Bull Market Corrections & Alt Season

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Correction or Continuation after Tesla News?

Bitcoin regained all-time highs yesterday up to $48k, before correcting 10% lower today to $44k.  The biggest news yesterday was that Tesla Motors used its corporate treasury to invest $1.5 billion into Bitcoin.  Elon Musk, who is a massive influencer and idolized by many, gave his vote of confidence to crypto with his company’s purchase.  Perhaps Tesla may make more profit with its Bitcoin purchases than selling cars so Musk made a smart decision.  Although the Tesla purchase news enhances Bitcoin’s reputation in the long run and may influence more companies such as Apple to eventually follow suit, Bitcoin may be due for a larger 35% correction from short-term peaks. If Bitcoin continues higher to $100k, I expect it could correct to $65k before heading higher.  However if we have a correction now prices could reach a low of $30k again.  Whether the crypto market will continue higher or have a more significant correction, it’s a good idea to keep aggressively accumulating and dollar-cost averaging in the next weeks and couple months and be aggressive when Bitcoin has larger corrections if you believe in the 2021 crypto boom market thesis. 

Let’s review Bitcion, altcoins, and look at the other investment markets as we usually do.

Bitcoin

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On its way to $48k, the Bitcoin price broke through its previous high of $42k that currently serves as a short term support level.  This $40-$42k key level may indicate if Bitcoin will continue its rapid rise or will need to consolidate towards the previous support at $30k before continuing the next phase of the bull market.  

Altcoin Season Begins In 2021

Bitcoin dominance has decreased since the beginning of the year after rallying at the end of 2020.  Ethereum and altcoins seems poised to make gains against Bitcoin similar to what happened in 2017.  However it will be interesting to see if the speculative ICO mania of 2017 was an aberration or something similar will happen in 2021.

DeFi Projects Are The New ICOs

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The 2021 altcoin boom seems to be led by decentralized finance (DeFi) cryptocurrencies.  DeFi projects have surpassed its 2020 highs early in the year and the DeFi index (FTX DeFi Perpetual Index) is up 3x from the beginning of the year. 

Uniswap

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Uniswap (UNI), the most popular decentralized exchange on Ethereum with about $3.8 billion in value locked on its platform has increased more than 4x since the beginning of the year. 

Binance

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Binance Coin (BNB) not only continues to dominate centralized exchange trading, its Binance Smart Chain (BSC) that was launched Sept 2020 has had incredible activity and growth in DeFi.  BNB has gone up 3-4x since Jan.  It will be interesting to monitor the activity on BSC compared to ETH in the coming weeks.

Avalanche

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Another smart contract platform Avalanche (AVAX) that is known for its breakthrough consensus mechanism is focused on DeFi and companies have built a bridge to enable compatibility to Ethereum DeFi and launched a Uniswap alternative. AVAX has entered the top 20 ranking after advancing over 10x since the beginning of the year.  

Ethereum

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The Ethereum (ETH) price has surged up to $1.8k leading into the CME futures listing and has doubled after previous all-time highs of $1.4k and the previous high remains a short-term support level.  

Litecoin

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Litecoin has not yet achieved previous all-time highs in 2018, but its being met with short term resistance at around 180.

It seems alt season is here and many smaller speculative cryptocurrencies will have some wild swings in the coming months. 

Stocks: SP500 & Nasdaq 100

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Stocks continue to move higher.  The SP500 closed at 3909.

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The Nasdaq 100 closed at 13,655.

Gold

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Gold has been flat at 1842 and within the lower range of prices in the last 6 months.

Silver

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Silver spiked due to some WallStreetBets discussion and remains elevated.

Bonds

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Ten year yields continue higher to 1.19%.

Money Supply

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M1 money supply is continuing its exponential trajectory.

Credit Risk

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There hasn’t been any indication of credit concerns as the high yield premiums have been steadily falling.  

Conclusion

Short term stock market corrections may affect crypto, but with continued monetary support from the Federal Reserve all assets seem poised to continue to go up.  Altcoins may start to outperform Bitcoin, but may have more extreme swings.  We’ll continue to monitor trends in Bitcoin, altcoins and Defi and happy year of the Bull!

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