The crypto market has changed : here’s how to profit from it

The 4-year cycle won't help you navigate this market correctly anymore

Welcome, I am Viktor and you can find me here on Twitter and here on Telegram. Enjoy your reading !

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In 2021, a large majority of the ALT/BTC charts bottomed almost exactly on the last day of 2020, so we can say that the alt season began on 01/01/21. Given the fact that seasonality is so strong and that we have respected the 4-year cycle so much until now, many people were expecting this scenario to repeat this year, with alt season beginning around early 2025, as well as an ETHBTC pump.

It was a common belief among CT that we would have a proper alt season in Q1 2025, and this was immortalized by the now famous tweet by Owen which got 5K likes.

Obviously, this alt season did not manifest at all, in the sense that we did not get a pump on the ALT/BTC ratios, but even worse than that : we got a market that is in a complete downtrend.

So is the cyclicality of the crypto market invalidated ? I would answer positively to that question. The usual 4-year cycle is invalidated, and relying on it is now misleading. So instead of expecting crypto to respect a 4-year cycle with a full blown alt season each time, I have now recalibrated my views into a new framework :

Out with the 4-year cycle, in with a new framework

• $BTC isn’t really impacted by the halving anymore, it tends to trade in lockstep with the S&P 500 but with higher beta. And obviously some crypto-specific events will have an influence on BTC price in isolation, both to the downside (Luna crash, 3AC/Celsius collapse, FTX collapse) and to the upside (ETF filings/listings, SEC cases, SBR news). $BTC strong uptrends last a few weeks to a few months, and they are usually related to a significant catalyst : ETF approval anticipation in Q1 23, reaction to positive ETF inflows in Q1 24, Trump victory in Q4 24.

• The steady state for altcoins is a slow bleed down. But whenever $BTC starts an uptrend, then the market switches to ‘risk-on’ conditions and the altcoins can pump significantly. In these conditions, a few altcoin sectors can outperform massively. But even during these risk-on periods, we do not reach the same level of euphoria and craziness on the altcoin front as during the 2021 bull run / alt season, as most altcoins will only perform on par with $BTC in bullish conditions.

You can very clearly see on the charts of OTHERS (which is the altcoin index, the best proxy for altcoins) and OTHERS/BTC why this framework is relevant : in 2021, OTHERS/BTC is basically up only for a year (or up only during 4+ months twice if you exclude the summer), whereas there has not been any similar move since then. The 2 closest things we got to an alt season were the Oct 23 - March 24 uptrend, and the November - December 2024 uptrend. In January 2023, we also had a short echo-bubble where the market pumped for almost 2 months.

But it’s very obvious on the OTHERS/BTC chart that even in these conditions, we were not in the same alt season set-up as in 2021, where the whole altcoin market went crazy for months while outperforming BTC. The new set-up is : OTHERS/BTC is structurally trending down, and it goes up during the short risk-on windows, but even then, there is no massive outperformance, because of the dispersion between altcoins.

I think that it is much easier to evaluate your positioning with that framework in mind, instead of relying on the 4-year cycle. For example, if you were betting on the 4-year cycle to repeat, you would have held altcoins for way too long, expecting them to finally reward your conviction during the full-blown bull run euphoria. But that never happened. Another major mistake you could have made is overlooking $BTC and be very skewed towards altcoins after a large BTC pump, expecting the BTC gains to rotate into altcoins like in 2021. This also did not happen. Once $BTC has ‘pumped a lot’, it’s usually close to the end of a risk-on period, and the last thing you should hold at this moment is altcoins, because they will probably dump and suffer way more than BTC on the downside.

Cycle top ? Long and violent bear market incoming ?

Another lesson we can get out of that new framework I presented is that the talks about cycle top are a bit irrelevant : most altcoins are in a permanent state of bear market, there is no cycle for them, they bleed out permanently (or range at best) and pump during the risk-on period. Knowing that an altcoin which is already down -80% has ‘topped for the cycle’ is obviously useless. You look at their charts and you can very clearly see that they have topped for a few months, but you don’t get additional and actionable info if you think they topped ‘for the cycle’.

At the same time, on the $BTC side, reasoning with 4 year cycles implies that you expect a very violent bear market both in terms of drawdown and in duration. But you have to think about what lead to the violence of the previous bear markets in the first place : my opinion is that they were simply a mirror of the excesses of the bull runs, and that if you expect a bear market similarly harsh this time, you’d have to think the upside overshoot has been as strong in 2024 as in previous bull markets.

My opinion is that it’s clearly not the case : there has been less excess on the altcoin front, with for example significantly less altcoins reaching $20bn+ or $30bn+ FDV compared to 2021. There is also much less hidden leverage in the system : there is less credit available for huge firms to gamble like Alameda or 3AC did, there is no huge Ponzi like Luna that could collapse with contagion effects, the funding rates have not been very elevated for multiples weeks in a row like in 2021, etc. Remember that in 2022, the 3 main drawdowns on $BTC happened each time because of the collapse of some crypto giants, which lead to contagion and forced selling : Luna in May 2022, 3AC/Celsius in June 2022, and then FTX in November 2022. You obviously can’t predict these things (except Luna), but I really don’t see any entity that would be in a similar dangerous spot now, and that could drag down the entire industry as badly as these 2022 crashes.

3 crypto crashes in 2022 : the hidden leverage unwinds

For people thinking that Saylor is the obvious candidate, my answer is that he is extremely unlikely to be forced to sell his $BTC, and you can read my whole article about MSTR to understand why.

Further takeaways from the new “risk-on/risk-off framework” :

So, what else can we conclude from this new framework to help guide our positioning? Here are a few insights:

• Once or twice a year, you get a risk-on season where there are the most opportunities. This is when you need to be active, and this is when you are rewarded by the market even without needing to have much edge.

• Most of the time, we are in a risk-off scenario. In this steady state, altcoins tend to bleed vs BTC with BTC ranging. Don’t overtrade, size down, and only take the best trades you find in these conditions. You will get chopped up if you are trying to force taking too many trades.

• Long BTC / short altcoins is a good baseline positioning. Obviously the execution is extremely important here as this trade can either be very profitable or make you lose a lot of money if your sizing and asset selection is incorrect. (Shorting is always dangerous, especially if you are not used to do it.) You can get blown out on this trade when risk-on szn begins.

• One of the best trades you can take is to be maximally long (on BTC + altcoins) right before risk-on season : in November 2023, the signal to be at max risk was the fake ETF headline by CoinTelegraph which kickstarted the ETF approval trade. In late Jan 2024, the signal was that the ETF inflows were massive after the launch of the BTC ETFs. In November 2024, the Trump victory was the signal, ideally you could have gotten fully exposed during the election night when it became clear that Trump was almost certain to win.

• A few sectors will massively outperform during each risk-on season, your job is to be exposed to these. SOL ecosystem, BTCfi and ordinals, and alt L1s (INJ, TIA, SEI) in Q4 2023, memecoins, AI coins, and RWA coins in Q1 2024, dino coins and AI agents in Q4 24.

• Usually, the hottest sectors/altcoins of one risk-on season are not the same as the next one, and so the ‘last season’ outperformers are likely to underperform next. For example, INJ, TIA and SEI have massively under-performed in Nov-Dec 2024, as well as most of the hot AI coins from 2023 (RENDER, FET, AR, AKT, ARKM, WLD did not make new highs in late 24), as well as STX and ordinals. It’s also likely that most dino coins that have been strong in late 24 will be underperforming during the next uptrend too.

• You want to de-risk in risk-on season when you see dead coins pull up a 2x-5x while the market has already been heated for several weeks : typically we saw weak DeFi 1.0 coins and some old dino coins pump massively in early December 2024, and that was a good signal to reduce risk a lot. A way to reduce risk is to go short a basket of alts versus BTC. What usually happens during risk-on szn is that people convince themselves that we have entered an alt season similar to 2021, and that we should have a rotation from BTC gains into altcoins. Be very careful not to fool yourself into this type of thinking.

A few altcoin charts to illustrate my point

• RENDER / RNDR : You can very clearly see the 2 risk-on seasons, as well as the underperformance during the second one.

• Huge winners in Q4 24, underperforming since then : ORDI, INJ, TIA, SEI

• Start de-risking when you see weak/old/irrelevant coins have parabolic legs while several narratives have already pumped

• MATIC : visible risk-on/risk-off framework. Lower lows and lower highs from one season to the other => worst kind of coin to hold

• ‘Risk-on / risk-off’ phenomenon clear as day, with multi-year range charts

• PEPE : a rare example of coin that was hot during 2 successive risk-on seasons

• XRP and XLM : evidence that some coins can skip several risk-on seasons before outperforming massively, that’s extremely rare though

Thank you for reading this article,
Cheers,
Viktor.

Ref link shill : My favorite exchange is Bybit, it is where I take most of my perp trades. If you want to start trading there, you can use my referral link by clicking here or use my code AOZDLZ6