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Today we zoom all over the crypto markets answering popular questions and brainstorming ideas for investments we can make early, before heading into the next cycle.
- Crypto’s price is certainly volatile, but it helps in these situations to look at the bigger picture: zoom in to Bitcoin, and compare trends with traditional markets and world news. It’s a good time to continue developing your crypto strategies for the long term and researching projects you want to keep your eye on.
Why Are Prices Dropping?
- With the market currently in a slump, talk of “crypto winter” is being thrown around already. New investors are likely to feel this current dip the most, especially those who are in their first cycle and likely bought during the 2021 hype. If you’re one of those peeps, we feel your pain - but remember, hodling through is what builds your conviction and you’re not alone.
- Looking back in Bitcoin’s history, we’ve experienced this twice already. Both 2013 and 2018 were emotional rollercoasters with all time highs followed by a year (or more) of blood red. The trend doesn’t change: after 2 years of sideways movement, BTC’s halving hits and see it all repeat.
- Prices are likely responding to increasing global tension, ranging from stable coin regulations to international crypto sanctions. It goes without saying that nobody wants crypto to lead to wars, but it’s important to remember that crypto was designed for this. Part of crypto’s mission of planting the seeds for adoption requires it to be nimble and resilient during times of chaos and uncertainty.
- The stock market is also suffering. And although Bitcoin should be seen as a hedge against traditional markets, we’re seeing a high correlation right now. News of world wars and international tensions often coincides with higher correlation.
- The S&P is down 11% this year with support in the 4,200 range, but a death cross is looming (50 day MA crossing below 200 day MA). This hasn’t happened since the beginning of COVID lockdowns in March 2020, and we shouldn’t be surprised if markets continue to drop further.
- Hopefully, crypto can break free from the correlation. Not all assets seem to be suffering - in the last few weeks, gold jumped from $1800 to $1900.
Zoom Into Bitcoin
- We all wanted a blow off top, but unfortunately it just hasn’t happened yet - this cycle appears to be different. Still, it’s important to recall the 2013 and 2018 market crashes.
- In 2013 we fell 85% from our all time high (from $1200 to $150) in 410 days, just over a year. And in 2017 we fell 85% once again (from 20k to 3k) over 363 days. So far this cycle, we’ve only fallen 50% from our all time high in the 60k range, but without this cycle’s “double top” trend it’s occurred twice. April will mark 1 year since first hitting 60k, so the bottom could be coming soon.
- Are we already in crypto winter? Near the bottom? It’s hard to say - but many investors believe this would be a good time to grab a chunk of BTC. Bitcoin drives the entire market and represents 42% of a massive 1.7 trillion dollar crypto space.
- Check out this chart on trading view where Gerbz connects the bottoms of the 2013 and 2017 cycles and the trend line extends to exactly this price we’re at now (around $34k).
Diving Into Ethereum
- Ethereum makes up 18% of the total crypto market, so together with Bitcoin, BTC and ETH represent 60% of the crypto market cap! ETH typically follows BTC’s lead.
- ETH has been a bit under fire for the last few years, as many competing chains are nipping away at it. Many EVM compatible chains like Avalanche, Binance Smart Cvain, Fantom, Matic, and others have taken a significant market share from Ethereum. These are often referred to as “ETH Killers.” If none existed, ETH would likely be closer to 40%.
- ETH 2.0 is still in the works, although it’s no longer called that. “Ethereum Upgrades” is the official terminology. The upgrades plan to happen in 3 stages, the first being the Beacon chain (the launch of the proof of stake network where people have been staking ETH). Coming in 2022 will be “The Merge” - at this point, the old proof of work chain and the new proof of stake chain will be combined, with only proof of stake moving forward. Finally in late 2022/early 2023 stage three will take place, beginning data sharding. This is when we’ll really begin to see speed boosts and fee decreases, and this is where Ethereum’s L2s should really shine.
What Comes Next?
- The next cycle (in terms of the Bitcoin halving) isn’t coming until roughly March 2024, so patience is really key here. New investors tend to disappear when the excitement wears off, but this is precisely the opposite of what you want. The money is made not during the boom, but by DCA’ing during crypto winter.
- This is also a good time to start building positions in sectors of the crypto market you believe have a chance at being big winners during the next cycle.
- Anything else that you are hesitant to buy more of on a dip - you might want to consider selling the next time there’s a pump.
- Every cycle has so called “winners” - the last cycle, ETH and ICOs had breakout success. This cycle, NFTs and “ETH killers” were clear winners. What’s coming next?
The Potential of Stablecoins
- The importance of stablecoins cannot be understated! Just a year ago they represented 50 billion, and today there’s over 150 billion! The saying proves true: “A bear market in crypto is a bull market in stable coins.”
- Gerbz’ preferred way to invest in stablecoins is Terra! The other day when the markets were just crushed, LUNA was the only coin in the green! Terra also just raised $1B to buy Bitcoin to act as a backstop and help maintain UST’s peg during times of volatility.
- Stable swap exchanges like Curve are also a great tool to look into - also check out the new Solid Swap on Fantom. Users provide liquidity and can earn fees when people swap using their pool on the exchange.
- DeFi on Bitcoin is coming, and this is a BIG deal. Soveryn is built on Rootstock as an EVM compatible sidechain for Bitcoin, and they offer a way to borrow stable coins against BTC. Soon, they’re launching something called ZERO which allows interest free borrowing as well.
- Stacks is another chain that leverages the security of BTC’s proof of work stake to enable smart contracts on Bitcoin. You may have heard of CityCoins (New York, Miami, and Austin have all launched city coins) - these are all running on Stacks!
- Thorchain is a decentralized exchange that enables native swaps between Bitcoin and other blockchains, like ETH and LUNA. Although the prices on many of these projects aren’t great right now, there’s a huge amount of potential for DeFi activity in Bitcoin’s future.
- DeFi is the future - the only reason CeFi was big in the first place is because other options weren’t available. Now, CeFi is under fire! Farming is still a great option, and Gerbz has been farming a lot on the Fantom network.
- Social network is a more speculative future, but it’s possible that networks could have their own chains. Zapper and DeBank, ENS, or even a dedicated chain?
What Should I Do Now?
- While we wait for these predictions to pan out, slowly accumulate and continue putting your assets to work. We recommend checking out episode #26 for some great info on our snowball farming strategy.
- Gerbz is continuing to put his assets to work by leveraging them and loaning out to acquire more crypto. Bitcoin is the most difficult to do this with, so we’re keeping a close eye on Soveryn. With LUNA, staking to earn fees generated by the network and airdrops is easy, and Gerbz likes to sell all that to buy more LUNA!
- For Ethereum, Gerbz is using Compound and Abracadabra borrow stable coins and drop them into his stable coin farming strategies, making sure to keep a close eye on the price of ETH to ensure his loan to value ratio doesn’t get to high (avoid liquidation at all costs!).
- Gerbz farms stable coins using Curve and Convex - many pools are paying 10-15%. Personally, Gerbz likes to hodl CRV and CVX rewards for a year in order to capture long term gains, and then dump them for stable coins and ETH when a pump occurs.
- Terra’s Anchor Protocol is still paying a whopping 19.5%!
- Gerbz is also loaning MIM and USDC on Hundred Finance, which is a multichain fork of Compound running on Fantom and currently paying 12% on USDC and 28% on MIM.
- Obviously it’s impossible to watch every project constantly, so try not to get overwhelmed and focus on the ones you find most interesting/have the most potential. The best way to keep up to date with projects is to hop on the BitLift Community Discord, where we’re discussing our strategies and predictions 24/7!