Are Crypto Fundamentals as Bad as the Sentiment? (REKT Vision)

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2:43Welcome everyone to this Friday's episode of Wrecked Vision. Today we have substituted Mando for Jamie Coutts in an effort to raise the moods and the vibes after our rather depressing show to kick off February last week. So Mando out, Jamie in for this week. Welcome back, Jamie. How are you doing? Hey, it's nice to see you. Yeah, good to see you too. I'm actually in Paris right now for NFT Paris. Apparently there are still NFT events that happen every year still. I think it's funny because it's called NFT Paris. I don't think I've been to a single NFT, actual NFT event. I'm on two panels today.

3:34One of them is trading meme coins. So one of them is a market update. So I think NFT price at this point is probably just some fields of branding. But yeah, it's just like everything is like meme coin focused, AI focused. I don't think I've seen a single NFT spoof. Even the Yuga Labs guys, which I guess would be Bored Apes. Even their booth is 8 Chain and 8 Coin. So, yeah, pretty amazing how that's all changed. That's got to be a pretty good contrarian sentiment signal though, right? I think so, yeah. I mean... Can it get any worse? Can it get any worse? Yeah. Price action for NFTs hasn't been too bad.

4:19You know, there's been pockets of rallies and it's not like it's just been down only anymore. I think, you know, things have relatively flawed. Obviously, it seems like some of the larger projects, the game there has been to launch a token so the projects that have not yet launched tokens tend to be the ones with slightly higher floors but yeah i mean volume and activity levels are still not even 10 of what they were back in 2021 so um i don't know i don't think we see that same mainstream mania that we did three years ago but i do think there are pockets of potential performance. But we'll see.

4:57I don't know. I'm yet to be convinced. I'm yet to be convinced. Well, if you're saying that prices have actually come up a little bit or they're stabilised and sentiment's still falling, I don't know. It was always a play like on the sort of mid to later stage of the entire cycle, which arguably you could say is roughly where we are. We're definitely not at the start and we're not at the end either. So I don't know. It feels like I need to go and actually start looking at the space. Like I am the worst NFT advisor or expert. So I've never really looked at it. It's never scratched an ish for me.

5:37Not until music comes along. But just based on what you're saying, it's starting to sound interesting given where I think the market's going to go. Yeah, I mean, it definitely formed the later part of last cycle. Like when NFTs really kicked off, it was towards the end. And NFTs continued performing, actually, even into the first half of 2022. But my view on it is just every crypto cycle, there's some form of narrative, which is the casino narrative. And in 21, it was NFTs. 2017, it was ICOs. 2020, it was DeFi. 2024, it was meme coins. This year, potentially AI. um you know that's remains to be seen i think um so yeah i don't see it coming back in that fashion but you know we could potentially see some performance um performance i think towards the end of uh the end of the cycle which um we're also trying to figure out when when that will be if it will get there i think i'm subscribing to the view that bitcoin is kind of no longer going to be in this four-year cycle and it'll sort of be a certain thing is a much more mature asset now and look at the altcoin sectors and how else you perform versus Bitcoin with BTC dominance still close to the highs, but it feels like we've already had that underperformance or big sell-off in alts.

7:04Hi, Raoul here. Listen, I think we've got until 2030 before the economic singularity arrives. Now, it might not be the exact date, but it's around then. So we have about six years to figure out how to unfuck our future. I've put together a report to help you called Prepare for 2030. It's going to help you take the first steps in that journey to make sure you're secure past 2030. So just click on the link below and start your journey now. Yeah, I'm curious of your thoughts on can we get a rebound in ult? Will we ever get an ult season? Did we get a very brief ult season around this time last year and that was it?

7:44Or was the altcoin season just memecoin season last year and that was it? Like it's hard to get your head around it now, especially at these levels, I think. Yeah, I mean, I've got a lot of index data now. So part of the ProCrypto product is sort of bringing some index data to life because there's a lack of that in the entire space. So now I'm able to break down all the different sectors and subsectors. When you go to subsectors in crypto, it gets a little bit difficult because some of the subsectors don't have enough assets in it to really constitute. So you look at the sort of sectors and there's five.

8:21There's digital currencies, which essentially Bitcoin and the dino coins, I unfairly call them because they've still got massive whopping market caps. And then your meme coins. And there's a smart contract platform sector. And that's about 22 % or, yeah, roughly 22%, I think, from the last check was, yeah. And then so you put that with the digital currency sector and that's like 95%. And the other three sectors are DeFi, applications, which is just a name or a general name to give all the other stuff that you don't know what to actually call them or where they should belong. And then there's another sector called infrastructure, which includes a lot of the oracles and AI type stuff, compute and whatnot.

9:10And I can sort of see, you know, if you look at all the different sectors versus Bitcoin versus digital currency sector or versus just the overall market, which is heavily weighted toward Bitcoin, like it's all been trending down in this very clear downtrend really since 2022 with just some counter trend reversals. But when those counter trend reversals happen, they're spectacular. And the two that we've seen, we've seen two essentially altcoin rallies or outperformance periods. As you said, it was at the end of 2023 and 2024, and that was pretty substantial. Like there was some real big outperformance there.

9:52And that happened just at the time that everyone said, you know, alts were dead. And then we had a mini one in Q4, which pretty much ended by the start of January. It was smaller in scale. and that was, you know, so when I look back at the last cycle, you had about three of those big moves or three or four, you could argue. So I still think that there's going to be juice in this market for all coins to outperform. And if we believe that blockchain adoption is going to continue to increase, capital will flow into not just Bitcoin, into other networks. And when you look at the amount of fees some of these networks are spinning off, it's remarkable.

10:39I mean, it's starting to get very concentrated in the smart contract platform with Solana and Ethereum. But I mean, you know, there's I think there's so many announcements coming out this in the last couple of weeks of so much more activity happening on some of the other chains is yet to realize substantial amount of fees. but I think there won't be two chains in five years' time. There will be probably five to ten chains. Everyone's objective to try and find which ones will be those second-tier chains. And when you think about applications themselves, some of these applications that are sitting on these chains, they're mainly DeFi-type tokens.

11:29they're trading on like one, two or three times their fees. So effectively the equivalent of like one, two or three times revenue. So some of these applications are no longer like super expensive, right? And in many cases now, especially with the regulatory changes, they're going to be returning capital or find a way for that, you know, for value accrual in the underlying token, UD swap comes to mind. so no i mean it's it's extremely bearish the problem is you've just got this constant fucking dilution right so so many whatever the number is these days um i think it's like 7 000 coins plus god knows how many millions of meme coins you've got two problems you've got dilution from just so many new coins snapping up attention but you've also just got the inflationary nature of a lot of these tokens.

12:23And until they get mature enough or they get traction enough, that inflation doesn't come down. And that's why you've got like just it's hard to be, you know, an altcoin, it's an altcoin investor because you're fighting a massive tidal wave of supply. So go where the activity is, go where the usage is. And it's pretty clear. You look at the Unchained Data where that is and if you're sort of exposed to those. It doesn't matter if you don't get this massive whopping 2017 alt season. It doesn't matter if you don't get the 2021 alt season. I think you'll do really well having some exposure to altcoins where you can see people are using the chain.

13:02I definitely agree with your point on delusion. One of the criticisms of ETH right now compared to perhaps three or four years ago is that the ETH scalability narrative has been L2s and so there are now so many L2s that you can buy and which one do you buy and it sort of dilutes the attention and the capital for ETH alone and then if you expand that concept to the Auckland market and the L1 market it's a very similar thing it's like okay do I buy Solana, Suri, XRP ETH say I feel like there's three or four times more options for L1s now than there were three years ago. So it's hard to like, if you want to express a view on alt season, that's maybe like a general view.

13:59It's really hard to pick which one could potentially be the winners. I guess you could buy a basket of L1s, but it then feels like you're just offsetting good performance and perhaps sold versus like some of the other stuff if you look at that basket last year. So it's really hard. Like I found it really hard to express in just like, okay, I want to outperform Bitcoin. What do I buy? Like it's been really hard to express that view, I think. And last year you could have done it with meme coins. And then after the whole pumped up fun thing, it's just even with meme coins now, I mean, right now a good meme coin will last, have a lifespan of about 24 hours.

14:38And then it's just like, okay, sell, move on to the next one. So it's just really hard to pick things that give you that outperformance against Bitcoin. And I know lots of people watching this show will maybe benchmark themselves to a stock index or something else. But people who are like really fully crypto native do benchmark themselves to Bitcoin. And many people will maybe even benchmark themselves to something like Solana. So it's just becoming increasingly hard to outperform it. and my hunch is that you have to kind of like pick a sector that will have some sorts of narrative and it was meme points last year and my hunch is perhaps it still could be the AI sector this year.

15:23I know if you look at the AI agent market cap it's down 75 % from its highs or something like that. That's the only thing I can see like fundamentally that could potentially have a strong enough narrative to outperform. and otherwise like you know there's stuff like monad and mega eth are coming which are heavily you know heavily anticipated but it just feels like it's the same thing you know you buy one of these coins and then three months later there's another new one and then you have to make the difficult decision as to whether you want to rotate what you want to rotate into it's been very hard to just buy and hold something other than bitcoin i guess soul like soul continues to outperform um and gain dominance and um on the previous slide that you have where i had the the dominance numbers like i it struck me that sole dominance is just um yeah 3.2 percent um potentially you know looking at that against eith or against bitcoin that's something that potentially i look at as maybe something that's something that could rise because every single new coin and all the activity still seems to be all the tvls still seems to be on Sol, all the fees generated are predominantly from Sol ecosystem coins.

16:32So I guess that would kind of like be my bet. Yeah, look at the problem with all of those other sectors is, as you describe it, narratives. Like everyone in crypto loves the narrative play because it's worked in the past. I think there's just too much competition now. And with all the supply that's going on, yeah, A narrative can take hold, as we saw with AI agents and AI infrastructure in November, December, but by January it was pretty much pitted out. Now, like there's a lot of potential in that space, but like it's really the unsexy way to sort of build a portfolio in crypto, but like why not just do the picks and shovels?

17:17Where are the AI agents operating? They're predominantly on Sol. They're predominantly on base. So you can form a portfolio. You can create a portfolio based on boring old fundamentals. And that's why, you know, I'm skewed to Bitcoin massively because product market fit, growing network. You can't say that about a lot of these other L1s or other applications, but yet there are other applications and L1s that are growing faster. And, you know, it's a question of just sort of what's the right position size to try and get that little bit of outperformance. and also trying to understand where we are in the cycle.

17:58You know, it was November, like early December, I was on Twitter and writing about it just that, you know, you can see all the macro conditions tightening, like the dollar, the DXY had rallied from 100 to sort of 105 in a straight line and it was touching on sort of, well, 107 at that point. I was like, well, that's the top of a range that it's been in for two years. It breaks above here. It's bad news. and predominantly talking about Bitcoin at that point. And people didn't believe it. And so, like, of course, everything is going to go down, especially the narrative-driven sectors that don't have yet the fees, the adoption to justify their valuations.

18:43So, you know, everyone went all in on a narrative and you have to be a bloody good trader. You have to set price targets up 50%, up 100%, you know, take it but everyone's looking for the 10x and then suddenly that's now their ai positions are long-term investments sorry um yeah it's just it's a really unsexy way to think about the space but like look at the volatility of the of the asset class like it's bonkers um people just make it really hard for themselves by going at the risk of a bit too much yeah no i i hear you it's just It's like there's no asset class that has this level of volatility, even Bitcoin alone.

19:24And then if you extend that to the thought of alts and some of the lower caps, it's pretty insane. It's just like, I don't know, it doesn't matter how good a trader you are, it's impossible to navigate that perfectly. It kind of just feels like you're flicking a coin for the most part, unless you're privy to seeing all the flows and et cetera and knowing what's going to come next. But otherwise, I think it's pretty challenging. What do you think happens to, you know, Bitcoin dominance has risen substantially over the last two years, what we feel like we're considering as a bull market. In the past, we've seen Bitcoin dominance rise, and then we have this great big old season, etc.

20:05and Bitcoin leads first. Maybe this time is different because of, you know, the ETS plus the sovereign game. But what do you think happens to Bitcoin dominance if we move to a bear market? Because we also typically see it rise then. Let's say in six months' time, things turn and we haven't really changed from the levels which we're at now. Does that result in Bitcoin dominance going above 70 % and even higher than where we are now? Like I'm trying to wrap my head around what happens in that situation. Well, yeah. So if you're talking about Bitcoin dominance being at, I know everyone refers to the trading view metric.

20:52So I can't remember where that is, but my Bitcoin dominance versus the top 200 assets, I think it's around, yeah. Did you mention 64 %? I think. I said 60, yeah. So everyone talks about the trading view metric because it's accessible. and that's like 50, 55 or something or maybe 60%. So people are probably freaking out when they're looking at this number versus the one they're used to seeing in TradingView. So my view is that it'll be lower by the end of the cycle because there will be a push higher and capital sort of distributing through, not through the entire space. Like that's the thing. I just do not think we're going to see the rip-roaring alt-heasons of the past.

21:34We don't have a kind of liquidity of the last cycle. like direct checks to consumers or to taxpayers created the conditions for bad shit crazy old season, right? Everyone's stuck at home and then just everyone's just flicking narratives and memes and that's not going to happen. But as more institutional capital comes in, ETFs are being filed across a wider range of assets now, so Solana and Dogecoin. but are they all ones? And then you'll start to see creative, you know, index products for DeFi and other sectors and blends of certain things, and that's what institutional investors will want. So, you know, I think we'll get a period of outperformance, but it'll be so selective, and that's why I keep banging the table, like look at the activity, follow the activity.

22:30That's what drives prices. Like liquidity drives the asset class, but really if you want to be a crypto asset picker, try to use some sort of fundamental rationale for it, which chains or which applications are growing fast and are not really overly expensive. So, you know, I would expect that number from 64 to be somewhere lower, under 60%. But if you're saying that it's going to finish the cycle where it is today, then, yeah, in the bear market, Bitcoin will outperform everything else for sure. It's just higher beta in the rest of the space. So, yeah, it'll push it to 70s and maybe even 80%.

23:09But I think it'll maybe in the cycle, like this really hard number to pinpoint, it'll be lower from here is my suspicion, even with all the sovereign investment that's going on. But probably not a lot lower. And therefore, yeah, it's probably 70 % in a bear market. Easy. Yeah, yeah, that makes sense. I'm curious to see the other chart that you had up a moment ago on the alt season indicator. Talk me through what this means and what we're looking at here. Right. So this is looking at the top 200. So I use an index provider called Bitformance, and they have like really robust data at sort of accessible to punters because a lot of the institutional index providers.

23:54and I've worked, you know, I built the Bloomberg index classification system. You know, you'll pay, you know, an obscene amount of money. So it's not really, it's for funds, it's for ETF providers, it's not for the general public. So you've got the ability to access this Bitformance product, which I think is, you know, pretty good. And so what I've done is I've just created an index of the coins outperforming Bitcoin on a 90-day lookback period and mapped it as a time series. And so when you see these large spikes, it goes from zero to one or zero to 100%. These numbers here, like if you look back to 2021 when we said the all-time high in the alt season index, what that was saying was that 93 % of the top 200 at that point in time were actually outperforming Bitcoin.

24:49So when you get up to anything around 70 % to 80%, and you're holding a bunch of alts, you've probably done well that you should start be looking for the exits because that's when things are just way overheated. And so if we look at the bull cycle that started in the end of 2022 but really for the broader market it was 2023 because Bitcoin led and the rest of the market didn't even wake up until mid-year. We've had this one rather big one here in 2023, Q4, Q3, Q4, and then we had this really sharp but short-lasting spike in November, December recently. So if we go back to 2019, 2021, the last bull market, you had one, two here you could argue and this was pretty sustained for a while and then three, then four and then the last one was about 70 % of the alts were outperforming.

25:49So, you know, four to five sort of bursts. Here we've had two. Look, if we get liquidity and liquidity hasn't even started and there's a big problem that they'll need to do something sooner rather than later with this sort of this geopolitical game that's being played. So while everyone's, you know, shitting themselves over their positions in the market, we're getting closer and closer to some action on that front. And so if global M2 is currently around sort of 105 and it expands by 30 % generally, like just based on the last couple of cycles and the lowest 90, we're probably looking at another 20 trillion in global M2 or the money aggregates of various top countries.

26:40And so that will fuel investment in everything, all assets, property, risk assets, but obviously Cryptzone because it's a small asset class will go up. And so Alts will benefit from that. So I think there's another one or two bursts higher. But as you can see, like Sol's outperformed Bitcoin the cycle and got XRP and some of the other ones have done really well, if not outperformed Bitcoin. as well. You know, it's just the nature of the beast. But, yeah, there's like L1s that have got, you know, traction and SUI has gone from, you know, no users to 700 ,000 daily actives. They're starting to get some dApps.

27:27They're starting to see some DEX volumes, TVLs flowing in. So it's got the signs of network activity picking up. So, you know, there's assets to be looked at, But it's fairly narrow at this point because the activity is fairly concentrated. What's interesting to me about this chart is the last time we hit 0.8 on it back at the end of 2024, that was right around when Trump got elected and people were talking about Bitcoin Reserve. and the time before that was looks like it was perhaps december 23 january 24 which was when we had bitcoin etf so it's kind of interesting to see that actually like the two big market things which have been like very bitcoin focused have seemed to be the times when alts actually outperformed into it because maybe that's when everyone just goes risk on um but the move following that is just like you know like a down only pattern for this but i wonder you know i wonder if like the next like i'm always a believer in i think i understand like charts and seasonality and and that kind of and momentum etc but i'm always believe there's some sort of fundamental narrative behind that to perhaps explain it or that sort of times up well that people are positioning around.

28:56So I wonder if we get to a potential approval start of a Bitcoin reserve, which maybe the SMIC time estimate for that is something like six to nine months. We haven't had any information yet, so I'm just completely guessing there. But I wonder if we get, as news for intensifies around that, if that ends up, if ironically, again, that ends up being the sort of like fundamental catalyst that actually causes ults to outperform again um and then we'll and then we'll see what happens after that because you know maybe it's once again short-lived but it seems like you know the big market the big positive market news for crypto have generally been bitcoin focused and in order to speculate on that dgen seems to want to gamble on everything else other than bitcoin which is like alts and memes and all that kind of stuff, which is what causes these like very short lid spikes because it's obviously not very sticky capital compared to the capital that goes into Bitcoin.

29:58So I'm curious to see if that's something we see play out this year. We should definitely circle back on it. Yeah, look, I think it's just because it's, you know, it was deemed a commodity by the SEC. So I was in the clear from a regulatory standpoint. It has global adoption, which is superior to every other asset. It has arguably the best product market fit. It's the most decentralized. The amount of hash rate that's securing that network is many, many times for the compute of the largest companies and nation states in the world. so everything happens first to bitcoin that's major first one for an etf first and personally hopefully the only asset the u.s puts in some sort of strategic reserve yeah i just do not buy the argument from people's you know flogging their own tokens that should be included in a strategic reserve of a nation state, let alone the world superpower.

31:12So yeah, I mean, it all happens to Bitcoin first, but it also overshadows. I mean, it does overshadow all the other amazing developments that's happening across the ecosystem. Like we understand that blockchains have attracted a certain type of user up to this point or a majority of users up to a certain point who are basically gambling or trading, whatever you want to call it. But it's basically proving out the infrastructure that is the blockchain to come what comes next, which is tokenization of real world assets, financial assets. And we're starting to see that. Ondo just basically launched its own chain and is partnered with, you know, the who's who of traditional finance to bring stocks, bonds, you name it, on chain.