This episode explores the surprising market dynamics in crypto post-election, revealing why Bitcoin's price hasn't surged as expected and how savvy traders can navigate the current altcoin landscape.
Podcast Welcome and Introductions
- Avi Felman and Jonah Vanborg, co-hosts of the ThousandX podcast, introduce themselves and the podcast's core mission.
- They aim to replicate trading floor conversations, offering a space for crypto traders to stress-test ideas and avoid isolated decision-making.
- Jonah emphasizes the central question: "how do we make money from it [blockchain technology] right now?" highlighting the need for short-term strategies in a volatile market.
Bitcoin's Unexpected Stagnation
- Avi and Jonah discuss Bitcoin's price action, noting it's only 20% above its 2021 peak despite positive developments like the ETF launch and talk of a strategic Bitcoin reserve.
- Avi points out two possibilities: either Bitcoin is undervalued, presenting a near-term opportunity, or it's a sign of weakness.
- Jonah attributes the stagnation partly to broader macro factors, referencing the Bitcoin/S&P ratio's stability, unlike previous crashes: "unlike 2022 when the ratio tanked...you need to sort of disagregate how much of the price action is due to just general macro factors."
Macroeconomic Influences and Trump's Impact
- Jonah delves into the potential impact of Donald Trump's policies, including shifts in taxation and government spending, causing market volatility.
- He suggests a potential 10% floor for the S&P 500, implying a limited downside for Bitcoin if the correlation holds.
- Avi adds that increased market volatility due to Trump's "reasonably unpredictable manner" leads investors to raise cash, often starting with volatile assets like Bitcoin.
Sponsor break
- The podcast takes a break to introduce the sponsors, Kraken OTC and Cryptotax Calculator.
Momentum vs. Value in Bitcoin Trading
- Avi explains two primary motivations for buying Bitcoin: momentum (riding the upward trend) and value (perceived risk/reward).
- He notes the current lack of momentum, shifting focus to value assessment. He suggests $75,000 as a potential value level, offering a 2x return if Bitcoin reaches $150,000.
- Avi views the equity market's performance as a key risk, describing it as a "beach ball underwater," poised to rebound if volatility (VIX) decreases.
Audience Poll and ETF Outflows
- Jonah polls the audience, asking how many sold core crypto holdings (Bitcoin, Ethereum, Solana) since the election.
- Few hands are raised, suggesting ETF outflows are driven by short-term traders, not long-term crypto-native investors.
- Jonah: "it's not you guys, it's not the crypton natives...who are selling. I think it's the people who are in for a trade they're out."
External Macro Catalysts
- Jonah identifies two significant external factors: a potential conflict in Iran disrupting oil supply (5% probability) and a potential ceasefire in Ukraine, which could lower inflation and prompt rate cuts.
- He emphasizes Bitcoin's favorable risk/reward in the low $80,000s, especially considering the improved crypto landscape post-election.
Altcoin Bear Market and Investment Strategies
- Jonah argues that, unlike Bitcoin, altcoins are in a "savage bear market," with dire sentiment and retail investors tapped out.
- He highlights the challenge of constant underwriting for altcoin positions due to rapid innovation and low switching costs in the open-source crypto world.
- Avi notes the proliferation of altcoins, diluting investment and diminishing the "alt season" phenomenon where Bitcoin's rise lifts all boats.
- Jonah points out that Total Value Locked (TVL) on Ethereum is down, both in USD and ETH terms, indicating declining usage.
Inverse Alt Season and Shorting Opportunities
- Jonah introduces the concept of "inverse alt season," advocating for shorting underperforming altcoins due to the commoditization of blockchain creation and token issuance.
- He emphasizes that crypto is no longer a monolithic asset class: "crypto is a misleading term now because it encompasses both bitcoin and non-bitcoin."
- Jonah references Bill Gates' quote about overestimating short-term technology impact and underestimating long-term potential, suggesting a current "despair phase" for crypto.
Actionable Insights: Pair Trades and Market Signals
- Jonah shares a specific pair trade example (short Cardano, long Litecoin) to illustrate how to identify market turning points.
- He explains that the lack of P&L on this trade indicates "market maker on market maker violence," suggesting fundamental stories aren't yet driving price action.
- Jonah: "as soon as fundamental stories start to reemerge...that's when you know a turn is coming."
Sponsor break
- The podcast takes a break to introduce the sponsors, Ledger and Wallet Connect.
Emerging Green Shoots: The RWA Sector
- Avi identifies the Real World Asset (RWA) sector as a potential bright spot, driven by the growth of stablecoins and the tokenization of assets like US Treasuries.
- He sees this as a logical extension of blockchain's utility in value transfer, with $4.6 billion in US Treasuries already tokenized.
- Avi and Jonah agree that stablecoin adoption is a key metric to watch, indicating the broader on-chain proliferation of finance.
Speed Round and Concluding Thoughts
- Avi and Jonah engage in a quick, humorous speed round.
- Avi emphasizes the importance of a sober, pessimistic outlook in crypto to avoid hype-driven decisions, reflecting on past cycles.
Reflective and Strategic Conclusion:
The discussion reveals a complex crypto market where Bitcoin's price is influenced by macro factors and altcoins face a challenging environment. Investors should focus on value, monitor RWA growth, and use strategies like pair trades to navigate the current "inverse alt season" and prepare for potential market shifts.
