Research Summary
The report by Cumberland discusses the recent volatility in the cryptocurrency market, focusing on Bitcoin’s (BTC) proximity to its all-time high (ATH). It also highlights the performance of other cryptocurrencies and the potential opportunities in the market.
Key Takeaways
Bitcoin’s Proximity to All-Time High
- Bitcoin’s Performance: BTC is currently about 9% below its previous all-time high. Historical data shows that whenever BTC came within 10% of the previous cycle’s ATH, it moved through it to make new highs. In three out of the four examples of the past decade, it reached the previous ATH within a week of the 10% touch.
Performance of Other Cryptocurrencies
- Altcoins’ Performance: Other cryptocurrencies are not performing as well as BTC. Ethereum (ETH) is down 30% from its high, Solana (SOL) is down 50%, Avalanche (AVAX) is down 70%, the DeFi index is down 80%, and Dogecoin (DOGE) is down 80%. Smaller market-cap assets have performed worse during the bear market.
Opportunities in Altcoins
- Altcoins’ Potential: The report suggests that a new BTC rally could provide the most value to altcoins. If the market is expected to make new highs, then altcoins provide more value than BTC at the moment. However, the report also warns that some altcoins may never return to their highs, especially those without active development teams.
Meme Tokens’ Rally
- Meme Tokens’ Surge: The meme-token space is currently experiencing a significant rally. Dogecoin (DOGE) is up 80% over the past two days, while Shiba Inu (SHIB) and BONK are each up over 100%. WIF has more than quadrupled in the past week. SHIB has now surpassed DOGE in fully diluted valuation (FDV).
DeFi Sector’s Potential
- DeFi’s Prospects: Despite having strong fundamentals, the DeFi sector seems less emphasized. The report suggests that if regulators back off, the DeFi sector could have the best chance for a re-rating. Uniswap (UNI) is down 71% from its ATH, Maker (MKR) is down 67%, and Aave (AAVE) is down 83%.
Actionable Insights
- Monitor Bitcoin’s Performance: Given Bitcoin’s historical trend of reaching new highs after coming within 10% of its previous ATH, it would be beneficial to closely monitor its performance.
- Assess Altcoins’ Potential: With the potential for a new BTC rally, altcoins could provide more value. However, careful assessment is needed to differentiate between “strong” and “weak” altcoins.
- Consider Meme Tokens: The current rally in the meme-token space could present opportunities, but due diligence is necessary given the high volatility and risk associated with these tokens.
- Explore DeFi Sector: The DeFi sector could have the best chance for a re-rating if regulators back off. Therefore, it might be worth exploring investment opportunities in this sector.
