GM everyone! Today’s newsletter is going to be a little different - as you can probably see, the market is in quite a sticky situation. Narratives really are just pockets of outperformance in periods of uptrend, caused by shifting liquidity - but in a down trend like we’re in right now? Narratives come and go in less than a day, putting people like me out of a job!
But I’m not too mad about it - I’m actually pretty glad, tbh. Lower prices just means a perfect time to chill and do research on coins to buy when liquidity inevitably comes back - but will it?
So today, I just want to pen down my thoughts.
HTF Thoughts
I’m still uber bullish on crypto on a generational timeframe; I don’t want to repeat the whole shtick of “it’s revolutionary finance” etc. but I did write a pretty good tweet explaining my thoughts - but yes, I think that if you’re in this industry, it pays to be bullish from not just a “market cap” point of view, but from a career point of view as well.
Zooming down, I’m on the fence as to how markets will continue playing out into 2025. This is where my weakness in macro comes in, because I have no real grasp as to how the puzzle fits. I know the basics, but I have no concrete data as to whether rate cuts are bullish or bearish (long term bullish, short term bearish were my initial thoughts), nor do I have any real experience in similar macroeconomic situations that I can refer to.
I want to say that I’m bullish, but this is more of a prayer than a thesis, tbh. 2025 LOOKS to be a good year - given the current Republican’s presidents odds, we can assume that Trump becomes president - and if we follow that line of thinking, it seems to mean looser credit, a more risk-on environment, and most importantly, loose crypto policy (Trump recently said he wants “Bitcoin to be made in the USA!”)
Well, the risk here is 1) If the Democrat nominee wins - they don’t seem to be AS bullish on crypto; and 2) If Trump wins, it doesn’t mean all is good - we could very much have a bad macro situation because currently stocks are at ATHs and there are some very, very bad indicators flashing that haven’t been since 2008 (go watch Game Of Trades);
Unfortunately, this long spiel has just one conclusion: I have no idea! My base case is that I’m bullish 2025, and this is what I’ve planned around - a Republican president, looser financial policy, and a general continuation in the uptrend with some hiccups in between.
LTF Thoughts
So given the base case of bullishness in 2025, what do I think on the LTFs (monthly and weekly?) Well, I believe that Q4 into 2025 will be very bullish for risk assets, and thus crypto - but I don’t think crypto will continue doing well right now.
In fact, I’m still very much bearish despite this move from 53k → 58k. I’ve actually been pretty bearish ever since that FOMC move a few weeks ago, where BTC into 72k couldn’t break while stocks broke higher ; Obviously, the time to be maximally bearish has since faded ; as the old GCR adage goes:
Maximally bearish at the top, less bearish at the bottoms. I’m still bearish, but cautiously so - I’ve bought a good amount of spot at the 53k level, just because they are *generally* good levels to get spot exposure in. On the perps account, I’m still short some of these high FDV tokens, hedged with some longs on ETH.
Where do I think this ends? Well, I like to think that we’re closer to anger now (the tweet above was before the move to 53k) ; 53k is the part where people seem to be getting angry, so one more leg down to 40s would make a lot of sense to me.
I do think that we’re going to see a relief rally at these levels of 53k - 60k; but I think that you sell any tap of 60k ; I can already see people getting maximally bullish when 60k is reclaimed, calls of “i told you so” and “it was just a deviation”.
Where Am I Wrong?
I’m wrong if BTC goes up, of course. But I say that half jokingly. I will turn technically bullish if BTC manages to reclaim the range lows of 60-62s and hold; but more importantly will be how alts react to such a situation - I want to feel the risk-on sensation in myself before I turn fully bullish. So far, these bounces (e.g 53k → 57k) aren’t a “risk-on” scenario similar to Jan / Mar, but more akin to just dead cat bounces / liquidation buys.
I’m not too concerned if I’m wrong though - again, that’s what those spot buys at 53k were for! I would be less allocated than I’d like to be, but that’s something that can be easily changed ; I’d much rather be wrong and miss the bottom, just to catch it later, than to be right yet be long here.
So… What Next?
Well, so to recap:
HTF: Bullish
Now: Bearish
I have no idea where it ends, but I’d like to say Q3/Q4 just because of the whole “summer lull” shtick (that has a lot of credibility, I’m just not elaborating on it); the tldr is; summer lull, books are thin, lots of asks (Mt Gox / German government), but come Q3/4 - FTX reclaims (16bn apparently?), ETH ETF, and a potential bullish Q4 (which is what we saw in 2023).
So what next? Well, preparing for the time when risk-on conditions come! I’ll cut you some slack and just get straight to it - here are the themes I think perform really well once we get risk-on again:
ETH ETF & DEFI
Scroll on Twitter for 5 minutes and you’re bound to hit a post that tries to gauge the “impact of the ETH ETF”; so I don’t think I need to explain to you why an ETH ETF is bullish. Some people believe that ETH ETF will be bearish because of how ETH has been acting the whole year - I think past performance doesn’t replicate future returns.
If we get risk on conditions again, the tailwinds of an ETF just seems omega bullish to me - it’s really that simple
RWA
Combining with the ETH narrative is the narrative that “institutions are coming” - thus, coins with some relation to this narrative will do very well. Expect speculators to come in, guns blazing, asking for the next “RWA with connections to BlackRock”.
Fundamentals
I will again spare you my long-form thoughts on this subject - but I do tweet about it semi frequently. In essence, I think coins that do things will send the hardest. We’ve already had some on-chain mooners (BANANA and ACX); and we’ve yet to see the rest of the market move on the rest;
Coin Selection
This is probably the part that I’m most excited about - getting to accumulate cheap coins! Although I do like the Jason Choi Tweet - asset selection gets you 20% of returns, while trying to time inflection point gets you 80%. I still love to asset select though, and I think if you pick the good small caps, it really gets you more than 20% (20% is a number meant for the big boys who can only long like top 50 alts I think).
ETH DEFI:
BTRFLY
MKR
AAVE
UNI
RWA:
CANTO
MKR
LINK
JASMY
DUSK
Fundamentals:
BANANA
ACX
TON
TAP
Depin:
Grass NFTs
PEAQ/KREST
Heurist NFTs
Others:
SHFL
AZURO
OM
BILLY
I do think DePin has a chance to be an evergreen narrative - it sits nicely between being entirely faded because people think it’s useless, and actually having some real use-case. Depending on the DePin project, there is a good chance that DePIN does have good fundamentals - Grass already has 2m users, and just launched a hugginface data set of over 600 million posts - more can be done to research whether this is useful, but it seems pretty legit to me compared to some of the existing decentralized AI projects and what they’re doing, tbh.
Anyways, that’s it for today! As usual, stay safe, and stay healthy!
<3,
Kyle
Another ETH Defi coin to consider: LDO