AlgoAlpha's Crypto Bull Thesis

2月1日

Introduction

In the ever-evolving world of cryptocurrency investments, one often hears conflicting narratives about market efficiency and the potential for massive gains. This article delves into the Crypto Bull Thesis, offering insights, and high-conviction crypto assets that may flourish in the next bull cycle.

Directional Bias

1. Limited Growth Stock to Flow

At the heart of our Crypto Bull Thesis lies the concept of the Limited Growth Stock to Flow (LGS2F). This model highlights Bitcoin's unique value proposition: its limited supply. The scarcer an asset, the more valuable it becomes, and Bitcoin's halving events every four years reinforce this scarcity. This limited growth S2F model underpins our base case, making Bitcoin a store of value unlike any other.


2. Bitcoin Four-Year Cycle

The Bitcoin four-year cycle is a well-documented phenomenon. It's akin to clockwork: approximately 2-3 years of bullish trends, characterized by remarkable price appreciation, followed by a year-long correction phase (red). This cyclical pattern has held true throughout Bitcoin's history and forms the foundation of our bullish outlook.


3. There is still room for more pump

Evaluating Bitcoin's long-term market conditions is paramount. We assess whether Bitcoin is overbought or oversold by analyzing indicators such as the Limited Growth Stock to Flow (LGS2F) or the BTC Supply in Profits and Losses (BTCSPL). These insights guide our perspective on market sentiment. Based on these indicators, we are clearly not at the top of the bull run yet.


5. ETF

The eagerly anticipated approval of a Bitcoin Exchange-Traded Fund (ETF) has been already approved, now institutions are eyeing other assets such as INDEX:ETHUSD. Such an approval would open the floodgates for institutional investors, propelling crypto into mainstream finance. This potential catalyst holds significant weight in our thesis.

6. Global Liquidity Cycle

Global liquidity conditions are never static. Monitoring changes in monetary and fiscal policies across the globe is essential. These shifts impact asset classes, including cryptocurrencies, and play a pivotal role in our assessment of market dynamics.

Alt Picks:

1. Highest Correlation to Bitcoin

The crypto market dances to Bitcoin's tune. Bitcoin, as the pioneer and bellwether of the crypto space, sets the tone for the entire market. When Bitcoin soars, the majority of altcoins follow suit, and when it corrects, they often do too. Therefore the best assets are those that are the most correlated to bitcoin and have the highest volatility.
https://www.tradingview.com/x/Be4sFjYq/
(credit: VanHe1sing)

2. Highest Beta with High Correlation

Risk-tolerant investors may seek high-beta cryptocurrencies that closely track Bitcoin's price fluctuations. As the market is highly correlated to BTCUSD , these assets are essentially leveraged bets on Bitcoin without the risk of liquidation as you do not need leverage. Bear in mind that this requires a strong stomach for volatility.

3. Percentage Distance from All-Time High (ATH)

Investors often hunt for gems that have yet to reach their previous all-time highs. We carefully examine how far an altcoin is from its ATH, as this metric can indicate growth potential and an opportunity to enter the market at an advantageous position. Below are some examples⤵️



Emerging Narrative Plays:

1. Solana Memes

The Solana ecosystem is vibrant, and emerging meme culture adds a unique dimension. Projects like Degen Ape Academy and SolPunks capture the community's imagination, making Solana a narrative play to watch. Some other Solana memes are: BONKUSDT and WIFUSDT

2. AI (Artificial Intelligence)

The convergence of AI and blockchain technology holds immense promise. Projects harnessing AI for data security and transparency within blockchain networks are at the forefront of this narrative play, exploring the limitless possibilities at this intersection. Some of these tokens are: BINANCE:RNDRUSDT , AKTUSDT , TAOUSDT

3. Domains

Blockchain-based domain management and trading platforms are gaining traction. As online presence continues to expand, cryptocurrencies related to domains present an intriguing narrative play with real-world applications. One such to coin to look at is: ENSUSDT

4. US Presidential Elections

US presidential elections are happening this year. This could potentially lead to rallies of tokens such as TRUMP2024USDT . Understanding this political narrative is essential for any crypto investor.

In conclusion, our Crypto Bull Thesis combines the limited growth Stock to Flow model, the Bitcoin four-year cycle, market correlations, and global liquidity conditions to guide investment decisions. Alt picks based on correlation, beta, and ATH distance provide diversification options. Additionally, emerging narratives like Solana Memes, AI, Domains, and the US presidential elections offer opportunities for forward-thinking investors to navigate the ever-evolving crypto landscape. As always, we provide this info for educational purposes, it is important to Do Your Own Research.