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SwissBorg MacroScope - 22 April 2024

SwissBorg MacroScope - April 22th

What’s ahead for crypto?

After a strong correction in the market, triggered by a revival of geopolitical tension in the middle east, it seems that Bitcoin has found a solid floor around the $60-61k levels and has reacted positively as market participants are starting to price that geopolitical tension will not escalate. However, this geopolitical situation could change fast and short term volatility should be expected if the middle east situation changes.

In any case, our base case scenario is still a continuation of this bull market.

A healthy reset in the market

Now, if we leave the reason for this dip behind, we see that in any case, the market needed a flush to go back to more healthy levels. The high OI weighted funding rate that we witnessed as Bitcoin price accelerated was unsustainable in the long term.

Hence, the negative OI weighted funding rate that we had in the last weeks was something really positive for the market. In fact, the last time OI weighted funding rate turned negative was in October 2023 before Bitcoin ran from $27k to $46k without any meaningful dip.

A healthy reset in the market
Source: Tedtalksmacro

So far, Bitcoin is still the king of crypto

Since the beginning of the bull market, Bitcoin has maintained its position as a leader. This is reflected by the uptrend in the “Bitcoin dominance” chart  since the end of 2022. In other words, this chart tells us that, for now, the global altcoin market has not outperformed Bitcoin.

So far, Bitcoin is still the king of crypto

So far, this structure is similar to previous cycles where Bitcoin’s bull market starts earlier than most altcoins. Looking at the 2020 cycle, we note that altcoins start their bull market on average 150 days after Bitcoin.

Histogram of time discrepancy from BTC bull market start

Moreover, we also note that altcoins runs are more intense but way shorter. Again, if we look at the 2020 cycle, we note that altcoins bull market lasts, on average, 250 days less than that of Bitcoin.

Time discrepancy from BTC bull market duration

The main take away from this short study is that, if the market follows a similar path to previous cycles, we should expect Bitcoin dominance to top and start a downtrend at some point in the future. This would be accompanied by an alt season where altcoins overperform Bitcoin for some time.

2024 in one picture

When we look at the performance of different asset classes since the beginning of 2024, we note that, even with the recent dip, Bitcoin is by far the best performer (46%) behind gold (16%). On the other hand, equities performance is lower but still positive while treasuries, as shown by the 7-10 US Treasury (IEF), has a negative performance so far in 2024.

2024 in one picture

Our Long-Term in-House View

  • We are in a bull market and we expect to see BTC > $100k, ETH > $10k and SOL > $500 as new ATH in the next leg of the cycle.
  • A dovish stance is starting to appear on central banks' sides and global liquidity is in positive territory. Long term, this is bullish for crypto assets.
  • The revival of geopolitical tension in the middle east is something to monitor closely, but for now, this does not impact the long term bull case for crypto.
  • We believe in ETH as the superior asset to Bitcoin for the next decade. Further, our view is that SOL has the biggest potential for consumer app adoption.
  • Our favourite altcoins thematics for the next upleg are Socialfi, Gamefi, DePIN, AIfi & Infrastructure for scalability.

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