Don't Stop Bullievin'

Level 3 - Virgin DeFi Analyst

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It’s been a rollercoaster of a week. Bitcoin propelled past previous its All-Time High, reaching ~$73,000 before being swatted back down to $63,000. After months of “up only”, we have begun to see signs of panic in the last two pullbacks.

That tells us three things:

1. People don’t have a plan

2. People are overlevered

3. Most people on CT hold minimal amounts of the majors, and are essentially all-in on altcoins

Today we want to provide you a roadmap for the bull cycle and our opinion on how this all plays out.

Cycle Theory

One of the predominant topics of discussion in the 2021 bull-run was that of the “Supercycle.” Murmurs of supercycles have started to appear and it’s a good time to level set expectations around cyclicality in crypto.

To understand the cyclical nature of crypto, you need to understand reflexivity.

Reflexivity is the concept that the perceptions and behaviors of market participants can influence fundamentals, creating a self-reinforcing feedback loop. George Soros is one of its primary proponents (we recommended his book on the topic in our holiday book list).

Crypto is the ultimate reflexive asset class. Price drives more buyers and speculators/users, which drives price, in a seemingly never ending loop driven by mass FOMO.

However, reflexivity cuts both ways. Eventually the expectations for the asset far outweigh what it can deliver, and the market gets ahead of itself. As the flood of new buyers slows and prices become unsustainable, crypto assets head into a downward loop that brings down large funds and companies.

Crypto will always have some element of cyclicality precisely for this reason. However, the growth of the crypto industry as a whole has made it such that there continue to be attractive opportunities to trade/invest in between these periods of high speculative activity.

Where We Are in The Cycle

In our opinion, we are just over half way through. We remain 100%+ allocated. Profits from trades are being taken into ETH, which we believe will continue to grind up slowly past ATH prices before skyrocketing to $5-$6K+. Every dollar we earn is being thrown at alt plays or more ETH.

We’re not worried about dips and continue to “bullieve” that this cycle will continue for at least a few months.

We’ve started to see some signs of bull market, but not what we would call complete mania. These signs so far include:

• BTC has now set a new ATH

• People on crypto Twitter are tweeting about buying cars and watches

• Projects are launching tokens (no more points!)

• Pre-sale launches on Twitter are raising millions, sometimes tens of millions of dollars (though the driver of some portion of the proceeds may not be completely organic)

• There are multiple memecoins over $1 billion market cap

• Elon Musk is commenting on Dogecoin again

• DeFi Ed readership accelerating

However, there are still many top signals missing:

• Widespread euphoria not present (only crypto natives who bought last year)

• Lot more room for more token launches

• Mainstream media hype cycle still lacking

  • When Floyd Mayweather launches a coin you can start being cautious

  • No major crypto sponsorship deals making headlines

• ETH still has not broken ATH, BTC ATH break not meaningful

Note, “top signals” can flare for a long time before the market actually tops. The point we’re making here is that it’s too early to be calling for the end of the bull market.

There are still lots of bullish catalysts on the horizon:

• Interest rates to come down (good for risk assets)

• TradFi potentially piling into DeFi for yield

• ETH restaking

• ETH ETF

• Bitcoin halving

• FTX estate returning funds to creditors

• US election year - potential change to a more crypto friendly administration (likely Republican Nominee Donald Trump has come out in support of crypto)

• Non-crypto retail still not here in meaningful way

And there is room for more upside in things that could happen but are not yet guaranteed, including:

• Nation states buying crypto

• Pension funds and other major institutions buying large stakes / DCAing

We’d like to see Bitcoin above $100K and ETH above $5K before we start worrying about any sort of “top signals.”

How Much Longer Do We Have?

There’s no way to know of course, but if we had to put out a guess we’d say 9 - 12 months. We aren’t subscribing to the supercycle theory, and would be happy to be wrong! There will be a time to start playing more defensively (taking profits more quickly), but for now we remain long on all our coin positions.

This is the best time to squeeze as much as possible out of the crypto market, so we suggest actively paying attention for the balance of the year.

For emphasis: the opportunities to make money will probably never be as easy in your lifetime. Even if we have more cycles, historically each crypto cycle is more efficient/competitive and the potential returns are therefore smaller. This is the time to put crypto ahead of your other responsibilities and really focus.

How To Manage These Conditions

The first rule is not to over-leverage. Altcoins are risky / volatile enough, and can easily dip 40-50% and then recover to record highs in a matter of weeks. You don’t want to get liquidated, so just invest capital that you can afford to lose with no leverage. You might get unlucky and pick the wrong coin, but you don’t want to panic sell (or be forced to sell) on a 50% drawdown only to see the coin do 4x.

We wouldn’t recommend borrowing against your NFTs either. It’s too easy to get liquidated and the borrow fees are too high. We bought the Milady dip last week.

after being careful to check we were buying from panicked holders and not the drained wallet (stolen property) - there seems to be no on-chain penalty for this, but its just not ethical.

The second rule is to bullieve in your bags. This applies to the majors. Maybe you have a conservative amount of leverage on *some* of your stack. We’re not likely to see ETH below $1,500, BTC below $25,000, or COIN below $100 this cycle. Remember that last cycle saw majors draw down 30-40% from recent highs - this time people are panicking after an 8-10% correction. Likely due to bad experiences in the bear market. If you don’t believe we’ve topped (and if you do, you would sell everything) then you believe in the majors setting new record highs. So hold, and add more with cash flow.

Quick Memecoin Update

We continue to be bullish on memecoins for this cycle, despite the vicious pullback we’ve seen.

The reasoning is quite simple:

• Crypto is viewed as a “get rich quick” scheme by the masses

• Ask 10 random people what one of the most popular terms in crypto “on-chain” means, and you’ll be lucky if 2 people know

• Meaning, you can’t expect the masses to care about things like “modularity” and “DePIN” or some other technical jargon

• It’s much simpler to just buy a funny dog picture, or something sillier

That doesn’t mean memecoins are the only theme in crypto that matter! In fact, we remain bullish on DeFi (perps dexs, borrowing/lending), AI, airdrops, L2s and more.

However, memecoins should not be ignored as a “sideshow” of this cycle — they’re part of the main show.

What we are seeing in the memecoin market now is an “evolution” of memecoins as we anticipated in a previous post. We’re moving from political tokens into social tokens. People with audiences are raising millions of dollars in “pre-sales.” The coins we listed in our last update have performed well and we expect our memecoin holdings to rebound with the broader market (we use Memecoin Monitor for tracking day to day).

DeFi Academy Update

We also have a special announcement regarding the DeFi Academy.

BowTied Pickle is one of the jungle’s resident smart contract developers and he graciously offered his time and expertise to build and entire course module on how he replaced his full-time job income within six months by becoming a software developer in crypto - entirely self taught.

Pickle didn’t have a background in computer science or software engineering. He joined crypto in May 2021, and by 2022 he’d already replaced his “real” job’s income.

A big part of why we put out the Academy was to show people what’s possible in crypto, without ever having to leave your job (and yes, he did all this pseudonymously as a Pickle cartoon).

The module covers:

• Who should consider becoming a dev in crypto (and who shouldn’t!)

• The ecosystem for dev work in crypto

• How to learn to code (resources, roadmap, etc)

• How to land your first client

• Managing and scaling your client base

The module is from the perspective of Ethereum, but most of the content should be applicable to whichever ecosystem you wish to build in.

You also get complete access to the other 10 modules of the Academy. For those of you who are already in it, you can access it now as part of your purchase.

Sign up here: https://www.bowtiedacademy.com/courses/defi-academy

Until next time!

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Disclaimer: None of this is to be deemed legal or financial advice of any kind. These are opinions from an anonymous group of cartoon animals with Wall Street and Software backgrounds.

• We now have a full course on crypto that will get you up to speed (Click Here)

• Security: Our official views on how to store Crypto correctly (Click Here)