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Summary
In this edition, we cover:
Altcoin dominance and its relationship with BTC/USD cycle breaks
How few days drive outsized performance gains during alt/beta rallies
Cycle Mechanisms, Psychology, and Alt Season
Extrapolating the patterns of previous Bitcoin halving cycles to the current one, the model implies ~320 days of broader upside momentum.
The last phase tends to be the most intense structurally.
With previous cycles, BTC’s convincing break of previous cycle highs has coincided with the break out in altcoin dominance (where alts outperform beta).
Structurally, this makes sense as investors rotate profits down the risk continuum deploying into other market sub-sectors.
In October 2020, when BTC broke its previous cycle high, altcoin dominance re-rated vs beta by +175% in short order.
At that time, the first US stimulus checks were handed out in April-June with the last in Jan/Dec 2021. In other words, there was a delay for investors to be ‘profitable’ in a global economic shutdown due to COVID-19.
What’s different this time is there is no global economic shutdown but the market mechanisms and investor psychology remain largely the same.
Profits are to be rotated down the risk continuum and it’s already having an impact on high cap names vs. BTC.
The possible implication for this cycle is a more immediate re-rate in altcoin dominance after BTC decisively broke its previous cycle high.
The path of least resistance for altcoin dominance appears higher with the index maintaining support but also now breaking out of its 2024 resistance.
2020-2021 Example: SNX/BTC
We can look at previous cycle examples of alt re-rates vs. beta using specific names.
In 2020-2021, we can see that alts poster child at the time like Synthetix (SNX) started their re-rate vs. BTC at the exact time when BTC/USD broke its previous cycle high convincingly.
Time in the market is also key. Being in the first month of the SNX/BTC re-rate from late 2020 -2021 added 2x the overall performance from trough to peak than without.
For SNX/BTC, there were also only 2 days with daily gains of >20%. Missing just these two days also drove a 2x underperformance vs. capturing these 2 days.
History rarely repeats but it often rhymes.
As the adage goes, “It's not about timing the market, but about time in the market.” But maybe with the right framework, you could do both.
Stablecoin yields remain high as Ethena hits 30% yield
The bullish market environment is driving stablecoin demand higher, pushing up stablecoin supply rates throughout DeFi
Re7 vaults are the highest stablecoin yields on Morpho Base as users seek to borrow against crypto assets and yield-bearing stablecoins. For example, Re7’s Base USDC vault.
Looping on the Re7 curated Euler stablecoin vaults is still showing double-digit yields.
Cross-lopping stables like M and AUSD give rate arbitrage yields on Euler.
rsUSDe is getting Ethena's native 20%+ yield with Mellow and Symbiotic points on top.
In short, it's a good time to be a stablecoin farmer.
Disclaimers
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