Are you a professional cyclist ready to win big?
Dust off the cobwebs, oil up the gears, and slip into some Lycra, because sound preparation now means having a strategy to ensure you cross that finish line in style.
Whether you believe we have seen the market bottom or not, now is the time to prepare for racing season: The new cycle theory appears to be playing out.
The recent deluge of negative news has certainly spooked the market, but there are key signs in play now which suggest that it’s the perfect time to prepare your portfolio for the next leg up: Crypto markets seem to be ignoring the noise and looking ahead.
We’re here to make sure the Banter cyclists are prepped and ready to come out on top.
- Bullish signs of recovery.
- Fail to prepare, prepare to fail.
- Portfolio strategy for success.
Good news, bad news, it’s all good in the end
When markets begin to shrug off news that previously would have crushed it, it’s time to pay attention.
In recent months, we’ve had no shortage of Fear, Uncertainty and Doubt (FUD) which has seen prices crash.
The Consumer Price Index (CPI) data in November pointed to rampant inflation and an overheated economy. The solution? A sustained policy of rising interest rates, with no guarantee as to when Federal Reserve (Fed) Chairman, Jerome Powell, will pull the trigger, or whether it will be a hard or soft landing for the economy.
Equity markets took a dive, the NASDAQ plummeted, and Bitcoin followed suit. The narrative was that Bitcoin was a risk-off asset, and being treated by investors like a tech stock.
Next came the growing tensions between Russia and Ukraine, with the prospect of a potential military conflict on the borders of Europe.
Once again, markets don’t like uncertainty.
That’s the bad news, and here’s the good news which points towards the beginning of a new market cycle.
Bitcoin has rallied 30% from its January lows, and it now looks set to prepare for a sustained breakout to $46k and beyond (see Sheldon’s chart of the day for more details). Could this be just a dead cat bounce? Or is it the start of the next leg up?
We would argue the latter. The bad news is still out there: CPI data came in at a higher than expected 7.5% last week, tensions have escalated further in Ukraine, and the Fed’s monetary policy is increasingly hawkish, with whispers of a 1% interest rate hike by June. There was even a suspicion that there would be an emergency inter-meeting rate hike!
Last month, these stories would have sent markets into a tailspin. What a difference a few weeks make! We are now shrugging off negative news and responding emphatically to good news. The tide is turning.
Markets are forward looking. Worst case scenarios get priced in until any negative news subsequently fails to have an impact. In fact, if the news ultimately provides any welcome surprises, we’re likely to see a major upside reaction and a potential short squeeze play out.
Catalysts to $50k (and beyond)
The risk/reward ratio is now favoring the upside. We may yet see some volatility (with downside retests), but at this point – as per our recent article – there is far more upside to being a bull than a bear.
What could be the catalyst to take us to the next level?
Relief alone could do it.
The Fed’s inter-meeting gathering came and went without an unexpected rate hike. Meanwhile, there have been reports of troops being withdrawn from the Russia/Ukraine border.
The markets have reacted positively, further signifying that sentiment has shifted in the bulls’ favor. We are seeing positive news being well received by markets, and negative news being ignored, or even met with a positive spin. A possible short squeeze will ultimately add fuel to a recovery move and be the final catalyst which blasts us through resistance and towards the next high.
5 steps for mastering cycling: on your marks, get set, go!
If you believe, as we do, that we’re entering a new market cycle, it’s time to prepare your portfolio and maximize your gains.
We’ve identified 5 key steps you need to take: the ultimate framework to ensure your portfolio is aligned with the smart money as well as with your own specific goals.
- Look at the market cycle, and identify where we are sitting within it (as we’ve just done!). If you’re still in doubt, zoom out. After a 50% correction in the Bitcoin price, and a series of macro and political grenades disrupting the market, we are finally seeing a more robust recovery in play.
- Select your risk profile. Each of us will have an understanding of our own appetite for risk, and from that, we will determine the size of our portfolios which we allocate to high-, medium-, and low-risk projects.
- Identify the narratives which will not only survive the volatility of unexpected bad news, but also ‘moon’ with good news.
- Select the tokens within the narratives already selected. Depending on your risk profile, you will allocate different amounts to different projects depending on their risk level.
- Once you have identified your narratives and selected your projects, it’s time to compare them with the smart money. Venture capital (VC) firms are legendary for their due diligence and research, and they can provide a valuable benchmark on which to assess the credibility of your own portfolio. Cross-reference your own choices with those of the experts in the field, and see if there are any gaps. Have you missed anything? Whether they’re in something you’ve discounted, or aren’t in a project you’re considering, ask yourself: “Do they know something I don’t?”
5 race-winning narratives to hone in on
Selecting the right narratives is key to maximizing profit. In a bull market, everything goes up, but we want to know what is going to go up the most! More importantly, we need to know what is going to survive the inevitable corrections along the way, and recover first on the green days.
The key narratives we have identified are:
- BTC as a store of value: No recent story has highlighted the value proposition more than the Canada / US border blockade. Canadian Premier Minister, Justin Troudeau, announced to the world that they will seize protester accounts and cut them off financially. Bitcoin fixes this. Not only does it hold its value better than anything, but it’s an asset you can actually own. Trudeau’s political misfire only boosts the case for the kind of financial freedom and independence Bitcoin provides. Meanwhile, investors seem to be recalibrating their understanding of whether Bitcoin is risk-on or risk-off. Just ask KPMG Canada!
- The insatiable demand for Layer-1 (and Layer-2) technology: We’ve talked about this at great length, and it’s central to our thesis: No single chain can carry the transactional load of all the smart contracts in the world. The scalability limits of every single Layer-1 means that we’ll likely see a range of winners emerging. It’s for this reason that we believe they represent one of the safest investment bets in crypto.
- Decentralized finance (DeFi): With inflation on the rise and yields in traditional finance an ever-increasing concern, institutions are primed to turn to DeFi for those highly sought-after returns on investment (ROI). We’ve got an article all about it, right here.
- The (decentralized) metaverse: Seeing so many major tech firms getting involved (not to mention brands and studios), the metaverse narrative is hotter than ever. We believe that the ultimate winners will be the decentralized metaverses, as well as the picks and shovels which will make them possible: this means the decentralized money, decentralized storage, decentralized computational power and graphics processing, as well as the actual metaverses themselves.
- Privacy: the case for privacy has never been stronger, as evidenced by everything that’s been going on this week in Canada. It remains one of our key narratives for 2022, with protocols like SCRT, TORNADO and OASIS being perfect examples of projects which could see some serious upside action.
Following narratives is paramount: It allows you to “see around the corner” and be well positioned to reap the most gains when they come.
That’s said, you also need to pick the right tokens.
If you read yesterday’s article about “following the smart money”, you’re already ahead of the curve. It’s not a case of copy trading the largest VCs in the world; after all, they got in at entry prices as close to zero as they’re ever likely to be. Instead, it’s about using the smart money as a litmus test to validate (or question) your own token selections.
Is the smart money bullish on your favorite tokens? If so, good, nobody does due-diligence better. Plus, as the recent Wormhole exploit proved, if it wasn’t for VC backing (thanks to Jump Capital) stepping in to restore funds, the project would have imploded. It can’t be stressed enough, especially for the newer, potentially riskier plays: Having big money with a clear incentive to see it succeed is one of its best chances for long-term survival!
Everyone wants to know when the bottom is in, and investors are looking for a green light to enter the market. Unfortunately, markets are never that straightforward. Nobody can say for sure that the waters are clear, and that investors can dive in without any associated risks.
What we can do, however, is formulate a strategy which provides us with the best chance of success, and that’s exactly what we have done here.
You need to understand where you are in the cycle, where you want to place your bets based on narratives, and ensure that your portfolio is well positioned to maximize upside potential while minimizing downside risk. This is how the best cyclists beat the amateurs (and make life-changing money along the way).