
6:46 AM ∙ Jan 20, 2023
2,116Likes584Retweets

Thanks for reading Exit Liquidity - 0xKyle! Subscribe for free to receive new posts and support my work.

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