Weekly musing: two views, one outcome.
What a nice couple of weeks! Crypto and stocks are having some respite after a tough April — with BTC up 20%, ETH 10% and SOL 50% month-to-date! Now the question is whether this is the beginning of the end of summer (quite early, I know) or just chop.
First, and as usual, I strongly agree with Alex. However, remember that as the market matures, crypto cycles won’t see spectacular growth across the board — only in certain sectors, e.g. nihilistic meme coins or new innovative verticals.
The meaning here is that BTC and ETH will continue to be massive projects known around the world. In other words, most potential buyers are already exposed to them and these won’t appreciate much more even if they’re “awesome”.
Why won’t they appreciate much? Because those two projects currently don’t scale. And without a change in scale, prices don’t multiply — it’s that simple. So what’s the takeaway? If you want juicy returns you must risk it for the biscuit.
Why I’m talking about this now? In the last post, two weeks ago, I explained that if alts pumped in May they would outperform BTC and that would sign an exciting summer ahead, as in 2020. And that’s just around the corner!
The only question is whether Solana, Base or another L1 will lead the way, creating the kind of FOMO we experienced in Q1 and that brought fresh blood into the space - who by now has mostly forgotten that crypto and its memes exist.
Secondly, the insight here is that most investors anticipate something from the previous year — until we go full circle — but not from the previous years. So if we get that bullish summer, we can also expect a crash well before Christmas.
My indecision lies with the fact such a crash can be similar to what happened in 2017 and 2021, or — if we’re lucky — this can be like 2016 and 2020 after all and the market continues to pump next year. I’ll surely continue to muse about this!
But, for now, it’s fairly consensual that we’re mid-cycle and the macro backdrop doesn’t pose any challenge to this nice outlook — at least until another unfortunate war plagues our world. Until then, remember to let the sunshine in!
Lastly, I’ll try out a new format for this newsletter — keeping the long-form posts just for those dramatic times which require thorough analysis. Meanwhile, I’ll test smaller updates covering just a couple of tweets you shouldn’t miss!
Chart art: two flows, one net trend.
Three things: two sides, same meme.
James Lavish explains money printing, “a seemingly simple, yet confusing topic”.
Pentoshi explains why we’ll see “the largest diminishing returns of any cycle”.
Jason Choi explains the real reason behind the rise of meme stocks and alts.