Hi All,
Just wanted to jot down a few thoughts on where we're at with the crypto market at the moment.
The quick summary of the year to date is that there was a large run-up in the Bitcoin price early in the year following the ETF launch, BTC price has been choppy since then, and altcoins have been bleeding down.
What are the stories here? And what's going to happen next?
Bitcoin is likely to keep outperforming altcoins. There is little to no new retail interest in the crypto markets at the moment (meaning everyday folks like us). As more coins launch, the current money in the broader crypto space gets diluted among more and more assets.
Alts have been bleeding for most of the year now and I see no reason for that to change in the near future.
Compounding this further, institutions are just starting to understand Bitcoin. They are nowhere yet on crypto at large. Combine institutions just beginning to dip their toe into Bitcoin (and this is a process that will take years) with a lack of retail interest in crypto, and you get Bitcoin outperformance.
For us altcoin enjooooyers out there, I see no reason to front-run the eventual shift with a heavy move into the broader crypto market before it actually happens.
Why the lack of retail interest in crypto? I would say it's a combination of three things: feeling burned after the last bubble in 2021, a major lack of regulatory certainty, and AI as the shiny new thing for folks to get interested in and pay attention to.
Will retail come back to crypto? Yes, for sure. Unlike AI, crypto is an entirely new asset class and is the natural progression of the internet itself. To quote Raoul Pal here: "The internet simply cannot reach its next state without blockchain. It is a prerequisite for advancement of the internet itself".
To add on to the above, this is why, to me, crypto is far more interesting than AI. AI is like a supercharged turbo engine that will indeed power productivity heights, but crypto is an advancement of the internet itself, enables the next version of the nation-state, and opens the door for new economic primitives that we have not even begun to explore. I am much more intrigued by the latter.
So am I saying not to own any coins other than Bitcoin? Well, no, I'm not saying that, but I do think that most other assets will underperform.
I do believe, however, it is time to whittle down your portfolio to only a few core assets. This is not the time to be holding on to the memecoin you bought months ago. That may work in a market where new money is flooding in, but not in the dry attention game we find ourselves in.
If you're going to hold something, it's not just about either fundamentals or narrative, it has to be both. If it is not fundamentally strong and doesn't have a narrative that is resonating with the market, I'm not owning it right now.
Exception: I'm still holding my ETH. Ha.
If you squint, you can see shoots of green outperformers on positive BTC days, and I think the strength is meaningful. What's strong in a terrible altcoin market may bode well for an eventual bull.
I tend to think most people should own a single-digit number of coins, maximum. I don't think 'spray and pray' is appropriate for the market here.
Larry Fink, CEO of BlackRock, is still only beginning his BTC and ETH pushes. This is not going away; it is the first inning of true institutional adoption. Don't let Larry take your coins.
I am skeptical of most new layer 1 launches and the L1 trade. The adoption of Solana in the last year (which I think is genuine) was born out of a time where ETH had $50 gas fees in times of high congestion. Solana brought that down to 1 cent. It makes sense in hindsight. New L1s are going to just be faster and cheaper than that? Meh.
At the same time… I think two opposite things are true. 1. The crypto economy has just begun and it is far too early to declare winners and losers. 2. The network effects of gaining more developers, apps, and users are very real and will be hard to overcome.
While a lot of people are feeling burned out by crypto, I am more excited than ever. From where I sit, there has been an enormous amount of progress on crypto applications and UI/UX. To me, crypto is already valuable, even if not a single new thing gets developed (and that's not happening).
I have no idea what effect the election will have on the crypto market.
