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In today’s newsletter:
🔎Some market thoughts
📊On-chain alpha
😂Crypto meme of the week
🗞️The latest DeFi news
It’s been another crazy week.
On Monday, most people on Crypto Twitter debated if BTC hit its cycle top. On Tuesday, after a small pump, everyone suddenly turned bullish again.
I find it fascinating how quickly the sentiment in this space can change.
The truth is that no one can be fully emotionless in a highly volatile market like crypto.
But ideally, you should never let emotions drive your decisions.
In this issue, I’ll share what I believe will happen next based on historical data & other factors and cover both the bullish and the bearish arguments.
Let’s dive in 👇
In both 2017 and the 2021 bull cycles, BTC dipped in January, and it eventually resumed the uptrend at the beginning of February.
I wouldn’t be surprised if this year the same thing happens. Markets have always been cyclical and there’s one more key thing to consider:
Donald Trump’s inauguration is scheduled for January 20.
And according to the Washington Post, Trump is expected to sign executive orders related to Bitcoin in the first few days of his administration.
This could be the catalyst that triggers a market rally in February.
I know that I’ve mentioned this metric many times in the past few months, but I’ve done it only because I consider it a key indicator.
As some of you already know, the real altseason historically happens only after the BTC dominance starts decreasing at a very fast rate.
Interestingly, in 2017 and 2021, the same thing happened:
BTC dominance started dropping significantly in late February / early March.
So the fact that the BTC dominance is currently still close to local highs and that we haven’t seen a proper altseason yet isn’t unusual.
If this time isn’t different, and it usually isn’t, the best market phase for altcoins could start at the end of February or in early March.
This is just a rumor for now, so take it with a grain of salt.
But imagine the impact on the altcoin prices if a US reserve for altcoins is established. Most regular ppl still see crypto as a giant ponzi scheme.
If the world’s largest national economy would launch a national crypto reserve, this would significantly contribute to legitimizing the crypto industry.
I could go on and on with dozens of other arguments that support the bullish thesis, but let’s also talk about a few bearish arguments:
According to Tokenomist, $20 billion worth of tokens have been unlocked in the last two months of 2024 alone. And Tokenomist tracks only 383 tokens.
This is because of the low float high FDV meta.
To reach a high fully diluted valuation (FDV) at launch, many VC-backed tokens have launched with a very small % of their total supply in circulation.
In the long run, this creates a lot of selling pressure and makes it harder for most altcoins to pump even when new liquidity flows into the market.
That’s one of the reasons why I believe that many of the tokens that were launched in the past 12-18 months have never caught a bid.
Many on-chain tokens like memecoins outperformed last year because ppl got tired of becoming exit liquidity for VCs by buying high FDV tokens.
So it’s crucial to research the tokenomics of the coins you buy. You don’t wanna buy a coin that faces huge selling pressure from insiders.
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In Jan. 2021, there were 4000 coins listed on CoinGecko.
By Feb. 2024, this number increased by over 3 times.
I see a lot of people on CT saying that “the upcoming altseason” will be “the biggest altseason we have ever seen”. That sounds great, doesn’t it?
Everyone wants to get rich so I get why posts like this get a lot of engagement.
But realistically, the most likely scenario is that we’ll see a great altseason in the next months, but it won’t be as good as the 2021 altseason.
In the same way, the 2017 altseason was way better than the 2021 one.
Liquidity is way more fragmented right now as the total number of coins has skyrocketed, so I doubt that every single token will do a 5-10x just like in the last cycle.
You can still make life-changing money in the upcoming altseason, but you need to pick carefully the coins you choose to bet on.
Tokens related to hot narratives like AI, DeFAI & RWA are most likely to do well.
To sum it up:
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I believe a new altseason is coming (probably in late Q1/early Q2)
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Most historical data suggests that the cycle isn’t over
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Predatory tokenomics are the main reason why many tokens (especially the new ones) will continue to perform terribly
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Be cautious with what you buy. We likely have a great altseason upon us, but this time it’s unlikely that every shitcoin with terrible tokenomics will pump
These are just my current market thoughts.
Sometimes I’m wrong, sometimes I’m right, but I always try to share my honest thoughts and invest in a way that the odds are in my favor.
Whether you agree or not with what I shared above, I hope you enjoyed reading this.
See you in the trenches🫡
Virtuals Protocol announced a $40M buy-and-burn program for AI agents
VanEck filed for an Onchain Economy ETF – the first actively managed crypto fund
Frax Finance launched frxETH V2 – a liquid staked ETH that enables validators to run a node with a minimum of 8 ETH
Solv Protocol released the $SOLV airdrop checker. The claiming portal will go live tomorrow
Soneium, an L2 blockchain developed by Sony, launched its mainnet. Soneium is built on top of Optimism’s OP Stack
pSTAKE Finance released YBTC, its BTC liquid staking token, on Ethereum. YBTC can easily be moved between major L1 & L2s through a LayerZero integration
Jupiter Exchange released its airdrop checker. The airdrop is tier-based
Hyperliquid announced that HYPE stakers will receive an ANIME airdrop
Liquity introduced sBOLD – a yield-bearing DeFi savings account
Raydium has launched its beta perpetual futures platform. Raydium Perps offers Solana users gas-free trading and is powered by Orderly
Spark announced plans to allocate up to $1.1 billion of its funds to Ethena’s USDe and sUSDe
MANTRA partnered with DAMAC group to tokenize $1 billion of real estate
That’s all for this week!
Until next time,
The DeFi Investor
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