Narratives of the week : January 5
Big liquidation day ; TIA, SEI and ETH beta coins bounce the most
Welcome to this weekly recap, I am Viktor and you can find me here on Twitter and here on Telegram. Enjoy your reading !
$BTC and the market overall
$BTC started the year at $42.3k, it initially pumped and broke out of its $44k resistance, and almost reached $46k. But at this moment, the funding rates was getting insanely high, close to 100% a year on $BTC and altcoins. This suggested that many people were long on leverage, which is not very healthy and implies that there could be a liquidation cascade if the market takes a hit.
And this is exactly what happened on January 3, when $BTC went from $45.3k to $41k in an hour, before bouncing back to $42.5k. This means a -5% dump on $BTC in one day, but some altcoins took a much bigger hit with some wicks going as low as -20%, before bouncing to -10% overall.
January 3 has been a massive liquidation day, according to VeloData, the total Open Interest on the main exchanges went from $24bn to $19bn. I wrote a tweet about how these liquidation days should be managed, here it is :
My perp account handled the flash crash very well yesterday because I had set many low buy limit orders. This means that you buy around the lows of the wick, and then the price bounces well above your entry price.
I thank myself for having taken the time to put limit orders on many coins a few days ago. Take some time to study the size of the wick candles, and then how much the coins bounced.
But you have to know that if the dip is really large, and you are buying on leverage, there is a risk of being liquidated if your orders are not low enough. And in the same time, you can't put them too low, because in that case they could not be triggered.
So either you really make sure that even if all your buy orders are hit, the account does not get too leveraged [low risk, conservative approach], or you have to be ready to be liquidated if we get a May 2021-like crash. Most of my holdings are spot, on-chain, so if the market tanks -50% in a day, the worst that can happen is that I blow up the perp account completely. Not great, but I will definitely survive, and nukes of this magnitude are very rare.
The screenshot below is $BONK : I was short on this coin to hedge my spot long, and my limit orders enabled me to close the short with good profits, and even transform my position into a tiny profitable long.
$ETH was showing signs of strength on December 28 with L2s pumping, but, as it always happens these days, it ended up giving back all its recent gains, both in USD terms and BTC terms : $ETH currently stands at $2220 and ETHBTC is back to its 0.051 bottom.
$SEI
The best-performer of the week has been $SEI, which is “high-throughput, low latency” alt L1. I have written about it a few times in this newsletter and stated what the bullish case was.
Over the last 3 monthly candle, $SEI is up +560%, and +40% in the last 7 days. Now the valuation (FDV) of $SEI is on par with the $APT and $SUI competitors, and this potential repricing was one of the reasons for going long $SEI.
The most recent performance of $SEI also comes from the fact that it is the only liquid coin for the “EVM parallelization” narrative. Monad is the main parallelized EVM coin but it is not out yet, and as it is very hyped… $SEI has more or less become liquid Monad !
Also, Hsaka has been shilling $SEI, which is definitely a great advantage if he keeps doing it just as he did with $SOL and $AVAX.
$TIA
As you know, $TIA has been a monster since its launch, because it is basically up 7x with any significant drawdown. $TIA has stabilized in the $12-$14 range since mid-December, but this week it finally had a new impulse upwards, right after the big liquidation day. $TIA is up +36% this week, and it currently stands close to $16.
$TIA is in my “winner bucket”, and I will probably remain permanently long $TIA during the whole bull run, simply because I don’t want to fade this type of performance, moreso with a project that I believe has very strong fundamentals. $TIA is the leader of the “modularity narrative”, and even if most people don’t really understand what that means, I expect this to be a long-standing narrative, just as the EVM parallelization one.
One of the reasons for the $TIA performance of this week could be the Dymension airdrop : Dymension is an IBC network that will enable the easy deployment of app-specific rollups, or RollAps. Dymension announced their network this week, and you can check on this link if you are eligible to it. One of the categories of users that get the airdrop is the $TIA stakers, and I see more and more people mentioning the fact that staking $TIA is a great way to get a lot of airdrops : this is one more bullish catalyst for $TIA. However, the current FDV of $TIA is now around $16bn, which makes it almost a top 10 coin in terms of FDV, so the r/r of longing now is getting worse and worse. I won’t try to call tops on these winner coins, but keep this in mind.
One coin seems to be following $TIA very much, and this is $NTRN : Neutron Finance. $NTRN might become the beta coin to $TIA, as it also fits in the modularity narrative, because it will be the settlement layer for Celestia rollups. Even after this week $NTRN pump, the market cap is still only $400M, so if this gets attention, you can expect it to reprice higher. Here is a good thread that summarizes the important information on Neutron :
The ETH beta rotation and restaking narrative
$ETH and its ecosystem have mostly been underperforming during the last 2 months of ETF-driven pump. Now that the alt L1 trade has been quite exhausted and the BTC ETF is so close, it makes sense for the market to be looking for the next narrative/rotation, and it seems to be ETH-centered. Which is why we have seen ETH-related coins leading the post-crash recovery, especially $ARB and $LDO.
$ETH did not do so well, which is why I think if you want to play an ETH short to mid-term rotation, it is almost always a better idea to go for the beta coins, and they definitely will outperform ETH : $LDO, $OP, $ARB.
From the October bottom, $OP has definitely been the best performer among the ETH beta coins, but this week, $ARB has been stronger. Both make sense as long trades to play the EIP-4844 catalyst, with the update set for February. $ARB is up +30% this week, and is finally in price discovery again. $ARB is one of my largest altcoin bags, so I am satisfied to see it move after months of underperformance, but I actually lost some conviction in it over time (high FDV, coin not moving, dilution between many L2s…), even if I did not sell my bags. Let’s see if it remains strong or if the last 2 weeks have been a short-lived pump !
$LDO is another of my large altcoin positions, because it is the de facto $ETH beta coin, and I expect ETH staking to remain a very important theme during the cycle. The LSDfi narrative has been back this week, and especially everything related to restaking, because people want exposure to EigenLayer and they are looking for liquid coins that they can already buy. The main candidate seems to be $RSTK, which goal is to enable liquid restaking. The token has been launched in December 2023, and is up around 2x this week. $SSV is also up +23% this week.
Other potential ETH beta coins other than OP, LDO, ARB, seem to be $PENDLE (+15% this week, very strong coin this year, a comfy position that I unfortunately don’t have in my portfolio) and $MAV (+38%, a DEX on Ethereum launched in 2023 and that is now close to price discovery.
By the way, all the “$ARB beta coins” have underperformed ARB this week, but here is the list of these coins : $GMX, $MAGIC, $RDNT, and $GRAIL.
What else happened in the market :
Surprisingly, one of the best-performers this week is $ICP again. I absolutely hate this coin and I am probably not the only one, so this could lead to a hated rally. But in the same time, $ICP chart is basically down only from its launch, and I have a hard time seeing such a token have a meaningful recovery.
This week the news got out that $MKR was planning both a rebrand and a 1:24,000 unit redenomination, which pushed very quickly the price from $1660 to $1900. New chart + new coin + lower unit… is all one needs to get bullish, and it is, indeed, very promising. Here are two bullish theses on MKR :
There is a lot of alpha in having Vitalik on notifications if you can take trades very quickly likes news traders : right after this week’s dump, he posted a tweet about how ENS was important and needed to be affordable. The price went up +50% in 15 minutes, and $ENS is among the best performers of the last 7 days.
Two cartel mega pump-and-dumps happened this week : $TRB on December 31st and $PEOPLE on January 3. I think that the best thing you can do is to ignore them unless you really think that you have an edge trading them, but these are so manipulated that it is very tricky.
Other coins that were strong this week include : $LYX (the token of the Lukso blockchain, an EVM-compatible), $BEAM (this was Merit Circle $MC before migration, it is a main gaming token and has been very strong since rebranding, read this guy’s tweets if you want to be updated on BEAM), $ASTR (an EVM blockchain made on Polkadot, its price has been going up steadily for 3 months), $STX (main BTC beta and Bitcoin L2), $KUJI (DeFi ecosystem on Cosmos, very strong coin).
Some good tweets / threads :
Q1 2024 thoughts by ChiefingZa :
How to play big BTC dumps in a bull :
Bullish on LDO :
Altcoin Sherpa plan for BTC ETF :
Q1 2024 picks :
Volume Spikes Indicator :
Jay Crypto learnings 2023, great article :
Predictions for 2024 :
Predictions for 2024 :
The road ahead for Arbitrum :
Predictions for 2024 :
The $AI ticker is on Binance :
Eugene picks post-liquidations :
Thank you for reading this article,
Cheers,
Viktor.
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