Where are we going with the "endless" volatility in the crypto market?

In Roman Catholic theology, Limbo is the borderland between heaven and hell, inhabited by souls who are not sentenced to punishment but are not in heaven to enjoy joy with God either.

In this market, many found themselves caught in an endless oscillation where Bitcoin went back and forth, killing most market participants.

Half of us are worried that the market structure will collapse and send us to hell. The other half is hoping that this is a bull market and we will soar upwards.

Meanwhile, the market is doing what it does best, punishing both parties to ensure maximum liquidable value.

Where should we go?

First of all, I am not a fortune teller, this is just how I have felt over the years. Bulls want to believe that the greatest pain is a rally that never goes down, but that is not true. The greatest pain is a sharp decline that destroys the last glimmer of hope of the last bulls before a reversal.

Since everyone believes they can simply allocate funds at the halving, the painful scenario is a rapid up and down move that keeps people speculating on the halving on the sidelines and then enters at a higher price.

Now, we find ourselves in a situation where bad news isn’t driving us down, and good news isn’t driving prices up. DeFi looks like it has weathered the worst of the storm, and the bear market for the industry is likely over, with all negativity having faded.

My view is that we are in a situation similar to 2019, where you could find a lot of cheap DeFi value coins that later went up 10-100x. Now, people are selling long positions because of a 10% move that will be irrelevant in 1-2 years.

Coinbase being sued by the SEC and Binance facing DOJ fraud charges is the worst case scenario. These are the two largest exchanges and the market is still waiting for this unresolved issue to be resolved. If it does happen, the bad news will be that the price will drop and people will claim the industry is dead. This is your signal to enter the market and it will free the market from its shackles.

Your mission is to survive and not get liquidated. Increasing your portfolio value by 10-20% during this shock is inconsequential in the grand scheme of things, as we are likely to see higher price levels over the next few years and long term holders will undoubtedly start to outperform short term holders.

Bitcoin Halving and ETFs

A large group of Ethereum enthusiasts want to believe that the Bitcoin halving is just a meme. People can believe whatever they like, but the fact is that it has a significant impact on the market structure due to the impact of selling pressure. Based on the income of Bitcoin miners, they are selling Bitcoin at record levels.

As this selling pressure is reduced by 50%, it is bound to have an impact on Bitcoin’s market structure as it reduces selling pressure, which usually leads to a new bull market.

The upcoming ETF approval outcome is being closely watched by the market and if it is rejected, it could very well be a catalyst that pushes prices further down. Approval is bullish if the institution applying for the ETF actually holds Bitcoin.

Regardless, if Bitcoin is approved, I believe Ethereum will outperform Bitcoin from that point on as that would mark a bottom in the ETH/BTC ratio.

What other stories do you want to weave to encourage people to buy Bitcoin? After that, speculation will turn to the approval of an Ethereum ETF, which may take longer. Personally, I continue to invest in Ethereum on each down day, and if we do have another down day, I will buy a large amount of Ethereum in one go. Please minimize your regrets. Ideally, I would like to continue to invest for another 6 months, but I highly doubt that I will have this opportunity.

NFT bottom

The NFT market has likely hit bottom and had its DeFi 2022 moment this summer. Considering all the liquidations on Blur and the Azuki incident, sentiment reached an all-time low.

People tend to forget that the NFT surge in early 2021 was the result of crypto natives making a ton of wealth during the DeFi summer of 2020, which then seeped into the NFT market. In my opinion, for NFTs to experience another bull run, you need people to make a ton of wealth in other areas of the market.

Contrary to what some people believe, I don’t think NFTs are dead, they are here to stay. Why? Because people who make money in this industry (or in general) have an inherent need to show it off. Considering how much time most people in this industry spend online, they want a way to digitally show off that they make a ton of money. And there’s no better way to do that than by swapping out a very expensive PFP.

However, even though the market has bottomed out, that doesn't mean most collectibles will survive, most will die. So the task is, to identify the collectibles that you think will survive in the long run. I have my personal list of collectibles that I believe will survive the current production war:

• Cryptopunks;

• Pudgy Penguins;

• Milady & Remilio;

• Kanpai Pandas;

• DeGods.

In summary, I think NFT is the last area in the market to rise. Therefore, you won't see a real NFT bull run until ETH, BTC, and DeFi run ahead. However, their prices will still gradually rise, which is why you have to pick your winners now. When the NFT bull run comes, the prices will rise like crazy.

Other ecosystems

Solana looks to be having a resurgence and will become a significant player in the L1 competitive landscape. Although the DeFi landscape established during the SBF period was a farce, they still have a strong community and are rebuilding.

I have been building a position in SOL since Robinhood liquidated user positions at the bottom and will continue to add to it at the lows. How should I determine the size of my SOL position?

If I believe SOL has the potential to return to its ATH (~$250), and I believe ETH will rise to $10k at its highest, then SOL would rise 10x compared to a 5.5x rise (let’s assume 5x for the sake of calculation).

Therefore, based on my hedging philosophy, I keep my SOL position 2x lower than my ETH position. No need to scale it higher as it will give me similar results. The risk adjusted returns are similar to ETH, making it a lower risk move.