After months of Bitcoin chop and liquidity chasing increasingly fewer and shorter alt seasons, the bottom has finally fallen out on most alt / btc pairs, seemingly across all sectors.
The NASDAQ closed down over 4% Friday, leaving a monthly chart that can only be described as the stuff of nightmares for anyone holding a risk-on asset.
Q1 GDP in the US fell by 1.4%, meaning negative GDP growth in Q2 will mean we’re officially in a recession. All this while the Fed continues to signal hawkish, anti-inflation measures will continue.
It has not been a fun week for the perma-bulls.
Current Portfolio:
Note that I’ve taken no trades this past week. The changes in allocation are due to price drops (DFK) against prior cash positions.
View of the Market:
Overall a few major trends carried the headlines this week, but more or less we’re now playing a waiting game while legacy markets and G7 governments figure out which type of market cycle they want to make policy for.
I have never been a successful low time frame or leverage trader, and pivoting to long-only spot allocations has been a saving grace for my psyche. But it also means I have very little insight into when we form a macro bottom or trigger a reversal here.
What I do know is that there can be no more denial that the last cycle has ended. The question now is how quickly the next one might start, what kind of innovation happens between now and then, and which 2021 cycle projects survive and keep building.
It is obviously impossible to know what sticks around or changes, so my plan is to stay on top of emerging trends, and watch which teams continue to build and innovate. 2020/2021 was all about new hyped narratives. If we really are going to start a new cycle more quickly than post 2017, I think it’s possible that the greatest gains come from compounding, rather than chasing the next new thing.
At some point in the last three decades of tech evolution, it became more profitable to simply compound in the companies that had already shown success, and some point crypto will follow suit.
JPOW Speculation:
On the macro front, things are confusing and difficult. The US is at a high risk of entering recession, but consumer spending is up, but inflation is high, but the Fed balance sheet has doubled in the last three years, but rates are still historically low.
The next FOMC statement is Wednesday at 2 pm ET, and while most people expect a 50 bps hike, the major questions are around the signals Powell gives the market about the state of their future plans.
Will they move forward with their plan to sell 100 billion+ in bonds a month starting this summer? Do they anticipate more 50+ bps hikes? What is their framework for changing those positions?
Wednesday might be the biggest FOMC statement of the cycle, as Powell can either look to calm everyone down, or he can reiterate that the market is right to price in additional aggressive action from the Fed against inflation.
At this point my portfolio is locked for a bit while I let the teams build and let my thesis play out, but it’s a dangerous time to be taking directional levered positions.
The GameFi Rout:
Jewel discussion was all the rage this week with the ongoing liquidity wallet/loot swap developments, but existing gaming (Ragnarok excluded) as a category saw big drops across the board. My thoughts on Jewel are unchanged. Happy to collect my yields and bag hold this one while it plays out. The vision remains clear to me.
The broader trend of the category also seems basically unchanged to me. These tokens would be higher if there was no macro liquidity crunch, but Crabada and Aurory and DFK and other existing games are clearly doing interesting and innovative things and in my opinion people are extremely impatient. They also associate token price to long term vision of the team, and those two things are nearly entirely unrelated in this market.
Frisky Fox of the DFK team made a specific mistake that caused this Jewel drawdown, but again I think the GameFi thesis was always extremely liquidity sensitive, and was always going to take a while to build.
I have much more long term faith in games drawing people into DeFi, than DeFi has of drawing users into crypto. That’s the fundamental thesis to me.
Playing the mints: (Ragnarok / Bears / Birds etc)
It’s been an insane week for new NFT mints like the Moonbirds and Okay Bears. The bear floor is still over 80 $SOL, and the birds are over THIRTY ONE ETH.
Insanity.
The long term bird vision of integrating with gaming is interesting, though I am quite securely priced out of participating, so I will simply hope my podunk projects learn from what sounds like a very competent team.
I’m starting to feel the same way about Ragnarok, a mint I did not secure a whitelist spot for.
I think Ragnarok devs seem incredible, and I wish them the best. But I would really appreciate a dip to buy.
Ape gas wars & Solana network downtime:
The Bored Ape land sale was both an interesting marketing case study, and a tale of two blockchains. Solana was down for several hours yesterday as it was hit by large amounts of bot transactions that took several hours to work through.
Meanwhile the Yuga Labs Bored Ape Yacht Club land sale sent ETH fees to their highest levels ever as the smart contract was horrifically poorly optimized and there was massive demand for the sale.
$3,500 to sell something on Opensea! Just because the demand for digital ape land was so high.
Worth noting that my personal conspiracy theory here (or more like just regular observation maybe) is that the Yuga team intentionally allowed this insane gas surge as a way to market their own future chain (likely an ETH L2 I’d guess) using APE as their gas token.
That’s a pretty smart marketing tactic to be honest.
Clearly the blockchain scaling problem hasn’t been solved anywhere yet, but it is interesting to note just how much activity remains across these chains through the bear market. People are increasingly becoming comfortable operating within these protocols, and to me the easiest long term bet is that we’re in for an incredible decade of on-chain adoption and crypto eating the digital world.
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