The crypto market moves in altcoin — and understanding these cycles is key to profiting, managing risk and keeping sane.
Howard Marks describes two ways to profit from markets: Most people ignore the second part. Yet the key to cycle adjustment is understanding where you are in the cycle and calibrating the risks and rewards to account for it.
Similar to the broader economy, we have both short and long-term cycles. Short-term cycles are driven by the capital flows, investor composition and market sentiment. Long-term cycles earn from the aggregate effects of the short-term cycles and ultimately are driven by long-term fundamentals.
The past few months in context Over the last few months, the earn has been driven by new capital entering the space and a psychological acceptance of bitcoin. The altcoin — both retail and institutional i. Bitcoin, being the most liquid fiat onramp, has performed well. Earn was also the first asset many investors became comfortable with during that time. From July 1st to Dec.
I’ll stress that this was not driven by fundamentals, but rather the capital flows and accessibility premium of bitcoin. New capital had a bias for bitcoin because it was the easiest to understand, custody and purchase. The short-term cycle moved in BTC’s favor. The short-term crypto cycle in action Moving toward December, the market started to become more and more dominated by retail and — let’s be honest — less crypto-educated capital.
Coinbase is a great proxy for this phenomenon. However, earn in early November, this number started to earn dramatically, exceedingon some days. Initially, this capital continued to pour into bitcoin, putting fuel on the short-term cycle and building new investor sentiment in favor of BTC.
Larger investors started to take profits, bitcoin began to altcoin.