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November 10, 2021
Bitcoin – the Inflation Hedge!
Since many of you are new readers of the EllioTrades newsletter, we want to express a warm welcome to all of you! This is the perfect place to stay up to date on all things crypto. No matter if relevant macro topics, breaking crypto news, market analysis, altcoin tips, and of course, NFT- and blockchain gaming-related content, we got you covered.
There are a few important things to mention:
The newsletter consists of two main sections: The daily roundup (which you are reading right now) and the deep dive section with in-depth analysis and breakdowns of interesting topics.
Of course, nothing in this newsletter should be considered legal or investment advice. We try our best to provide you with profoundly researched and helpful information which is meant to help you build your own framework. Nothing we say replaces your responsibility to do your own research and make informed decisions.
With that being said, let’s jump into today’s roundup!
BTC Demonstrating Its Inflation Hedge Function
After yesterday’s record producer price inflation read, we have gotten even more horrific inflation data today: The CPI has jumped to 6.2%! The immediate effect? While stocks are sliding due to fears of an imminent Fed intervention, the DXY (US Dollar Index) and Bitcoin are rising. Who would have thought that BTC is an inflation hedge after all? 🤭
Of course, there has been no shortage of jokes and memes today…
Naturally, with every all-time high push from BTC and ETH the fears of a correction or even “the end of the bull market” resurface in the crypto community. This is actually a good thing because as long as there is no bullish consensus we still have room to grow. As soon as the warning voices quiet down and everyone is lulled into the bullishness of the markets, that’s when you want to start looking for the exit…
A nice effect this summer’s “bear market” had on the fundamental structure of the crypto markets is that it reduced the overall amount of risk-taking and leverage, which provides a far more fertile ground for organic, spot-driven price action.
Thus, instead of massive liquidation cascades and red candles, mild sideways consolidation can often be enough to reset funding rates and set the basis for the next leg up. As long as we don’t rise too parabolically and greed stays in check…
“Bear Market Proof” Your Portfolio
With BTC and ETH in price discovery mode and altcoins set to follow suit, it’s time to ask yourself if you are really prepared for what comes next: A massive blow-off top in December followed by a brutal bear market, a slow and steady grind up to new highs next summer or even a “supercycle” that lasts many more years – are you mentally prepared for either of these scenarios? (We haven’t mentioned the unlikely but possible scenario of a “macro puke” where global stock markets implode and send the crypto markets down with them).
Here is a possible scenario that could leave many crypto investors in pain:
So, how should you handle the uncertainty of outcomes and position your portfolio accordingly? After all, you still want to sleep at night, right? While crypto can make people rich quickly, it can also end up in a catastrophe if you approach the crypto market like a casino…
Here are some thoughts that can help shape your strategy now that we enter the most volatile but potentially profitable time in the bull market. Firstly, there are two different “base strategies”:
The aggressive and active strategy is where you try to stay on top of the markets and anticipate which altcoins are the likeliest to produce gains in the near future. This involves of course much bigger risks and a lot more time commitment since you expose yourself to short-term volatility by trading in and out of positions and need to be able to react VERY fast to developments in the markets.
The more passive strategy involves picking projects which you expect to grow long-term – irrespective of the current hype cycles which ebb and flow. Such a strategy includes identifying narratives and overall sectors with massive growth potential, for example, L1s with strong network effects (ETH, maybe SOL, AVAX, ADA, etc.), infrastructure projects (e.g. file storage and distribution: The Graph, Filecoin, Akash, Coldstack, etc.) and of course gaming and metaverse projects. Be aware though that for some narratives with long-term potential the “time to shine” might not come in the next few months just yet…
Of course, the two strategies can also be combined since long-term bets can also do very well during the remainder of this bull cycle. You just have to be careful to not confuse hype-driven price rises with fundamental adoption (which is very hard during an altcoin mania phase)
While some of you will try to maximize your profits in the coming weeks (and take on massive risks), others might already want to prepare for the inevitable market downturn and only hold projects that you are willing to hold for more than just a few months.
Of course, most if not all altcoins will get crushed in a bearish downturn but it's good to remember that certain narratives and coins with fast-rising adoption can also do exceptionally well even during bearish times (e.g. CEX tokens like BNB back in 2019).
Crypto Gaining More and More Recognition
While crypto’s rise has never been dependant on endorsement by public figures, it’s an inevitable step on the way towards mass adoption. Thus, Apple’s Tim Cook declaring he owns Bitcoin and Ethereum is certainly another step in the legitimization of crypto. After all, some of the most influential tech innovators in the world, Elon Musk, and Tim Cook, own crypto now.
Gaming & Crypto: A Trend That Is Only Just Beginning
After years of ignoring, the gaming industry is finally paying attention to crypto and NFTs. In the last few days alone, Ubisoft, EA, and other big gaming players have voiced their support for the emerging blockchain gaming space!
64% of game developers are sure that blockchain will prevail in gaming in next two years.
Cities Fomoing Into the Metaverse
Not just crypto projects and tech giants such as Facebook and Microsoft are scrambling to conquer the Metaverse. Now, we also see cities – yes you read correctly – trying to play a role in this emerging trend of the future. We don’t know yet what role crypto will play in Seoul’s Metaverse though…
With all the Metaverse hype right now, it’s important to remember that not all Metaverses are equal and that what the crypto community strives for has little to do with centralized virtual reality projects from the likes of Facebook.