This will be the first edition of a series I'm going to be writing about different currencies and how they are correlated to one another, in good and bad ways.
Cryptocurrencies are the fastest growing asset class on the face of the Earth. To prove this let's look at some other assets compared to Bitcoin.
These metrics are from mid-late 2021, they aren't perfect, but my point will be made nonetheless. If you had held these assets for 10 years prior to 2021, you would have made these amounts in return.
Gold - (-6%) Loss
Bonds - (+35%)
S&P 500 - (+344%)
Google - (+937%)
Apple - (+1,112%)
Microsoft - (+1,280%)
Amazon - (+1,427%)
Netflix - (+2,337)
NVIDIA - (+6,053)
Tesla - (+15,200%) ...
But Bitcoin? My guy... Bitcoin - (+994,608%)
Point made.
While I won't get into philosophy of how this came to be I'm going to do a deep dive on Bitcoin's number one competitor, Ethereum. While holding the second largest market cap in the crypto space for the entirety of Bitcoin's existence the argument of when or if Ethereum will ever take over Bitcoin has been a fierce debate. Today I'd like to diagnose this idea in depth. While this war has been going on for nearly 15 years now, I'd like to focus my microscope on the last 3 years, the reason being this has been the time period where we've seen the entire landscape of the space change as world scale institutional adoption has taken hold.
First let's talk about price action. When it comes to cryptocurrency, Bitcoin has always been the front runner of the macro market. Cryptocurrency has a very well established macro movement pattern. Typically, Bitcoin will pump, the top 20 alt-coins will follow, then the s**tcoin market moves. This is not always 100% the case, but 9/10 times, it is.
Why is this? Well, much like I explain on my trading channel and to my students who take my course, the market moves due to three factors, fundamental analysis, market sentiment and technical analysis. This is the analytical tools institutions are using to make their decisions on why they'd take a position in cryptocurrency. If you read my previous papers on my global macro perspective on Bitcoin or why I am bearish for all the worlds market environments you'd understand that if you're really trying to understand the macro price movement, you NEED to think like an institution.
Institutional trading is EXTREMELY different from what people like you or I may do. While a trader like myself is largely technical based, also called a growth investor, most institutions are value investors. What does this mean? Let's break this down.
Value investing is a fundamental based practice that looking at variable like what the product or service does, the profits and earnings of the company and the companies balance sheets.
Growth investing is using the full range of analytical skills to generate the highest percentage profit over time.
In the macro space we see amplitudes of institutions and even countries onboarding crypto into their monetary policy. This is a large indication to me that the space is changing. What was once, many years ago, a space of like minded individuals and retail investors has now became a globalized landscape of some of some of the highest net value institutions that exist in the world. This brings to light one my main focuses when analyzing the world markets, market correlation. What we've seen in this last 3 years is the integration of the world economy. This is why you see Bitcoin trading in similar price action to certain U.S. stock market indexes.
These institutions are what is moving the price action right now. Michael Saylor, CEO of Micro Strategies owns roughly 129,000 Bitcoins to date. Retail investors speak for very little bitcoins market cap at this point and like I had mentioned in my article on Bitcoins future, the market is in an extremely critical position, globally. Our market cap was extremely over-leveraged and some claim it still is. Add a monetary tightening cycle into the mix that is trying to combat hyperinflation from the world markets crashing and you have the crash we just witnessed since the end of 2021. Bitcoin moved, then alt-coins, then s**tcoins followed.
How about the future though? We always hear the Ethereum community talk about when the "Flippening" will happen. This is when, or if, Ethereum's market cap becomes larger than Bitcoins. To put simply, because it is a very long discussion to be had with many factors to consider, I don't see this happening in the next 1-5 years and that is my BEST estimate. Bitcoin, however, has a specific tactical advantage against Ethereum when it comes to adoption.
When a company has an advantage over its competitors due to a certain feature it has over others, this is a companies "mote." Let's consider we're talking about countries adopting a cryptocurrency, what are some major things they'd consider? Well, one thing about Ethereum that is completely different than Bitcoin is that it's a company run by people and the creator is from Russia. You could assume, that there are going to be certain countries because of that fact alone that will not consider it as a possibility. We need to remember that, regardless of the advantages Ethereum has technologically or monetarily. Bitcoin is the one true "decentralized" financial network. There is no other coin that works the way Bitcoin does in this sense. This is what makes it so attractive to the global landscape. So when it comes to the potential of Ethereum getting the institutional "bag" over Bitcoin, I don't see this happening over the time period i stated before. At best, it's a long way away.
I still don't believe we're out of the water in the sense of the sell off we've seen this year. It's my prediction we'll continue to move down. With Three Arrows Capital bankrupt, and just today, Celsius filing for bankruptcy I believe this is going to leave an extremely bad taste in the mouths of the investors. As for Ethereum being adopted world wide, this is already largely happening and in this sense it may be a good thing long term. Institutions can get in low to minimize risk, early investors make their fortunes and we all win at the end of the day.
Let's just hope the world doesn't collapse before then, while we're still here, I'm going to be trading these markets. Thanks for reading!
- Watson
I am not a financial advisor and this is not financial advice. This is for educational purposes only. Investing is risky and you should always consult a financial advisor before making financial decisions in your life. Any risk taken is of your own doing and I will not be held accountable for your actions.
Cryptocurrencies are the fastest growing asset class on the face of the Earth. To prove this let's look at some other assets compared to Bitcoin.
These metrics are from mid-late 2021, they aren't perfect, but my point will be made nonetheless. If you had held these assets for 10 years prior to 2021, you would have made these amounts in return.
Gold - (-6%) Loss
Bonds - (+35%)
S&P 500 - (+344%)
Google - (+937%)
Apple - (+1,112%)
Microsoft - (+1,280%)
Amazon - (+1,427%)
Netflix - (+2,337)
NVIDIA - (+6,053)
Tesla - (+15,200%) ...
But Bitcoin? My guy... Bitcoin - (+994,608%)
Point made.
While I won't get into philosophy of how this came to be I'm going to do a deep dive on Bitcoin's number one competitor, Ethereum. While holding the second largest market cap in the crypto space for the entirety of Bitcoin's existence the argument of when or if Ethereum will ever take over Bitcoin has been a fierce debate. Today I'd like to diagnose this idea in depth. While this war has been going on for nearly 15 years now, I'd like to focus my microscope on the last 3 years, the reason being this has been the time period where we've seen the entire landscape of the space change as world scale institutional adoption has taken hold.
First let's talk about price action. When it comes to cryptocurrency, Bitcoin has always been the front runner of the macro market. Cryptocurrency has a very well established macro movement pattern. Typically, Bitcoin will pump, the top 20 alt-coins will follow, then the s**tcoin market moves. This is not always 100% the case, but 9/10 times, it is.
Why is this? Well, much like I explain on my trading channel and to my students who take my course, the market moves due to three factors, fundamental analysis, market sentiment and technical analysis. This is the analytical tools institutions are using to make their decisions on why they'd take a position in cryptocurrency. If you read my previous papers on my global macro perspective on Bitcoin or why I am bearish for all the worlds market environments you'd understand that if you're really trying to understand the macro price movement, you NEED to think like an institution.
Institutional trading is EXTREMELY different from what people like you or I may do. While a trader like myself is largely technical based, also called a growth investor, most institutions are value investors. What does this mean? Let's break this down.
Value investing is a fundamental based practice that looking at variable like what the product or service does, the profits and earnings of the company and the companies balance sheets.
Growth investing is using the full range of analytical skills to generate the highest percentage profit over time.
In the macro space we see amplitudes of institutions and even countries onboarding crypto into their monetary policy. This is a large indication to me that the space is changing. What was once, many years ago, a space of like minded individuals and retail investors has now became a globalized landscape of some of some of the highest net value institutions that exist in the world. This brings to light one my main focuses when analyzing the world markets, market correlation. What we've seen in this last 3 years is the integration of the world economy. This is why you see Bitcoin trading in similar price action to certain U.S. stock market indexes.
These institutions are what is moving the price action right now. Michael Saylor, CEO of Micro Strategies owns roughly 129,000 Bitcoins to date. Retail investors speak for very little bitcoins market cap at this point and like I had mentioned in my article on Bitcoins future, the market is in an extremely critical position, globally. Our market cap was extremely over-leveraged and some claim it still is. Add a monetary tightening cycle into the mix that is trying to combat hyperinflation from the world markets crashing and you have the crash we just witnessed since the end of 2021. Bitcoin moved, then alt-coins, then s**tcoins followed.
How about the future though? We always hear the Ethereum community talk about when the "Flippening" will happen. This is when, or if, Ethereum's market cap becomes larger than Bitcoins. To put simply, because it is a very long discussion to be had with many factors to consider, I don't see this happening in the next 1-5 years and that is my BEST estimate. Bitcoin, however, has a specific tactical advantage against Ethereum when it comes to adoption.
When a company has an advantage over its competitors due to a certain feature it has over others, this is a companies "mote." Let's consider we're talking about countries adopting a cryptocurrency, what are some major things they'd consider? Well, one thing about Ethereum that is completely different than Bitcoin is that it's a company run by people and the creator is from Russia. You could assume, that there are going to be certain countries because of that fact alone that will not consider it as a possibility. We need to remember that, regardless of the advantages Ethereum has technologically or monetarily. Bitcoin is the one true "decentralized" financial network. There is no other coin that works the way Bitcoin does in this sense. This is what makes it so attractive to the global landscape. So when it comes to the potential of Ethereum getting the institutional "bag" over Bitcoin, I don't see this happening over the time period i stated before. At best, it's a long way away.
I still don't believe we're out of the water in the sense of the sell off we've seen this year. It's my prediction we'll continue to move down. With Three Arrows Capital bankrupt, and just today, Celsius filing for bankruptcy I believe this is going to leave an extremely bad taste in the mouths of the investors. As for Ethereum being adopted world wide, this is already largely happening and in this sense it may be a good thing long term. Institutions can get in low to minimize risk, early investors make their fortunes and we all win at the end of the day.
Let's just hope the world doesn't collapse before then, while we're still here, I'm going to be trading these markets. Thanks for reading!
- Watson
I am not a financial advisor and this is not financial advice. This is for educational purposes only. Investing is risky and you should always consult a financial advisor before making financial decisions in your life. Any risk taken is of your own doing and I will not be held accountable for your actions.
