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  • Writer's pictureDaniel Shapiro

Market Update #2

Abstraction Capital’s Market Updates provide insights into the crypto market and strategy performance. Please enjoy Market Update #2.

High Time Frame

Bitcoin continues to range near previous cycle’s all-time high, this week pushing beyond $70,000. The biggest news of the week, though, was the Spot Ethereum ETFs getting approved. Once news came out that the Democrats did a complete 180 on their crypto policy, Ethereum gained 70 billion market cap in a few hours. Historically Ethereum begins outperforming Bitcoin post halving once Bitcoin enters price discovery, and the ETH ETF narrative seems to be lining up for this to happen again.


Medium Time Frame

Stablecoin flows have recovered and are now increasing at an accelerating rate. Global liquidity is inching up as well – as we get closer to the election this trend should continue. With the ETH ETFs launching within ~30 days, I expect any market pullbacks to be shallow. I don’t think we are going to break-out cleanly and enter price discovery – I expect we will aggressively reject off the first test of the all time high, trapping eager market participants trying to long the break-out. We likely repeat this process a few times while BTC slowly compresses around ATH, with shallow pullbacks that don’t give market participants the large correction they want. I am no longer cautiously bullish; I am simply bullish. Retail is not yet here, though, so trading remains zero-sum. With funding rates, premiums, and open interest up, expect sharp choppy moves to liquidate over-exposed market participants before expansion occurs.


Short Term Developments

As discussed last week, Bitcoin did end up reaching $72,000, approximately the top of its current range. ONDO and LINK have both continued breakouts out as well. Uniswap announced that another vote to turn on the fee switch will occur at the end of the month. UNI moved aggressively off this move - if the fee switch is turned on then expect continued outperformance. Memecoins look like the strongest aggregate category at the moment. The two strongest memecoins this cycle have been PEPE and WIF – I believe we are seeing the early signs of a rotation from the former to the latter.


Cross-Asset Momentum Strategy

The strategy is currently long ETH, LINK, IMX, UNI, and DOGE.

1 Week Performance

7.76%

Performance since Market Report #1

7.76%

 

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