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Pickle's Predictions and Cycle Journal
A random walk down crypto 2017 to 2022 and predictions for the future
Welcome to the alpha please newsletter.
I’m slightly delirious right now with a cold or flu, and a high temperature, so I thought what better time than now to write my thoughts on investing, the bear, the next bull, lessons learnt since 2017, 2023+ forecasts and everything in between. This might ramble a bit, but I’m also using it as a journal for my thoughts and to keep me accountable for what I say and do. Not Financial Advice. Minimally edited, some verbal diarrhoea.
Firstly, a reflection on the 2018 bear market and 2020-22 bull market, and my history as I remember it. Feel free to skip this, but it may give solace to those suffering badly right now.
In 2018 I lost everything I made from 2017, and then plenty more fiat which I chucked in ‘trying to make it all back’ - both with alts and with leverage trading, combined with poor risk management. I actually had 4-5 BTC left which I had on Bitmex with longs set at 4.5k, incase price hit that. Which it did, then blew through to liquidate me. At that point I hadn’t looked at anything crypto related for 3-4 months and only realised through a Bitmex e-mail that I was down to 0 in the morning before going off to work. Unpleasant feeling to say the least.
To backtrack, I had actually made a reasonably timed exit in mid Jan 2018 after the first capitulation of the 2017 bull-market and start of the bear, with a fat chunk of profit still in hand, but I dreamt of getting back to my paper ATH net worth. I naively thought we were still heading back up (you only know a bear market has started several months after, in retrospect) after all, a BTC ETF was just around the corner and all the selling was due to Chinese New Year, right? I listened, read and looked at charts that purely confirmed my bias. Instead of taking time to consider my fortunate position and accepting I couldn’t see the future, I went further out on the risk curve into bad alts and suffered dearly.
Roll round mid November 2018 and I came back to crypto after being liquidated to see… not much was going on, besides BTC maximalism. My usual social community sources of information were twitter and /biz/ (and maybe Reddit back then). I ended up becoming a LINK Marine after having held the token on and off since 2017, and ultimately buying into the narrative and value proposition (Samuel was also convinced after messaging back and forth a lot during this time, but he went deeper into the culty/autistic breadcrumbs aspect of the community on biz and discord...later we fudded Aylo out of his other bags to join up too).
My holdings were split varying amounts between BTC and LINK for the remainder of 2018 and the 2019 rally (‘echo bubble’ might be the term now, popularised by GCR) which means I did well that year compared to many others - other than LINK, most alts did nothing but continue to bleed.
Then Covid hit the crypto markets in March 2020. Shit.
Bitmex nearly sent Bitcoin to 0 before a ‘fault’ caused them to shutdown, and stop liquidated longs being sold into non-existent buys.
I remember the abject panic I felt during these events. In the 24-48hrs that the capitulation lasted I was on the last week of my traveling/honeymoon and we were in Bangkok for a couple of days before flying home. I distinctly remember messaging friends and we all thought it may be over. I thought YOLO and put whatever I had sitting on coinbase into Bitcoin. Either it was going to 0 or this was the bottom. No event in crypto has been as scary since this period, not even close. Luna , 3AC and FTX blow ups are all bad, but none of these events made you feel like crypto itself might be dead forever.
The days after, things stabilised. That was all I needed for my belief in the crypto markets to increase significantly. Up until then, crypto had existed on a backdrop of great macroeconomic conditions which made me persistently question if it was all a ponzi ready to utterly collapse during the next equities bear market in the West. This was an absolute huge test for all markets worldwide, and crypto survived, people kept building, and prices started to recover.
Over the rest of March and April, I pulled all my money from other investments and piled into mainly LINK and some BTC. Keep in mind I had a good job that paid well, no dependents, youth(ish) on my side and therefore security knowing even if everything went to 0, I’d be hurting badly but able to recover. Again, I got lucky with this timing, DeFi summer kicked off, and I did well. This is where my outperformance ends.
I, perhaps alongside others thought LINK was genuinely going to be a top 3 token and potentially even flippen ETH given its importance and blockchain agnosticism. The same bullish vibes applied for all the major DeFi protocol communities. Euphoria in August was palpable. That was probably a sign to exit or at least significantly diversify (ETH price of LINK is down 90% from the high as of writing this, similar to many DeFi protocols from ETH ATHs).
I would define this is my personal bullmarket top. DeFi Summer 2020 was pure joy. I was working like an absolute dog during the days to make money to put into crypto, sleeping 4-5 hours a night, pissing my wife off no end, probably developing an ulcer from the stress, but loving it all.
I faded most narratives that followed, including most of them in 2021 (the real bullmarket) holding out hope for LINK, married to the token and the concept of ‘fundamentals’ in my mind justifying this choice. I eventually started diversifying in early 2021 but not as much as I should have. Nevertheless, ‘a rising tide lifts all boats’ and I peaked my net worth a few X over DeFi summer, partly due to being very active on-chain with farming, airdrops and leveraging my tokens on Aave at opportune times to buy more.
I played the second half of 2021 atrociously. I was slow to take profits before the mid-cycle Summer 2021 dip, slow to re-buy and at that, I bought mainly BTC and ETH thinking there would be a return to safety/quality and BTC dominance, rather than going heavy on the L1 trade SoLunAvax. I made many mistakes (being a small AXS whale in 2020 which I subsequently sold in a few months as no one else bought into the hype before it did its 300x run, as well as buying TIME with 2 hours of release, being one of the top holders then selling within 20 minutes because I thought it was bound to fail - which was true but not until after a 100x - I actually sold for a loss lmao).
I was late to realise we were in a bear market and didn’t start taking significant stables out until late March 2022 (besides what I needed for taxes) and at that, at a slow rate. I’m down 70% or so from ATHs, again it would be lower but farming on-chain has been lucrative and kept the money coming in.
Fortunately, I didn’t start redeploying those stables until after the 3AC June capitulation, and still have most sidelined, which I’m currently DCAing primarily into BTC and ETH, at an increasing clip.
The best time to start buying is after capitulation but not before apathy sets in - people engage less, things are a bit boring, prices are boring, traders start trading other assets. It may not be the bottom, but it’s probably close. I consider this as a ‘sentiment reset’. I believe crypto bear markets are more a function of time than price (after all, speculation is still the main driver, no fundamental value creating backstops to prices going down).
Consider the mindset of most retail traders in the past two cycles.
They buy in mania for the last few weeks or months of the cycle, maybe make profit, but mostly lose money once the market turns. They buy dips which keep dipping then eventually leave, angry and disillusioned. They need the market to die and stay quiet for a long time. Eventually they ‘reset’ and then some sort of trigger event rekindles their interest and they re-enter, fresh and ready to throw their money at the next 100x. However, when major negative events occur in crypto which filter down to the retail normies, this reset is not possible. FTX blow up is the most recent negative event, had it not occurred, not much noise would have been made since the 3AC collapse. The sentiment clock was reset in November. The exception to ‘sentiment reset’ is when up only bullish price action can resume relatively quickly. The normies are still hurting, buying dips but haven’t left. Transaction volume on CEXs and DEXs remain high and media engagement is still there. We saw this in the Summer 2021 dip.
In a bear your time is best spent researching protocols/projects which may enable innovation and a significant change within crypto. It doesn’t mean you have to buy them there and then, but it’s worthwhile collecting a short-list of things to consider buying. A community based around a project is great, it both supports price, helps gain attention of other crypto nerds and makes it more likely to thrive in a future bull market. Be wary of projects which look interesting but are just full of angry bagholders from previous cycles.
Newish tokens tend to perform the best. Not always, but the psychology of the community behind that token matters. When people are down 90% they will often sell on the way up. This is also a reason NOT to buy alts too early in a bear market, and instead wait til a bull market seems likely/confirmed. A project released in a bear with a token may be fantastic, but chances are the token will underperform/dump on public release as underwater traders try and claw back money. You’re then left with angry bagholders instead of a positive supportive community by the time the bull market rolls around.
Most traders lose. In a bear market this is even more true. PvP is real. Once the normies leave it’s just you and some guy with a box full of adderall and 12 screens. Probably try and avoid trading for meagre profits when the reality is you’ll eventually get chopped up. Bide your time until the up only good times return. Inaction is an action in of itself.
Read this thread, it pretty much summaries my bear market thoughts alongside some of the additions above.
Finally, don’t jump into private sales/locked vesting schedules/IDOs/LBPs etc. The bargains and best buys in a bear market are in the public market with everything down 90-99%. The opportunity cost of locked capital is too big. Don’t be fooled by VCs and influencer noise pumping their bags they they overpaid for during the easy money days of 2021/early 2022. They’d be buying liquid tokens if their mandates allowed it, but they have to create an air of mystique and unique ability to outperform - otherwise their LPs would simply leave and buy ETH 80% off it’s highs all by themselves - but then where would VCs collect their management fee from?
I think I’ve realised, having been active through my first full bear/bull cycle, that a bull market has multiple stages.
Sidelined capital returns to the market - this is from active crypto participants including traders, normies that are now natives, funds, DCAers etc. This is probably the easiest part of the market to predict, but not the most profitable. ‘Fundamentals’ sort of matter. People care about the protocols the tokens are used for, what the protocols do, the token distribution, yield and where it comes from etc. Simple research can help you direct your pennies to the right projects, and if you did this research during the bear market, you should have a head start. The simple thing here is to just buy BTC/ETH though, as they’ll inevitably pump.
Something triggers normies to re-enter the markets. This might be a gradual thing such as the main stream media starts noticing prices recovering robustly, or something new in crypto that attracts them. Last cycle it was BTC ATH break and Dogecoin running alongside memestocks, which then led into the NFT mania. This new money will continue to push some ‘fundamentals’ driven projects, but capital will largely be looking for somewhere new to go to get the big multiple X gains.
People who play the game well will rotate out of their initial wins when they see the hordes arriving.
Probably the best metric to watch for their return is youtube viewership of crypto channels (the BitBoy type channels..), MSM articles, TikTok and google searches. The normies tend to appear late on twitter.
So many tokens blew up and I only heard of them late because, like it or not, Crypto Twitter is only a small subsection (be it the most interesting and arguably high IQ) of crypto. If you want to make money, you’ll need to be aware of the crowds.
At this stage, ‘fundamentals’ matter less, and its all about simplicity, marketing and memery. Find tokens with simple to understand narratives. ‘Best delta neutral hedging protocol onchain’ doesn’t mean anything to a guy with $1000 to throw at something. ‘Valve’s new blockchain which is faster than everyone else, has games and NFTs’ (as cringe as that may sound) is.
The future promise; the story, is all that matters. Execution isn’t necessary, just enough belief in ‘what if’ and a suitably large addressable market to make it seem the token will do a 100x (or whatever silly number). It’s the same but pressure as growth stocks.
Tokenomics matter less. Normies don’t understand marketcap or FDV/circulating ratio. People have unit bias - low value individual tokens matter more to them.
On-chain is only used for gambling through DEXs or NFTs, and mainly on cheap chains - next cycle this may change with gaming, and better developed UX/UI. Be sure to understand though - normies couldn’t care less about decentralisation, or validator sets, or time to finality - they want cheap fees and good UX, that’s it.
Despite everything I’ve said above, many will read through this and think I’m talking nonsense.
They’ll say this cycle will be different, people will adopt web3 in their droves. Real fundamentals will be the main driver throughout. But guess what; this was the exact same mentality in 2018 for the following bull market, and as history shows, it didn’t play out.
Fool yourself as you may, but 99% of people in crypto are here to make money, the social and egalitarian aims of it are a nice target but they’re not why I buy tokens. I buy them to speculate and make life changing money.
Stubbornly holding out hope for a ‘return to fundamentals/value’ throughout an entire bullmarket will leave you disappointed.
The market is never wrong, if it chooses to go in a different direction to your strongly held thesis, you’re a fool to think it’ll come back to you. People have already voted with their cash as to what they think is valuable, whether you agree or not doesn’t matter. You either adapt, or remain on your high horse and miss out. Really think about why you’re here.
The final gasps. The ‘blow off’ is what many of us expected in 2021 November as with prior cycles, but we seemed to get a rounded top. Whether this is something we’ll see in the future, or it was due to market hijinx by the bad boys (Do, 3AC, SBF) isn’t clear. I have no real insight into this.
Previous cycle top signals came months before November, so they weren’t helpful other than making you miss the gains at the end of the bull, if you used them to exit. Timing the top is harder than the bottom +/- 20%. I would suggest when you’re feeling particularly manic, thinking about that 3rd Ferrari, that you start DCAing out alts —> ETH/BTC —> fiat, and stick to it no matter what. Leave in only what you’re willing to let ride for at least 5 years. Using targets in price terms or portfolio value will never work - we’ve all done the same thing - you hit your target, then increase it. Use sentiment (yours, normies, non-crypto friends, media) as the trigger.
A big trap for me was equating my holdings with communities I was a part of. Holding LINK meant I was a LINK marine, through which I’d made multiple online friends. The great positive of this is the camaraderie and ability to hold through dips it gives you - which helps you with the volatility on the way up, but can equally keep your exposure too high and for too long on the way down. Selling any LINK felt like a betrayal of that community, so I held. This is MADNESS. You should steelman arguments to not hold something, and if others can’t see the other side or berate you for exiting your positions - they’re effectively trapped. We are here (mostly) to make money. The tech is great, the gamification of finance through DeFi is fun, but don’t lose sight of your goal. The real friends you make will not disappear, the ones that do weren’t friends in the first place.
As I write this, Bitcoin and Ethereum are both 75% off their all time highs. The December rally looks to have died.
If it’s not already apparent, I am not a trader. I tend to be buy only mode in bear markets and mostly sell mode during bull markets, will little to no additional allocation of fresh stables.
My strategy is mostly determined by social signals, macroeconomic picture, narratives, sentiment and sometimes being contrarian. I’m not a big fan of TA. What I do is specific to me and my circumstances/liquidity available to me, but what I plan to do may vibe with others who don’t want to constantly fret about the markets and timing the lows and highs.
It will come as no surprise that I’m in the camp of those who believe we will see a sustained rally (‘echo bubble’) in 2023. By this I mean notable higher highs and higher lows rather than the reverse which is what we’ve been seeing all of 2022. I think this will be similar to 2019 - mostly driven by sidelined crypto capital rather than new money, and more so a mean reversion play rather than necessarily new narratives leading the way.
I’ll not go into macro-economic ramblings as that’s an entire topic in of itself, but I don’t think we get a true bullmarket until 2024 earliest.
My play has been DCAing ETH and BTC the past 6 weeks or so post FTX collapse. I’ve ramped up in the past month and only into BTC now. There are certain alts I’m bullish on and that I’m holding, but only small allocations. Why? I think the rally will be hard to predict. I think it’ll happen before Summer 2023 ends, but that’s a lot of time for alts to potentially get chopped up. The closer we get to Summer without a real rally, the more l’ll start considering buying alts.
Traders and influencers are clearly confused, TA charts are mostly showing people’s bias. Everyone is flip flopping every few days. This is usually a good sign for me as this sort of behaviour, alongside general apathy, is usually a bottoming sign. I remember 2018 when BTC hit 3k, half the people thought it would revisit the 1ks while the other half thought the lows were in.
Between ETH and BTC, I feel ETH will outperform in absolute terms from now until the next bullmarket peak and probably flippen BTC, partly due to ‘ultrasound money’ thesis post merge and EIP 1559 implementation. It will be minimally inflationary and sometimes deflationary, giving it the monetary premium BTC has, as well as being a smart contract layer. However, during the coming rally, it’s unclear, and looking at sentiment between the two, and the ETHBTC chart, there’s a real possibility of BTC outperformance.
BTC sentiment has been in the toilet for a long time. Former maximalists like Nic Carter (who’d argue he was never a maxi) have turned and left the camp, leaving only the dregs and low IQ cultists who collectively come off as a group of desperate angry bagholders, espousing the importance of lightning network (the only moderately useful thing built on Bitcoin in the past 5 years), without acknowledging the relative failure and underperformance. Their identity is built on hating other things these days.
Price never achieved the heights people expected in 2021, and it’s now below its 2017 peak, something no one could have expected to occur. People who bought 5 years ago are currently sitting on a loss (although this is a similar story for ETH give or take a month).
For these reasons, I think crypto natives are underallocated to BTC (as shown by BTC dominance being low 40%s) and there are many incremental buyers left, unlike ETH which seems to be largely acknowledged (by crypto natives) to have a promising future and more positive sentiment. The vibe I’m getting from twitter is similar to Q4 2020 where BTC and BTC holders had a similar identity crisis following the DeFi explosion on ETH, but ultimately had a huge rally with ETH initially being left behind.
ETHBTC has been ranging for months now and I expect a squeeze (I think down). My plan is to have laddered buys for ETH on the BTC pair down to 0.05 (June ETH low when 3AC started unwinding their ETH and stETH positions).
My current allocation to crypto is 60% ETH, 17% BTC and the rest in alts, so if i’m wrong about ETHBTC, I’m ok with that as I want some BTC anyway. If it wasn’t so skewed towards ETH already, I’d likely still be buying both.
The only other token I’m adding to from stables right now is SOL, and only a tiny amount (<2% of my weekly DCA), for similar reasons as above for BTC - extremely poor sentiment and as a mean reversion play - but in this case there is a thriving onchain NFT community, a strong dev community and enough differentiation from Ethereum that it *may* do ok in a future bull market. I never held Solana any SOL until the past few weeks when my opinion started to change. Long term having the FTX cartel gone is good. With them, their DeFi projects which had horrendous predatory tokenomics with low floats and huge FDVs are dead. Solana’s DeFi ecosystem can rebuild in a more fair and equitable way. There are plenty of Solana haters, but steelmanning the pros and cons, it’s the only other L1 out there right now that I think is worth allocating to alongside ATOM (if your kneejerk reaction is to immediately hate it without delving deeper…you’ve learnt nothing from the past bullmarket). If I’m wrong here and it goes to 0, it will make a negligible difference to my portfolio.
I believe mid to long-term (3-8 years) we will see ETH over 14k and BTC over 125k. Let’s call that at least 7x from here. This is my personal (crypto degen) ‘risk free return’. ‘Real’ investors will balk at that and call me deranged, while crypto moonboys will say I’m underestimating. But that’s my belief and the basis on which I invest. Other projects need to simply allow me to multiply my ETH or BTC holdings. I will be approaching this cycle with the intention of selling in clips to one of the majors if something does a reasonably sustained pump. I am not looking to hold for or dreaming of a 100x.
The alternative or addition to the above is to have a lot of moonbags, of micro/lowcaps which are illiquid, mostly will go to 0 while, and just clutter my mind and portfolio. This is NOT worth it for me, but may be for people running smaller value accounts to get up to a reasonable size more quickly. It can also lead to ruin more quickly.
I’m not discussing L2s, L1s or any of that, it’s too well covered elsewhere and at the forefront of most people’s minds, instead I’m talking more widely about potential bullmarket narratives.
I think most uses of blockchain are already known and being experimented with, I’d genuinely be surprised if new uses are discovered, as opposed to iterating on what already exists or putting them together as legos. DeFi and NFTs were the first proof of concept after digital money but had been around for several years before taking off in 2020-2021. I think digging deeper into what’s possible and what projects are addressing those areas isn’t too difficult.
DeFi, of course, will likely be pushed as a narrative again, but I think the lack of regulatory clarity is slowing its growth and its use by more TradFi institutions, as well it often being too novel and risky this early on in its life cycle. Being down only against ETH for 2.5 years is also a big hurdle to overcome before any long-term bullish momentum (beyond the wider market carrying it up) can be achieved.
NFTs have utterly broken out and are adopted in the legacy world more widely now. I’m completely rubbish in following or understanding NFT trends. The interview Punk6529 did with Raoul earlier this year stands up really well and summarises where NFTs could be heading.
Gaming was a hyped end of cycle narrative, but what we got was unreal engine trailers, and piss poor, badly funded, rubbish games. A few AAA titles will come out in the next couple of years thanks to all the hype and funding smaller studios got, and from developers leaving establishing gaming studios to enter web3. I’m yet to be convinced that the games need to be ‘on the blockchain’, but rather just items and in game currencies, which could be represented by NFTs.
Wallets may be investable by integrating apps and DEXs while skimming a fee to accrue to token holders. There are a few out there already but they’ve not really penetrated the mobile market in a meaningful way, which is the holy grail. UX is paramount for wider web3 adoption and a good wallet could capture a lot of the future users and therefore value.
Decentralised social media attempts have existed for a while, but all have been inferior in most ways compared to their web2 counterparts. This is probably the hardest area for a breakthrough protocol to achieve adoption, but if any one can do it, it’ll be worth multi-billions. The breakthrough project will likely be on Ethereum L2s, most likely ZKs (although Aribtrum Nova may also be sufficiently cheap).
The idea of the Metaverse is still rather vague, purposefully so by marketers I feel, but I don’t think anything we’ve seen so far is appealing or gaining any real traction, but it’s still an area to watch. I don’t feel any of the current major web3 projects working on this are doing a very good job.
Decentralised ID (DID) is something that’s been discussed since 2017 seriously on Ethereum and Bitcoin and I think it will eventually become a reality and investable as our world becomes digitised. There are again a few projects working on it already but I’ve yet to see one which looks like it will be the breakout success.
Decentralised Cloud services (both compute and storage) have been around for two cycles, and we started to see some adoption, particularly storage in relation to NFT metadata, but not so much in the way of of ‘legacy world’ data. Long term, this area has a 10,000x growth potential in use, but I’m wary of how investable tokens will be relating to such projects, the current front runners have relatively weak tokenomics.
Gambling and prediction markets are one of the biggest markets to break into. Interestingly, this hasn’t taken off onchain so far despite having the tooling available, and I think the reason seems pretty obvious. Crypto trading of tokens on DEXs and CEXs is in of itself on the extreme end - pure gambling. Normies come to crypto primarily to gamble (speculate) with tokens, not to use platforms to gamble on sports or politics which they can do using web2. The reason to use web3 for gambling in the traditional markets is four fold: Better UI/UX, regulations preventing gambling in the users own nation, better liquidity/spreads, and lower fees. Most of this is not yet true, but there are a few projects gaining traction now.
Social/Fan tokens are an interesting but a sort of dystopian idea, which we’ve mainly seen take off around football during the World Cup, but not to any meaningful degree. You could consider it as psuedogambling or a voting mechanism on the broader performance of a team/person/group/cause etc.
Pure memes. Hard to predict. Generally are best when they have no real use or utility which allows price to fly very high without any fundamental analysis possible to cap it. Doge will be around, probably Shiba too. There will be other meme tokens yet to be released that’ll do 1000x, but the chance of you picking the right ones with size before being wiped out is slim. Not sure many people called cumrocket or safemoon early. Stick to the ones you know or generally avoid them, in my opinion.
Since posting this, Chat GPT3 became useable by the public, spawing a VC rotation into early stage AI-ML products and a similar narrative with AI related tokens.
As those that were around for the previous cycles(s) will know, bull markets are mentally and physically far more draining than bear markets. Fear of missing out is a huge problem, and you can and will set aside physical and psychological health to keep trying to win, the urgency of it all will you give anxiety and your sleep will be wrecked. You’ll check your portfolio several times a day. You’ll be distracted easily. We’re not at that point right now, and what you do in the next 2-3 months probably won’t make or break your gains in the next few years, so I urge you - give your brain a break, zoom out and stick to a strategy whilst ignoring the noise of CT (and it is 99% noise) sort your health out and prepare yourself for the future slog that will come. I’ve shown it’s very much possible to completely fuck up a cycle and still do well in the future.
I think with the next few years there will be more adoption of crypto, more people will get pulled in and stay. I don’t think we see widespread use for a long while yet, and I still think another speculative bubble is inevitable. People will, because they’re FOMOing greedy animals, go out on the risk curve to smaller market cap and stupid tokens to try and maximise their gains. Human nature can’t be changed and whilst crypto is unregulated, people will use it as a means to speculate, gamble and make life changing money. The opportunities are out there, just survive long enough to be able to capitalise on them and don’t get chopped up in this bear market.
And that’s your alpha.
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Not financial or tax advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Do your own research.