Crypto market outlook, Jan 2022
Thought dump to look back on
Thought dump to look back on
1/ Caveat: these are my personal views.
I prefer to think on venture horizons (5-10 years) - it's more fulfilling and much more interesting.
I mostly only consider weeks - months timeframe when making high time preference decisions. This thread is about the latter!
I prefer to think on venture horizons (5-10 years) - it's more fulfilling and much more interesting.
I mostly only consider weeks - months timeframe when making high time preference decisions. This thread is about the latter!
2/ In November I shared what I thought the next bear market could look like.
TL;DR: extreme sector rotations, and fast(er) recovery for sector-agnostic sell-offs.
TL;DR: extreme sector rotations, and fast(er) recovery for sector-agnostic sell-offs.
https://twitter.com/mrjasonchoi/status/1463886162909491206?s=20
3/ We saw this sector rotation happen in December to today:
Gaming/Metaverse assets are down 15-60% *against* $ETH, while L1s generally traded up, with $NEAR leading the pack at 130%+
DeFi also began to see some bid, with $SUSHI $CRV $YFI up 30-40% against $ETH
Gaming/Metaverse assets are down 15-60% *against* $ETH, while L1s generally traded up, with $NEAR leading the pack at 130%+
DeFi also began to see some bid, with $SUSHI $CRV $YFI up 30-40% against $ETH
4/ In that period, $BTC was also down 25% against USD.
This meant no new wealth was being created, which exacerbates the game of musical chairs.
Over longer time frame I do think the significance of $BTC to wider crypto market lessens, but not today.
This meant no new wealth was being created, which exacerbates the game of musical chairs.
Over longer time frame I do think the significance of $BTC to wider crypto market lessens, but not today.
5/ But what about the billions of new capital being raised?
In my experience, new capital earmarked for liquid crypto can leave as quickly as they come.
Just because funds have onboarded capability to long $BTC and $ETH futures doesn't mean they have to.
In my experience, new capital earmarked for liquid crypto can leave as quickly as they come.
Just because funds have onboarded capability to long $BTC and $ETH futures doesn't mean they have to.
6/ Most of the capital that's guaranteed to hit the market is committed to venture funds where majority of capital is deployed in private deals.
In my view private valuations will continue to remain frothy because of this. $50-$100M pre-product seed rounds are not uncommon.
In my view private valuations will continue to remain frothy because of this. $50-$100M pre-product seed rounds are not uncommon.
7/ In short: private valuations keep getting bid up, while secondary bid fizzles out.
This will continue until VC private rounds returns converge with public market returns (with a risk premium).
This game of "if I get in, I will make money" will not last.
This will continue until VC private rounds returns converge with public market returns (with a risk premium).
This game of "if I get in, I will make money" will not last.
8/ This is a tricky time for VCs, but a great time for founders to take advantage of VCs that *have* to deploy.
However, due to self-selection many founders that enter the market now may also be opportunistic, so job appliers beware!
However, due to self-selection many founders that enter the market now may also be opportunistic, so job appliers beware!
9/ In a broader context, I haven't come across any conflicting thesis that changes my view summarized by @CryptoHayes here.
Caveat is I am clueless about markets beyond crypto - which in itself is another reason for me to have been cautious.
Caveat is I am clueless about markets beyond crypto - which in itself is another reason for me to have been cautious.
https://twitter.com/mrjasonchoi/status/1470323647122317313?s=20
10/ Other heuristics that tipped me off to derisk in Dec
- $BTC $ETH languishing as people make 50-100% intraday gains off unheard of lowcaps
- Peers are long and justifying averaging down week after week
- Massive VC unlocks upcoming for specific verticals
- $BTC $ETH languishing as people make 50-100% intraday gains off unheard of lowcaps
- Peers are long and justifying averaging down week after week
- Massive VC unlocks upcoming for specific verticals
11/ In the short term from a pure trading perspective, it's hard to gain conviction on most large caps given where valuations are.
Most theses being peddled on Twitter look more like attempts to kickstart narratives in an increasingly zero-sum game.
Most theses being peddled on Twitter look more like attempts to kickstart narratives in an increasingly zero-sum game.
12/ Strategy wise - event-driven/ catalyst-driven traders will outperform value-investors in the short term given where baseline valuations are, with some exceptions.
The market is less efficient than you think, especially in non majors. The alpha will be in reading *redacted*
The market is less efficient than you think, especially in non majors. The alpha will be in reading *redacted*
13/ But all is not doom and gloom.
On a long time frame I am completely unbothered.
I only care about the short term inasmuch as it ensures survival - if my hypothesis is correct, recoveries for market-wide selloffs should be prompt.
On a long time frame I am completely unbothered.
I only care about the short term inasmuch as it ensures survival - if my hypothesis is correct, recoveries for market-wide selloffs should be prompt.
https://twitter.com/mrjasonchoi/status/1463886162909491206?s=20
14/ "The days of being binary bullish / bearish are way behind us" - wisdom from brother @AviFelman
https://twitter.com/mrjasonchoi/status/1467168912580042753?s=20
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